A Passage To India

A dedication

To India which prepared me for the world

And, America which opened the world…

-‘A personal guide to offshoring in India’ by Atul Vohra

India: The recent beginnings…

McKinsey Quarterly Report, 2001

India: The rest of the story

• A history that is 3000 years old, and, one in the making.

• Western man is “semitic in religion, greek in philosophy, roman in
politics, saxon in morality and Aryan (Indian) in language” ( Max
Mueller circa 1850)
• By 1500 A.D. Emperor Aurangzeb’s revenues in India were 10x those
of his contemprary,Louis XIV of France
• By 1900 India was still a top 5 economy with the third largest rail
network and 2.5% of world trade
• By 1990 India was a bottom 5 country with 90 years of zero/negative
per capita income growth, the largest number of poor and illiterate, a
mixed up economic model, rampant intellectual and capital flight and,
near insolvency.
• 2004 India is on fire… among the fastest growing economies, the
world’s back office and a strong influence in the arts, culture and
fashion. As Tom Friedman says, India is now giving the world “Zippies”
• India Shinning is not just a slogan but the reality
India: The rest of the story ,continued

• The Indian paradox continues-for everything you can say, the

opposite also holds true…it is like wonderland: everyone seems
mad and everything is bizarre, upside down
• The promise comes with unending frustrations…of population,
pollution, public apathy.
• Yet India can not be ignored for economic, political and spiritual
reasons. It is like Hotel California-you can check out, but never
leave.
• And, therefore you need a guide to understand India and profit
from it.
• This presentation is about understanding the potential and ways
to mine it.
India: Offshore Potential

• High Quality • Rapid Scalability

– In IT 50 of world’s 70 CMM5 Companies – 3 Mn+ Graduates each year
are in India – Depth in Legacy & leading edge
– Cost of Quality ranges from 20-60% of technologies
IT application budgets – Estimate Indian users a generation
– Similar data emerging for contact centers ahead of US mainstream
and business processing outsourcing – Enables corporations to become more
(BPO) units nimble
• Lower cost • Flexibility
– $5000 - $8000 pa starting salaries – Vendors more flexible than employees
variable cost models
– Advantages in service and
– Rewarded by the markets
manufacturing sectors
– Quality in services related to vedic
heritage,not physical infrastructure
dependant.
• Predictable
– 90% + of IT projects on-time v/s 30%
industry average
– #1 Pressure point for Operation &
Technology Managers/Enterprise Users
The India Advantage

• Scale – 300 Million English • Commitment to Quality

Speaking Middle Class by • Intellectual Property
2010 Protection & Enforceability
• Government Support
• Educational System &
• Eco system & Industry
Focus on Quantitative momentum from $11 bn in
Ability 2002 to $70 bn in 2008
• Work ethic in the IT/ITES (McKinsey Estimates)
industry
• Powerful Demonstration
effect of successful
Indians in India and
overseas
India’s Strategic Advantage is based on three key factors

Lo ono
ng m
Ec
er

T e ic s
ow

rm
np

Strategic
Ma

Advantage

Govt. Support
Overall

People Factor Infrastructure Factor Environmental Factor

•Skill Base •Telecom •Govt fiscal incentives

•Availability •IPLC Costs •Simplicity of
•Skills mix •Skills mix tax structure
•Work attitude •Speed of deployment •FDI policy
•Cost Advantage •Property •Politico-Legal
•Employee cost •Transportation environment
•Productivity •Power •Economic environment
•Institutional Support •Banking and Finance
•Training
•Labor Laws
As a result, India present a compelling outsourcing case

Long Term Econ

Firms in the US can

save between 30%-
60% of their
processing costs by
outsourcing to India
 The talent pool in India gives it a significant edge . . .

•Placed second to US in size &

Manpower
availability of skilled and English
speaking manpower
•Availability of a large pool of Data
Entry Operators and Accounting
Professionals for back office
operations
•Availability of a large number of
IT Professionals to provide IT
support
•Presence of over 11,000
recognized educational institutions
apart from other unrecognized and
other vocational training institutes
India Offshore Opportunities

• IT-Application development and maintenance

• IT Infrastructure monitoring and hosting
• IT Product development
• BPO Contact centers
• BPO Processing-payments, claims, applications
• BPO Administration-transcription, digital assets management
• BPO Content-research, animation, graphics, analytics
• BPO Engineering, design, and Project Management
• BPO Healthcare-radiologists, drug testing, and research
• Manufacturing-generic drugs, autos
India: Challenges &
Resolution

Challenges Resolution
Understand and build Indo US
Fear Of Working presence ands capability.
Learn to manage offshore
with Overseas Mgt.

Develop US strengths and

Domain Expertise build in the offshore team

Transparency and
Loss Of Control processes including ePMO
Tools and interpersonal ties.

Managing US Invest in retraining, higher

value activities, ownership of
political, labor and Indian firms and
social issues communities. Enable opening
of Indian market.
The BPO industry is critical for Indian economy from a
macro economic perspective

• Currently, IT and BPO services together account for 2% of the

Indian GDP
• Share of GDP expected to go up to 7% by 2008
• IT and BPO sectors expected to contribute 20% of the GDP
incremental growth between FY2002 and FY2008
• Share of foreign exchange inflows expected to grow from 8% in
2002 to 30% by 2008
• Will employ over 2 million people directly by 2008
• Will generate indirect employment for an additional 2 million
people
OFFSHORING-A Mega trend for our times

• O- Offshore or Ossify
• F- Fit and Feel (of the partner)
• F-Friend not Foe (or vendor)
• S-Start Smart( Real commitment, not an invisible pilot)
• H-Hi Tech and Hi touch (Processes and teams)
• O-Oversight not out-of sight ( Transparency)
• R-Risk Management not elimination
• I-Incentivize collaboration (goal and reward alignment)
• N-Nimble( flexibility and speed the greatest pay-offs)
• G-Globality for greatness!
Offshoring-Doing the right thing and doing it right

• Develop key supplier relationships-look for compatibility and

chemistry
• Build internal buy-in, champions and visibility
• Build a roadmap which shows real commitment while managing
the risks of knowledge, critical dependency, sovereign risk etc.
• Work as One team-goals, systems, rewards and recognition
• Look at onsite-offshore as an integrated model. Monitor the
ratio and reinvest in both.
• Establish multi –level relationships not a single point
salesperson/purchasing officer face-off.
• Strategically assess the buy vs. build issue. Revisit every 2-3
years.
Thank You
The Government has also shown commitment to promote the sector
Govt. Role
•100% income tax exemption (up to 2010)
•100% FDI Permitted
•Setting up of Software Technology Parks (STP) to
facilitate/support Infrastructure requirements
•Repatriation of income permitted
•Duty free imports of goods
•Exemption from payment of excise duty
•Capital gains on VC investments exempt from tax
•Task forces set up for BPO services
 …and Telecom infrastructure, which was cited as a weakness in the
past, is no longer an issue
International Bandwidth
Domestic Connectivity Players System Capacity
SEA-ME-WE-2 1 Gbps
SEA-ME-WE-3 20 Gbps
FLAG 10 Gbps
SAFE 80 Gbps
Network i2i 8.4 Tbps
Dishnet DSL 7.86 Tbps
•Bandwidth supply will shortly
outstrip demand (Q2FY04)
-Huge network build outs by
private operators
•Prices for domestic and international
bandwidth have halved in the last 12
months
•Private Operators are expected to
drop prices further
The remote future-estimates of $50-70 billion by 2008
(BEST IN A GRAPH)

Segment Estimate $ billion ( Source

Nasscom)

• IT Applications and System • 30

integration
• Products and technology • 10

• BPO • 25