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Perspective 2020: Transform Business, Transform India
Perspective 2020: Transform
Business, Transform India
Perspective 2020:
Transform Business, Transform India
2
2
PERSPECTIVE 2020: KEY MESSAGES
An unparalleled impact on the Indian economy in the last 10 years
Demographic shifts will fuel the growth of new sectors, markets, and service lines
80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments
80 per cent of incremental growth cannot be captured solely through the current “offshore and low-cost” proposition. Need for new business models
Business services will account for 60% of the total opportunity in 2020
The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion and the domestic component will grow to USD 50 billion by 2020. Additional USD 150 billion at risk
3
THE INDUSTRY HAS HAD AN UNPARALLELED IMPACT ON THE INDIAN ECONOMY
Rapid growth in the last decade
Exports USD billion47
18
82
2009200520021998
CAGR 1998-2009 (exports)
CAGR 1998-2009 (domestic)
33%
26%
Areas of Impact Impact
Employment Creation
• 45% of new urban jobs created (1995-2005)
Contribution to Education
• 6-7x fold increase in tertiary education in exporting states
Diversity and Global Exposure
• Women in the workforce estimated to be 30%; new entrants-45%
• 30% of delivery outside India
Contribution to Exports
• Exports offset close to 65 per cent of India’s cumulative net oil imports over past decade
4
4
PERSPECTIVE 2020: KEY MESSAGES
An unparalleled impact on the Indian economy in the last 10 years
Demographic shifts will fuel the growth of new sectors, markets, and service lines
80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments
80 per cent of incremental growth cannot be captured solely through the current “offshore and low-cost” proposition. Need for new business models
Business services will account for 60% of the total opportunity in 2020
The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion and the domestic component will grow to USD 50 billion by 2020. Additional USD 150 billion at risk
5 *Estimates Source: McKinsey Global Forces research
Regional share of global GDPPer cent
Middle East & Africa
Latin America
Asia (except Japan)
Europe
North America
Japan
0
20
40
60
80
100
1990 ‘95 ‘00 ‘05 ‘10 ‘15 ‘20 2025
7%
5%
20%
25%
33%
10%
2020 share
BY 2020, ASIA (INCLUDING JAPAN) WILL BYPASS EUROPE IN THE GLOBAL ECONOMY
6Source: UN population prospects, 2004; McKinsey Global Forces research
Decrease in working age (15-60 years) population: Japan
Millions of people
Increase in retiree (60+ years) population: United States
Millions of people
Current offshore base in India –
1.6 million
WORK FORCES WILL DECLINE AND AGEING POPULATIONS INCREASE IN KEY WESTERN COUNTRIES
7583
2008 2020
854
38
2008 2020
16
7
7
PERSPECTIVE 2020: KEY MESSAGES
An unparalleled impact on the Indian economy in the last 10 years
Demographic shifts will fuel the growth of new sectors, markets, and service lines
80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments
80 per cent of incremental growth cannot be captured solely through the current “offshore and low-cost” proposition. Need for new business models
Business services will account for 60% of the total opportunity in 2020
The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion and the domestic component will grow to USD 50 billion by 2020. Additional USD 150 billion at risk
8
Total revenue potential for global sourcing, 2020
USD billion
CURRENTLY UNTAPPED MARKETS WILL DRIVE ALMOST 80% OF INCREMENTAL GROWTH BY 2020
Growth in core markets
• Not adjusted for potential erosion due to automation
200190
New verticals in developed countries• Public
sector• Healthcare• Media• Utilities
230
New customer segments• SMBs
380
Outsourcing market in new geographies• BRIC
Up to 80% of growth from markets that are not core today
1,500
Core markets 2008• 6 verticals*• N. America,
Europe, Japan
• Large enterprises
500
*BFSI, telecom, retail, pharma, manufacturing, travel
9
9
PERSPECTIVE 2020: KEY MESSAGES
An unparalleled impact on the Indian economy in the last 10 years
Demographic shifts will fuel the growth of new sectors, markets, and service lines
80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments
80 per cent of incremental growth cannot be captured solely through the current “offshore and low-cost” proposition. Need for new business models
Business services will account for 60% of the total opportunity in 2020
The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion and the domestic component will grow to USD 50 billion by 2020. Additional USD 150 billion at risk
10
Total addressable market for global sourcing and domestic outsourcing, 2020
BUSINESS SERVICES WILL ACCOUNT FOR 60% OF TOTAL ADDRESSABLE MARKET OPPORTUNITY IN 2020
Business services
USD billion
Growth in core markets
New customer segments• SMBs
New verticals in developed countries• Public sector• Healthcare• Media*• Utilities
Domestic outsourcing market in new geographies• Brazil• Russia• India• China
Core markets 2008• 6 verticals (BFSI, telecom,
retail, pharma, manufacturing, travel)
• North America, Western Europe, Japan
• Large enterprises
Total addressable market in 2020
*Printing and publishing
Source:Global Insight; Gartner January 2009
280
220
500 120-140
200-250 130-150
190-220 145-160
230-250280-310
380-420
605-220
895-980
1,500-1,640
11
11
PERSPECTIVE 2020: KEY MESSAGES
An unparalleled impact on the Indian economy in the last 10 years
Demographic shifts will fuel the growth of new sectors, markets, and service lines
80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments
80 per cent of incremental growth cannot be captured solely through the current “offshore and low-cost” proposition. Need for new business models
Business services will account for 60% of the total opportunity in 2020
The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion and the domestic component will grow to USD 50 billion by 2020. Additional USD 150 billion at risk
12
PROVIDERS CAN CONSIDER MULTIPLE “STEP-OUT” BUSINESS MODELS TO CAPTURE FUTURE OPPORTUNITIES
*Independent verification and validationSource:McKinsey analysis
NOT EXHAUSTIVEH
ow
to
co
mp
ete
(c
om
pe
titi
ve
ad
va
nta
ge
)
Multi-client services/ products
Domain expertise
Customer intimacy
Delivery excellence
New geographies (BRIC)
SMBs Large enterprises
SMBs
Developed markets
Where to compete (customer segments)
Large enterprises (Fortune 1000)
3 Domain approach
2 Customer-centric approach
1 Delivery/technical approach
4 Solution approach
“Step-out” plays
Customer specialist
Lean factory
Vertical specialist
Saas-enabled
BRIC specialist
13
13
PERSPECTIVE 2020: KEY MESSAGES
An unparalleled impact on the Indian economy in the last 10 years
Demographic shifts will fuel the growth of new sectors, markets, and service lines
80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments
80 per cent of incremental growth cannot be captured solely through the current “offshore and low-cost” proposition. Need for new business models
Business services will account for 60% of the total opportunity in 2020
The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion and the domestic component will grow to USD 50 billion by 2020. Additional USD 150 billion at risk
14
India’s technology and business services export market in 2020 – scenarios*
USD billion
AN OPPORTUNITY OF UP TO USD 150 BILLION COULD BE AT RISK IN 2020 (1/2)
Business services
Growth multiple
CAGR
FY 2020-Focused Initiatives
and Innovation - driven grow
225-310 135
• Expedited reforms in tertiary education
• 10-15 Tier II cities with world class infrastructure
• Adoption of new business models by the industry
• India among the top 3 innovation hubs of the world
• Talent pool of 13.5 million
7.7x 18.6%
FY 2020-Current
Initiatives• Slow pace of reforms in
education (talent pool of 10 million)
• Limited development of Tier II, III cities
• Continued trust as a sourcing hub
• Continued government support
• Limited lash back from protectionism
4.4x 13%
175
FY 2008
40
11
87110-150
15
Indian domestic technology and business services market in 2020 – scenarios
USD billion
AN OPPORTUNITY OF UP TO USD 150 BILLION COULD BE AT RISK IN 2020 (2/2)
• GDP CAGR of ~5.5%
• Moderate IT adoption across verticals
• Significant government thrust on IT adoption including broadband rollout
• Reinvented business models
FY 2020 - Current Initiatives
4.2x 12.6%
50
65
• GDP CAGR of ~7%
• Significant IT adoption across verticals
5.4x 15%
FY 2020 - Focused Initiatives
and Innovation Led Growth
15
FY 2008
12
2
24 32
Business services
Growth multiple
CAGR
16
Catalysing growth beyond
today’s core markets
Establishing India as a
trusted global hub for
professional servicesHarnessing
ICT for inclusive growth
Developing a high calibre
talent pool of over 3 million
people
Building a preeminent innovation hub in India
Five themes
15
2
3
4
16
• Winning through the downturn
• Reinvented business models
• New verticals, geographies, customer segments
• Robust domestic demand
• Infrastructure
• Corporate governance
• Risk management and security
• Global branding
• ICT solutions for healthcare, education, financial services, public services
• Connectivity and access
• Soft infrastructure
• Quality scale of tertiary education
• Curriculum and faculty quality
• Intellectual property framework
• Centres of Excellence
• Entrepreneurship
SUCCESS WILL RELY ON CONCERTED ACTION ANCHORED ON A FIVE-FOLD VISION