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Presentation regarding the businesss process outsourcing industry and emerging trends.
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A Dedication to Service
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1
Emerging Global BPO SectorsMoving up the Value Curve
Presented by: Larry Jones, CEO StarTek, Inc.
October 2009
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2
Discussion Topics
• Background
• Trends in BPO Industry
• Impact of Current Economy Downturn
• The Emerging KPO Sector
• Future BPO Mega-Trends
• How Can the Philippines Remain Competitive?
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 3
Overview
Founded in 1987Headquarters in Denver, CO, USA
20 Delivery Centers in the U.S., Canada, Philippines, and Costa Rica
Employees: 9,000Publicly Traded since 1997 (NYSE: SRT)
2008 Revenue: $273 Million11% Revenue Growth in 2008 and 2009
Customer Care & BPO • Sales & Sales Support• Consumer & Business Care• Receivables Management• Technical & Field Support• Order Management &
Provisioning• Account Management
Industry Focus:Communications & Technology
• Telco & Wireless• Cable/Broadband/Satellite• Content Provider Services• Consumer Electronics• Software, Systems & Internet
Denver, ColoradoHeadquarters
A Dedication to Service
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 4
Trends in the BPO Industry
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 5
The Evolution of Outsourcing
Logistics & Fulfillment
Computing Services
Call Centers
IT Services
Back Office (BPO)
Knowledge Process (KPO)
1960s’ 1970’s 1980’s 1990’s 2000’s 2003 2009
Mainframe Computers
Low Cost TelcoPBX Switch
Software Platforms
Offshore LaborGlobal Connectivity
Outsourcing Enablers
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 6
The Outsourcing “Value Stack”
Facilities
Labor
Technology
Facilities
Labor
Technology
Process
Facilities
Labor
Technology
Process
Facilities
Labor
Technology
Process
Intellectual
Facilities
Labor
Technology
Process
Intellectual
Logistics & Fulfillment
Computing Services
Call Centers
IT Services
Back Office (BPO)
Knowledge Process (KPO)
Facilities
Labor
Technology
Process
Intellectual
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 7
Sector Comparisons
Onshore Call Center
OffshoreCall Center
OffshoreBPO
Offshore IT
OffshoreKPO
Functions Voice VoiceVoice and Non-Voice
Non-Voice Non-Voice
Work Time Day Night Day or Night Day Day
Source: Company Reports, Baird & Co.
KeyLocations
USCanada
PhilippinesLatin Am.
India
IndiaPhilippines
IndiaPhilippinesEast Europe
India
Wages ($US) $8-10 $3-4 $2-4 $5-7 $15+
Attrition 80-120% 50-60% 25-35% 15-20% 15-25%
Skills Required
ComputerConversational
Tech or Care
AccentGrammar
ConversationalTech or Care
IntuitiveProcess
TechnicalAnalytical
EngineeringProgrammer
Education High School College College College/MBA MBA
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 8
BPO Trends - Client Perspective
In light of the economic downturn, we are observing:
1. Less transaction volume (sector specific)
2. Increasing % of outsourcing (for cost savings)
3. Accelerating migration to offshore (for cost savings)
4. Increased focus on revenue generation (selling skills)
5. Eliminating non-performing vendors
6. Slower decision cycles (risk averse)
7. Deploying technology to offset labor costs
8. Heightened concern about risk (disaster recovery)
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 9
BPO Trends - Vendor Perspective
1. Chasing new labor markets– Less Canada and Europe; More use of at home agents in U.S.– Accelerating use of traditional offshore– Larger vendors expanding into emerging markets
2. Focused on profitability– Client retention– Selective price increases– Operating efficiencies– Use of Shared Services to reduce SG&A costs
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 0
BPO Trends - Vendor Perspective
3. Focus on growing verticals sectors– Healthcare is new hot sector– Communications continues to grow– Financial Services needs cost savings
4. Moving up the value stack (improved margins)– Less labor and facilities focus– Better use of technology (client driven)– More process (BPO)– More intellectual (KPO)
A Dedication to Service
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 1
Knowledge Process Outsourcing … The Hot Spot!
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 2
What is KPO?
The KPO term was coined by Evalueserve’s Chief Operating Officer, Ashish Gupta, in September 2003, in an effort to differentiate between his firm’s services and those of the established BPO firms
BPA/P defines KPO as: an extension of BPO involving greater business complexity and focusing on knowledge-intensivebusiness processes that require significant domain expertise. Knowledge workers delivering these services are highly educated and trained, and trusted to make important decisions on behalf of their clients.
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 3
KPO vs. BPO
KPO has more:
• Complex processes that provide guidelines but not rules
• Agent judgment rather than rule driven
• Higher agent level skills (MBA vs. BA)
• Higher agent wages ($15 vs. $4)
• High interactivity with other corporate teams and processes
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 4
KPO Functions
• Investment research; financial modeling• Company and industry reports• Credit risk analysis• Valuation of companies• Equity and Capital Market analysis
Equity and Financial Research and Analytics
• Market research and analysis• Data mining and report preparation• Customer analytics
Business and Marketing Research
and Analytics
• VLSI and chip design• Simulations• Product design support• Prototype development
Engineering and Design Services
• Offshore drug discovery• Clinical research
Pharmaceutical Research Outsourcing
Source: TPI
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 5
KPO Services Segments
Projected 2010 KPO Usage by Segment
Data Research, Integration & Management
29%
Biotech & Pharma
18%Engineering and
Design12%
Remote Education & Publishing
12%
R&D12%
Animation & Simulation Services
8%
Other9%
Source: NASSCOM.
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 6
KPO Growth and Delivery
The KPO market is growing at 34% CAGR
India dominates the KPO Sector and will do so for the near future
Other markets are rapidly expanding into KPO
Global KPO Industry Total Sales $4.4 Billion
Global KPO Industry Total Sales $16.7 Billion
2006-07 2010-11
Source: “India’s KPO Sector: Origin, Current State, and Future Directions” by Alok Aggarwal, Chairman, Evalueserve (2008)
Other 30% Other 33% India 67%India 70%
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 7
KPO Value Proposition
Facilities
Labor
Technology
Process
Intellectual
• Real estate cost savings• Minimal value
• Significant labor savings• Access to scarce labor markets• Selection and training
• Basic technology infrastructure • Advanced analytical tools
• Proprietary processes• Process portability• Integration with onshore operations
• Functional and industry knowledge• Patents and IP
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 8
KPO Vendor Challenges
• Availability of Skills
• Training Requirements (and associated costs)
• Portability of Processes (complex and not well defined)
• Lack of Economies of Scale
• Protecting Intellectual Property Rights
• Legal and Licensing Issues
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 1 9
KPO Wrap-up
• KPO represents the next stage in the evolution of the business process outsourcing market
• The KPO market continues to grow in maturity and adoption
• Offshore delivery (primarily India) still dominates KPO
• Clients will continue have concerns over the outsourcing of core business functions
• Many vendors are aggressively moving up the value curve into KPO segments
A Dedication to Service
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 0
Future BPO Mega-trends
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 1
The Evolution of Outsourcing
Call Centers
IT Services
Back Office (BPO)
Knowledge Process (KPO)
1980’s 1990’s 2000’s 2003 2010 2015
Low Cost TelcoPBX Switch
Software Platforms
Offshore LaborGlobal Connectivity
Outsourcing Enablers
What’sNext?
Mobile Devices/PDAsHome ConnectivityCloud Computing
Global Issues: Energy, Health
1. Technology over Labor2. At Home Agents3. New Vertical Industry Growth
Three Mega-Tend Predictions
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 2
1. Technology over Labor
Technology (not labor) will drive BPO “value-added”– Self-help via user friendly technology– Technology assisted agents (email, chat, social networking)– Analytics (customer, market, operational, sales)
TODAYPDAs & KiosksEmail, IM, ChatSocial Networks
Web Information Access
Data AnalyticsCloud Computing
Reports
FUTURE
Business Intelligence
Self HelpAgent Assisted Chat
Multi-Channel Support
Phone CarePhone Agents
Research
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 3
2. At Home Agents
Home agents will compliment center based delivery– Why build a call center if agents can work at home?– Reach new labor pools that are not near a call center or able to commute– Rapid adoption in US today; minimal impact for offshore due to connectivity– Requires a lot of technology and a whole new way of managing the workforce– Same technology can automate existing call center processes
TODAYHome Connectivity
VoIPScreen Takeover
eRecruitingeTraining
ChatSocial Networks
FurniturePhones
PCs
Real Estate
FUTURE
At Home Agent
Agent Portal
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 4
3. New Vertical Industry Growth
Certain verticals will lead the growth– Global issues will drive investments: Health & Wellness; Energy– Bio-tech, Healthcare, Clean-Tech, Utilities, Organic Food, Water
TODAY
Global IssuesHealth & WellnessNatural Resources
Customer CareBPOKPO
Retail
Communications
Financial Services
FUTURE
Utilities
BioTechPharma
CleanTech
Organic Food Healthcare
A Dedication to Service
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 5
How Will the Philippines Remain Competitive?
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 6
The Philippines Today
• Strengths– Viewed as #1 for customer care call center– Abundant labor pool of English literate college graduates– Open and team based culture
• Weaknesses– Lagging in BPO, IT and KPO to India– Lack of ample Engineering and MBA talent– Business continuity (weather and Telco)– Mid-management leadership skills (lack of assertiveness and
accountability)
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 7
Recommendations
1. Address the continuity issue– Market to the “perception” issue– Build Redundant infrastructure
2. Address Educational issues– High-end degrees with industry specific skills– Leadership skills (assertiveness and accountability)– Technology literacy
3. Market to the high growth industries– Less about BPO, IT or KPO– More about industry excellence
4. Develop Philippines as a “customer care technology” center– University focus– Adopt call center automation technologies– Develop Infrastructure for next generation technology
A Dedication to Service
B PA / P O u t s o u r c i n g S u m m i t O c t o b e r 2 0 0 9 P a g e 2 8
Thank You