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8/2/2019 Cebu Presentation 2010 Final
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2009. Copyright Tholons Inc. All rights reserved.
Advisory Investments Research
From BPO to KPOCebu City, Philippines
Jonathan De LuzuriagaManaging Director
June 2010
Version 1.0
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Trends in Services Globalization
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Page 3
Trends in Outsourcing: By Geography
North AmericaOn shore
Central and Latin AmericaOffshore/Near shore
Eastern Europe and ChinaOff shore/Near shore
South AsiaOff shore
Southeast AsiaOff shore
Current offshore market is estimated at US$70 billion. From 20 countriesconcentrating in the industry in2006, to 50 countries in 2008, with over 200 cities being tracked.
US IT/BPO Offshoreexpenses:
US$40B - US$50B
Source: NASSCOM 2009
EU IT/BPO Offshoreexpenses:
US$12B - US$16B
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Trends in Outsourcing: Increased Complexity
Product DevelopmentEngineering Services
ADM
R&D
Legal Services
North America
USA
Canada
Multilingual ContactCenter
Product Development
ADM
Central & SouthAmerica
Brazil
Chile
Mexico
Argentina
Costa Rica
Eastern Europe &China
China
Russia
Poland
Czech Republic
HROProduct Development
R&D and ESO
Business Analytics
Product Development
Engineering Services
Finance & Accounting
Business Analytics
Contact Centers
South Asia
India
Sri Lanka
Unique Value Proposition
Highly complex services with the lowest possible
costs.
Southeast Asia
Philippines
Malaysia
Vietnam
English ContactCenter
Engineering Services
Finance & Accounting
Medical Transcription
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Employed people with excellent languageskills, capabilities and qualification
(Graduate and Post-Graduate Level)
Employed people with excellent domainknowledge and qualification,
(Graduate, Post Graduate, PhDs)
Employed people with good languagecapabilities and qualification
(Graduates Level)
Employed people with limited languagecapabilities and skills
(Under graduate to Graduate Level)
Trends in Outsourcing: Moving into higher value services
Mid90s
Early 2000
onwards2000
onwards
Early-Mid 2000onwards
Rule Based Processing (BPO)e.g. Data Entry, Transcription, Help Desk, etc.
Problem Solving (High end BPO)e.g. Inbound Voice, Claims Processing,
A/P, A/R, Payroll etc.
Problem Solving (High end BPO)e.g. Outbound Voice, HR, Procurement,G/L, Trading, Technical Support etc.
Knowledge Driven (KPO)e.g. Analytics, Equity Research, R&D,Engineering Services, Clinical Trials
Management etc.
High value KPO is a result of the success of process driven BPO.The evolution has happened over a period of 10-15 years
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The KPO Segment in Detail
Sample KPOSegments
Services Being Offshored Skill Sets Required
Legal services Research Services Due diligence services background checks Contract services drafting
Knowledge in US/UK laws Adept in legal application Ability to reason & research
Market research &analytics
Secondary & primary research Business research Customer Analytics CRM Analytics
Use of statistical tools, researchtechniques
Report writing & presentations Database research
Writing & contentdevelopment
Editorial, content delivery and data enrichment English communication skills Journalism Experience in writing
Pharma R&D Drug discovery Clinical research and trials
Doctors, Master's degree in Scienceand PhDs
Healthcare services Diagnostic Medical coding Genetic profiling
Medical degrees (specialized subjectknowledge)
Education &training
Private tutors (e-training) Curriculum design Content development
Teaching methods/techniques Cultural sensitivity Online teaching methods
Financial Services
Equity Research Financial Modeling Valuations and Investment research Actuarial services
CAs, MBAs Certified Finance professionals
Note: The list of KPO segments and services above is not comprehensive and represents only a subset of the KPO market
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Where is the Opportunity? Growth in the KPOSegment
% indicates CAGR
Source: Tholons & Evalueserve
Data Search, Integration and Management, Biotech and Pharma will be the two biggest growth sectors
Engineering Design, R&D, Remote Education and Publishing will also fuel the growth
Equity and Financial Research is also witnessing an upsurge in demand
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Cebu City Venturing into the KPO segment
A Level-Up for Cebu Citys Outsourcing Industry
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415,000
400-500
550-650 2 - 3
440,000
900
1,520
6,300
Philippines: Center of Excellence in voice-basedEnglish language BPO services
STRENGTHS
Competitive cost structure compared to other top offshore nations: at par ITO salary (US$600-700 per month) andBPO salary (US$400-500 per month) with India
English language as a primary medium of communication (in education, radio and television) to contribute well inEnglish proficiency of the people
Dynamic business incentives for O&O industry through economic zones: 217 operating economic zones, 103
economic zones being developed with more than 60% of the total recognized as IT Parks/Centers Manila NCR as Tier-I outsourcing destination city, and other major cities considered as excellent emerging
outsourcing destination, like Cebu City
Philippines Snap Shot
CATALYSTS
Government support through PPP framework (e.g. TESDA's "Training for Work Scholarships" for near-hires)
Initiatives of government bodies such as CICT and PEZA to evolve "next wave cities" as Tier-II and Tier-IIIdestinations and to tap these as possible sources for greater labor pool
BPAP as the umbrella organization to support the outsourcing industry in the country
Annual GraduateOutput
OutsourcingWorkforce
BPO Entry LevelSalary (US$)
ITO Entry Level
Salary (US$)
Revenue ITO (US$million)
Revenue BPO (US$million)
FDI 2008 (US$million)
Real Estate Cost
(US$/ SqFt)
Source: Tholons Research 2009
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Talent Pool in the country is abundant but is bound to see saturation at some point, which would lead to cost,
attrition and scalability issues. There is a need to search for new cities and for moving up in the value chain.
Emerged Outsourcing Destination
Increasing Resource Pool Saturation
Increasing cost of Resource Pool
Increasing cost of real estate
Increasing stress on Infrastructure
Higher sociopolitical Risk factors
Emerging outsourcing
Destination Untapped Resource Pool
Low-cost Resource Pool
availability
Lower real estate cost
Developing Infrastructure
Low sociopolitical Risk factors
Paradigm Shift: From Emerged to Emerging
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Competitive Outsourcing in Cebu City
Cebu City, Philippines Rank 1
Shanghai, China Rank 2
Beijing, China Rank 3
Krakw, Poland Rank 4
Ho Chi Minh City, Vietnam Rank 5
Cebu City Outsourcing Value Proposition:
A scalable, low cost and low riskoutsourcing destination city in the Philippines
Established and Expanding in Cebu Tholons 2009 Global Rank
Cebu City as the Top
Emerging Outsourcing
Destination for 2009
40,000 employed in
outsourcing industry
More than 23,000
graduates(15-20%
are IT graduates)
Approximately 100
established BPO
companies
Presence of SEZ
(e.g. Asiatown IT
Park)
With Cebu Citys inherent strengths and dynamic IT-BPO ecosystem, it is now moving from a Tier-IIdestination towards Tier-I status in terms of providing a robust ecosystem for IT-BPO providers/ buyers.
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Successful BPO to Competitive KPO: A Level-Upfor Cebus Outsourcing Industry
High-end service delivery capability with excellent English speaking capabilities bundled with low cost and
risk of business operations
Move from positioning availability and
abundance of labor pool supporting low-end
ICT services
Quality and delivery capability of talent pool
to support high-end ICT Services
Finance & Accounting
Life Sciences
Administration & Back OfficeData Processing & Transcription
HR Services
Customer Support & Contact CenterServices
Legal Services
Publishing
Logistic/Procurement
BPO KPO
Research & Analytics
Engineering Services
e-LearningAnimation
Research & Development
Equity / Financial / Insurance Research
Paralegal Content & Services
Medical content and services
Biotech & Pharmaceuticals
Moving Towards KPO IndustryCebu Citys BPO Industry
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Roadmap for Cebu Citys KPO industry
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Tholons Location Assessment Framework
Scale & Quality
Labor Pool Skills Availability Graduate Output Complexity
Cost Business Catalyst Infrastructure Risk Profile Quality of Life
Cost of Operations Cost of Training Cost of Real Estate Cost of Bandwidth Cost of Living Cost of other
Infrastructure
Connectivity Bandwidth Availability Transportation
Commercial Risk Political Risk Natural Risk Social Risk
Social Infrastructure likeEducation Institutions,hospitals etc.
Non Work Culture Availability of
Recreation/Leisurefacilities
GovernmentBenefits/Incentives
Competitive Landscape Untapped Labor Pool Currently Employed
Skills and
Scalability
SavingsBusiness
Environment
Operational
Environment
Risk to
Business
Non-Business
Environment
Each city has unique dynamics and capabilities to offer to the Services Globalization Industry, the
Tholons Location Assessment Framework acknowledges and helps identify that
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Focus Areas for the KPO Segment
Employability Business Environment Connectivity Risk Profile
Number of graduates andresource pool is notenough to judge a
location
Employability is a factorneglected but has a majorsay in deciding scalabilityfor a destination
It can be considerablyimproved by introducingspecialized trainingcourses andcertifications
Policy Makers are thecritical link in the process
of transformation
Business Catalyst Tax Incentives Land Allocation Government Support
Adequate public transportsystem
Physical connectivity is asimportant as internet &
telecom infrastructure Adequate and quality
bandwidth Submarine Line Satellite Uplink Leased Line
Adequate and qualitytelecommunication
infrastructure
Manage future risks toenhance presentattractiveness
Impact on Business dueto:
Natural Risk Political Risk Social Risk Commercial Risk
Emerging cities musthave lower risk to attractinvestments
Factors mentioned are fast becoming hygiene factors for emerging destinations and the real differentiators for
established destinations. Cebu City has to focus on developing its employability and business environment.
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Improving Employability:Comprehensive Skills Assessment
An Example: The Philippine Benchmarking and Evolution Strategy (BEST)
A two-phase study conducted by Tholons and the Board of Investments (BOI) under the Philippines
Department of Trade and Industry (DTI).
Objectives of the study:
Gather data on the competitiveness of various Philippines cities as locations for global Voice BPO, Non-Voice
BPO and ITO operations.
Establish a platform for dialogue between industry, government and the academe to maximize the growth of the
Philippine outsourcing industry.
Phase 1
Tholons LocationAssessment Framework
Identify Current BPODestinations in the
Country Manila NCR
and other locations onTholons radar
Phase 2
Partnership withMeritTrac:
Assess 5 distinct skillsets of candidates
Assess Specific Skill-Sets of Talent in the City
What skills that need to
be addressed?
Comparison of Different
local government units.
Aside from Metro
Manila, where else can
BPOs locate?
Aside from Contact
Center Industry, what
else can Philippine
Talent offer?
Resulting toKey Findings
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Philippine BEST : Initial Results & Future
SpokenEnglishTest
0%
10%
20%
30%
40%
50%
60%
70%
80%
Verbal Ability Analytical Ability Attention to Detail
53%
47%
45%
52%
51%
47%
73%
50%
55%
Low End (India) Philippines High End (India)
ThresholdA
nalysis
0
0.5
1
1.5
2
2.5
3
3.5
4
Voice Clarity Accent
Neutrality
Fluency Grammar
3.96
2.71
3.04
2.87
3.99
2.15
2.55
2.28
Philippines India Identify actual capabilities in terms of skillavailability, which would help streamline thepositioning of a location for specific clients andservice lines
Expansion of testing to hired employees, withthe help of Business Processing Association of
the Philippine (BPA/P) A comparison of theskill sets between:
Newly Hired Employees on the production floor Potential Future Pool
Working with BPA/P and various universities/ localgovernment units to achieve objectives
BenefitsofSkillsAssessment
CurrentResu
lts
Comparable hire-able rates between India andthe Philippines
Given an indication as to the basic skill sets thatthe Philippines excel in and the skill sets that itneeds to improve on
For the next phase: Indentifying employabletalentin particular Tier-2 and Tier-3 cities -enabling the Philippines to promote thecapabilities of these cities to the right investors.
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From the BEST results: Cebu City Identified
Identifying the skills gap of Cebuanos for the outsourcing industry is the first step to improve their employability.
The success of KPO in Cebu City will rely on the quality of services.
Phase 1
Particular to Cebu City
Phase 2Skills Assessment
Key Findings
How will KPO thrive in Cebu City?
City Mapping: gathering of pertinent
data for city-level comparisonCity Selection Index: mapping the
BPO readiness of Cebu City
Testing and Identifying Cebu
City Talents: Specific Skills
Assessment exam for
BPO/ ITO/ KPO segments
both for the Academe and
Service Providers
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Marketing Cebu City: Perception vs. Reality
Moving away from a Tier-2 touristdestination
to the perception that Cebu is anIT-based City
Cebu City is dubbed as the ICT center of the Philippines. Asiatown IT Park is an IT Special Economic Zone in
Cebu City, operating for almost seven years. It is home to BPO and IT companies. Asian iOffice Inc. has
announced to build an office building in Asiatown IT Park for local and multinational BPO companies.
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A Lead Organization for Cebu Citys Outsourcing
Industry
Aside from these organizations, a BPA/P-like structure in Cebu City is needed to sustain the growth of
outsourcing industry by being the middle man among key industry players, related associations and the local
government, ensuring a close cooperation.
Lead Organizationfor outsourcing industryin Cebu City
Concentrates on creating the
best possible businessenvironment for investors in
Cebu
Intervenes in the HR
development sector to increase
the quantity and improve thequality of professionals in ICT
and ITeS industries.
Concentrates on strengthening
the global competitiveness of
Cebus businesses and people
and influences the development
plans for Cebus industries
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Points to Consider
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Economies of Scale in KPO segment
KPO companies need only 50 employees to conduct its operations. The quality of services rendered for this
segment matters more than the number of employees.
*Source:NASSCOM, BPA/P & JETRO, 2008
KPO segment will serve as a competitive advantage of Cebu City over other outsourcing
destination cities in the country, even in other global cities.
KPO segment requires higher quality of services from the labor pool, which means a need for
enhancing employability of the people through better education and training.
Economies of scale can happen. Bulk hiring is required for BPO operations to achieve target
revenues. In KPO, smaller labor pools can generate substantial revenue.
Sample Case: Animation Industry in the Philippines
US$70 billion Global Industry*
Estimated US$105 million revenue for the Philippines in 2007 with only about 7,000 employed*
From every animator: Philippines generates US$15,000, while each Contact Center agent generates
US$16,000*
Animation is just one of the verticals of KPO segment. The larger the employable labor pool, the greater
the revenues in the KPO segment.
In order to achieve these, what is needed? What should be done?
Bulk hiring is required for BPO operations to
achieve target revenues.
In KPO, smaller labor pools can generate
substantial revenue.
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The Role of the Roadmap for Cebu Citys KPO
Guide
Target Focus
Milestone
Roadmap + Effective Implementation = Success in KPO
Roadmap
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Tholons advisors formed the Offshore Advisory
industry a decade back and continue to lead it
Tholons is a full service management consulting firm exclusively focused on advising clients on outsourcing ofservices
Tholons has advised on more than 250 offshore focused engagements with a combined value of more than $7 billion.
Tholons maintains and tracks 1000+ vendors in the BPO/ITO space worldwide and has excellent relationship withCXOs of leading vendors in outsourcing markets including India, Philippines, Sri Lanka, Vietnam, Latin America, etc.
Tholons works closely with Governments across the world to promote outsourcing of services. Tholons has worked withIndia, Philippines, Jordan, Sri Lanka, China, Vietnam, Brazil, Argentina, Chile, Uruguay etc.
Strong research capability facilitate initiatives such as e-Services 2008 (Philippines) Global Centers of Excellenceand annual editions of Top 50 Emerging Destinations the industry reference for location analysis
Relationships with key institutional groups include governments of both offshore and client markets, trade bodies suchas Nasscom and BPAP, industry regulators, other business partners such as HR consultants
On the ground presence in large markets such as US, UK, India, Singapore, Philippines, China and Sri Lanka
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Tholons advisors past experience have impacted deals
worth over $7 billion across an array of industries
Sample List
Manufacturing
Technology
Retail
FinancialServices
VC/PrivateEquity
IT/BP ServiceProviders
Media &Entertainment
Governments& Education
Health Care
Oil & Gas
Travel/Logistics
http://images.google.co.in/imgres?imgurl=http://www.vossenchocoladewerken.nl/afbeeldingen/logo/R-ABN-3.abn%20amro%20onderaan.jpg&imgrefurl=http://www.vossenchocoladewerken.nl/referenties.php&h=150&w=200&sz=4&tbnid=BvV0R2XthdkJ:&tbnh=74&tbnw=99&hl=en&start=1&prev=/images?q=abn+amro&svnum=10&hl=en&lr=&sa=G8/2/2019 Cebu Presentation 2010 Final
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Governments and Trade Bodies across the globe havebenefitted from our advisory and consulting expertise
2007
Centers of Excellenceswere identified among the
Cities
2006
Cities identified asOutsourcing Destinations
instead of Countries
Tracking the worlds emerging outsourcing destinations
2008
Development of Centersof Excellence andRegional Analysis
2009
Detailed report onRegional Distribution ofCenters of Excellence
Progressively developed assessment framework which evolved over time
Relationship with stakeholders (investors, buyers, suppliers) across all the
regions
Relationship with Governments and Trade associations in over 30 majorOutsourcing Destinations, including NASSCOM, BPA/P, RUSSOFT, NAO, ICTA,
BRASSCOM, CESSI, PIKOM, VINASA etc.
Dedicated Research Team with over a decades experience, working on location
specific research and analysis
De facto rating of Established/Emerging Outsourcing Destinations in the
Industry, widely accepted and covered by Global Media and other stakeholders
Our clients - Government & Trade
Associations
http://www.bpap.org/bpap/index.asphttp://www.mapsofworld.com/images/world-countries-flags/jordan-flag.gif8/2/2019 Cebu Presentation 2010 Final
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Contact
Jonathan De LuzuriagaManaging Director
Asia Offices
Europe OfficeAsmec Centre
Eagle House, Bracknell
Berkshire RG12 1HB, UK
Phone: +44-1628-566140
India Office2/10, 2nd Floor, 80 Ft Road
RMV Extension Stage II
Bangalore 560 094, India
Phone: +91-80-23519760
Philippines Office
Unit 803, Richmonde Plaza
21 San Miguel Ave., Ortigas Center
Pasig City, Philippines
Phone: +63-2-635-9236
North America Office5 Penn Plaza, 23rd FloorNew York, NY 10001
Phone: +1-646-290-9320
Fax: +1-646-349-3546