Destinations Compendium 2010 by Cybermedia

Global Services An integrated media platform which connects the various constituents of the global technology and business processing services industry ecosystem.

Directory of Services Newsletter A regular digest of key industry happenings. Digital Magazine

A CYBERMEDIA Publication

Pradeep Gupta Chairman & Managing Director Cyber Media (India) Ltd. E. Abraham Mathew President Ed Nair Editor ed@cybermedia.co.in Satish Gupta Associate Vice President satishg@cybermedia.co.in

The fortnightly digital magazine features research reports, articles and expertsâ&#x20AC;&#x2122; views. Available on www.globalservicesmedia.com

Smriti Sharma smritis@cybermedia.co.in

Webinars

Sruthi Ramakrishnan sruthir@cybermedia.co.in

Global Servicesâ&#x20AC;&#x2122; web-based seminars aim to impart useful information related to outsourcing industry in the form of presentations and discussions by industry specialists. Research We deliver indepth analysis and research reports on sourcing subjects. Microsites Online resource center designed to provide focused content on special subjects to the outsourcing community. Events From multi-day, high-level, resort conferences to intimate breakfast discussions we offer a number of opportunities that connects the outsourcing community.

Niketa Chauhan niketac@cybermedia.co.in Virendra Kumar virendrap@cybermedia.co.in Offices Global Services Media LLC. 806 Green Hollow Drive, Iselin, NJ 08830 T: 678-665-6005 Global Services Cyber Media (India) Ltd. CyberHouse, B- 35, Sector 32 Gurgaon-122001, India Tel: +911 24 4822222 Fax: +911 24 2380694 Contact: globalservices@cybermedia.co.in Disclaimer All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher.

CUSTOM PROGRAM Customized services rendered through different media platforms. OSOURCE BOOK A directory of global outsourcing service providers. www.osourcebook.com

Letters to the Editor Send letters to ed@cybermedia.co.in, or to any of our writers. We reserve the right to edit all letters. Postings submitted to our blogs and letters to the editor may be published in our digital magazine or Website.

Global Services LIVE! is a quarterly compendium that features success stories in the global sourcing and delivery of IT and BPO services to businesses worldwide. The compendium features live cases that offer live lessons to the sourcing world. Service providers that participate in the program stand to benefit in terms of being able to showcase their best capabilities, leverage and reuse existing marketing assets, and reach their target market effectively. The program helps buyers of services identify service providers with demonstrated capabilities, skills, delivery profiles and industry domain knowledge. 2010 – Q4 Edition

2011 – Q1 Edition

2011 – Q2 Edition

2011 – Q3 Edition

The program is delivered in multiple formats such as Digital Magazine, PDF, Microsite, Online repository, e-newsletter, social media to name a few.

Power Of Customer Advocacy! For more details

Click Here

To be a part of this program, write to satishg@cybermedia.co.in

Editor’s Note

The Business of Places B Ed Nair Editor ed@cybermedia.co.in

IT and BPO are both global business opportunities and tools for economic development for countries. This year’s research and ranking feature 100 cities from 49 countries.

6 GS Destinations Compendium 2010

usiness is all about ideas, money, and people. And places. This is specifically true in the global services industry. As we end this decade that marked the maturing of global sourcing of services, the role of outsourcing locations has really played out very well for all of us to see. For one, global sourcing was always about the ‘place’. In the beginning, it meant India and now it means much more. The journey from thereon has been fascinating. Remarkably, the journey also coincided with many other concomitant trends like rapid globalization, liberalization of economies, growth in emerging economies, and technology refresh cycles. These trends spurred the growth of global locations from where services could be delivered. The other point is that services in the form of IT and BPO are both global business opportunities and tools for economic development for countries. The breadth of economic impact of pursuing global services is wide: it includes increase in FDI, growth in exports, increase in domestic employment, rise in purchasing power, infrastructure development, and overall GDP growth. Every country including India is witness to these effects. The Global Services Destinations Compendium is an attempt to bring together the myriad dynamics of outsourcing locations in one place— complete with research, data, profiles, and expert opinions. At the most granular level, we look at cities and how they compare with each other. More importantly, we look at how upwardly dynamic the cities are compared to previous years. The research and ranking from Tholons feature 100 cities from 49 countries. It is indicative of the phenomenal spread of the global services business. GS

www.globalservicesmedia.com

A T R U E P U B L I C P R I V AT E PA R T N E R S H I P

W o r l d ’s # 9 Outsourcing

Fa vo ra b l e Destination

“A.T. Kearney Report 2009”

Reliable Infrastructure Educated Technical Human Resources Your Gateway to the Middle East Fast Growing Economy

Contents

Expert Speak

The Top 100 Cities

by Avinash Vashistha &Manuel Ravago, Tholons The list of Top 100 Outsourcing Cities will set the outlook for the industry in coming years.

� Choosing the Right Off-Shoring Destination 50 by Atul Vashistha, Founder & Chairman, Neo Advisory � Compete or Cooperate? Bridging the NearshoreOffshore Divide 53 by Anupam Govil, Founder and CEO, Global Equations � Rise of IT-BPO Outsourcing Frontiers Regional Analysis 56 by Viral Thakker and Nishant Mathur, KPMG Advisory Services, India � Latin America: The Next Sourcing Frontier or an Afterthought? 59 by Esteban Herrera, Senior Vice President, HfS Research

21 Country In Focus: JordAn

JORDAN

27 Regional Dynamics by Sruthi Ramakrishnan

� Location Assessment: Perception and Reality for Global Businesses 28 � Europe: Showcasing the Challenges and Opportunities 32 � Perspectives and Potential of Asia’s Hotspots 36 � Middle East & Africa: Leveraging Africa & Middle East 41 � Latin America: The Enduring Promise of Latin America 44

8 GS Destinations Compendium 2010

� Africa: The emerging frontier for services offshoring 63 by H.Karthik and Nikhil Rajpal, Everest Group � Location Selection Best Practices 65 by Jehil Thakkar and Shailesh Narwaiye, KPMG Advisory Services, India � Global Sourcing for FAO: Strong, Successful and Growing 68 by Stan Lepeak, Managing Director, EquaTerra Global Research � Why Latin America is Still a BUY 71 by Mario Tucci, Senior Global Business Consultant � Africa- The Next Outsourcing Frontier 72 by Dr. P.K.Mukherji, President & Managing Partner, Avasant Asia � Latin America Emerges as a Key Outsourcing Destination for 2011 74 by Don Jones, Partner, Technology & Life Sciences Practice, BDO USA � Africa as an Outsourcing Destination 76 by Pumela Salela, BPO/ITeS expert Consultant, World Bank � Offshoring in the Latin American Region 82 by Pradeep Udhas, Executive Director, IT/ITeS Sector, KPMG www.globalservicesmedia.com

� India’s Global Expansion: Eyeing Latin America 83 by Sumeet Chugani, Associate Attorney, Diaz Reus & Targ � Legatum Prosperity Index

� Dalian 104

� Santiago 128

� Guangzhou 106

� Shenzhen 130

� Hanoi 107

� Singapore 132

� Beijing 88

� Ho Chi Minh 109

� St. Petersburg 133

� Belfast 90

� Johannesburg 111

� Toronto 134

� Brno 91

� Kolkata 113

� Warsaw 136

� Budapest 92

� Krakow 115

� Buenos Aires 96

� Kuala Lumpur 117

� Ahmedabad, Bangkok, Bhubaneswar, Brasília 137

� Cairo 98

� Mexico City 119

� Bucharest, Cape Town, Dubai, Glasgow City 138

� Chandigarh 98

� Prague 120

� Guadalajara, Istanbul, Jakarta, Kyiv 139

� Coimbatore 100

� Rio de Janeiro 122

� Colombo 101

� San José 124

� Montevideo, Moscow, Mysore, Nizhniy Novgorod 140

� Curitiba 103

� Sao Paolo 126

City Profiles

� Penang, Perth, Seoul, Taipei 141

Destinations

Compendium 2011

One Stop Resource On Global Outsourcing Destinations

RELEASING NOVEMBER 2011

Inviting countries, cities, associations to take part in this initiative For more details, write to satishg@cybermedia.co.in

9 GS Destinations Compendium 2010

www.globalservicesmedia.com

� Ranking Fluctuation 12 � Methodology and Scope of Study 15 � Point of Scale Resistance 15 � The Top 100 Cities 16 � Top 10 Emerged Cities 18 � Top 10 Emerging Cities 19

by Avinash Vashistha

Chairman and CEO, Tholons

Manuel Ravago

Research Director, Tholons

The Top 100 Cities

Ranking Fluctuations The 2010 List of Top 100 Outsourcing Cities is a deliberate attempt to encapsulate trends in the new era of services globalization. Boon or Bane?

Change has been the best descriptive word for the outsourcing industry in 2009, and this year, Tholons has encompassed the world’s Top 100 Outsourcing cities twice the number of previous Lists. The expansion of the list has created an avenue for a more concise understanding of industry movements – across 49 countries from 10 defined regions. Industry experts noted that the outsourcing activities from 2009 to this year have become sluggish. Countries tried their best to prove resiliency in the crisis and opted for strategies that could mitigate the effects. Indeed, some of the countries that had been resilient experienced smaller GDP growth, below expected growth targets; on the other hand, countries which were greatly affected by the global recession posted negative growth, which often deterred their development as service delivery locations. Likewise, the repercussions of the global economic crisis postponed many large outsourcing deals across geographies, while forcing service buyers and providers alike to stretch operational budgets. The mantra of ‘doing more for less’ has never been more relevant to the service providers as it was this past year. The effects of the downturn also spurred apprehension among clients in renewing outsourcing contracts. This cautionary stance was felt by most if not all horizontal and vertical segments of the industry. On a positive note, many have viewed these challenges as opportunities, treating the economic downturn simply as a transitionary (or even evolutionary) phase for the industry. There is now a greater call for delivering complex services than maintaining cost advantages, which leads to a more widespread transformation of outsourcing models to fit the requirements of an ever-changing buyer market. Further, there is a stronger focus on business transformations among service providers, which will foster enhanced customer satisfaction. In the end, stronger buyer-provider relationship will be seen. The 2010 List of Top 100 Outsourcing Cities is a deliberate attempt to encapsulate such trends in this new era of services globalization. Thus, this year’s List is not only a reflection of the current competitiveness (and stature) of cities in the global outsourcing landscape, the List 12 GS Destinations Compendium 2010

likewise provides insight to the future potential of locations in addressing emerging trends and demands in services globalization. Location Assessment Framework

These recent events in the global economy certainly highlighted the importance of more accurately assessing a location and the corresponding outsourced services that can be potentially delivered. Given this, the Location Assessment Framework has been applied in generating this report. The Framework covers six broad categories with fifteen subcategories, with each category and subcategory having their own respective weight. These weights are then utilized to generate a corresponding ‘City Score.’ These categories are “Scale and Quality of Workforce”, “Business Catalyst”, “Cost”, “Infrastructure”, “Risk Profile” and “Quality of Life”. The parameters above are the essential components in differentiating cities from each other. Consequently, the parameters serve as guide in determining the capabilities of each city to deliver services in the wider spectrum of the outsourcing industry. Aside from presenting the inherent strengths, the parameters are also an effective base for identifying the inhibitors or areas for improvement which may undermine the development of the industry in the location. The framework also reveals additional factors which may spur a location’s service delivery maturity. The combination of these parameters results in a specific correlation of the cities to their respective service niche. For example, considerations in the workforce extend from scalability to employability of workforce. Cities with an abundance of Spanish-proficient speakers will have a greater value proposition for catering voice-based BPO services to the US Hispanic market. Likewise, cities with high percentage of engineering graduates may be better equipped to venture into the ESO space. Cost still plays a significant factor in locating. Coupled with the capacity to deliver specialized services, low cost cities can have a definitive advantage in attracting investors or service providers. Along with this, developed and supportive ITeS infrastructure is needed in order to fulfill the requirements of the industry. In order to support the www.globalservicesmedia.com

The Top 100 Cities

Scale & Quality • Labor Pool • Skills Availability • Graduate Output • Complexity

Skills and Scalability

Cost • Cost of Operations • Cost of Training • Cost of Real Estate • cost of Bandwidth • Cost of Living • Cost of other Infrastucture

Savings

Businee Catalyst • Government Benfits/Incentives • C ompetitive Landscape • Untapped Labor Pool • Employement Profile

Business Environment

growing ITeS industry, Kuala Lumpur for example, has shown concerted effort in improving infrastructure, which contributes to its overall attractiveness as an outsourcing destination. Factors such as Risk Profile and the Quality of Life in the cities are also included to assess the viability of the location. Political violence and social unrest may greatly affect the conduciveness of business operations in the city. One recent example is the increasing crime rate in Mexico, which has definitively affected the decisions of service providers in locating and expanding in the country. The Framework also considers various regional dynamics which also have a direct influence on the positioning of the cities in the global outsourcing space. Latin America is reputed for its nearshore advantages to the US; on the other hand Eastern Europe is known for its cultural affinity and geographic proximity to the Western European client market. The Tholons Location Assessment Framework thus becomes more relevant in critically identifying, monitoring, and evaluating the competencies of emerging global outsourcing destinations. City Movements: Losers and Gainers

The top gainers this year were mostly Tier I destinations – Colombo, Kuala Lumpur, Singapore, Brasilia, and Montevideo. A clear factor for the movement is attributed to the global effects of the economic crisis. With most economies recovering and rebuilding their competencies, service providers have been more keen on strategically placing their investments in (safer) Tier I cities and in locations with established service delivery capabilities. For instance, the city of Colombo moves up 5 places this year, in recognition of its capabilities in FAO, producing accountants that meet UK standards and the significant 13 GS Destinations Compendium 2010

Infrastructure

Risk Profile

• Connectivity • Bandwidth Availability • Transportation

• Social infrastructure (Hospitals, Educations Institutions, etc.) • Non-work Culture • Availability of Recreation/Leisure facilities

Operational Environment

Business Risk

Quality of Life • Commerical Risk • Political Risk • Natural Risk • Social Risk

Non-Business Environment

improvement in perceived risk in the country by the client nations. The city of Kuala Lumpur moves up 4 places highlighting the city’s robust and continuously developing infrastructure and maturity of service delivery capabilities for high-value ITO and FAO. On the other hand, the major drops were seen in Tier II locations: Nizhny Novgorod, Thiruvananthapuram, Cordoba, Chandigarh, Belfast, Accra, and Jaipur. One possible reason is the inability of Tier II locations to improve on service delivery maturity, in relation to its Tier I competitors in their respective countries. The two-old factors can be attributed to this: quality of scalable labor pool and infrastructure concerns. Many Tier II locations likewise have struggled to develop labor pools, or to at least reach the same labor pool quality of Tier I locations. Many Tier II locations have also experienced labor migrations of their highly-skilled resources, and as induced by rising unemployment rates. Challenges pertaining to employability have also been an occurring problem in many Tier II cities – especially when considering English proficiency and technical skills. For example, the city of Jaipur in India has lost some of its appeal as a destination of choice due to the perception of low employability of its technical and managerial talent pool. In contrast, and in St. Petersburg in Russia, the high technical graduate output is one of the major contributing factors which moved its ranking up, albeit having high labor costs. Weak infrastructure support also remains a deterrent for service providers from locating in Tier II cities. For instance, India’s ITeS-related infrastructure is nearing peak capacities, which makes it less efficient in fulfilling the requirements of the industry. This is noticeable among Tier-I locations in India and is further observed among Tier II locations. www.globalservicesmedia.com

The Top 100 Cities

Movement

Major Gainers

Movement

Major Losers

St. Petersburg

-4

Nizhniy Novgorod

Colombo

-4

Thiruvananthapuram

Singapore

-4

Belfast

Brasilia

-5

Cordoba

Montevideo

-5

Chandigarh

Kuala Lumpur

-5

Jaipur

Brno

-5

Accra

Tianjin

The downturn has proven the importance of location assessment for investigating the service delivery maturities of outsourcing destinations. Factors for locating may not entirely rest on the cost advantages but on the quality and complexity of services being delivered. Service providers have been keen in evaluating the best-fit city which will deliver their processes. Thus, the challenge now lies for the emerging countries to increase its overall competitiveness to gain traction in the outsourcing landscape. This will require more effective and creative initiatives that will position better position their countries in the market and highlight their inherent service delivery advantages. City-centric Approach – The Continuation of the Paradigm Shift

City-level analysis has always been the best approach in identifying corresponding service delivery strengths. As compared to country-wide analysis, a city-centric approach allows a more granular investigation of the inherent capabilities of and the opportunities for each potential city. For example, a country having specialization in IT services may encompass Software Development, IT Training and

Education, or Application Development Management services from its cities. Thus, the country value proposition is merely a rough summation of the service capabilities of its key outsourcing cities. City-centric assessments also receive greater traction from large service providers, and as city’s can better decouple themselves from the broad or oftentimes ‘generic proposition’ of the country. Value propositions of the cities are oftentimes overshadowed by the generic country value proposition. Cebu City for example has high potential to become a global KPO player but the city’s image is often overshadowed by the Philippines’ voice-based BPO reputation. For Tier II cities, decoupling will become an increasingly necessary process, especially among emerging cities with very specific skill set propositions. Decoupling from the country image will entail an efficient highlighting of the local value propositions and a more focused marketing and promotions strategy. The underlying premise for decoupling still lies on the coordination among key stakeholders in the particular location. More responsive decision and implementation will be required as the city-centric approach is significantly smaller compared to country-level approach. Successful concerted effort will also be a crucial factor in identifying and building the outsourcing industry in the city. The revamp of the global economy marks the emergence of key trends in outsourcing – a paradigm shift encompassing the types of services and the geographies of ideal locations. In the near-term, we should experience a more granular approach to location assessment - focusing on cities rather than countries and as a city-centric approach fosters better identification of specific niche services. GS

27 January, New York “Other outsourcing conferences do not have a good mix of Buyers and Sellers. Most of the time it is lot of sellers. So I think, it’s a good mix, you get to hear from the buyers prospective which is very important”. -Global Services Conference 2010 Attendee 14 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

The Top 100 Cities

Methodology and Scope of Study

he Top 100 Emerging Outsourcing Destinations 2010 report was fulfilled through a combination of proven methodologies. First, surveys and interviews were conducted with Tier I & II service providers and buyers aimed at determining trends in delivery and consumption of outsourced services in specific destinations as well as determining market and labor sizes, identifying the expansion strategies of Tier I & II service providers. Second, secondary research was conducted in support of primary means. Country economic information were gathered from historical data from

governments, trade bodies, and global institutions, while government publicly released data were used to present country macroeconomic data, while market assumptions and analyses were grounded by data such as annual reports, industry bulletins, and trade publications. In generating the rankings in the report, a combination of qualitative and quantitative analyses, developed and refined by senior consultants, considering numerous variables in providing the rankings and evaluating the impact of non-numerical data on the assessment of outsourcing locations were employed. GS

Point of Scale ResistanceSM

he current global outsourcing landscape is marked with by heightened competition with service delivery locations aiming at securing their respective shares of the global outsourcing market. One major challenge for these locations is how to better integrate their respective labor pools in the outsourcing sector as service providers most often choose locations on the basis of accessibility of qualified talent in the long-term. With this shift of paradigm from basic availability to sustainable and employable talent supply, the concept of Point of Scale Resistance (POSR) has been introduced in analyzing service delivery locations. This concept refers to the point beyond which organizations will encounter challenges in ramping up operations in a specific location – highlighting sustainable employability of talent. For instance, if Country A has a POSR of 850, this means that service providers would theoretically encounter difficulties in ramping-up headcount beyond 850 employees. This clearly suggests that scalability is a function of multiple parameters and not just population, and the inhibitors have been classified into the following segments: ❑ Low Demand: Demand can be seen not just in the number of MNCs present in the country to the

15 GS Destinations Compendium 2010

amount of investments flowing into the sector. It can also be seen in aspirations (or intent) of students to take education related to specific outsourcing service lines. ❑ Low Employability: Employability is a factor of quality of education, quality of institutions and availability of industry-relevant skill sets of a given labor pool. ❑ High Competition: Competition is a significant factor for scalability as it can come from not only the services outsourcing industry but also from other industries hiring from the same pool. ❑ High Risk: The perception of risk can vary across the stakeholders in the industry, and hence high risk locations (at times with excellent talent pool availability) fail to provide scalable solutions. ❑ Financial Feasibility: While focus has remained on cost and operational benefits, high salary inflation inhibits scalability. The POSR concept will become an increasingly important consideration for emerging delivery locations to promote their capabilities as it assists in identifying what a location can/cannot or should not do when assessing its service delivery capabilities. GS

www.globalservicesmedia.com

The Top 100 Cities

The Top 100 Cities 2007

2008

2009

2010

City

2007

2008

2009

2010

Top5

Top8

Bangalore

Top5

Top8

Top5

Top8

Top5

Top8

Johannesburg

Mumbai

Toronto

Delhi (NCR)

Rio de Janeiro

Top8

Manila (NCR)

Kuala Lumpur

Top8

Chennai

Coimbatore

Top8

Hyderabad

St. Petersburg

Top5

Top8

Dublin

Brno

Top8

Pune

Guangzhou (Canton)

Cebu City

Mexico City

Shanghai

Belfast

Kraków

Warsaw

Beijing

Singapore

Buenos Aires

Chengdu

Cairo

Jaipur

São Paulo

Monterrey

Ho Chi Minh City

Bucharest

Dalian (Dairen)

Brasília

Shenzhen

Accra

Curitiba

Moscow

Colombo

Tianjin

Hanoi

Guadalajara

Prague

Bratislava

Kolkata

Montevideo

Santiago

Sofia

San José

Tallinn

Chandigarh

Halifax

Budapest

Ljubljana

16 GS Destinations Compendium 2010

City

www.globalservicesmedia.com

The Top 100 Cities

2007

2008

2009

2010

2007

2008

2009

2010

Casablanca (Dar-el-Beida)

Penang

Kyiv

Seoul

Alexandria

Perth

Bhubaneswar

Bucaramanga

Glasgow City

Asunción

Istanbul

Wroclaw

Cork

Amman

Jakarta

Birmingham, Alabama

Nizhniy Novgorod

St. Louis, Missouri

Bogotá

Santa Rosa, Laguna (or Metro Laguna)

San Juan

Lima

Valparaíso

Thiruvananthapuram

Port Louis

Medellin

Mysore

Davao City

Xi’an

Indianapolis, Indiana

Córdoba

Dubai

Ahmedabad

Cape Town

Oklahoma City, Oklahoma

Taipei

Belgrade

Recife

Campinas

San Antonio, Texas

Novosibirsk

Bangkok

Iloilo City

Tunis

Leeds (Yorkshire & Humber)

100

Bacolod City

Status 2010 ESTABLISHED

City

EMERGING

17 GS Destinations Compendium 2010

City

ASPIRING www.globalservicesmedia.com

The Top 100 Cities

Top 10 Emerged Cities

his year’s list of Top Emerged Outsourcing Cities has expanded, identifying ten global delivery locations. Two new cities join the eight previously acclaimed outsourcing cities. Cebu City and Shanghai have significantly developed their respective outsourcing industries which have allowed these cities to join the Top 10 Emerged List. Bangalore retains first place for the 4th year running, setting an example through its high talent output, and established and expanding service delivery capabilities. Mumbai moves up to 2nd place this year, with its huge labor pool consistently displaying enhanced service delivery in complex and high-value FAO services. Delhi NCR moves down to 3rd place this year, owing to rising real estate costs and infrastructure stress on Delhi City, and despite its established FAO sector. Manila NCR stays at 4th place as it encounters challenges in moving up the value chain towards KPO services, given its mature service delivery in voice Contact Support & FAO. Chennai moves up to 5th place due to its access to the large technical talent pool from Southern India and its maturing service delivery capabilities. Known as the IT hub of India, Hyderabad moves up to 6th place owing to its mature service delivery capability and large pool of engineering and technical graduates. Despite its mature delivery capability in R&D and IT services, Dublin constantly faces high costs and limited scalable labor – the city slips to 7th place this year.

18 GS Destinations Compendium 2010

Pune, considered as the educational hub producing quality labor pool in ESO and ADM remains at 8th place this year as it faces stiff competition from other emerged Indian cities. Cebu City has been successful in further developing its outsourcing capabilities. An established English voicebased processes sector supports its 9th place rank. Shanghai has developed complex IT and R&D services, optimizing its labor pool, cost advantages, and transport linkages, rounding of the Top 10 list this year. GS Rank 2010

Rank 2009

City

Country

Bangalore

India

Mumbai

India

Delhi (NCR)

India

Manila (NCR)

Philippines

Chennai

India

Hyderabad

India

Dublin

Ireland

Pune

India

Cebu City

Philippines

Shanghai

China

www.globalservicesmedia.com

The Top 100 Cities

Top 10 Emerging Cities

he list of Top 10 Emerging Cities will set the outlook for the industry in the coming years. With cities coming from South America and MENA regions, it is compelling to see stiffer competition arising from these locations in order to capture a significant share of the global outsourcing market. Each city in the list has been positioning itself and their respective niche services and specific target markets - leading to more defined value propositions per city. The only Eastern European city, Krakow leads the Top 10 Emerging Outsourcing Cities List. The city has been constantly moving up the ranks since 2008. The city has built expertise in delivering FAO services with improving service delivery maturity for ITO and HRO services. Large multinational companies have established their presence in the city, like Capgemini, Google, IBM and Microsoft. Beijing is second in the list of Emerging Cities. The city’s primary strength is its enormous scale and talented labor for ITO services. In fact, the ITO sector has already captured 80 percent of the total outsourcing revenues of the city. However, Beijing continually faces challenges improving its business climate as it remains affected by strict government regulations. Buenos Aires, the primary outsourcing city of Argentina, also moved one place higher in this year’s rankings. The city has been harnessing its capabilities in delivering multilingual Contact Support Services to key markets. This specialization contributes to the improving service delivery maturity of the city. A notable outsourcing city of the MENA region, Cairo moved to fourth place this year. The fusion of nearshore advantage to Europe and multilingual skills of the people, positions the city in delivering quality voice-based services to European and Arabic markets. Sao Paulo continues to move up the rankings, being the banner high-value ITO city of Brazil. With still an underutilized pool capable of fulfilling R&D and Engineering services, Sao Paulo is poised for better positioning in highvalue services in the coming years. 19 GS Destinations Compendium 2010

Vietnam’s Ho Chi Minh, an ITO-centric city, has significantly dropped three places due to scalability and employability of its labor pool and as service providers in the city have begun to experience scale-up issues. Leaping 3 places, Dalian is one of the impressive emerging outsourcing cities this year. The city experienced an estimated 30 percent increase in software and services outsourcing exports last year. Dalian has remained successful in targeting the Japanese and South Korean markets for ITO and KPO services. Shenzhen moved one rank lower this year due to lower annual graduate output coupled with challenges in creating conducive business environment for investors. Curitiba takes ninth place this year. The city government has embarked various initiatives like Curitiba Offshore Center to promote the city as a prime ITO hub in Brazil. Sri Lanka’s chief outsourcing city, Colombo, closes the Top 10 Emerging Cities List. A significant factor for its inclusion is th e recognition of its capabilities for delivering FAO services, together with the improvement of the perceived business and political risk. GS Rank 2010

Rank 2009

City

Country

Krakow

Poland

Beijing

China

Buenos Aires

Argentina

Cairo

Egypt

Sao Paolo

Brazil

Ho Chi Minh City

Vietnam

Dalian

China

Shenzhen

China

Curitiba

Brazil

Colombo

Sri Lanka

www.globalservicesmedia.com

COUNTRY-IN-FOCUS Ensuring Global Visibility

A special feature for countries to showcase their uniqueness

There are numerous outsourcing destinations that exist as great alternatives to India and China.

Inviting Countries to showcase capabilities that accentuate their uniqueness.

Examples of Country-in-focus feature Egypt

Philippines

Jordan

JORDAN

For more information write to satishg@cybermedia.co.in

JORDAN

Advertorial

Interview of Country Representative

Stable Costs and High Quality of Talent Pool is Jordanâ&#x20AC;&#x2122;s Primary Value Proposition How is the Jordan economy growing presently, and what are the projections for the immediate future? Jordan has focused on creating a globally integrated economy that is knowledgecentric. Over the past two decades, prudent fiscal and monetary policies have helped in maintaining low inflation rates in the range of 3-5 percent and a stable currency. Exports in the country increased from USD 4.3 billion in 2005 to nearly USD 6.3 billion in 2009. External debt during the period decreased from 56 to 21.7 percent. Gross official reserves at the end of 2009 stood at USD 10.8 billion. Jordan has adopted aggressive and comprehensive development processes with active participation from the private sector which are targeted at creating an investmentfriendly climate in the country. Many businesses are finding Jordan to be one of the most liberal and business-friendly economies in the region. How did the outsourcing industry evolve in Jordan and what is the expected growth in the industry? Jordan, as an outsourcing destination, started gaining prominence a decade ago. Key potentials for the growth of the industry such as a qualified workforce, competitive cost structures, a near-shore location and a

His Excellency Marwan Juma Minister of Information & Communications Technology

Jordan is fast emerging as a destination of choice for outsourcing. to the economy, and produce14,928 direct

Together with attractive incentives,

jobs. Exports have increased with an average

investor-friendly policies and excellent

of 343 percent in comparison to 2007, while

infrastructure, Jordan has everything

investments increased by 164 percent. The

required for a smart outsourcing

industry is expected to grow to USD 250

destination. Jordanâ&#x20AC;&#x2122;s progressive

million over the next three years, creating

government has also recently launched a

over 10,000 jobs. The outsourcing sector is

new Development Zone strategy,

further supported by Jordan being one of

encompassing multiple specialized zones

the initial countries in the region to establish

at specific industries such as outsourcing.

a chapter of the International Association of

These development zones offer aggressive

Outsourcing Professionals (IAOP). This

financial incentives to complement existing

reflects on the growth of the country as an

economic advantages of operating in

outsourcing destination and provides an

Jordan.

extremely conducive environment for service providers and shared services organizations.

convenient time zone were identified early on. Strong government backing was provided with world-class infrastructure, dedicated business parks and a liberal economic environment. Today Information and Communication Technology (ICT) and Information Technology Enabled Services (ITES) industry both contribute 14.3 percent

Mr. Aiman Mazahreh Chairman-Int@j

What are the key factors that contribute into making the country an outsourcing destination of choice? Jordanâ&#x20AC;&#x2122;s primary value proposition lies in its stable costs, and the high quality of its talent pool that is sustainable in the long-term.

What are the infrastructure requirements of the industry and how well does the country meet these requirements? Jordan has one of the most open telecommunication markets in the Middle East which is overseen by an independent regulator. Jordan is connected to the international network through various fiber ...continued

http://www.intaj.net/outsourcing

Advertorial

Interview of Country Representative

...continued from previous page

optic links, in addition to satellite connectivity and terrestrial links with neighboring countries using modern fiber optic cable networks. Jordan has three main submarine cables that provide reliable international connectivity. In addition, Damamax is part of the Hong Kong Telecom Group PCCWâ&#x20AC;&#x2122;s Global Network, providing MPLS connectivity to more than 1,000 cities worldwide at very

government taking to ensure quality of talent and how are you ensuring

introduced as a worldwide program that

Jordan has a young population with nearly

powerful teaching tool and enhances the

70 percent under the age of 30. Jordan has one of the most successful education systems in the region with a literacy rate of 92 percent. The country is ranked first in the Middle East by the World Bank in terms of

The country has developed dedicated

spends 20.6 percent of its public

Zones to nurture the growth of its priority sectors, such as ICT and BPO. These business parks offer plug-and-play office space, connectivity and services to local and international firms and a streamlined process of setting up operations. People are a key asset in this industry. What measures are the industry and the

classrooms. Intel Teach Initiative has been

scalability of the available talent?

competitive prices. business parks within the Development

by integrating technology in the

educational reforms. The government expenditure on the educational system. English is being taught at an early age in all schools, and modern technologies and methods have been introduced in the educational system to ensure technology

focuses on using computer technology as a creativity levels of both teachers and students. An MoU was signed between Microsoft and the Ministry of Education in 2003 that focuses on creating an Innovative Teachers Network (ITN), a School Technology Innovation Center (STIC) and an Education Support Center. The government is providing computer labs in all public schools and universities as part of its comprehensive e-learning program. A country-wide broadband

proficiency.

network connecting all public schools,

There are a number of public-private

community colleges is also being

initiatives that are focused on creating a knowledge-based economy in the country

universities, community access centers and deployed.

http://www.intaj.net/outsourcing

Outsourcing Oasis of the Middle East

Advertorial

The Jordan Factfile

Jordan, located where Africa, Asia and Europe converge, is ideally positioned as an investment gateway to the Middle East. The country’s robust economy, huge talent pool of human capital, temperate climate, convenient time-zone, state-of-the-art infrastructure and the ongoing economic liberalization procedures make it one of the most preferred destinations for outsourcing firms. Jordan’s immense human capital is one of the main drivers of growth in the region. A workforce, widely regarded as one of the most competitive and qualified in the region, has contributed to Jordan being ranked ninth in the 2009 Global Service Location Index (GSLI) by analyst firm AT Kearney. Strong work ethics and low attrition rates work in Jordan’s favor. Jordan invests more than 20.4 percent of its GDP on education and has more than 200,000 upcoming graduates to meet the demands of the fast growing outsourcing industry. Jordan possesses world-class infrastructure in terms of Internet connectivity, telecommunications network as well as transport accessibility within the country and to international destinations. Dedicated business parks which boast of international standards of connectivity and services have been set up in Amman and Irbid to nurture the growth of the BPO industry in the country. These parks offer a streamlined regulatory environment and various tax benefits, coupled with high-end housing and associated facilities to attract and retain further investment in the outsourcing sector. Jordan enjoys strong government support and reliable telecom connectivity through various international submarine cables for its ICT sector. This has made it the fastest growing sector in the Jordanian economy with an annual average growth rate of 25 percent. The ideal location of the country, investment-friendly economic climate and competitive rates contribute to the steady rise of Jordan as a preferred outsourcing location.

at a glance Currency: Jordanian Dinar Main industries: Tourism, Banking & Financial Services, Engineering Services, Healthcare & Pharmaceuticals, Energy & Renewable Energy, Information & Communications Technology Literacy rate: 92% Languages spoken: Arabic (official), English, French, German, Armenian, Spanish International airport: Amman (2), Aqaba GDP growth (World Bank): 2.8% (2009)

Countries that outsource business to Jordan: Gulf Cooperation Council (GCC) countries, US, UK, Middle East and North Africa (MENA) region Key verticals: Healthcare, Banking, Insurance, Telecom, Hospitality, Technology Key services: Business Process Outsourcing, Information Technology Outsourcing, Knowledge Process Outsourcing, Shared Service Centers and contact centers Some big players: Hewlett-Packard (HP), Dell Perot Systems, CISCO TAC, CrysTelCall, Extensya, Aspire Services, Microsoft, Oracle

Global ranking: 9 in the 2009 Global Service Location Index by analyst firm AT Kearney

Key competitive advantages: Robust Economy, Strategic Location and Convenient Time Zone, Immense Human Capital Resources, Investor-friendly Economic Environment

Quick look at the IT-BPO sector growth

Main cities: Amman, Irbid

Total number of employees: 14,928 Annual growth rate of IT/BPO sector: 25 percent

Emerging locations: Aqaba

http://www.intaj.net/outsourcing

Advertorial

Opportunities and Future Potentials

The Face of Jordan

Now and Beyond

Jordanâ&#x20AC;&#x2122;s commitment to economic liberalization and its privatization program have been recognized by the World Bank. The World Bank lauded the privatization program as one of the most successful programs in the Middle East and North Africa (MENA) region. Jordan has created a competitive, free market

Jordanâ&#x20AC;&#x2122;s strength lies in the ICT, health and

Jordan is also taking necessary steps to

though a multi-pronged privatization

financial sectors. The growth of the

enhance the existing infrastructure base in

approach. Today, the private sector plays a

outsourcing industry is expected to

the country. In 2010, VTEL Jordan and

major role in spearheading growth and

concentrate on these sectors by building

Reliance Globalcom are establishing a link

development in the country. Jordan is now

vertical specialization in financial services,

to the FALCON undersea cable through

seen as one of the most business-friendly

medical services, IT outsourcing,

Aqaba which would triple the current

economies in the region. The government has

telecommunications and tourism services.

bandwidth. It will be the first 'Terabit' cable

also taken significant steps to streamline regulations and decrease red tape.

The future of the ICT sector looks rosy with

landing in Jordan.

the sector continuing its exponential

The future of outsourcing in Jordan

Establishing business ventures in Jordan now

growth. Jordan's National ICT Strategy for

promises to be bright with an industry

takes less time than the average number of

the next three years identifies the sub-

poised for growth in all sectors. KPO and

days in the MENA region.

sectors that are conducive for growth in the

BPO operations are expected to head the

current economic situation in the country.

growth ably supported by concerted

Government initiatives to facilitate this

efforts put in by the government and the

growth are also laid out. The plans include

private sector. An attractive business

developing a USD 3 billion ICT sector,

environment, combined with supportive

provision of 35,000 jobs and increasing

government policies and world-class

Internet penetration to 50 percent. Other ICT

infrastructure, will continue to make Jordan

initiatives include provision of laptops to

one of the most sought after outsourcing

university students, encouraging women in

locations in the MENA region.

The Development Zones established across the country in key business areas offer reliable infrastructure, specialized services, labor and resources to access major regional and global markets. At present, there are six zones that are operational throughout the country offering various investment opportunities. Jordanâ&#x20AC;&#x2122;s ICT sector today is the fastest growing sector offering more than 80,000 jobs with an annual average growth rate of 25 percent.

technology programs and graduate internship programs.

Contact info: Int@j Tel: +962 6 5152322 e-mail: info@intaj.net

http://www.intaj.net/outsourcing

Quotes from Reports Jordan at the ninth place is another top performer as it has solid capabilities in IT and is home to numerous successful outsourcing companies that compete internationally. It has also one of the region’s most favorable business environments. ~ A.T Kearney Report 2009 Currently, there are several contact center operations in Jordan serving clients domestically and offshore, across a variety of vertical markets. In addition, the availability of

Advertorial multi-lingual agents with university education, coupled with excellent language skills has been a compelling reason for this growth. It is clear that from the standpoint of telecommunications, Jordan has made significant strides over the past decade. In addition to the efficiencies still being realized by the deregulation of the telco sector in 2005, Jordanian telecom has invested over USD 400 million in recent years in a number of technology solutions

Testimonials

designed to make Jordan more accessible to the rest of the world. Jordanian telecom has invested over USD 400 million in recent years in a number of technology solutions designed to make Jordan more accessible to the rest of the world. ~ Datamonitor

Publications It looks like another little oasis of IT delivery is building up as the vast sands of the Middle East blow winds of new market opportunity; now Jordan joins the club, as it gets all set to woo the outsourcing industry. At the Nasscom Summit 2009, foreign delegations of many hues and shades were seen exploring and selling business opportunities in the new world order that is shaping up for a post-recession scenario. We could see delegates from Jordan too. They were not only prepared for a strong competitive pitch, but also had large spoonfuls of the pudding’s proof up their sleeve.

As to the cultural milieu, Jordan has an open and welcoming arm. On the infrastructure side, areas like powers, roads and buildings are positive. It has already been recognized on the eco-friendly distinction, where the example of Amman, a building zone, is cited as an example, and an award-winning case in masterful city planning. ~ Global Services Magazine

have rendered it definitive advantages, including a favorable time zone, proximity to continental Europe and the country's perception as a stable oasis in a stormy, but vital, region. Enthusiasts also point out that Jordanians can offer relatively low compensation costs, as well as exposure to English languages by virtue of its strong focus on education, especially at the tertiary level. ~ Jordan Business: Jordanian Magazine

To highlight the benefits, Jordan’s geographic and geopolitical positioning

Testimonials Jordan is open for business with a very capable and sought after workforce, competitive cost structure, political stability, ease of access, robust ICT infrastructure, as well as a government that is fully committed to creating the right investment environment. These are only some of the factors that position Jordan as a great global destination of choice as well as the ideal access point and gateway to the Arab world.

dedication has paid off, and businesses continue to succeed. Thanks to all the partners involved, the country continues to gain visibility as an outsourcing destination.

His Excellency Mr. Marwan Juma Minister of Information and Communications Technology

BPO investors will find in Jordan a highly advanced legislative and infrastructure platform that supports their work and business endeavors. The Development Zones Commission (DZC) facilitates all necessary procedures and arrangements for the industry to operate and prosper in the

Coming to Jordan opened our eyes to the country’s potential. The country’s will and

Som Mittal President, National Association of Software and Services Companies (Nasscom)

Development Zones. His Excellency Dr. Bilal Bashir Chief Commissioner, Development Zones Commission

Jordan has enabled the ITO/BPO services industry and we run our operation supported by a strong legislative base, a sound telecom infrastructure and skilful human capital which really makes our business succeed. The government is involved in updating the skills of IT trainees to qualify them for our line of business. Kaushal Shah Managing Director, Aspire http://www.intaj.net/outsourcing

by Sruthi Ramakrishnan � Location Assessment: Perception and Reality for Global Businesses 28 �

Europe: Showcasing the Challenges and Opportunities 32

�

Perspectives and Potential of Asia’s Hotspots 36

�

Middle East & Africa: Leveraging Africa & Middle East 41

� Latin America: The Enduring Promise of Latin America 44

Regional Dynamics

Location Assessment: Perception and Reality for Global Businesses Global Outsourcing Locations Evolution of Services Driven Economy

15 years ago, there were very limited options in terms of outsourcing. India was the predominant answer for IT outsourcing. 10 years ago, BPO started coming up as well. At that point, 2 primary locations emerged: India and Philippines. Predominant clients for them were the US and UK, basically the English speaking countries. When Europe started showing interest, people were very finicky about the data Acts and data privacy as they started having Eastern Europe come into prominence. Some of the South American countries began coming into prominence through nearshoring from the US and their Spanish language capability. What is it that makes a location emerge as a preferred location? Perceptions about a country and the reality can be very far (illustrated in table 1). Why are clients seeking new geographies?

Clients are beginning to look outside India, Canada, Philippines and Eastern Europe and Latin American countries, because of: • Localization- More so if you have a product and have to localize that for a given country. Every product cannot be built to meet the local conditions of every country, but a regional center can help facilitate localization of products. Also, a client in the US outsourcing his call center functions would rather have his service provider provide services out of a center in the US rather than offshore. • Evolving and Developing Processes- Some locations are reaching talent saturation, leading clients to look for other locations where they can get talent at better quality and at a better price. Figure 1 The Global Offshoring Landscape

Source: Tholons- Global Services January 2010 webinar ‘Location Assessment: Perception and Reality for Global Businesses’

28 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

City

Perception

Reality

Colombo, Sri Lanka

A war-torn nation

One of the fastest emerging FAO destinations with more than 50,000 people employed in the IT/BPO industry in Colombo and growing at over 20 percent year-on-year. Sri Lankan IT BPO industry grew at 23 percent even during the war time.

Accra, Ghana

Cocoa Producer Nation

Destination for Back Office processes with presence of companies such as ACS and 3G (Contact Support) and the development of initiatives such as the Kofi Annan ICT Center of Excellence for Human Capital and Infrastructure Development. Companies like 3G are looking to expand workforce in the next few years in this commercial gateway to Western Africa.

Bhubaneswar, India

Crowded Tier-II City

One of the fastest growing IT regions in India with ample labor force in IT and Engineering (with 60 Engineering colleges producing 25,000 graduates per year). Bhubaneswar is a location of choice for big industry players in India with the presence of companies such as Wipro, Infosys, Mahindra Satyam, and Tata Consultancy Services.

Santiago, Chile

Chile considered as a small LatAm country with a limited population and not known traditionally for outsourced services

Foreign investor-friendly business environment and technical industry capabilities strongly support highvalue services in KPO-ESO. Chile’s IT-ITES workforce produces $38,095 per FTE in the industry which is 41 percent more than India. This is due to higher value services being performed out of Chile compared to India (on an average).

Table 1 Global Delivery Locations - Perception vs. Reality

Source: Tholons- Global Services January 2010 webinar ‘Location Assessment: Perception and Reality for Global Businesses’

Figure 2 Key Question: Where should we locate?

Source: Tholons- Global Services January 2010 webinar ‘Location Assessment: Perception and Reality for Global Businesses’

29 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Figure 3 Parameters influencing selection: Process Requirements and Geographical & Operational Delivery Models.

Source: Tholons- Global Services January 2010 webinar ‘Location Assessment: Perception and Reality for Global Businesses’

Outsourcing to the Right Location vs. Offshoring? The change in terminology is a sign of maturing of the industry and its players. The right solution at this point to the outsourcing/ offshoring/ nearshoring debate is global sourcing. It is more offshoring than outsourcing. Why global sourcing? Firstly, if something is not outsourced to a third- party vendor, it is insourcing. Outsourcing does not necessarily cover that. Secondly, a significant number of clients are willing to have everything sourced and not keep anything within the physical confines of their office. This does not mean it is going off the shore or out of the country. So the only term today which covers all of this is global sourcing.

• Integration of new countries into the Global Economy (Example: Brazil, South Africa, China) • New Customer Segments are emerging- For example, customers are looking at Brazil because it is a significant economy growing at a fast pace. So while certain things can be outsourced to Brazil, at the same time clients are looking at addressing the available market there. The same can be applied to China. • Customer Demand is becoming more sophisticated Why will existing solutions not be enough in the new decade? • Closer to Customer • New Generation of Services • Specialized Skill Requirement • Established Locations inhibited by Talent Saturation Moving from Emerged to Emerging

There is a move, where clients are feeling that emerged destinations are saturated in terms of the labor pool, and have salary inflations year over year. There is a churn in the people which leads to lower quality. So clients are looking for emerging destinations which probably have a higher talent pool available, lower costs and governments more eager to attract investments. Clients who have been in outsourcing for around 10 years are moving from established locations. Main factors in play in this shift:  Emerging destinations being viewed as opportunities: • Emerging Locations will hold the key in the near future for Global corporations as they will provide as host of new opportunities. They are looking at such locations to bring high quality and scale together with low costs. • Emerging Economies, opportunities to tap the domestic talent and market, and evolving customer demands are driving client and service provider migration to new international geographies  Perception marketing: • Perception Marketing: Effectiveness of conveying concrete information, strategic

30 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Figure 4 Emerging Destinations – What to Look For

Source: Tholons- Global Services January 2010 webinar ‘Location Assessment: Perception and Reality for Global Businesses’

marketing, and promotions to combat negative external perceptions will be crucial in attracting potential clients and competing in the global services industry • “Employability” and “Scalability” are now more critical to “Productivity” and “Sustainability” with exceedingly lower emphasis on “Cost Advantage” alone  Importance of distinct Value Propositions: • Competitive and shareholder pressures are driving demand, creating more nimble, efficient market players • Due to the rapid maturity of the services outsourcing industry, locations are struggling to create and sustain their competitive advantage – making it even more important for “value propositions” to be brought out using the “Centers of Excellence” model

31 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Europe: Showcasing the Challenges and Opportunities The Emerging Nearshore

Prominent Nearshore Options: Eastern Europe 66Poland: Kraków, Warsaw, Gdansk, Wroclaw 66Czech Republic: Prague, Brno 66Hungary: Budapest 66Russia: St. Petersburg, Moscow, Nizhniy Novgorod, Rostov-on-Don, Novosibirsk 66Romania: Bucharest, Cluj-Napoca 66Ukraine: Kyiv, Lviv 66Belarus: Minsk 66Slovakia: Bratislava Bulgaria: Sofia 66Slovenia: Ljubljana 66Serbia: Belgrade 66Estonia: Tallinn 66Croatia: Zagreb 66Latvia: Riga 66Lithuania: Vilnius 66Malta: Valletta Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

Western Europe has done a significant amount of nearshoring to Eastern Europe. Over the years, the gap in GDP between Western Europe and Eastern Europe has widened instead of declining, which has helped in attracting clients from the former to the latter. This has helped in making nearshoring to Eastern Europe an attractive opportunity. It has been a destination of choice for Western Europe for more than a decade and this attractiveness has become stronger over the years. CHALLENGES

 Clients face dilemma- No single country can take care of all languages. But Estonia can take care of the 5 major languages.  Most smaller countries do not offer scale ADVANTAGES

 Europeans are conservative businessmen compared to their American counterparts and are more comfortable keeping work closer to home. Thus nearshoring is a favored option.  Considering a cut off population of 10 million, only Russia, Ukraine, Poland, Romania, Belarus, Czech Republic, and Hungary have the advantage of a sizable talent pool  Multiple factors enable to be perfect nearshore options for Western Europe like: 1. Financial Attractiveness 3. Trade laws (European Union) 2. Cultural compatibility 4. Excellent Education Major clients nations in the region are:  United Kingdom  Spain  France  Italy  Sweden

   

Denmark Finland Germany Norway

REGIONAL DYNAMICS

 European Union member countries in Eastern Europe have significant advantages, providing them the edge to become “nearshore locations of choice”  A recent trend is of clients preferring to send work onshore or to nearshore locations. This is true for US itself. This is not necessarily because of a language preference. This is being preferred even at a higher cost than offshore locations. This trend is favoring Eastern Europe.  Being a part of the EU makes the smaller countries offering cost arbitrage very attractive nearshore destinations, some other benefits for Eastern European 32 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

countries becoming members are: • Political stability and greater integration • Increased trade • Increased inward investment • Social policies and subsidies  Eastern Europe has attracted a lot of investments from service providers and clients (captive operations) in the last 3-5 years making it a strong “offshore cluster” and a “skills cluster” Global Clientèle

 With 63 percentage of all developed countries in Western Europe, it is the largest cluster of buyers across the world. This attracts large business firms from across the world to have centers in the region to cater to the domestic markets in these developed economies.  Eastern Europe hence caters to the global clientele indirectly, this has successfully built a strong brand for “Nearshore to Eastern Europe”, offering cost differential of 15-20 percentage compared to Western Europe.  Clients say productivity per employee higher in Eastern Europe than offshore locations like India, Philippines and China.  High skill sets available for processes like Product Development (Turkey, Ukraine, Russia), Regional Multilingual Skills (top 5–6 locations of previous list), and R&D (Russia and across the region). Europe: Centers of Excellence

Western Europe

Region/ Country/ City

Ireland

Dublin

U.K.

Belfast

Poland

Kraków

Czech Republic

Prague

Hungary

Budapest

Russia

St. Petersburg

Core Specialization

• Specializes in R&D, Infrastructure Services and Custom Development Application

• High value processes in Financial Analytics, R&D and Applications Development Management

Eastern Europe

• Business Analytics, Finance and Accounting Outsourcing, multilingual Contact Support, HR Outsourcing

• Focused on HR Outsourcing, R&D processes and emerging destination for Engineering design services

• Focused on HR Outsourcing, R&D in Software Development and Testing

• Specializes in Engineering Design and R&D services.

Companies Established SAP, Quest Software, IBM, Microsoft, Accenture, Marino Software, PMI Software, Infosys, Deloitte, Amazon

Figure 1 Europe: Centers of Excellence.

Barclays, Accenture, InfoTech, HCL, Capgemini, HP-EDS, KPMG, Xerox, ECOM, First Data Google, IBM, Motorola, Fujitsu, HCL, Capgemini, ACS, Hewitt, Quantum, Sabre Sun Microsystems, Accenture, GE, SAP, Google, Intel, Capgemini, Mahindra Satyam, IBM SAP, Microsoft, Sun Microsystems, TCS, Genpact, Cognizant, Canon, Mahindra Satyam, SCA Intel, Motorola, Sun Microsystems, Boeing, HP, Auriga, Google, Luxoft, EPAM, Arcadia

Page 10

Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

PRIMARY VALUE PROPOSITION

It is a viable nearshore destination for Western European clients for several reasons:  Western Europeans prefer outsourcing to Eastern Europe than to traditional offshore destinations like India or Philippines due to the unique service delivery profile of Eastern Europe.  Factors such as cultural affinity, skills expertise, labor pool availability which includes engineers and scientists who are not abundantly found in offshore locations, contribute to this appeal. 33 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

 Bottomline- Eastern Europe would continue to maintain this advantage at least in the near term. Conclusion: Challenges and Opportunities

Challenges and Opportunities.

•

Key Accelerators:  Strong combined “value proposition” for locating in Europe  Nearshore advantage with Western Europe as client  Excellent education system with high rate of employability  Excellent cultural/linguistic compatibility  Part of European Union (same trade laws, incentives, currency etc.)  Time zone affinity  High quality and reliable infrastructure and connectivity

•

Key Inhibitors:  Bureaucracy: Communism has left its legacy in excessive bureaucracy and processing delays which often leads to ineffective business execution

 Corruption: The high levels of corruption in certain Eastern European nations often leads to additional costs. Although this trend has decreased with the implementation and enforcement of more stringent standards and policies by EU

 Labor/Talent Migration: Countries in the region have experienced a migration of talent towards Western European countries where the pay is higher. This constitutes one of the shortcomings of nearshoring to Eastern Europe, and is a result of the relatively short distances between provider and client locations Page 11

Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

Q/A

Has macro-economic situation diluted the key value proposition of any of these countries? The income coming from outsourcing is exportoriented. There is very little emphasis in terms of domestic currency. There is significantly more impact in terms of currency of the source geography rather than your own. If the currency valuation of a country goes down, it may not be good for the country itself but it increases its attractiveness

Russia does not seem to have performed according to the potential it is believed to possess. What can Russian industry do to have a bigger stake? There is some challenge in terms of promoting what can be serviced out of Russia. They need to do more focussed pormotion of what they can really do, especially cities like Moscow and St. Petersburg. Outsourcing history in Russia goes back a long time, but there have been only a few companies which have been able to take the glag and move forward. And most of them are focussed on R&D, in telecom, wireless, security. One of the main issues related to outsourcing here is that the process discipline in Russia is not as strong as in rest of Eastern Europe, or like in India and Philippines. Also, the infrastructure, as compared to other Eastern European countries is not as robust. So, experts feel Russia will continue to lag as compared to other Eastern European countries.

34 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Are there any IPR issues in Eastern Europe? This has been one of the boons of being part of EU. As countries adopt the principle and cover of EU, they are able to care of such issues.because of standardization of IPR in the European Union. They also possess the capability to manage outsourcing from countries outside this particular block.

Which would be the best European market for SME IT outsourcing companies? That depends on the exact area the IT outsourcing company is in. From a smaller perspective, for basic IT, the best destinations would be Poland, Czech Republic.But if a company is in telecom or product development, then places like Russia can be considered.

What is the breakup of IT Services, IT Infrastructure Services and BPO services curently provided from Eastern Europe? Eastern Europe follows a different trend from other regions. Eastern Europe as a group of contries has a very different profile from India or Philippines. IT services is probably 40 percent of this. BPO would be another 40 percent, and about 20 percent would be infrastructure services.

What should be the strategy for a small country like Moldova which does not have the scale, but has a location that is proximate to the EU? What is the potential for partnering with players in India and the Philippines to kickstart the industry? For a smaller country it is very essential that they differentiate themselves through a niche capability. Any partnership with India or Philippines would depend on what that niche is. Niche is more in BPO and KPO. One of the things that a smaller country can do is to focus on analytics. There is a significant amount of employability in that country, considering the demand for analytics. So from a BPO/ KPO perspective, that would be the right direction for that country.For them to go into F&A would be absolutely wrong. Even from an IT perspective, there seems little scope for a country like that to partner with India. A niche capability would be fine, at the same time some of the ERP, SAP- based IT stuff or looking at doing something in business intelligence would be good areas in IT.

Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

Global Shore 2010 Webinar Series Europe: Showcasing the Challenges and Opportunities View Webcast

35 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Perspectives and Potential of Asia’s Hotspots China and Philippines in Focus Global IT spend is expected to increase at a faster rate post 2009 as several service buyer markets unentangle themselves from recession. Growth may still be tepid but nonetheless more significant than the previous 3 years. Post recession clients are more aligned towards offshore benefits. Drivers for Technology Spend:  Cost reduction as clients look for demand recovery  Growth in competition leading to need for scalable, optimized and effective operations  Diversification of business and expansion into new markets is pushing clients for innovation and faster time to market  Growing SMB participation as service buyer (currently at 33 percent of total spend) globally How suppliers can exploit growth in IT spend?

There remain opportunities for outsourcers, as offshoring spend remains relatively small  Identification of new delivery and engagement models  Overhauling of existing resources/ network to offer higher value  Foster innovation/ IP/ assets- must for gaining edge over competition  Develop ready to deploy platforms / frameworks for multiple geographies in order to enable faster time to market The demand side is still composed of two regions of the globe- North America and Western Europe, which together contribute about 55 percentage of global IT/ BPO spend. Offshore revenue share is 75 percentage. But domestic markets from BRIC nations will also become increasingly important players in the near term. The supply side will stretch across geographies and begin accelerating the pace of competition. Countries in S. America such as Argentina, Chile, Colombia, Uruguay, etc. are some which will be vying to supply clients, particularly the Hispanic population in US. The incumbent Indian providers will continue to build delivery centers in key delivery regions such as Latin America, Eastern Europe and China. Game changing strategies on supply side :  Vendors positioning themselves as End to End service providers rather than cost saviors to increase wallet share  Increased vendor consolidation and diversification (eg. Dell acquired Perot Systems, Product vendors expanding services portfolio etc)  Building capabilities around RIM/ IO* and platform based BPO services (Service 36 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

lines witnessing traction from client side)  Vendors entering new regions to support existing client’s localization needs (deepens client reach and wallet share) Strong Domestic and Regional Markets

There is strong market potential in Asia Pacific region as evidenced by robust growth rates of regional domestic economies. Apart from India and China, smaller countries like Philippines and Vietnam, which are seen as supply side components, have strong domestic consumption potential, as evidenced by their strong growth rates on the back of increased domestic consumption.  Healthy growth in IT spend provides tremendous scale for growth in these markets  Current outsourced market for the region is over US$22 Billion - primarily served by local & regional vendors  Technology spend by government, BFSI, telecommunication and manufacturing will drive the growth  International and regional vendors serving these markets have witnessed double digit growth Asia: Strongly Positioned to Facilitate Growth of Suppliers… Established Cities

• Bangalore Delhi NCR, Mumbai, Manila NCR, Chennai, Hyderabad, Pune, Cebu City, Shanghai, Beijing and others

Key Characteristics • Most prominent centers of offshoring (lowest risk) • Access to huge employable pool with niche and diversified skill sets.

• Hosts strong lines for innovation due to well established •

processes and delivery capabilities. House client’s commercial operations and BFSI captives/ R&D centers of global clients and vendors

Value for Clients Innovation & Time to Market

Figure 1 Asia: Strongly Positioned to Facilitate Growth of Suppliers…

Emerging Cities

• Dalian, Chandigarh, Kolkata, Colombo, Coimbatore, Guangzhou (Canton), Kuala Lumpur, Jaipur, Chengdu etc

• Lower salary inflation when compared to established centers

• Proximity to education institutes/ universities provides stable supply of talent

• Attractive infrastructure and government policies provide

Cost Optimization & Growth

long term confidence to investors

Emerging Tier II / III Cities • Locations with high potential to compete head on with

• Bhubaneswar, Iloilo City, Thiruvananthapuram, Santa Rosa etc

emerging cities

• Apart from providing cost and talent advantages these

Niche Skills

cities are leveraged to service domestic market and verticals such as government

New Cities

• Xian, Taipei, Seoul, Ahmedabad, Mysore, Jakarta, Bangkok, Davao, Bacolod, Penang etc

• Low cost of operations is major selling point • Proximity to established/ emerging locations would

Expansion

strengthened their visibility to clients

Page 7

Source: Global Shore webinar 2010 ‘Perspectives and Potential of Asia’s Hotspots: China and Philippines in Focus’

Service Delivery Cluster-

In the past 10 years, the service delivery cluster in Asia (earlier composed primarily of India, Sri Lanka and Philippines) has evolved to a circle of multiple nations providing a multitude of services and catering to a diverse group of markets and verticals. For this cluster to further expand, and further clusters will emerge across the globe. Each service cluster will develop its own niche and market development segment. These clusters will lead to growth of the region as a whole. Top Cities in Asia

Continuous demand has led to proliferation of outsourcing locations in Asia.  Indian cities continue to lead the pack, followed by Philippines and China catering to both global and domestic requirements. Many, particularly in China are 37 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

looking at catering to the domestic market instead of the global requirements.  Manila NCR, after Indian cities like Bangalore and Delhi, has been consistently making it to the top of the outsourcing cities lists.  China follows India in terms of most number of cities on the lists. Dalian has been consistently moving up rankings.  Several cities moving down the rankings are also an indication of strong competition among the cities. This also indicates the aggressiveness of cities in promoting themselves as locations of choice.  Most of the emerging Tier II/III cities are from Southeast Asia- from Philippines, Indonesia, Thailand and Malaysia. This could be mostly due to initiatives undertaken like by the Business Processing Association of Philippines (BPAC) Centers of Excellence: Established Centers

Figure 2 Centers of Excellence: Established Centers

Country/ City

Companies Established

Core Specialization

• Contact Support, Business Analytics, Delhi NCR

Oracle, Accenture, HP, Amdocs, Capgemini, SAP, Wipro, Infosys, Siemens, Motorola

Software Development, Product Development, Engineering Services

• Application Development , Engineering Hyderabad

Mumbai

India Bangalore

Pune

Philippines

Manila NCR

Services, Product Development, Software Testing, Contact Support

Accenture, Capgemini, TCS, Wipro, Infosys, Symphony, KPMG, Delloite, Dell, Hewitt, Karvy, Mahindra Satyam Accenture, Capgemini, TCS, Wipro, Infosys, KPMG, Deloitte, Morgan Stanley, JP Morgan, IBM Daksh

• FAO , Financial Analytics, Contact Support Services

• Software Development, R&D, Contact Support Services

Sun Microsystems, Accenture, GE, SAP, Google, Intel, Capgemini, Mahindra Satyam, IBM SAP, Microsoft, Sun Microsystems, TCS, Genpact, Cognizant, Canon, Mahindra Satyam, SCA

• Contact Support Services , Software Development, Testing

Convergys, People Support, • Contact support services, FAO, Medical Accenture, IBM, HSBC, JP Morgan Chase & Co., Transcription Sykes, Telus

Page 13

Source: Global Shore webinar 2010 ‘Perspectives and Potential of Asia’s Hotspots: China and Philippines in Focus’

Centers of Excellence: Emerging Destinations

Figure 3 Centers of Excellence: Emerging Destinations

Country/ City

Core Specialization

Companies Established

• High value processes in Financial Philippines

Cebu City

Shanghai

Accenture, AWS, NCR, Lexysoft, Alliance Software, Sykes Asia, Aegis, Stream, Convergys, ePerformax

Analytics, R&D and Applications Development Management

IBM, World Software Services, Neoris, softtek, Infosys, Accenture, Sitel, ACS

• Software Development, ADM, R&D, FAO

SAP, Tumbleweed Communications,

China

Beijing

• Software Development, ADM, R&D, FAO IBM, BTC International Contatct Center, OPI Global, HP IBA Group, Honeywell, SGI,

Shenzhen

• Software Development, ADM, R&D, FAO Accenture, IBM, CSC, Deloitte, Ernst & Young, Genpact

Hanoi

• ESO Software Development, Contact Support Services

FPT, HPT, HiPT, IBM, VTCOMTECH Co. Ltd, Equant, Contact Centre Vietnam

Vietnam Ho Chi Minh City

• ESO; Software Development, Contact Support Services

Teledata, VPT, Jupiter Systems, FPT

Page 14

Source: Global Shore webinar 2010 ‘Perspectives and Potential of Asia’s Hotspots: China and Philippines in Focus’

38 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Conclusion: Challenges and Opportunities • Key Accelerators:  Globally the strongest cluster of countries for outsourcing (India, Philippines, China, Vietnam, Singapore, Malaysia, Sri Lanka)

Challenges and Opportunities.

 Most mature incentives for outsourcing industry at offer in the region  Key region to global outsourcing strategy for all organizations  Huge employable pool as a result of quality education conducive for IT at affordable salary cost  Cultural affinity to client market supported by linguistic compatibility  World class infrastructure to house delivery centers, R&D and Innovation labs

• Key Inhibitors:  Quality of Life: Although the infrastructure has developed by leaps and bounds in these countries, it is still difficult to retain the top level management professionals from client nations if they have to reside in the region

 Sociopolitical Risk: Risk of terrorism, higher crime rates, and political instability in the region  Corruption: High levels of corruption in Asia often leads to additional costs. The trend is expected to subside as governments are becoming aware of export contribution from offshore services

Page 16

Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

Q/A

What is keeping back cities like Dhaka from being among the list of outsourcing destinations? Numerous factors are taken into account for an outsourcing destination. Primarily scale and quality of labor pool, costs, business capital aspect which mostly involves government benefits and incentives, the competitive landscape within a particular location. Infrastructure is the fourth major aspect considered. Risk profile is also very important. Quality of life aspect involves the social infrastructure, education, hospitals, availability of facilities, etc.

Why is Kuala Lumpur, which is otherwise commercially rated high in terms of business volume, not part of Asia’s top outsourcing destinations? For Kuala Lumpur the cost component has to be considered. That holds it back from moving up. But it is a feasible location for higher value services. A lot more shared services operators are locating there, instead of outsourcers, and that is how the value proposition is being considered there. The same set of reasons could also hold for Singapore, aside from the scalability of talent.

Is the IP issue with China a continued concern or is it subsiding? It is a perception-to-reality question. Perception is there are security risks in China and reality is there are such risks. But often times, it is a cost vs. value consideration that many locators look at when considering China. Are the cost benefits worth managing the security and IP risks? It also depends on the sliver of services being discussed. As more mature Indian or American providers moving there infuse global best practice standard, the risk will be mitigated or lessened. This makes the value proposition for China even more appealing. Introducing legislation for IP protection will also improve matters.

39 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

What is the best location in Asia in terms of local management professionals and local talent? All of the outsourcing locations have a mid-management crunch. That is a weak spot in terms of structure. Most of the top cities in this list have been active for more than a decade. So there is a pool of management talent which will be available there. So selection is the key there. There are a large number of Indian managers in the Philippines. Cost will not be a consideration here, but that is not a solution for the long term. Holding on to talent is a problem in locations like Philippines. Source: Global Shore webinar 2010 ‘Perspectives and Potential of Asia’s Hotspots: China and Philippines in Focus’

Global Shore 2010 Webinar Series Europe: Showcasing the Challenges and Opportunities View Webcast

Global Shore 2010 Webinar Series Perspectives and Potential of Asia’s Hotspots: China and Philippines View Webcast in Focus 40 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Middle East & Africa: Leveraging Africa & Middle East Lower per capita GDP in the region provides significant cost advantage in all the cities located in Africa and Middle East Nearshore opportunity for Europe:

 Time zones similar to Europe offer immense near-shoring opportunity for the region. Mauritius has the greatest time difference in the region with London, and that is of four hours.  The cornerstone of value proposition of any location is availability of talent, its employability and scalability. Improving higher education & multilingual language skills are key accelerators. Major countries of the region come in the top 100 of the global higher education index.  Buyers are looking at a wider range of language skills. The language capability (English, German, French, Arabic, Spanish) available here is not easily available in other locations.  There are several areas of improvement needed, yet there is improvement in the top outsourcing cities of the region. The improved infrastructure provides better broadband connectivity and electricity supply – this is essential for operational continuity and reducing downtime  Various government agencies have been formed to smoothen the procedures to start the business, protect the investor and reduce the corruption. Political Risk scores must be further improved in the region Global Clientele

With 63 percent of all developed countries in Western Europe, it is the largest cluster of buyers across the world. This fact has not escaped the attention of large business firms from across the world that have set up centers in the region to cater to the domestic markets in these developed economies. Thus Africa and Middle East cater to the global clientele indirectly - this has successfully built a strong brand for “Nearshore to Middle East & Africa”. What Latin America is to the US, experts say Africa and Middle East will emerge for Europe. Centers of Excellence in Middle East & Africa-

 Cairo: best-in-class promotion strategy followed by the government of Egypt  Johannesburg: does not have geographical proximity but does have the advantage of time and cultural proximity to UK and other clients in Western Europe  Casablanca: Expected to emerge as a strong player in coming years with its  excellent French capabilities

Offerings of the two main regional hubs of Africa Sub-Saharan Africa (Southern, West, East, Central) � English, French, Portuguese, � Banking, Financial Services, Insurance (BFSI) � Telecommunications � Voice � Back Office � KPO North Africa � Arabic, German, Spanish � IT Services � Software development � Computer programming � Back Office � R&D

South Africa has identified and adopted the following five strategic pillars for strengthening and enabling its IT and BPO structure:  Talent Development

Source: Global Shore webinar 2010 ‘ Middle East & Africa: Leveraging Africa & Middle East’

41 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Comparative snapshots of African Outsourcing Destinations Figure 1 Comparative snapshots of African Outsourcing Destinations

Note : the list is not exhaustiveNote : the list is not exhaustive Source: Global Shore webinar 2010 ‘ Middle East & Africa: Leveraging Africa & Middle East’ Source : Avasant

   

Strategic Marketing Quality Standards Incentives Telecoms

Africa: an Alternative to India and Philippines

Figure 2 African Countries African & Countries BPO & IT Services BPO IT Services     

   

South Africa Ghana Malawi Nigeria Mauritius Kenya Egypt Morocco Tunisia

: BFSI, Telecoms,Retail, ITO,KPO, LPO : Customer Care, Data Entry,English : Customer Care, English : Financial Services, Back Office : Financial Services, French, IT : IT Services, Financial Services : Software Development, Back Office : IT Services : IT Services

Source: Global Shore webinar 2010 ‘ Middle East & Africa: Leveraging Africa & Middle East’

 Africa lies in between the US and India and thus provides an evening shift for US offshorers versus India’s night shift. This further enhances the low attrition value proposition for Africa  Setting up an African operation can costs 10–20 percent than India  Despite the Economic Recession, African markets have grown at a rate of 5–6 percent  The Services Sector contributes to over 60 percent of the GDP of some African countries  African Nations are formulating policies that encourage the development of the IT and BPO Services  Free trade zones, tax exemptions, providing incentives for technology business operations, relocation and development are some of the support measures offered  Governments have steadily reduced the regulatory overhead and timeline required to start a business.  Africa is a risk-diversification option for India and the Phillipines

Q/A

What are the political risks in South Africa? Experts feel that the entire region is still reeling from certain events of the past, which has prevented the outsourcing industry from going to the region as fast as it should have. But now varied requirements are coming from different source geographies.

What is the effect of China’s influence in Africa as China continues to use its economic power to buy natural resources in the region? China has been focused on natural resources and commodities. There have been a lot of influences as far as services economy is concerned. But one issue where China’s influence is having a spillover effect is the infrastructure. China has been helping build infrastructure in several African cities in return for commodities.

42 GS Destinations Compendium 2010

www.globalservicesmedia.com

Global Shore 2010 Webinar Series Europe: Showcasing the Challenges and Opportunities

Regional Dynamics

Conclusion: Challenges and Opportunities

•

Key Accelerators:

 Multilingual capabilities can extend market reach to European markets  Local Governments have been encouraging service industry by forming various supporting organizations

Challenges and Opportunities.

View Webcast

 Better time-zone affinity to Europe compared to Asian destinations  Other than Israel, most countries have low per capita GDP making them cost effective  Due to proficiency in Arabic - Middle East region is also a service buyer market

•

Key Inhibitors:  Currency Risk: Highly volatile currencies and risk of inflation makes investors cautious

Global Shore 2010 Webinar Series Perspectives and Potential of Asia’s Hotspots: China and Philippines View Webcast in Focus  IP Risk: some of the countries in the region lead the world piracy and cyber crime lists  Diluted Value Proposition: Most countries in the region offer similar value proposition - a unique positioning is critical for individual countries

Page 13

Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

What is the role of World Bank in promoting IT/ITeS or BPO activities in the region? World Bank is taking a keen interest and supports various projects across the continent. Individual countries approach the World Bank with their needs. Kenya has projects funded by the World Bank. In Rwanda, it is funding an initiative called eRwanda, which is about developing ITC in the country. In such projects, the World Bank funds developing human skills, infrastructure particularly in the BPO sector. They help develop SMEs in the sector. It promotes uptake and usage of IT by the government, so that at the end of the day, the government can itself kickstart the outsourcing sector by outsourcing its own activities. The World Bank also helps countries attract FDI to the BPO/ITeS sector. Helping ranges from assisting the formation of implementing agencies to help building capacity in a particular sector.

Global Shore 2010 Webinar Series The Enduring Promise of Latin America

View Webcast

Global Shore 2010 Webinar Series Leveraging Africa & Middle East View Webcast 43 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Latin America: The Enduring Promise of Latin America Unique Regional Dynamics In recent years, clients have been preferring this region as a nearshore destination even at higher costs than some of the farshore destinations. Emerging destinations from the region are now competing with the more mature Asian offshore destinations. South America has the maximum number of emerging outsourcing cities – buoyed by growing US demand for nearshore services and regional economies tapping the under-utilized Services markets. Top Cities in the Region

 Buenos Aires, Argentina has moved up in recent times.  Santiago, Chile- one of the most promising locations for KPO and ITO, and has very good skilled people to deliver on that. But Chile, with a population of 60 million, cannot afford the same scale as Argentina does. The question for Santiago is- can they train and make available enough skilled people to compete with Chile, to take certain scalable work for BPO?  Brazil has largest scale in the region and Sao Paolo is a very favorite destination for clients for domestic market. Just behind Buenos Aires in preference.  San Jose, Costa Rica is a significant destination for ITO.  Lima, Peru is a favorite as a lowcost nearshore destination  Challenge- Perception of Colombia as a high risk destination has undergone significant change, though clients are still apprehensive Regional Outsourcing Dynamics

 Latin America has not caught up with inflation with regard to total cost, so is still costeffective. But cost is not the only factor. Countries are looking at reducing total cost of operation: • Mexico promises to lower costs, and offers incentives • Uruguay has free trade zones which offer 0 percent tax • Colombia gives exemptions in taxes • Most govts have very aggressive promotion agencies.  Total cost of doing service in Latin America is going to fall. The dollar has been an issue in Latin America. The dollar is losing ground here, as in many other parts of the world. Last year was especially complicated in this respect. This year is a little more stable. Markets the Region can Address

 With established regional markets, Latin America as a region has a very strong value proposition of having the ability to cater to multiple markets • Nearshore to US English and Hispanic Market- 20 percent of consumers in US are Hispanic 44 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Value Proposition Strong Regional : Diluted Individual

• European Markets in Spain (Spanish) and Portugal (Portuguese)  Time zone issue- Latin America is very well positioned, is in more or less same time zone as in US and Europe.  Analysts say that with the world talking about ‘agile development’, it is very difficult to have agile development if you are farshore.  Latin America can be part of a dual strategy for companies- whatever has to be done in customer interface, do that with your Latin America team, and connect with your Asia-based team for the rest of the process.  Analysts advise looking beyond outsourcing traditional works to Latin America, and thinking in terms of innovation. Latin America has leadership and partnership capability  Clients find vendors ready to answer questions, and approachable as compared to other countries  Area offers not just cost-effectiveness but is ideally located for testing innovations, to set up R&D facilities there.  Challenge- Reaching the global market is a challenge for Latin America outsourcing players more particularly small and medium enterprises. Primary client remains the regional market. The full potential of the region in catering to external markets is yet to be optimized.

•

With established regional markets, LatAm proposition of having the ability to cater to

 Nearshore to US English and Hispanic Ma  European Markets in Spain (Spanish) and

•

However, reaching the global market is a players more particularly small and mediu

•

Unique Value Proposition for individual c

many Figure 1 country Value positions revolve around - M DESTINATION PropositionStrong Regional:  Leads to commoditization of service delive Diluted Individual Opportunity for individual countries to diffe

Page 9

Value Proposition

Unique Value Proposition for individual countries is often weak, as a result many country positions revolve around being part of a ‘Multilingual Nearshore Destination’. The region has to make effort to identify the niche value proposition that it has, i.e., competitive advantage in niches within ITO, BPO and KPO industry. This will also provide opportunity for individual countries to differentiate themselves from the pack  Colombia - 33 percent graduation students here are studying engineering. Colombia is in fact, a country of engineers. Yet it is not exporting engineering services.  Uruguay- Medical industry can prosper here. A very renowned French medical institute has opened office here. Has more doctors per capita than any country in the region.  Chile building its competitive advantage from natural resources. There are services Realizing Potential Developmental Areas

Course of Action

   

• Comprehensive English training and proficiency Human Capital

Marketing and Promotion

programs have been implemented • Technical/Finishing schools are now in place

• Increase focused Promotion activities through partnerships between private and multilateral agencies to attract large captive operators

• Government and Institutional support through Business Climate

Figure 2 Realizing Potential

Realization

Country specific associations

funding and policy building has been accelerating with focus on developing Service Industry

• Expand market in US by enticing large Indian Market Expansion

Providers to utilize region as a Delivery Hub

• Transition from Regional to Global Market • Continue to transform image of South America, Reality vs. Perception

particularly in areas related to Security and Infrastructure. Global image needs to be enhanced.

• Increasing ITeS SEZ /technopark build ups across region

• Crime rate decreasing across South America

Source: Global Shore 2010 webinar ‘LatAm: The Enduring Promise of Latin America’ Page 10

45 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Destinations of Choice

Figure 3 Destinations of Choice

• • • • • • • • • •

Argentina

Good scalability and capacity to provide multiple Service Segments

Brazil

Large domestic market, while having the best profile for scale in Latin America

Chile

Mature and proven destination for high-value ITO and KPO processes

Colombia

Robust infrastructure and talent pool for BPO & ESO. Risk perception is fast improving.

Costa Rica

ITO remains a strong point, and has capitalized on Intel as an anchor client

Mexico

Large labor pool, but currently experiencing domestic security issues

Paraguay

Strategically located with potential to provide niche services. Scale is a concern.

Peru

Rapidly evolving economy, offers capable talent at lower cost than competition

Puerto Rico

Affinity to US political/business environment. Relatively untapped destination.

Uruguay

One of the safest destinations, with rich and talented labor pool for ITO/KPO Services

On Tholons Radar asAmerica’ future Offshore Nations: Source: Global Shore 2010 webinar ‘LatAm: The Enduring Promise of Latin

• • • • •

Venezuela Guatemala Panama El Salvador Nicaragua

around the natural resources. It has copper, it also has copper engineers. In a study 11 ofPageengineering market in the US to help export engineering services from Chile, it’s a very huge untapped market.  Brazil – leader in the world in certain agri-business processes.  Challenges • How to sell the region as a whole? • Where there are natural resources, there is a service associated with it. But this potential has been left largely untapped. • Central America needs to move away from manufacturing to services Conclusion: Challenges and Opportunities

Challenges and Opportunities.

•

Key Accelerators 

Potential to become Regional Service Cluster that can corner large US Hispanic market



Large, developing economies like Brazil, Mexico, Argentina will provide lucrative regional market for Outsourced Services



Multilingual capabilities can extend market reach to European markets



MERCOSUR and other trade agreements will be significant enablers



Better time-zone affinity to US and Europe compared to Asian destinations



Rapidly improving infrastructure and connectivity



Diminishing advantage in manufacturing (due to China and India) has led governments to focus on Services Industry



‘Coopetition’ - Creating healthy competition with India through cooperation. Entry of large Indian and American Service Providers in the Region will accelerate Services Industry across Latin America

Key Inhibitors 

Diluted Value Proposition: Most countries in the region offer similar value proposition - a unique positioning is critical for sustainable growth



Service Delivery Maturity: Needs to be improved to expand its high-value services portfolio.



Political & Economic Stability: Overly dynamic political landscape and fluctuating currency in specific countries are reasons of concern for many large providers.

PageGlobal 12 Source: Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

46 GS Destinations Compendium 2010

www.globalservicesmedia.com

Regional Dynamics

Q/A

The cost of telecom and taxes in countries in LatinAmerica are sometimes restrictive, restrict moving projects from say, Chile to Colombia. Things to remember for intraregional movement of projects like call center work? According to experts this is true if traditional modes of negotiating are followed.The way negotiation is done in Latin America is a little different. It is unfortunate to see tax retentions among countries. Brazil is withholding a lot of taxes. Even within MERCOSUR (Uruguay, Paraguay, etc.), its not very easy to do business. However, hope should not be given up, as the infrastructure, the vendors are still growing and they are looking at the long term. So if you are large, if you are serious, you’ll get the deal you need.

Global Shore 2010 Webinar Series Europe: Showcasing Qthe Challenges and Opportunities

Is there a country in Latin America which is setting itself apart in terms of specializing in help desk services? This is probably there in Central America. For mainframes and large systems its probably Brazil. Its difficult to pinpoint one which excels. Colombia is providing a lot of call(?) services its still Viewbut Webcast growing. So in the future, Colombia would be a good place to start as prices are still low.

There is a school of thought that locales within a continent or a large nation ought to focus and offer differentiated advantages for specific verticals, e.g, Financial Services, Semi-con work, to really attract the meaningful global anchor players. Is anything like that happening in Latin Am? Are clusters like Silicon Valley, Bangalore, HongKong-Shenzen, Shanghai-Hangzhou-Suzhou developing? There are clusters emerging even in places like Mexico. Brazil, Uruguay and Buenos Aires is a very important cluster here. Paragauy, with Brazil and Argentina around it can provide services in Spanish. The advantage is that such clusters are not consolidated, and are developing. That’s why there is a first mover advantage in Latin America right now.

Global Shore 2010 Webinar Series Perspectives and Potential of Asia’s Hotspots: China and Philippines View Webcast in Focus

Global Shore 2010 Webinar Series The Enduring Promise of Latin America View Webcast

47 GS Destinations Compendium 2010

www.globalservicesmedia.com

WEBINAR SERIES:

Rightshoring Strategies: Deriving Value, Defining Success

Global Shore 2010 Webinar Series! WEBINAR SERIES

GlobalShore 2010 is a webinar series on the dynamics of outsourcing locations meant for sourcing practioners and service providers to be able to make right decisions in choosing service delivery locations. The webinars are jointly produced by Tholons, the globalization and sourcing advisory company, and Global Services Media, the global media platform on the outsourcing industry.

Webinar Topic Europe: Showcasing the Challenges and Opportunities

View Webcast

Perspectives and Potential of Asiaâ&#x20AC;&#x2122;s Hotspots: China and Philippines in Focus

View Webcast

The Enduring Promise of Latin America

View Webcast

Leveraging Africa & Middle East The Top 100 Outsourcing Cities-2010

Avinash Vashistha Chairman & CEO Tholons Inc.

Brian Tumpowsky Director, Sourcing and Governance Publicis

View Webcast

Ed Nair Editor Global Services

Pumela Salela ITeS Consultant World Bank

View Webcast

Jonathan De Luzuriaga Managing Director, SE Asia Tholons Inc.

Manuel Ravago Research Director Tholons Inc.

Fabrizio Opertti Senior Integration and Trade Specialist Inter-American Development Bank (IDB)

Mario Tucci Senior Global Business Consultant and Entrepreneur

� Choosing the Right Off-Shoring Destination

by Atul Vashistha, Founder & Chairman, Neo Advisory

� Compete or Cooperate? Bridging the NearshoreOffshore Divide 53

� Global Sourcing for FAO: Strong, Successful and Growing 68

by Stan Lepeak, Managing Director, EquaTerra Global Research

� Why Latin America is Still a BUY

by Anupam Govil, Founder and CEO, Global Equations

by Mario Tucci, Senior Global Business Consultant

� Rise of IT-BPO Outsourcing Frontiers Regional Analysis 56

by Dr. P.K.Mukherji, President & Managing Partner, Avasant Asia

by Viral Thakker and Nishant Mathur, KPMG Advisory Services, India

� Latin America: The Next Sourcing Frontier or an Afterthought? 59 by Esteban Herrera, Senior Vice President, HfS Research

� Africa: The emerging frontier for services offshoring 63 by H.Karthik and Nikhil Rajpal, Everest Group

� Location Selection Best Practices

by Jehil Thakkar and Shailesh Narwaiye, KPMG Advisory Services, India

� Africa- The Next Outsourcing Frontier

� Latin America Emerges as a Key Outsourcing Destination for 2011 74

by Don Jones, Partner, Technology & Life Sciences Practice, BDO USA

� Africa as an Outsourcing Destination

by Pumela Salela, BPO/ITeS expert Consultant, World Bank

� Offshoring in the Latin American Region

by Pradeep Udhas, Executive Director, IT/ITeS Sector, KPMG

� India’s Global Expansion: Eyeing Latin America by Sumeet Chugani, Associate Attorney, Diaz Reus & Targ

� Legatum Prosperity Index

Expert Speak

xperts Choosing the Right Off-Shoring Destination

by Atul Vashistha, Founder & Chairman, Neo Advisory

While cost containment will continue to be an important factor in the global sourcing decisions of organizations, other factors such as access to a global talent pool, new market entry, and geographic risk diversification have become increasingly important.

he global outlook for outsourcing remains optimistic despite the recent economic crisis. Organizations continue to adopt outsourcing as a business strategy and an effective optimization and transformation lever, to help them mitigate the current financial and competitive challenges. As a consequence of increased adoption of outsourcing, the global sourcing landscape has undergone significant changes. Many global locations are now evolving to serve specific needs of organizations embarking on their globalization journey or evolving as mature globalizers. Global sourcing is now mainstream. While cost containment will continue to be an important factor in the global sourcing decisions of

organizations, other factors such as access to a global talent pool, new market entry, and geographic risk diversification have become increasingly important. New destinations are constantly emerging in the global marketplace. Organizations need to be aware of the changing landscape across the more established as well as emerging destinations. Methodology & Work Process

Six categories are critical to be analyzed while choosing a location. 1. Financial Attractiveness

Cost saving has been one of the traditional business drivers for globalization and continues to remain a critical decision criteria. Cost, broadly can be

S. No

Location Factors

Key Parameters

Financial Attractiveness

Real estate rent, support cost, corporate tax rates, labor cost, HR cost, cost to start business, tax incentives

Service Maturity

Size of industry, presence of major IT & BPO companies, multilingual capability, key services, industry specific services and focus

Human Capital

Size of workforce, university graduates output, attrition rate, scalability, sustainability, wage inflation

Infrastructure

Number of ISPs, personnel computers, number of IT parks and SEZs, airline connectivity, road infrastructure

Risks

Crime rate, financial risk, labor risk, infrastructure risk, geo-political and socials risk

Business Environment

Government support and incentives, social environment, quality of living, bureaucracy, cost and time to set up business, cost of living

50 GS Destinations Compendium 2010

classified as personnel cost and operations cost. Personnel cost in terms of wages, administration cost, related HR cost accounts for approximately 40-50 percent of the total globalization cost. Operations cost is also another critical factor to be considered while settingup operations. Operations cost include office real estate rent, telecommunication cost, tax incentives, corporate tax, travel cost, cost of electricity, and cost to set-up a business. 2. Service Maturity

Service maturity typically gauges the relative capability of a location in the global sourcing landscape. The presence and type of services delivered by large IT and BPO companies is a leading indicator to gauge the maturity of a location. The market size of the outsourcing industry, multi-lingual capability, established and emerging services, industry specific focus are few factors that help provide a holistic view of service maturity of a location. 3 Human Capital

Global competitiveness is driving market growth across domains, and as organizations expand, the need to focus on core or anchor service capabilities becomes increasingly critical. Human capital is the most critical success factor to retain and grow core competence in the global services market. The availability of a well-educated, www.globalservicesmedia.com

Expert Speak

qualified labor pool, its scalability, and sustainability in a competitive environment are few key parameters to be considered while evaluating this factor. While the above stated factors are specific to the current labor pool,

a futuristic evaluation parameter to be considered would be the educational system that supplies appropriate quality labor force to meet the forecasted demand of the industry. Large numbers of fresh graduates lead to low wage

inflation and high productivity in the labor market in a particular location. Numbers of university and technical graduates, attrition rates, size of IT & BPO workforce are some of the factors to be considered.

Location Assessment Framework Examples Example 1: Critical assessment metrics analyzed while choosing a location from a current & future standpoint:

Example 2: Cost Component Analysis â&#x20AC;&#x201C; Location A

51 â&#x20AC;&#x201A; GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

Example 3: SWOT Analysis – Location A

Example 4: Growth of Employees in Location A

100000 Cap Gemini E&Y ACS EDS HP Services

80000 60000 40000 20000 0 FY02

FY03

FY04

4 Infrastructure

5 Risk

With demand for sourcing of services surging globally, there is a definite need for a well established infrastructure adhering to global standards. Infrastructure would encompass physical infrastructure like air, land, and sea connectivity and related support system, industry infrastructure like development of technology parks, presence of Special Economic Zones (SEZs), and business infrastructure like availability of office space, telecommunication, and other related business support systems.

A robust and pro-active risk monitoring system for global locations is proving to be a key success factor for sustainable business operations. Risks such as labor risk, financial risk, security risk, geo-political risk, and social risk are the different types of risks to be cognizant of while setting up new business in low cost locations. 6 Business Environment

While a location could be financially attractive, and mature in terms of service capabilities with a sizeable labor

52 GS Destinations Compendium 2010

FY05E

FY06E

pool, a critical success factor for locations is the business environment and the support system that it can provide. Business culture, quality of life, government support, procedures, cost of living, and cost and time to commence business in a particular location are key aspects to be studied. Understanding the business environment is a necessary step for organizations setting up a business operation within its own country or outside. GS Founder & Chairman, Neo Advisory (Formerly neoIT), Neo Group

www.globalservicesmedia.com

xperts Compete or Cooperate? Bridging the NearshoreOffshore Divide

Expert Speak

by Anupam Govil, Founder and CEO, Global Equations

For offshore BPO providers to succeed, they will have to tackle the Nearshoring challenge.

earshoring is here to stay and the Americas region is brimming with cost competitive and competent destinations, each vying to be the next big thing. But the looming question is, will these contenders co-exist with the larger and more mature offshore destinations or is this a zero sum game? While many had initially dismissed Nearshoring as a niche trend unlikely to compete with well entrenched offshore destinations, the success of many destinations in Central and Latin America in attracting investments, providing quality services and developing the desired mix of skills have proven them wrong. More importantly, the need for de-risking and diversification has propelled Nearshoring as a critical component of global sourcing. Service providers are adopting a global strategy by developing new locations that mirror client needs as well as address the saturation of some offshore locations. Access to capabilities not found offshore such as Spanish skills and cultural affinity are making Nearshore Americas an attractive choice. Most top tier global ITO and BPO providers are expanding their Nearshore footprint either through greenfield options or through acquisitions. But the pure play offshore BPO providers have

been slower at adopting this approach. They have either been unable to find suitable mid-size acquisition candidates or have been reluctant to set up a grounds-up operation due to lack of familiarity with the region. It is increasingly becoming apparent that for offshore BPO providers to succeed in this market they have to tackle the Nearshoring challenge. Offshore to Global

The offshore provider landscape is rapidly morphing with the maturing of global sourcing. While service providers are now expected to offer seamless delivery of services across diverse geographies, it has also become important to shake off the tag of an ‘Offshore’ provider to mitigate the political backlash. They can bridge this perception gap by establishing a multi-regional presence, especially with a blend of onshore and nearshore delivery. This is an imperative not only for major providers like HCL, Patni and Genpact but also for the second tier companies wishing to diversify their client base and spread risk away from highly concentrated offshore locations. Bridging the OffshoreNearshore Divide

Capitalizing on their talent pool and nearshore advantage, nations

53 GS Destinations Compendium 2010

such as Brazil, Chile, Costa Rica and Dominican Republic have rapidly expanded their share of the outsourcing pie. Brazil exported IT-BPO services worth $2.2B in 2008 and is likely to touch $3.5B by the end of 2010, while Costa Rica exported around $600M and Dominican Republic over $450M. In fact nearshore outsourcing is expected to continue to grow annually at double digits to over $20B by 2013. The business and service delivery infrastructure in these countries has improved significantly and is almost comparable to major outsourcing destinations such as India and Philippines. However, apart from Brazil, none of the other nearshore countries have large locally owned vendors that can go head to head with the global or India based service providers. There is a distinct lack of transformational or multi-tower outsourcing deals in the nearshore region due to relative nascency of the providers and a narrower set of skills. But the potential is certainly there, as is evident in the recent Cap GeminiCPM Braxis deal which is seen as a bold move by the French firm to penetrate the lucrative Brazilian and Latin American market. Aegis’ acquisition of Argentina based Actionline and the recent acquisition spree by ACS (Xerox) and Teleperformance across the Caribbean and Latin America www.globalservicesmedia.com

Expert Speak

are indicators of a market that has reached a critical mass. Such strategic transactions are rapidly changing the landscape and accelerating the maturity of services capabilities in the region. Global corporations are rapidly embracing Nearshoring, leveraging it for Comfort while expanding Offshore for Scale. Its easier to test new processes, vendor capabilities and delivery models closer to home. However nearshore vendors still have a long way to go in building complex service supply chains in a costefficient manner. Hence companies seeking strategic, transformative and long term deals overwhelmingly prefer offshore destinations such as India, China or Malaysia. The opportunity for Nearshore vendors is to offer a broader suite of capabilities and scale through collaborative partnerships with larger offshore vendors. Hence they can emphasize their core differentiators and strengths rather than build end to end capabilities. The offshore vendors on the other hand are seeking to establish nearshore delivery centers where client processes can be piloted and initial traction can be attained. Hence a marriage of convenience can bridge the Nearshore-Offshore divide. In this pursuit everybody wins. The clients feel more comfortable with an offshore provider that has a Nearshore center, without sacrificing the process maturity and cost efficiencies. The nearshore providers can embellish their strengths and close their capability gaps by bundling services with offshore partners.

becoming an integral component of a global services portfolio. Its important to plan a Nearshore strategy with long term objectives and a sustainable growth plan. Balanced Approach to Location Selection – Its more than just the numbers: While Latin America offers many nearshore choices, zeroing in on the exact country or location is not as simple. There is a surprisingly high variance in cost and performance factors between various countries in this region. Once a company has shortlisted a few locations based on broad parameters such as the nature of services to be provided, client requirements and cost considerations, there

don’t always portray the right picture. Many of the cities in Top 20 list also happen to be rated high in the Most Dangerous cities list. Countries like Jamaica, South Africa and Colombia are considered high crime, yet have a flourishing outsourcing sector. Create your own decision matrix weighing factors more important to you (and your clients) and then look for the right combination of skills availability, process maturity, risks and costs. Localization through Partnerships: The Americas (Latin and Central America) offers a sizable regional market for corporations and service providers. Countries in this region have a healthy growth rate and mushrooming middle class. However, tapping into this market requires considerable local expertise and a long term approach. Local partnerships can prove critical in the success of nearshore operations, especially during the initial stages. A Local partner can not only ensure faster ramp up and access to infrastructure and manpower, but they can also be the beachhead to penetrate the local and/ or regional market. This is especially true in countries such as Brazil and Colombia where very little English is spoken and business customs can be quite different from North America. A good example is the recent JV between Datamatics of India and Genti Teleservices of Brazil. Genti benefits from Datamatics’ expertise in non-voice BPO while Datamatics gains access to Genti’s expertise in voice services, allowing the JV to offer a broader suite of services to their client base in Brazil. The Right Business Model: For small to mid-sized providers, nearshoring should be approached with caution as the market is still maturing and a substantial amount of time and resource investment is required. At the same time not having a nearshore

Aegis’ acquisition of Argentina based Actionline and the recent acquisition spree by ACS (Xerox) and Teleperformance across the Caribbean and Latin America are indicators of a market that has reached a critical mass.

Integrating Nearshore into the Global Services Supply Chain

With the entry of global firms and growing maturity of local service providers, Nearshoring is increasingly

has to be a more detailed drill down to identify the final location. Often factors that are not reflected in an Evaluation matrix may play a larger role. For example, Worker productivity and work ethics are not easily captured in Location reports and can only be judged through site visits and interviews with management from various groups (HR, Ops as well as Sales). Government support is still critical in this region for long term sustenance, however don’t be swayed by over the top incentives. Its more important to gauge the government’s efforts in ensuring skills development and inflation control. Also, statistics such as crime rates or country rankings

54 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

presence can limit a provider’s ability to expand or bid on contracts requiring such capabilities. Larger firms have the flexibility to deploy capital and resources and can often secure client commitment for testing the new location but smaller providers have to get the business model right the first time. Most large companies prefer setting up a greenfield operation or acquiring an established local firm, while smaller firms should look at entering into JV’s or Strategic bundling partnerships to minimize the risks involved in ramping up or integrating nearshore delivery centers. Widening the breadth of Business Continuity options. For mission critical processes, it is imperative to have a

seamless business continuity plan. Hot Sites, where the process is split across multiple locations, can be another reason for having a blend of nearshore and offshore locations. Often providers cross-train their employees across multiple locations to take over each other’s functions in the case of an emergency. Alternatively one could sign up with a nearshore partner who can provide excess capacity when desired. Experts Matter: It is important to seek the help of advisors with sound knowledge of the region. Experienced Advisors will quickly narrow in on the short list of location choices based on their prior experience. They can also help facilitate and negotiate the right incentives and cost package with the

local government and infrastructure providers. As the boundaries between Nearshore and Offshore continue to blur, it is evident that clients will opt for providers that have a blended portfolio. Eventually providers will be measured by their maturity in leveraging the right location for the right skills with the optimum balance between cost savings and performance. Successful players will be the ones who create a scalable network of global delivery by harnessing the complementary strengths of Nearshore and Offshore locations. GS Anupam Govil is Founder and CEO of Global Equations.

55 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

xperts

Expert Speak

by Viral Thakker and Nishant Mathur, KPMG Advisory Services, India.

Rise of IT-BPO Outsourcing Frontiers

Regional Analysis Shift in priorities in outsourcing strategies and exponential growth of the outsourcing market has allowed newer offshoring clusters to evolve and flourish.

T-BPO outsourcing phenomenon caught the imagination of the industry at the turn of this century. The Y2K phenomenon gave necessary impetus to the hibernating outsourcing industry. In the initial phase, availability of skilled workforce and cost arbitrage were the primary drivers of outsourcing industry. Asia Pacific region, which offered both, took the first movers advantage and emerged as the leading offshoring supplier. Since then, IT outsourcing has become an essential part of every corporate strategy. With experience, the corporate outsourcing strategies of businesses have matured to look beyond mere cost arbitrage. Shift in priorities in outsourcing strategies and exponential growth of outsourcing market has allowed newer offshoring clusters to evolve and flourish.

Emergence of new offshoring destinations, each offering distinct combination of advantages and risks, has given the customer a variety of options to pick from. Though cost arbitrage is a common advantage among all the outsourcing clusters, but parameters such as sustainability and scalability of business, quality of work force, cultural and linguistic affinity, etc. have become differentiating factors. The table below lists out some of the objectives and priorities of the demand side of IT-BPO outsourcing industry and advantages and capabilities offered by clusters of supply side. We can categorize the outsourcing clusters into three major categories – a) Asia Pacific (ASPAC), b) South America and c) Central and East Europe (CEE)

Cluster 1: Asia Pacific

Asia Pacific (ASPAC) is the most dynamic and fastest growing outsourcing cluster. The rise of Asia Pacific as an outsourcing destination was led by success stories of India, followed by China. Over the last few years, other Asian locations such as Australia, Malaysia, Sri Lanka, Vietnam and Philippines have gained spotlight on global IT-BPO map. The main parameters of influencing Asia Pacific as a choice of outsourcing destination: Low Costs: Most of the Asian outsourcing destination’s offer 20 percent to 50 percent cost saving on labor over America and Europe. Availability of vast skilled labor force at lower cost gives Asia a massive advantage. Though wages have increased in India

Objectives & Priorities of Customers

Advantages & Capabilities of Locations

The cost reduction mandate Complexity of processes to be outsourced Cultural and linguistic alignment Degree of managerial control Time-zone alignment

Scalability Specific skills and capabilities Cost of operations Similar time-zones Cultural affinity to buyer

Figure 1: Factors affecting the choice of location for outsourcing (Source: KPMG Analysis) 56 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

due to inflation, yet they are considerably lower than that in Unites States of America and Europe.

Main parameters influencing South America as a choice of outsourcing destination:

Language Skills: India, Philippines and Malaysia have leveraged large English speaking population to attract key US and European markets. Asia Pacific markets – Japan, Taiwan and Korea find China, Malaysia and Vietnam lucrative for regional language skills and cultural affinity. The region has struggled to capture Non-English European market due to absence of Spanish, French and German speaking work force.

Near shore and Time zone alignment: South American nations have the unique advantage of proximity to the biggest hub of outsourcing supply end – USA. Near-shore operation offers advantages of time-zone alignment, faster implementation and better control over operations.

Large number of service providers: The large number of indigenous service providers offer wide choice for buyers looking to outsource to Asia Pacific countries. It also makes the region very cost-competitive.

Language skills: Spanish language requirements in the U.S. and the growing English language capability

alternative as compared to the U.S. and Europe. Cluster 3: Central and Eastern Europe (CEE)

Preference of West European companies to near-shoring and cultural and linguistic similarities has made Central and Eastern Europe a viable outsourcing destination. Bulgaria, Hungary, Poland and Russia are all set to compete with Asian and South American counterparts for the West European outsourcing market. Main parameters influencing CEE as a choice of outsourcing destination:

The outsourcing story will become really interesting when Egypt and some other African countries also actively join the IT-BPO outsourcing bandwagon

Experience and Maturity: Rich experience in outsourcing industry has given India the delivery maturity of offering endto-end solutions. It gives them edge over their counterparts. Malaysia and Philippines have emerged as strong outsourcing destinations because of the availability of workforce with niche skills, whereas China based suppliers are also growing rapidly Cluster 2: South America

Though South America has less than 10 percent share in global outsourcing market, yet the region shows promise. With better economic stability, the “near shore” advantage of South America has become more compelling for the United States of America. Brazil, Mexico and Chile reaped the benefits of the first mover advantage and business maturity. Newer destinations such as Argentina, Uruguay and Costa Rica are becoming viable options due to attractive cost and maturing business sector.

of the labor pool in the region are key to the region’s competitiveness. Mexico, Argentina and Costa Rica are capitalizing on their sizeable pool of English speakers by offering bilingual services. Cultural affinity with the U.S.: USA and Latin America share a number of cultural similarities. These aspects of cultural affinity assist the U.S. and European companies to retain a similar corporate culture in captive centers and facilitate business with outsourcers. Cost Attractiveness: Latin America has a significant cost advantage over Europe and U.S. Chile and Mexico are relatively more expensive locations as compared to Costa Rica and Argentina, however these regions can still provide a cost-competitive

57 GS Destinations Compendium 2010

Language skills and cultural affinity: Language skills are important, and are often used as a selling point by the nearshore destinations in the CEE, especially to Western European countries like Germany and France.

Wage differential: In the new EU states labor costs are nearly 20 percent of those in Germany and France. Wages in countries like Romania are one-tenth of those of their European counterparts. The wage differential, even though it is considerable today, is narrowing as wage growth in the region is rising. EU regulation: Since most of outsourcing destinations including Hungary and Poland, have joined EU, European customers find East European outsourcing destination more regulated then their Asian counterparts. It shifts some of the regulatory responsibilities towards the vendors. Schengen visa and adoption of Euro as a common currency has also played its part in strengthening CEE cluster. Standard of Education: Most CEE countries have superior educational www.globalservicesmedia.com

Expert Speak

Figure 2: Analysis of Outsourcing Clusters Parameter

Cluster Asia Pacific

Central and Eastern Europe

Latin America

Major destinations

India, China, Philippines, Malaysia

Ukraine, Romania, Czech Republic, Poland

Brazil, Chile, Mexico, Argentina

Upcoming destinations

Vietnam, Thailand, Sri Lanka, Pakistan

Slovakia

Paraguay, Peru, Columbia, Equador

Closest markets

Japan, Korea, Australia, India, China

Western Europe

US, Canada

Service Focus

Global markets

European markets

North American markets

Reason for emergence as a cluster

• Low costs • English language skills • Relatively mature service providers

• European language skills • Educated workforce • Good infrastructure

• Spanish language skills • Cultural affinity with American markets

Emerging areas of opportunity

• Vertical BPO • Knowledge services

• Technology services • BPO

• Contact center • BPO

Note: The table contains indicative data and may contain generalizations to enable comparison across regions. However, there are disparities within regions on each of the above parameters, some of which are highlighted in following sections. Source: KMPG Analysis

systems that are almost at par with outsourced has extended from “voice state-of-art infrastructure and cost the EU-15. A study by MGI claims based” services to insurance under- effective work force. With the advent that 50 percent of graduates (engi- writing. At the same time, new clus- of tier two outsourcing cities, customneers, mathematicians, statisticians ters have made the outsourcing market ers get several options even within a and physicists) from the Czech extremely competitive. Suppliers need country. Republic, Hungary or Poland are to continuously evolve and innovate From Y2K to global recessions, suited to working for international to attract customers. For instance, outsourcing has come a long way. The do not and have a good mix ofspread Buyers Sellers. destinations service“Other providers.outsourcing conferences despite inflation increase in wages of and outsourcing Most ofofthe time it is lot So I think, it’s aisgood mix,across you three get to hear from Emergence new clusters hasof sellers. and real estate prices, India still the continents has been the buyers is very important” . resultedthe into increaseprospective in length andwhich most preferred destination because of biggest leap. But this can prove to be breadth of outsourcing. The inhibi- maturity of industry in India and sup- just a beginning; the story will become Know More -Global Services Conference 2010 Attendee tions and reservations against IT-BPO port extended by the government and really interesting when Egypt and few outsourcing that existed, due to differ- promotional agencies. other African countries also actively ent priorities of customers, have been Regional analysis gives hawk-eye join the IT-BPO outsourcing banddiluted considerably by emergence of view of outsourcing destinations, wagon. GS new destinations. Outsourcing has but each of the regions also offers been embraced by more customers large diversity to the customers. For Viral Thakker is Executive Director, KPMG across geographies. With availability instance, in Asia, India offers mature Advisory Services, India. Nishant Mathur of diverse technical and profession- IT-BPO industry and English speak- is Consultant, KPMG Advisory Services, al skills, the breadth of work being ing workforce where as China offers India

27 January, New York

27 January, New York “Phenomenal & an Excellent platform to meet lot of clients and other people from same industry. Good exchange of thoughts and ideas. I would definitely come back year after year and would highly recommend people out there to come and participate”. -Global Services Conference 2010 Attendee

58 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

xperts Latin America: The Next Sourcing Frontier or an Afterthought?

Expert Speak

by Esteban Herrera, Senior Vice President, HfS Research

Nearly every provider of IT and Business Process services has wrestled with a Latin American Strategy. The strategic question : Is Latin America a destination of choice, or a destination of convenience?

n Spanish, the word “servicial” is a high compliment. It describes a person who is always ready to lend a hand, who senses what others need before they even ask. Parents teach the concept to their children, in hopes that they will develop this behavior. Providing a service in Latin American culture is noble and prestigious—so how is it that it is not the business services engine of the world? Nearly every provider of IT and Business Process services has wrestled with a Latin American Strategy. On one hand, it is a large, relatively prosperous market with a wealth of welleducated professionals. On the other, it is highly fragmented and diversely regulated; as a result, it has been difficult to scale. Another difficult choice for service providers is focus: are we building for the local market or to provide offshore/nearshore services? The two options require very different approaches, and therefore it is difficult to do both successfully at the same time. Perhaps the biggest limitation to date has been the inability of the local industry to organize regionally. Individual Latin American countries lack the population to offer the scale that more established Asian offshoring

destinations do. But viewed comprehensively as a region, it’s a formidable services population, with millions of qualified engineers, accountants, HR professionals, MBAs, doctors, lawyers, etc. and Billions of dollars in demand for IT and IT-enabled services ($8 Billion in Brazil alone). Latin America desperately needs, but probably will not get, a NASSCOMlike organizing body that will refocus the industry away from its current nationalistic tendency. It could start with the already commercially friendly Mercosul countries and perhaps expand northward as it proves its success. Possibly the best-kept secret is the abundance of English language skill available in the region. For both voice and non-voice services, Latin America is competitive with, or superior to, most of the usual offshore back-office destinations when it comes to working in English. HfS Research toured a call center facility in Nicaragua not too long ago, and found over 120 representatives placing outbound calls in perfect, nearly unaccented urban American English. Over 80 percent of these young employees had lived in the United States at some point in their lives. Of course, Latin America boasts

59 GS Destinations Compendium 2010

some of the well-know near-shore advantages of similar time zones, quick, relatively cheap flights, and most importantly, cultural similarities with American and European clients. However, the outsourcing industry here is not as mature, relying on heroics and creativity more than process and discipline. The strategic question for both providers and buyers: Is Latin America a destination of choice, or a destination of convenience? Latin America as a destination of choice

Companies on either side of the services equation that see Latin America as a unique and differentiated proposition will seek to leverage the cultural familiarity bred by the outsize influence of the United States and Western Europe on Latin American Society. This has something to do with colonial history, economic power, political influence and aid, and shared JudeoChristian foundations for legal and social structures (though the region is increasing in religious diversity quickly). But it has even more to do with a shared experience and popular culture. Latins who were teenagers in the 80s remember when “Video killed the Radio Star” inaugurated www.globalservicesmedia.com

Expert Speak

MTV broadcasting, at exactly the same time as in the US. Cable subscribers throughout the entire region have more foreign (and mostly American) channel choices than they do Spanish-language and local choices. While there is a vibrant independent film industry in nearly every Latin American country, Hollywood rules the cinemas. For all of Brazil’s compelling music, visit one of Sao Paulo’s famous “boites” and you are most likely to hear Euro-pop mixed by Europe’s top disc jockeys. Bottom line, Buenos Aires looks and feels a lot more like Boston than Bangalore. Outsourcing is ultimately about providing services in a way that creates economic value for both parties. Cultural understanding can certainly grease the wheels of the relationship, but without an economic incentive, there is little reason to proceed. Latin America still does offer labor arbitrage for desirable skills, but it is fading just as quickly as anywhere else. On a pure labor rate basis, Latin America appears disadvantaged relative to India and the Philippines, for example. But on a total cost of ownership (TCO) basis, that disadvantage shrinks. HfS research estimates the difference in TCO at no more than 10–15percent between most Latin America activity (whether IT or BPO related) and India-originated services. Companies that see Latin America as a destination of choice will logically invest more heavily, and their strategies should reflect the following elements: n Adopt a regional, networked approach, rather than a countryby-country approach. Make sure work is easily movable from one location to the other, and get skilled at capturing the right skills in the right cities n Make the cultural similarities and the physical proximity part of the differentiated advantage.

n n

Aggressively promote these advantages and how they translate into real business value Carve out new niches that fit well—Application maintenance is mature and well supported by other regions. But GUI design, for example, has a cultural appeal element to it and is a strong niche for Latin American providers. Focusing on the services that are best provided from the region can only help Lobby local governments for less restrictive service export policies and tariffs—and reward the locations that embrace pro-business regulatory environments Invest in local leadership Compete vigorously in the local market and the global service delivery playing fields to mitigate risk and enhance economic benefit

Latin America as a destination of convenience

While the regional, all-in approach may well be right for many providers and clients, but it isn’t for everyone. For some enterprises and their providers, a more opportunistic approach to Latin America is more appropriate. Simply put, some companies do not have the demand for services delivered from Latin America, because their customers and their business doesn’t require it. These companies will likely take advantage of niche expertise, and the ability to provide “localized” services when their limited presence in the region demands it. A few others might view Latin America purely as a diversification move, a nearshore minor site wih disaster recovery capabilities and a beachhead for potential future expansion should the situation change. This is probably the more difficult strategy to execute, because it requires making riskier choices about location and focus. Amongst service buyers,

60 GS Destinations Compendium 2010

the companies that can afford to follow a “convenience” strategy are the ones that do not have a large commercial presence in the region—they lack the language and culture-specific requirements of companies with large footprints in Latin America, and they are not large enough or “outsourced” enough to require the portfolio diversification. Service providers of any scale are unlikely to have no customers with local requirements, be they due to commercial need or geographic diversification. However, if the demand is not large, one or two medium sized delivery centers will suffice. Latin American service strategies that are more opportunistic will probably emphasize the following elements: n Site choices that reflect broad language and regional capability. Since there are likely to be less sites and a smaller footprint over a large expanse of the map, companies are more likely to choose areas like southern Brazil, where it is easier to recruit bi- and tri-lingual speakers. Where companies have a specific large market to be served, such as Mexico or Brazil, companies may choose sites or providers with local strength n Niche activities—certain kinds of application development, bilingual contact centers, KPO, and sports books, among others, are all reflected with relative strength in the region n Customer acquisition, in the case of providers. There are still a number of captive shared service centers in the region that could be sold to providers looking to win a new customer. n Portfolio diversification/Disaster Recovery. Companies that find themselves too heavily invested in a single region may find it attractive to conduct some business activity in Latin America, taking www.globalservicesmedia.com

Expert Speak

advantage of its labor arbitrage while managing business risk. n Marketing and Sales: Ultimately, service companies cannot call themselves global if they ignore 22 million square kilometers of the earth’s surface, with a population of 600 million. Establishing a presence in Latin America is critical to service providers and consumers that need to compete globally. The Challenges of the Region

While there are many more reasons to invest in Latin America than there are reasons to avoid it, there are some challenges for business service providers and their customers in the region: 1. Politics. Led and funded by Hugo Chavez’s regime in Venezuela, leftist, antibusiness and anti-American/ European governments have been elected in places like Bolivia, Ecuador, Nicaragua, and Argentina. While the threat to foreign businesses is real, it is also overstated. All of these countries require foreign investment, and still actively pursue it in spite of the political rhetoric their leaders promote. Brazil has grown economically, grown its middle class, expanded capitalism and foreign investment, and gained more influence in the region and the world in the last eight years, ostensibly under the leftist leadership of the Worker’s Party, which was just re-elected to the presidency for another fouryear term. 2. Brand. Colombia has some of the best professional talent in the world, available at reasonable wages and within a short flight from the United States. But Colombia has a terrible reputation as a violent, dangerous place that keeps a lot of foreign

investment away. In truth, the security situation is far better than it has been, not just in Colombia but throughout the region. The concerns over security are, in HfS’ opinion, overblown. Philadelphia, Washington D.C. and Baltimore are just three of the cities in the United States with higher murder rates than Sao Paulo. Buenos Aires is safer than Dallas. 3. Population/Scale. The main problem with single-country strategies is that no one country in the region, with the possible exceptions of Brazil and Mexico, has a huge population, therefore limit-

parts of the industry but not others. Most countries, even as they attempt to attract foreign investment, trip over their own bureaucracy. Fortunately they have all set up government-sponsored development agencies skilled in helping new entrants get established. Service Provider Landscape: Approaches to the market

Different service providers have taken different approaches to Latin America, and even within a category, the strategies have differed Traditional Western outsourcing providers such as Accenture and IBM have long had a presence serving the local market. Because of their country-specific organization structures though, it has only recently become possible for them to offer the services of their Latin American delivery centers to non-Latin American clients. CapGemini has perhaps the most aggressive investment program in the region and has backed it up with acquisitions, like the recent CPMBraxis transaction, and leadership to make it happen. All of these have local leaders running the operation, generally reporting to the home office in the US or Europe. Contact Center Providers were early and heavy in the region, for reasons mentioned earlier. Sykes, for example, operates in Argentina, Brazil, Costa Rica, El Salvador, and Mexico. Sitel is in Brazil, Chile, Colombia, Nicaragua, and Panama. West is a relative laggard with just one large Mexico operation. Call Center management is a highly poached job category in the region, but because of their prevalence and experience, there are plenty of local managers running these contact centers. The largest Indian ITES providers have all established a presence in Latin America, generally following an

Cultural alignment is the strongest calling card for the companies wishing to provide services from the region, but they must resist the temptation to “sell against India.” ing the actual and potential educated workforce capable of providing services. Costa Rica, which has the most educated population on the continent, has just four million inhabitants, 300,000 of them already working in the services-for-export industries. Chile, with a stable democracy, strong infrastructure, and the highest per-capita income in the Americas after the US and Canada, has just 16 million inhabitants. Both of the above have proven difficult places to recruit in for recent corporate multi-national arrivals. 4. Regulation. Latin America has not helped itself with a consistent policy for services exports. While Brazil taxes them, Nicaragua offers a 15-year tax holiday. Panama offers similar holidays for some

61 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

either build or buy strategy, but not both. Wipro has made some strategic investments in which it acquired both desirable assets and marquee customers. TCS moved early and has mostly built. Infosys has been characteristically cautious and opportunistic. HCL and Cognizant arrived late and do not have as large a presence as the others. Both WNS and Genpact have built and bought in the region. Those India-based providers that don’t already have a presence are talking about it, with commitment to getting established sooner rather than later. HfS has observed that the India-based firms are having difficulty engaging local clients, perhaps in part because they have largely failed to hire local leaders to run their shows. One senior executive from a large and successful provider recently remarked to HfS Research that “Portuguese/Spanish language skill and cultural understanding” were not that important to lead the Latin America business. This sounds a lot like the American globalization failures of the 1960s and 70s, in which US corporation dispatched ex-pats to run far-flung operations with little regard for local language, customs, preferences, culture and regulation. Large local providers, like Softtek, Neoris and Politech, have established businesses in the US, but their penetration is small relative to the the

brands mentioned previously. They have had the opposite problem of the India-based firms. They know and serve their home-market very well, but they have struggled with enterprise-level selling in the US and Europe. For obvious reasons, all of these firms have chosen a “destination of choice” strategy. They have a compelling near-shore value story to tell, but are far behind in awareness and market share. HfS Research sees the immediate challenge for these firms as sales and marketing, but longer term, they must also establish themselves as true global providers, meaning they too will have to come to places like India, The Philippines and China if they are going to be a full-service provider. They will also have to invest in BPO capabilities, as they are largely IT focused and HfS Research sees a slow but consistent swing towards bundled, end-to-end services over the next few years. Yet another category of provider is the smaller, high-end Latin American software development outfit—companies like Hexcta, Avantica, and PSL, with deep expertise, smaller project based work as their main offering, and more midsize than enterpriseclass clients. Their clients find working with them easy, for the nearshore advantages described elsewhere in this report, but they also tend to get a lot of personalized attention that

executives of larger firms could not give them. More than any other constituency, this group of providers has an interest in promoting the region as a destination of choice, particularly for high-end software services. The bottom line

Outsourcing in Latin America will continue to grow, in part because the region can serve many different types of demand. Cultural alignment is the strongest calling card for the companies wishing to provide services from the region, but they must resist the temptation to “sell against India.” The business services industry is, at this stage of globalization, much less a competition amongst countries than it is a competition amongst companies. Consumers of business services have a choice of locations and providers, and as they seek to both diversify risk and integrate services, Latin America will continue to be a key ingredient in the recipe. Whether the region plays a dominant or secondary role in the sourcing strategies of enterprises and providers, expect to see continued, paced, growth in both the local and export markets. And why not harness the energy of a culture that prides itself on providing a service? GS Esteban Herrera is Senior Vice President, HfS Research

62 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

Expert Speak

xperts

by H.Karthik and Nikhil Rajpal, Everest Group

Africa: The emerging frontier for services offshoring Africa’s growth in offshoring has been primarily driven by its low-cost proposition and talent availability in meaningful scale. However, Africa is often perceived as ‘high-risk’ by foreign investors.Here, the continent is analysed across key decision drivers in location selection.

he offshoring of global services is an established phenomenon. In 2009, over $90B of services were sourced across BPO and IT through ~4 M people from offshore locations. As demand grows, the offshore location landscape is evolving rapidly, with over 150 cities that are potential location options for companies. Africa is a relatively recent entrant to this list of potential destinations. The region has witnessed significant uptick in offshoring activity in the past 24-36 months. Recent investments by leading global companies (e.g., Amazon in South Africa) are likely to favorably influence interest in the region as a global sourcing destination. Among the African destinations, Egypt, Morocco, South Africa, and Mauritius are the leading countries in terms of scale of direct employment in the offshore services sector. Each of these countries has more than 10,000 offshore jobs in this sector and host delivery centers for a number of leading global suppliers and captives. Africa’s growth in offshoring has been primarily driven by its low-cost proposition and talent availability in meaningful scale. However, Africa is often perceived as ‘high-risk’ by foreign investors. In this article, we explore key African countries across three key decision drivers in location

selection, namely talent availability, costs and operating risks. Meaningful scale of talent available in many countries

Everest analysis suggests that at least four countries in Africa provide talent in meaningful scale to support large operations (in excess of 1,000 FTEs). Egypt, South Africa, Morocco and Tunisia each produce more than 50,000 graduates annually. South Africa, for example, produces 350,000 graduates annually and is among the Top 3 global locations that can provide English language skills at scale. While the size of talent pool in these countries is smaller than the established offshore locations (India, Philippines), it is comparable to that of emerging offshore locations in Central and Eastern Europe, Latin America. Other African countries such as Kenya, Ghana and Mauritius can support moderate-scale centers. Historical influences from the colonial era have provided these countries with a pool of language skills that are a key driver towards growth in offshoring. Given the diverse language skills in the region, we see three “belts” emerging: n Francophone belt in NorthAfrica and Mauritius: Primarily comprising Morocco, Tunisia and Mauritius, these countries

63 GS Destinations Compendium 2010

constitute the majority of the Francophone offshoring market. Most offshore operations in these countries support clients and customers in France and pan-European multinationals having significant French-language needs. For example, Capgemini has a ~1,500 FTE strong operation in Morocco providing French-centric IT application development, transactional BPO and contact center services to its customers. n English language belt in subSaharan Africa: Primarily comprising South Africa with Kenya also starting to gain traction, these countries primarily deliver English language BPO services. South Africa is one of the leading destinations to serve the UK market, given its preferred accent and cultural affinity with the UK. Five of the top 10 global contact center players are already leveraging South Africa to deliver voice work for the UK market. destinations n Multi-lingual for Europe: Some countries in Africa can support service delivery across multiple languages. Mauritius offers an attractive bilingual proposition for French and English work. Egypt is well positioned to support multiple European languages at moderate www.globalservicesmedia.com

Expert Speak

scale and has witnessed credible success to the effect. Costs significantly lower than source markets; however, costs vary across locations

Locations in Africa offer significant arbitrage potential from source markets. For example, costs in South Africa are 50-60 percent lower than the UK. Also, most locations in Africa offer lower costs than the Central and Eastern European region. However, costs vary significantly across locations. Whilst Kenya, Mauritius and Egypt are among the lowest cost destinations in the region, Tunisia and Morocco are among the more expensive ones. Some countries offer attractive incentives that make a significant difference to the cost of operations. For example, the recently announced (Nov 2010) incentives in South Africa help reduce costs by 20percent. Whilst payroll and facility costs in African countries are in general competitive to India and Philippines, telecommunication costs are higher. This is largely driven by historical telecom bandwidth constraints. On an average, the cost of telecommunications in African countries is 5-7 times higher than that in India and Philippines. However, telecoms costs have reduced considerably over the past 3-4 years. Going forward, the advent of new cables (e.g., SEACOM) is expected to further reduce telecom costs and strengthen cost competitiveness of several countries in the region.

infrastructure). Whilst perceptions of risks in some areas are exaggerated, there are some challenges that investors need to consider and manage effectively. Also, these risks vary across countries and investors need to make conscious risk-reward tradeoffs in making location choices in the region.

violence and unrest in Nigeria and Senegal. Governments are making concerted efforts and strong commitments to improve the attractiveness of the operating environment. Initiatives include skill development (e.g., ITIDA-led programmes in Egypt, Monyetla programme in South Africa) and accelerating infrastructure development through technology parks (e.g., Casanearshore parks in Morocco, Ebene Cybercity in Mauritius). Most countries offer incentives for the offshoring sector; however, the nature of these incentives and their financial impact varies across countries. On the whole, the outlook on the offshoring opportunity for Africa is positive. We expect that growth will continue to accelerate as both suppliers and buyers build global delivery networks and diversify into newer locations. In addition to growth from international markets (e.g., UK), locations in Africa are also likely to witness growth from regional shared services operations (i.e., leading companies consolidating their back-office operations for the African region). Furthermore, the expected improvements in infrastructure augur well for the future of this region. Most of the work delivered from African markets is currently transactional in nature. While this is expected to continue, some countries offer opportunities to deliver complex work in certain areas (e.g., South Africa for complex BPO in financial services, Morocco in applications outsourcing). The political and security environment may continue to remain a concern in few countries but investors are finding ways to manage risks as they enter these markets. GS

While the size of talent pool in these countries is smaller than the established offshore locations (India, Philippines), it is comparable to that of emerging offshore locations in Central and Eastern Europe, Latin America

Concerns on risks are a blend of real issues and perceptions; risks can be managed

Investors are often concerned with risks in Africa (e.g., stability, security,

From a relative risk standpoint, the region can be segmented into three groups n Egypt, Morocco, Tunisia and Mauritius are stable locations on account of a favorable geopolitical climate, socio-economic regime and investor-friendly business environment n South Africa offers a “FirstWorld” environment in terms of its infrastructure and quality of life. Investor confidence in South Africa has grown in recent years and the success of the FIFA 2010 World Cup has further strengthened the country’s reputation. However, there are some concerns on security that can be managed with appropriate investments n Instability of the political and macro-economic environment is a concern in some countries such as Kenya, Nigeria and Ghana (e.g., unstable coalition and burgeoning economic debt in Kenya). In addition, there are concerns with

64 GS Destinations Compendium 2010

H.Karthik is Vice President, Global Sourcing, Everest Group. Nikhil Rajpal is Partner, Everest Group www.globalservicesmedia.com

xperts

Expert Speak

by Jehil Thakkar and Shailesh Narwaiye, KPMG Advisory Services, India

Location Selection Best Practices There is no ‘one-size-fits-all’ strategy for organizations to choose but they need to follow a planned and scientific exercise of location selection

he recent financial crisis gave a big set-back to the world and a lot of companies are still grappling to recover. One big lesson that companies have learnt is that they can no longer exist in isolation. The world is getting closer and every global phenomenon will be impacting companies. Companies which had never considered outsourcing are opening up to offshoring / outsourcing to rationalize costs and delivery models. On the whole, access to global opportunities is getting easier. Offshoring not only helps in cost rationalization but also gives access to a diversified talent pool. If companies move to a relatively less explored location, they can leverage many additional benefits of being the “first-mover” like acquiring various incentives such as government grants due to a heavier hand at the negotiation table. Globally, several destinations are attracting IT-BPO players to set-up their delivery center. Depending on the strategic priorities, companies can choose between two types of cities, Leading Tier I or Emerging Tier II. Leading Tier I locations are early bloomers in IT-BPO sector and are quite mature in service offerings. Moreover, due to presence of large number of service providers and captive units in the city, skilled talent pool is large. Infrastructure of these

cities is well established and quality of life is also better. However, such cities have higher costs of operation and higher attrition rates.

stakeholders need to ask few important questions to themselves before finalizing the location to see if they are moving in the right direction.

Emerging Tier II locations are cities which started little late after watching the success of some of the leading destinations. These Tier II cities have large talent pool with relatively lower wages. Overall cost of operations is also low in these cities. However, infrastructure in these cities may not be sufficient to cater to the demands of the companies, but attempt is being made to improve the situation. Governments are focusing on development of city infrastructure and providing suitable incentives to set-up IT-BPO companies in these locations. Considering the gamut of choices in terms of cities that are available, it becomes difficult for organizations to choose the right city. Organizations are increasingly looking at parameters beyond cost arbitrage. Both Tier I and Tier II cities will have their own pros and cons and companies want be sure that they have chosen the best city to fit the bill. Ultimately, location selection is a scientific exercise and should be done with utmost care otherwise one may end up in a place where one gets a few advantages but does not meet overall objective of moving offshore. Location selection should be done with extreme caution and

1. Is a clear Sourcing strategy defined?

65 GS Destinations Compendium 2010

Organizations that are planning to explore new/alternate destinations need to have a clear sourcing strategy defined. Having a detailed sourcing strategy not only gives a business case and a plan for the next few years for offshoring but also gives a complete idea of the requirement. It also outlines future plan as to which processes are ideal to offshore, how to offshore and when to offshore them. This is a very important aspect from location selection point of view because it gives a clear idea about the scale and scope of services. It also helps to choose a location by keeping in mind about the future expansion plans. 2. What kind of time-zone proximity and support is expected from the new location?

Organizations should also be clear on nature of support they are expecting from the offshore location. Depending on the requirement, the center can be a near-shore or an offshore center. If there is a good amount of time overlap with the parent office then for the work to be carried out smoothly a near-shore center within time difference of 3-4 hours can be ideal. E.g. www.globalservicesmedia.com

Expert Speak

Mexican and Chilean cities can be a good option for US head-quartered companies. Offshore centers can be considered for large scale operations with minimal/no overlap with parent offices. In such cases, Indian and Chinese cities can be a good option for US head-quartered companies. Companies can also go for regional centers under ‘Follow the Sun’ strategy. In which case regional centers will take support charge during regional office’s ‘office hour’ timings. Other choice can be ‘24*7 offshore support’ model in which the offshore center always supports the required services. 3. Will an unexplored emerging Tier II location be a good choice for operations?

be executed from the location, one should look for suitable talent pool. For some of the transactional work, overall graduates’ pool can be considered, but for certain high end complex processes, looking at specific talent pool becomes essential. E.g. Commerce graduates can be considered for accounting process related work. Apart from the proportion of graduates, other factors which could impact the availability of talent pool are out-migration of talent and competition available from other/competing industries. E.g. The call center

nearby markets. E.g. Chinese cities like Changsha and Hangzhou can be a natural choice to support Japanese market due to their linguistic and cultural similarities. The Central and East European cities are good to support Western Europe; the Latin American cities are good for North America, etc. However, there are some interesting anomalies. E.g. Buenos Aires (Argentina) can tap both North American and European business due to linguistic similarities with both regions (Spanish, Portuguese and English). Similarly, accent similarities with the US mean that cities in the Philippines are well suited to serve the US market.

Some cities have set up areas for promoting specialized services – like the Gujarat International Finance TechCity in Ahmedabad (India) and the Tunis Financial Harbor in Tunis (Tunisia) are to be dedicated for financial services, Changsha (China) has a “Cartoon City” to house animation companies

Typically, moving to unexplored Tier II cities will have all the advantages of being ‘first-movers’ for large transactional work centers. State and local Governments will be ready to provide incentives for new set-ups. Talent pool will also be easily available and at a lowest possible cost in initial years. Although, in those initial years infrastructure may not be adequate but over the period if few good companies set-up in the city, infrastructure would be automatically improved to sustain the growth. Hence, if companies are ready to compromise a few aspects of location, their ‘High Risk – High Return’ strategy surely can provide them better benefits in the unexplored tier II location. But if companies are looking at setting-up a center for niche skills, a careful decision needs to be taken between established Tier I city verses unexplored Tier II city. 4. How good is the talent pool availability within the city?

Talent pool is one of the most critical aspects of location selection. Depending on the services to

industry faces competition from the tourism industry in some cities. Moreover, if there are industry clusters in nearby areas, typically a higher level of professionalism can be expected from the talent pool and can be employable. 5. Does the location have linguistic and cultural proximity?

Services which largely require customer interaction, possessing linguistic and cultural proximity really helps. Typically, near-shore emerging cities have strong linguistic similarities and cultural compatibility with the

66 GS Destinations Compendium 2010

6. Is there a dedicated IT-BPO Infrastructure available within the city?

Availability of dedicated zones for IT-BPO companies with ready basic infrastructure and facilities (such as power and telecommunication) can be of good help while deciding on a delivery location. Large number of cities have Free trade zones (FTZs) or special economic zones (SEZs), which can be ideal for IT-BPO companies. Some cities have gone a step further and set up areas for promoting specialized services – for instance, the Gujarat International Finance Tech-City in Ahmedabad (India) and the Tunis Financial Harbor in Tunis (Tunisia) are to be dedicated for financial services. Changsha (China) has a “Cartoon City” to house animation companies. For companies which are looking for niche services, cities with dedicated infrastructure and specific talent available can be of natural choice 7. Are Government incentives being carefully evaluated?

Different locations have different incentives for IT-BPO company setwww.globalservicesmedia.com

Expert Speak

ups these days. Even the governments are taking active interest in marketing their cities to IT-BPO companies. Competitive monetary and non-monetary incentives such as quicker clearances, facilitation with real estate and recruitment are some incentives on offer. For instance, in Guadalajara (Mexico), the time taken to set up business has gone down considerably in recent years. Port Louis (Mauritius) provides easy work permits to encourage expatriates to work in the otherwise small country. Other efforts include encouraging technical education (such as in Santiago, Chile) or the study of languages (such as English in the Chinese cities) to better prepare the talent pool. Hence, it is very important for organizations to evaluate these benefits carefully before finalizing the location to get maximum benefits from the location.

issues like cost of living, provisions, etc. may have a direct impact on an employee’s life style. Additionally, recreation facilities are also quite important to judge quality of life within the city. 9. Is site visit done before finalizing the city?

organizations to choose but they need to follow a planned and scientific exercise of location selection. We wish you all the success in this exciting journey! GS Jehil Thakkar is Executive Director, KPMG Advisory Services, India. Shailesh Narwaiye is Manager, KPMG Advisory Services, India

Site visit is one of the most important aspects which should not be missed. Even though all the important aspects of a city have been considered, companies will gain the planned benefits based on the final site chosen within that particular city. Therefore, once the final two-three cities are decided upon, a visit to the actual sites with these cities is critical before finalizing the offshore destination. One should not underestimate the value of a site visit and conversations with other experienced business groups conducting business in that location. For example, local business groups, pro8. How is the quality of life in the fessional associations and chambers of “Other outsourcing conferences do not have a good mix of Buyers and Sellers. selected location? commerce. Mostquality of the of time I think, it’s a are good mix, you get to hear from A wideSorange of choices availTypically, lifeit isis lot anof sellers. the buyers prospective which is very important” . able today, for companies in many untouched aspect of the city selection process. Cost of living, crime rate, parts of the world with the similar Know More -Global Services Conference 2010 Attendee pollution and ease of commuting basic advantages offered by these citare few important parameters while ies (E.g. lower costs, qualified talanalyzing a location for the quality of ent and aggressive incentives). But life it offers. Although pollution and depending on organizations’ strategy ease of commuting may not have an and project requirement, each city immediate and direct impact on the becomes unique in its own way. There quality of life a city offers, but other is no ‘one-size-fits-all’ strategy for

27 January, New York

67 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

Expert Speak

xperts Global Sourcing for FAO: Strong, Successful and Growing

by Stan Lepeak, Managing Director, EquaTerra Global Research

Despite the pressure for increased service trade protectionism among many in Western governments and general anti-globalization saber rattling, the use of global sourcing and service delivery models remains strong.

Global Sourcing Market Overview

The use of global or offshore resources to support outsourcing efforts is nothing new. The market has grown and matured over the past 10 years with most medium and large end-user organizations now engaging in some form of global sourcing, and all top service providers possessing diversified global service delivery capabilities. There is ongoing debate in the market on both the overall merits of offshore or global sourcing and its future growth. Some pundits predict (or hope) that global sourcing, like globalization, has peaked and, due to shifting buyer preferences, more restrictive trade and tax policies, converging wage ranges, etc., the growth of global services sourcing will slow or perhaps begin to contract. However, the reality of the market for global services sourcing is much different. While models, preferences and policies are always shifting, overall growth in global services delivery continues unabated. EquaTerra recently released the result of its 3Q10 global advisor and service provider Pulse survey. While the results were mixed to positive relative to the overall growth of business process and IT outsourcing, they were clear on continued strength of the offshore and global services market. Despite the pressure for

increased service trade protectionism among many in Western governments and general anti-globalization saber rattling, the use of global sourcing and service delivery models remains strong. The quarterly Pulse surveys poll the top global business and IT service providers and EquaTerra senior advisors on what impact various market conditions are having on buyers’ global sourcing preferences and patterns (see Figure 1 for 3Q10 results). The advisors and service providers described to what degree they agreed or disagreed with five positions related to trending in global sourcing. They ranked their responses on a

68 GS Destinations Compendium 2010

one-to-five scale where one represents “strongly disagree” and five means “strongly agree”. The only trend with consensus agreement, and it scored just above the mid-point, was that outsourcing buyers are growing more interested in offshore services delivered from locations other than India. This trend is natural as the number of quality and viable global sourcing locations expands and India-based service providers themselves diversify delivery capabilities beyond their home market. Neither advisors nor service providers see buyers pulling back from global sourcing in general or their use of India-based service providers as major trends.

Market Conditions: Impact on Global Sourcing www.globalservicesmedia.com

Expert Speak

Results were similar in EquaTerra’s 2009 – 2010 European ITO Service Provider Performance and Satisfaction Study. This market study analyzed over 1,600 IT outsourcing (ITO) contracts across Europe, and found that over 50 percent of all ITO buyers (with a high of more than 70 percent in the U.K.) are currently utilizing near or offshore outsourcing. Among these users of global sourcing services, over one-half plan to increase near and offshore usage going forward and less than 10 percent plan to do less global sourcing. Global FAO Provisioning

While these findings reinforce that the use of global service delivery models is well established for IT its growth also continues in other non-voice business process areas. EquaTerra client engagement experience and research consistently find that the use of near and offshore resources to deliver finance and accounting (FAO) services is increasingly prevalent in today’s market as part of a coordinated and comprehensive sourcing strategy. EquaTerra explored this trend in the recently completed, inaugural edition of its Global FAO Service Provider Performance and Satisfaction Study. This FAO study investigated 110 FAO contracts held by more than 90 of the top finance and accounting (F&A) spending organizations worldwide. The total annual contact value (ACV) of the contracts included in this study exceeds $1 Billion. Eighty-six percent of the organizations that participated in this research study are currently utilizing near and/or offshore resources (see Figure 2). Forty-eight percent of these are employing both, 34 percent are using only offshore, and four percent are using just nearshore resources. This growth of global FAO provisioning has been facilitated by the increase of service capabilities of India-based service providers with ITO roots,

Global Sourcing Models to Support FAO the expansion of global service delivery footprints by multinational and regional FAO providers, and the growth of offshore captive F&A operations, some of which have been spun off into successful FAO providers. Top Global FAO Service Delivery Locations

Not surprisingly, India is the dominant offshore destination (see Figure 3). Seventy-eight percent of market study respondents are using India to fulfill at least some of their global sourcing needs, while 43 percent are using processing centers in Central and Eastern Europe. The usage of Central and Eastern Europe was much stronger for buyer organizations located in Western Europe than in the North America, while India was a top destination for North American buyers as well as those in the United Kingdom. Central America, the Caribbean,

69 GS Destinations Compendium 2010

the Philippines and China are also popular offshore locations, with 19 percent, 18 percent and 14 percent, respectively, again more heavily utilized by buyers in North America. While only eight percent of respondents cited South America, it is on a solid growth trajectory from a small base. Location selection and preferences are a function of buyer preference, language needs and requirements, and the footprint of leading FAO providers. Future FAO Global Sourcing Plans

As noted above, nearly three quarters of respondents in this market study plan to increase their overall usage of FAO. Buyers are also bullish on their future use of global sourcing to support their FAO needs (see Figure 4). Sixty-eight percent of the buyers using offshore resources for Record to Report plan to expand efforts, as do 60 percent of the buyers using offshore for Order to Cash. For Procure to Pay, 51 percent of the respondents expect to increase offshore efforts, but it is important to note that much of this work is already offshored. While the use of near and offshore service models is common across all FAO process areas, it is most frequently utilized to support transactional activities. More strategic work like

Top Global FAO Service Deliver Locations www.globalservicesmedia.com

Expert Speak

Future Global FAO Sourcing Plans analytics is increasingly moving offshore, albeit on a much smaller scale. There are no signs that FAO buyers are pulling back from their global sourcing efforts, and protectionism, quality concerns, language challenges and other issues cited by some market pundits are having no material impact on global FAO demand. The ongoing, increased use of near and offshore FAO resources is one important means to help buyers achieve the cost reduction and other goals they seek from their FAO efforts. Global FAO can increasingly deliver on drivers such as access to skills, for example, to support more KPO -centric FAO efforts. Global service delivery across a broad spectrum of markets is increasingly the norm for FAO services, whether for global, regional or local buyer organizations. Global FAO Sourcing = Global FAO Satisfaction?

Regardless of the usage levels of global sourcing to support FAO efforts, the most important questions are how satisfied buyers are with their global FAO efforts and how satisfied they are with the performance of their FAO service providers. The answers here are affirmative on both counts. When asked to what degree FAO had delivered on the original drivers, buyers sought in its usage, 40 percent

of respondents were significantly posi tive and 46 percent moderately posi tive. Equally important, 20 percent of respondents were very satisfied and 48 percent satisfied with the performance of their FAO service providers, with zero respondents very unsatisfied with service provider performance. Further reinforcing these positive findings, over 70 percent of respondents plan to increase their usage of FAO going forward. Several deal attributes, including deal size, age, geographic scope and complexity, affect these satisfaction levels. The strongest direct positive correlation to service provider satisfaction was with buyers’ self-assessed sourcing management capabilities, highlighting the importance of good outsourcing governance to outsourcing success. The use of offshore or nearshore FAO service delivery models also contributed positively to FAO results. Buyers using both offshore and nearshore FAO services were more likely than buyers just using onshore resources to indicate that FAO has achieved the original drivers sought in its usage. • For buyers using offshore FAO service delivery models, 41 percent were significantly positive and 38 percent were moderately posi tive that FAO has met its original

70 GS Destinations Compendium 2010

drivers. • For buyers using both offshore and nearshore FAO service delivery models, 33 percent were sig nificantly positive and 53 percent were moderately positive that FAO has met its original drivers. • For buyers using just an onshore FAO service delivery model, 24 percent were significantly positive and 56 percent were moderately positive that FAO has met its original drivers. While all models overall supported the achievement of FAO drivers, the relatively highest levels of success came via offshore and nearshore delivery models. Finally, relative to general service provider satisfaction, buyers that are using offshore and nearshore FAO provisioning registered higher scores than buyers just using onshore service delivery. Nineteen percent of buyers using offshore provisioning were very satisfied with their service providers and 38 percent were satisfied. Buyers using both nearshore and offshore scored providers at 22 percent for very satisfied and 53 percent for satisfied. Buyers using just onshore delivery scored providers at just eight percent satisfied and 46 percent satisfied. So while overall all buyers were generally satisfied with their service provider’s performance, those using offshore delivery were the most satisfied. Global sourcing has become a core means to deliver F&A services. While the nature and mix of buyers’ global F&A service delivery models will continue to evolve over time, global sourcing will continue to play a critical role. And as the bar on the benefits buyers’ seek from FAO is continually raised, so too must their capabilities to design, execute and manage their global service delivery models. GS Stan Lepeak is Managing Director, EquaTerra Global Research www.globalservicesmedia.com

Expert Speak

xperts Why Latin America is Still a BUY

by Mario Tucci, Senior Global Business Consultant

If you combine lower risks, a better cultural fit and an appetite for investments, you will recognize a pattern for a BUY market in Latin America

recall six years ago when Tata Consultancy Services was expanding from India to open Global Delivery Centers around the World. Latin America and China began almost at the same time. The latter was promising great opportunities, large amount of people, fantastic costs. Now fast forward to 2010. TCS has around 8500 people in Latin America, but only 1500 in China. It has gained new customers within Latin America and shows an accelerated growth rate as this region is being “discovered” by large US and European countries. So, how come you grow faster in a region with so many different countries, much less people and more distance to your main location? Investors know that the obvious is not always the best deal. Welcome to cheap Latin America. Or should I say Right Latin America. Do you need to lower your risks? Even with higher wages than India or China or some parts of Africa and Eastern Europe, incorporating Latin America in your portfolio will significantly lower your risks. If you are a US or European company, just imagine calling your vendor or team during regular hours. Imagine talking about cultural issues that are much similar. Think in flying over there in less than 5 hours average. And what if you need to speed things up? Agile development is much easier to execute from similar time

zones, as well as functional testing and descriptions. In general, Latin American people live in environments that are very similar to those of the US or Europe. Americans drink Corona. They fly Embraer«s jets. They give Colombian flowers. They drink Chilean wine. They travel to Uruguay.

will provide precious feedback that will bring innovation to your processes, balancing the costs with better and faster outcomes. Also, we have welcoming governments. Almost all Latin American countries are luring IT companies (regional and global) to establish centers there. You will come upon Free Trade Zone regimes, investment promotion activities, tax vacations, research benefits and probably a special perk if you ask for it. You will also find improving abilities with regards to infrastructure (internet, airports, security, electricity). So, if you combine lower risks, a better cultural fit and an appetite for investments, you will recognize a pattern for a BUY market. But move fast. More and more people are discovering Latin America’s hidden treasures. GS

Latin American people understand US business, culture and preferences.In IT projects that means less conflicts, accurate functional aspects and better testing That means, Latin American people understand US business, culture and preferences. And in IT projects that means less conflicts, accurate functional aspects and better testing. Please also consider the ‘Follow The Sun’ approach in which projects move from Latin America to Europe to Asia in a round-the-clock, non-stop environment. But is Latin America ready and available? Firstly, let’s think people. Yes, there are some issues (shortages, attrition, language abilities, strong local currencies) in some countries. But in exchange, most Latin America IT people have a lot of working experience as they are graduates from universities. That means they can and

71 GS Destinations Compendium 2010

Mario Tucci is a Senior Global Business Consultant. He is also a principal partner at Hemistion a Globalization Consulting company. He leads several consulting and business activities including support to Government Agencies, Free Trade Zone Parks, BPO startups and IT Companies.

www.globalservicesmedia.com

Expert Speak

xperts Africa- The Next Outsourcing Frontier

by Dr. P.K.Mukherji, President & Managing Partner, Avasant Asia                                                Countries across  Africa are trying to position themselves as competitive

destinations for IT/ BPO by promoting low-cost labor and nurturing conditions for a build-up of world class IT infrastructure.



 



                                   ollowing in the footsteps of opportunities and to gain consider-

India and the Philippines, able marketshare. countries across Africa are A number of African nations      trying to position themselves are regaining traction as emerging  as competitive destinations for IT/ IT/BPO destinations. While South BPO by promoting lowcost labor and Africa leads Africa’s BPO sector; pernurturing conditions for a buildup of forming call center services and all  world class IT infrastructure. These types of backoffice operations, in        nations are leveraging their advaanthecontinent, other nations across         tage of younger demographics, popu- the continent are emerging as favolation          destinations. with good English and Frenchl rable  outsourcing            anguage skills, a high degree of cul- Countries like Kenya, Ghana, Egypt,  tural alignment to Western countries Mauritiuus, Tunisia and Morocco coupled with a similar timezone to are using outsourcing as a key tool           Europe and a shared business culture. to alleviate themselves from the cur         The countries are realigning their rent situations to achieve Economic         focus to address the paradigm shift in Proogress and prosperity. Most of  the outsourcing arena and are devel- the African nations are using their  oping comprehensive strateggies to differentiated version of the “four  rapidly position themselves as attrac- pronged approach” to attract BPO tive destinations for IT/BPO services companies: taxbreaks; competitivet  

        



Rank 1

Country India

Finan cial

People & Skills

3.13

2.48

Business 1.3

   2 China 2.59 2.33 1.37

Total Score 6.91 6.29

Egypt

3.07

1.2

1.37

5.64

Philippines

3.19

1.17

1.24

5.6

Ghana

3.26

0.7

1.36

5.32

Tunisia

2.86

0.91

1.45

5.22

Mauritius

2.32

0.95

1.77

5.04

Senegal

3.06

0.88

1.08

5.03

Morocco

2.62

0.93

1.42

4.97

South Africa

2.28

1.02

1.44

4.74

elecommunication rates; training funds; and marketing aid. Vast Talent Availability, Untapped The Next Billion

Second only to Asia, Africa provides access to a large pool of youthful workers. The continent, in its entirety, has a favorable demograpphic wherein majority of the population is in the less than 25 years age group. To illustrate, South Africa and Egypt are the leading nations, each contributing a labor force of over 20 million. Following them are nations like Ghana, Kenya and Morocco, each with an available workforce at or around 11 million workers. However, inspite of the availability of a reasonably large labour pool, a very small percentage of the pool is directly deployable in the industry. Challenge for most of these countries is to provide traiining to the labour pool to increase the level of skill for deployment in the induustry. It is thus imperative for them to bring a larger cross section of the population into the labor force and transition to a global services centric model. In this evolution, these countries are investing in skills development and enhancement to enable their vast young population to take up jobs in the growing services sector.

Source: AT Kearney Global Services Location Index 2009

72 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

Total Population

<14 years

51–64 years

Morocco

34,343,220

31%

64%

11.39 million (2007 est.)

South Africa

48,782,756

29%

66%

20.49 million (2007 est.)

Mauritius

1,274,189

23%

70%

574,000 (2007 est.)

Kenya

37,953,840

42%

55%

11.85 million (2005)

Ghana

23,382,848

38%

59%

11.29 million (2007 est.)

Egypt, Arab Rep.

81,713,520

32%

64%

22.1 million (2007 est.)

Tunisia

10,383,577

23%

70%

3.593 million (2007 est.)

Labor Force

Source: CIA Factbook 2008, July 2008 estimates

Vast Continental Market Opportunnity

Africa also has the fastest growing telecommunications industry. The total number of mobile subscribers in Africa is expected to reach500 6600 Million by 2013. Nigeria alone, being the most populous country in Africa, has over 74 million subscribers and is growing at the rate of 23 percent each year. South Africa and Egypt lead the banking sector in Africa, with both these nations succcessful in attracting foreign banks to operate in the local market. In 2008, Egypt attracted FDI of $13B, outpassing South Africa’s $8.5B. Kenya’s 45 commercial banks posted a 14 percent growth, while Nigeria grew at 15 percent in 2009. With a low rural penetration, Kenya, has less than 10 percent of its population utilizing banking facilities. This offers a great opportunity for growth in the African banking system. These are expected to further propel the growth of the BPO industry in the region because of the need for better customer service in the growing industries.

As per International Monetary Fund (IMF), the gross domestic product (GDP) of the African region has been growing 5 to 6 percent annually, since 2001. In parallel, foreign direct

they become destinations of choice for providing best in class global services and making them conducive to do business. A positive case for outsourcing is built not just with labor cost arbitrage but coupled with multiple key drivers such as a nation’s ability to provide and sustain a host of catalysts, such as a sustainable output of industry ready talent pool, availability of quality infrastructure, a risk free macro econnomic environment, financially attractive incentives and business structures, employment laws, quality of life etc. Investors in Africa today, are finding considerable benefits from leveraging the vast multilingual talent pool, competitive cost structures, proximity to European and Middle East markets and the growing domestic markets. Hence there is a need for a concentrated effort by regional governments to analyze internal strengths and weaknesses to build a specific niche. In parallel, countries need to undertake macrolevel development across sectors to enhance available skills, brand and position their respective countries and put in place necessary incentives to boost further investment in the region. GS

As per IMF, GDP of the African region has been growing 5 to 6 percent annually, since 2001. In parallel, FDI into the region has shown significant growth since the turn of the century

Africa-Outsourcing Market Drivers • Multi-lingual Delivery Capability • Near Shore advantage for Europe and • proximity to Middle East Markets • Access to local market economies which • is growing at 5–6 percent • Improving infrastructure and connectivity

investment into the region has shown significant growth since the turn of the century. Governments of a number of countries with support from international organizations like the World Bank and The Commonwealth Trade Development have been proactively working towards attracting investment into the IT& BPO sectors.

Dr. P.K.Mukherji is President & Managing Partner, Avasant Asia

Conclusion

While the world still views Africa as a region marred by conflicts, corruption and health issues, governments in many countries are taking the lead on branding their countries, by putting out right positive messages and countering the negative perceptions. Countries in the region are taking the lead to make the infrastructure in the leading cities world class so that

73 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

xperts Latin America Emerges as a Key Outsourcing Destination for 2011

by Don Jones, Partner, Technology & Life Sciences Practice, BDO USA

As countries in Latin America become more developed they are also becoming more attractive as potential IT outsourcing jurisdictions

istorically, the top four criteria for selecting an IT outsourcing location include cost (both initial and ongoing), education and skill level of the local workforce, scalability (i.e., the ability of an IT outsourcing provider to handle growth), and political stability. The values placed on these criteria may vary based on the need of the company seeking to outsource its IT. As countries in Latin America become more developed they also become more attractive as potential IT outsourcing jurisdictions based on these four criteria. 2010 saw Latin America officially emerge as a new destination for IT outsourcing. Based on recent surveys Latin America is number three overall in jobs outsourced from the U.S. The strategy implemented by U.S. companies that outsource IT functions to Latin America is often referred to as “near-shoring.” This near-shoring trend is expected to continue as South and Central American economies have been growing steadily over the last decade and are poised to become business and IT outsourcing forces in 2011. We have seen local companies in these emerging markets quickly become

multinationals, such as Politec Global IT Services (based in Brazil) and DBAccess (based in Venezuela). Even Indian outsourcing giant Tata has leveraged its presence in fourteen countries in Latin America with offshore centers in Brazil, Uruguay, Mexico and Chile to serve emerging organizations with local and global IT resources. China and India continue to be the major players in the IT outsourcing market; however, Latin America is poised to take market share from both of these respective countries.

China’s strong IT infrastructure, the language barrier in China and the lack of adequate legal protection for intellectual property continue to hinder China when companies are selecting a jurisdiction to place outsourced IT operations. These issues are not as relevant in Latin America as the local workforce is generally proficient in both Spanish and English and a better atmosphere for protecting intellectual property. Other important factors that may sway U.S. companies to choose Latin America over China or India include time zone similarities and geographic proximity. Time zone similarities may not affect 24/7 customer support (as these lines will be staffed at all times), but for general research and development outsourcing having employees that work in the same time zone is a definite benefit both for the main team and outsourced team. Similar to China and India, with the primary exception of Mexico and a few other countries, the political climate in Latin America is stable for the most part. Finally, although a minor factor, there are fewer cultural differences between the U.S. and Latin America versus the U.S. and China or India. These

Indian outsourcing giant Tata has leveraged its presence in fourteen countries in Latin America with offshore centers in Brazil, Uruguay, Mexico and Chile to serve emerging organizations with local and global IT resources In 2010, while China was able to gain market share from India in the global IT outsourcing business due to

74 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

factors have paved the way for Latin American IT outsourcing service providers to shine. In response to China and Latin America’s outsourcing growth, India has sought to establish a stronger infrastructure to facilitate IT contracts in Bangalore as well as other parts of the country in order to quell concerns that India may not have the technology or the ability to meet the growing demands of large U.S. companies. For some companies operating on a smaller scale, the issue of IT infrastructure may not be a top priority when choosing an IT outsourcing service provider. These companies may be uninterested in a stronger Indian IT infrastructure and may choose Latin America over India for other reasons. Regardless, with proper planning, high speed data centers and other IT functions can be moved rapidly to anyplace in the world with little impact on the bottom line. India continues to be a major player in the IT outsourcing market due to the education and skill of its workforce as well as its politically stable government; however, the overall cost of outsourcing to India has been slowly rising as the country becomes more developed and the U.S. dollar continues to weaken against the Indian Rupee (since 2009 the Rupee has appreciated by approximately 9 percent against the U.S. dollar).

China is not encountering these issues as costs remain low for IT outsourcing purposes and the Chinese Yuan has not appreciated against the U.S. dollar (as it is generally fixed to the U.S. dollar). Thus, from a cost perspective China remains attractive but is still subject to the previously discussed limitations with respect to language and IP protection. These cost considerations and other factors may push more companies towards Latin America over China and India when companies are looking to relocate their IT infrastructures. In 2011, we can expect this trend to continue as new firms located throughout Latin America bring innovative, new IT and business-focused solutions to companies looking to outsource IT functions. Moreover, they are expected to do this all with a cheaper price tag than other traditional outsourcing powers such as China or India. With the increasing cost of doing business in the U.S. from a both a regulatory and an overall tax perspective, more and more U.S .companies will continue to turn to IT outsourcing as a means to lower overall IT costs and increase global profitability. We can expect to see U.S. companies look to Latin America in the near future to satiate this demand for low cost and effective IT outsourcing solutions.

When it comes to outsourcing strategy however, company’s set of unique needs should be considered before selecting a country to place outsourced IT operations. In order to maximize the cost benefit of IT outsourcing, companies may want to consider seeking the help of qualified experts when selecting an IT outsourcing jurisdiction. These experts can assist the company in navigating regulatory and local customs of which the company may otherwise by unaware. The cost of good advice is arguably much less than the cost of relocating IT operations to a more favorable jurisdiction. Once a company has determined its IT outsourcing needs, it is crucial to address the possibilities that lie ahead. GS Don Jones is a Partner in the Technology & Life Sciences Practice of BDO USA, LLP, a national accounting firm providing assurance, tax, financial advisory and consulting services.

75 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

xperts Africa as an Outsourcing Destination

Expert Speak

by Pumela Salela, BPO/ITeS expert Consultant, World Bank

Africa has the essential ingredients to be a force to be reckoned with in the global BPO space, and addressing the challenges it faces will enhance its value offerin

n the past Africa, with its 53 countries, was known as a continent of starvation, disease, war, conflict, famine and hunger inhabited by those which Franz Fanon called “The Wretched of the Earth”. Today, Africa presents a different face to the rest of the world. A face characterized by economic growth, regulatory and political reform. To date, Africa is estimated to have one Billion inhabitants, the majority of which are of working age population group. A recent study by McKinsey Global Institute (MGI) indicates that today, Africa’s collective GDP is $1.6 Billion, roughly equal to Brazil’s or Russia’s. Tomorrow (year 2020) Africa’s collective GDP is estimated to reach $2.6 Trillion. Real GDP rose 4.9 percent per year from 2000 through 2008, more than twice its pace in the 1980’s and ‘90s. Telecom, banking, and retail are flourishing. Construction is booming. Foreign investment is surging. South Africa recently hosted the first FIFA Soccer World Cup to be hosted on the African soil and delivered a spectacular world class event. Africa surprised all in the area of mobile phone subscriptions, as its subscribers have increased steadily since year 2000 to reach 316 million to date. Interesting to note that African countries are seen to be equally competing with other emerging markets and are as productive as other countries such as India and China. The MGI study estimates that

by 2040 about 1.1 Billion Africans will be of working age. This is significant, in an era where the working age population amongst other countries is shrinking. Furthermore, 128 million African households are predicted to be having discretionary income by 2020. Finally, 50 percent of Africans will be living in cities by 2030. What does this mean for the Globalization of Servic es in the form of Business Process Outsourcing & Off shoring? Hope in BPO

Part of Africa’s growth can be attributed to the growth of the Services Sector within Africa. The Services sector contributes to more than 60 percent of the GDP in those African countries wherein it is developed. In these countries, Services sector accounts for the majority of employment creation. Business Process Outsourcing and Off shoring, presents a new hope for Africa, whereby the continent will no longer be seen as a continent for aid, but rather a continent ready for trade in services. If we look at the necessary ingredients of a country strategy for building the BPO&O sector, we will realize that Africa is making significant strides in developing its BPO sector. A summary Gartner’s Top 10 Criteria, AT Kearney Global Services Location Index, McKinsey Location Readiness Index and Hewitt’s International Benchmarking Model reveals that the top five building blocks of a country

76 GS Destinations Compendium 2010

strategy are: Talent Development, Infrastructure, Business Environment, Incentives and Marketing. In the discussion that follows, we will illustrate how Africa fares in each of the pillars identified. Talent

As indicated above, Africa is home to 1 Billion people, the majority of which are of working age. Africa has a highly educated workforce, both within the continent and in the Diaspora. African Countries are investing in training and skills development initiatives, to ensure that a readily available pool of labor is at hand to feed into the global services model. Egypt, for example, has a system of converting graduates from other fields of study, be BPO sector ready and provides subsidies for the training and conversion thereof. Nile University, which is housed within Egypt’s Smart Village (A BPO Park) also, trains students in the areas of ICT Enabled Services. Talent development is seen to be related to job creation, whereby African countries have specific targets to the number of jobs they wish to create in the sector, within stipulated time frames. Infrastructure

Across Africa, changes in broadband connectivity are underway. A number of undersea cables are scheduled to be completed by 2011 (see before www.globalservicesmedia.com

Expert Speak

and after diagrams). On the West side of Africa, in addition to the existing SAT3 cable, there shall be the WACS (Q2 2011), MaIN OnE (Q4 2010), ACE (2011), GLO-1(Q4 2009). On the East side of Africa, in addition to the SAFE cable, the EASSy (Q2 2010), Seacom (2009) and TEAMs (Q3 2009) cables have recently been launched. This signals a positive change from a continent that was only served by the SAT3 cable on the West and the SAFE cable on the East. This will improve not only the quality of telecommunications in the continent but also the costs thereof, as some of these providers promise to slash telecommunications prices by up to 80 percent of the current market price. African governments are engaging the private sector to develop other critical infrastructure such as energy including electricity, water supply, roads, rail, air connectivity, hotel amongst others. Real Estate is becoming a big draw card as governments, together with private sector, are building readily available “plug play” facilities for BPO Operators. Examples of these can be found in Kenya, South Africa, Mauritius, Egypt, Morocco, and Tunisia.

countries involved in the outsourcing sector are doing everything possible to lessen the burden of starting up a business, thus improving the ease of doing business in the respective countries. Incentives

Countries in Africa have woken up to the need for incentives as “sweeteners” to outsourcing deals. These vary from capex, opex, talent through to tax breaks. Morocco for example offers a tax exemption of 5 years and imports

of hardware and software is charged at 2.5 percent. On the other hand Egypt offers a corporate tax of 20 percent and customs duty of 6.2 percent. Countries which do not offer tax breaks, for example South Africa and Kenya, offer capex, opex and talent development tailor made incentives Marketing

Increasingly African countries are seen as key exhibitors and participants in the global BPO conferences, summits and seminars. Each country involved

Africa Telecommunications before

Business environment

On a macro-level, the 2009 Africa Competitiveness Report came out amid the most significant financial crisis in generations. In this context, the state of Africa’s financial markets figures was among the main topics analyzed in the Report. The analysis finds that some African countries— namely South Africa, Algeria, Nigeria, and Egypt—are well poised to bounce back from the crisis. This is because these large economies enjoy competitive banking systems and have functional regulatory systems, the consequence of financial-sector reforms adopted since the early 1990s. On a micro-level, the rest of the African

Africa Telecommunications after i.e. by 2011.

77 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

in the BPO space is creating awareness about its value proposition, demonstrating its readiness to take on outsourcing of off shoring work from global clients. Ghana is amongst those countries. Through, the leadership of Avasant, a global sourcing advisory firm, Ghana is making strides in showcasing itself as a viable outsourcing country, within Africa. BPO Country Developments Sub-Saharan Africa

Ghana

An industry association called GASSCOM was formed. An article by Lewis (2010) indicates the Secretariat of Ghana’s Information Technology Enabled Services (ITES) wants to establish e-governance and electronic voting in his country. The Secretariat has even disclosed that BPO would be contributing millions of dollars to the country’s economy. He anticipated that it would help Ghana to become fastest developing nation in the world. It is mentioned that English is the official language in Ghana which means that “the people of Ghana won’t be facing any problem dealing with US or UK based service buyers”. The country sees itself as having the right kind of resources for attracting all sorts of French BPO jobs including French call centers. In addition to that the country sees huge potential in the areas of graphic design, business enquiry and legal processes outsourcing among others. South Africa

South Africa was one of the first movers into the BPO space within Africa. As early as 2006, the country had identified BPO as a priority sector for development. As a result, all the necessary strategic pillars were put in place to position the country globally as a contender in the BPO space. To date, the country has managed to attract some of the world’s

top BPO investors in the form of Genpact, Aegis, Teleperformance, amongst others. Recently (October 2010) a new value proposition was launched which positions the country as a gateway and delivery center for the rest of sub-Saharan Africa, a near shore destination to Europeparticularly the United Kingdom and a Dutch language outsourcing hub due to its history and Dutch language capabilities. According to the Global Competitiveness Index, South Africa’s education is ranked higher than that of India and China. A research conducted by Everest in 2009 indicated that South Africa has three times (3x) the number of qualified actuarial scientists than India. South Africa has mature service offerings in Banking, Financial Services, Insurance, Retail, Telecommunications, IT Outsourcing, Knowledge Process Outsourcing and Legal Process Outsourcing. South Africa prides itself of having an English language whose accent is neutral and augers well with the countries cultural and product affinity with Europe and the United States. Malawi

Malawi is new in the game but is set to make its mark. In September 2010 the country held a workshop facilitated by the Commonwealth Secretariat, with the aim of developing a roadmap for the country to grab a slice of the BPO Global space. In its initial offering, the country will focus in the lower end of the value chain, focusing on English and its Customer service capabilities. Nigeria

The World Bank has recently (November 2010) published a paper titled: Developing an African Off shoring Industry-The case for Nigeria. The purpose of the policy note is to raise awareness of Nigeria’s potential as an African off shoring hub, and it is aimed primarily toward policy

78 GS Destinations Compendium 2010

makers, potential private sector investors, and development partners. The note addresses the following questions: what can Nigeria do to take advantage of the benefits of global trade in services; how can the country brand itself as an off shoring destination for international investors; and what government policies are required to ensure that Nigeria plays a role in the growing ICT off shoring sector. In the same paper, Nigeria’s main strengths as a potential off shoring destination are identified to lie in its relatively low-wage and cost structure. The country’s large size and youthful population are also seen as assets for companies wishing to establish largescale call centers and similar operations. Along the same vein, Nigeria’s good record on contract enforcement and flexible labor market regulations are viewed as having a potential to increase its competitiveness, as do recent steps to streamline business registration. Mauritius

Mauritius prides itself for ease of doing business as the country states that a new business can be set up within 3 days. The country indicates that it has 15,000 available bilingual talents (English and French) from Knowledge Worker to Cadre level. It cites a low fiscal regime as one of its strengths (15 percent harmonized personal and corporate tax, 0 percent tax on dividends, free repatriation of profits). In terms of Service offerings, Mauritius is strong in the following CRM (Telemarketing, helpdesk), Application Development ( Software Design and Development, Website development, IT Consulting),IT Services ( Data Centers including hosting, IT Help Desk, Disaster Recovery ), BPO / KPO (Finance & Accounting, HR Outsourcing, Publishing and content developme nt,Procurement,Architectural & Engineering Design, Legal). The www.globalservicesmedia.com

Expert Speak

Top 10 Things that Make Africa an Attractive BPO Destination n Low attrition African countries report low rates of attrition. Explanations given have centerd on the notion that when an African gets a job, they hold on to it. This is usually attributed to the fact that one working African person may be responsible for ten others, who may be members of a household and/or dependants. Some countries report attrition rates that are as low as 14 percent. n Multilingual workforce As indicated above both North and sub-Saharan Africa offer multiple languages which could support the United States, Middle East and the European markets. These range from Spanish, French, Dutch, German, English, Italian and Arabic n Near shore location for Europe The maximum time difference between the African countries and Europe is four hours. The time zones similar to Europe offer a near shoring opportunity to Europe, for the region. n Improved telecommunications infrastructure African Nations are formulating policies that encourage the development of ICT infrastructure and BPO services. By 2011 the telecommunications infrastructure in the continent will have improved three-fold. n Cost competitiveness In some parts of Africa, setting up BPO Operations in Africa can cost 10–20 percent less than India. Other countries are willing to match the prices that potential BPO investors get in India, the Philippines or any other countries competing with Africa. n Strong Government Support Governments at the national, provincial and local levels are supporting BPO initiatives through adding their own broadband initiatives to those offered by the continent, supporting marketing initiatives, approving incentive policies, providing infrastructure at reduced rates. Another trend is for the governments to have a BPO ambassador at a high level in government, to represent the respective countries during international marketing awareness engagements. In essence, governments have put pillars in place that provide a solid foundation for the BPO sector in Africa. n Emerging local market opportunities International BPO operators and other Multinational Corporations who set up shop in Africa can benefit from penetrating the domestic market in the said countries, arising from an untapped rising consumer market which demands goods and services that can be provide by the companies with the global experience. In some cases, international companies have come up with innovative ways to service the local market as evidenced by Safaricom who cut the boundaries between banking, financial services and telecommunications through a mobile phone. n Offshore destination for the United States Africa lies in between the United States and India and thus provides an evening shift for US offshorers versus India’s night shift. This further enhances the low attrition value proposition for Africa. n Availability of Labour Africa has a high population of a young work force, which is talented and educated. This provides a readily available labor pool for investors to draw from. n Continued GDP growth Despite the Economic Recession, African markets have grown at a rate of 5–6 percent in some cases outperforming most global economies. 79 GS Destinations Compendium 2010

www.globalservicesmedia.com

Expert Speak

country is positioning itself as the regional hub of Disaster Recovery and Business Continuity planning infrastructure and services for the global service provider community. Kenya

The country has a world class captive in the form of Safaricom and a well known BPO third party service provider, KenCall. Kenya is driving innovation. Safaricom launched the world’s first mobile phone service that allows money transfers by phone: MPESA. According to the Kenya ICT Board website(www.ict.go.ke) Kenya’s BPO strengths lie in Call Centers ( inbound customer services & support, outbound sales +marketing, market research, event management, print media); Back office processing (online database management, email & forms processing, data entry & conversion, corporate communications and graphic design); Software development (website development and animation).Kenya purports that the cost of operating a 1000 seat BPO center in Kenya is lower than in competing destinations such as India and the Philippines largely because an average FTE cost is $300 in Kenya as opposed to $425 per month in India). One of Kenya’s key competitive strengths is that it has a well developed financial services sector, and is developing into a regional (East Africa) hub. As one of the indicators of this strength, ATM numbers in Kenya have grown by 41 percent per annum. North Africa

Egypt

itida is the agency responsible for Egypt’s BPO sector. Over the past few years, Egypt has been striving to enhance its ICT infrastructure through national initiatives and projects implemented jointly by the public and private sector. Egypt has extensive availability of high quality and low cost/subsidized support infrastructure and services such as

A new world class BPO Park in South Africa called Coega.It offers readily available infrastructure and ‘plug&play’ facilities. power, telecoms and internet. According to Datamonitor, Egypt’s Outsourcing sector is expected to grow rapidly due to increased offshore interest from Western Europe as well as the United States and Canada. BPO country studies by A.T. Kearney (2009) place Egypt in the 06th position globally, out of the 50 countries surveyed. Itida reports that “Egypt is proving to be an attractive location for world leaders in the ICT industry, surpassing its competitors in the developing world – India and the Philippines – and attracting the attention of major corporations in the developed world, notably Orange, Vodafone and SQS. These corporations are investing heavily in Egypt as a coveted ICT outsourcing location.” Egypt has a number of initiatives to support the BPO sector, from smme incubation, through eduEgypt (training initiative) to international marketing support for established BPO operators in the country. Egypt has various language capabilities which include French, German, Arabic, English and Spanish. Morocco

Morocco is seen as the African country that is leading in broadband

80 GS Destinations Compendium 2010

penetration and telecommunications networks, foundations which are solid for the BPO sector. Morocco has been included in the Gartner list of the Top 30 Outsourcing destinations. The country’s strategy was developed by McKinsey through the so called McKinsey 2006 -2012 Impact Plan. Morocco has a number of BPO Parks for example, Morocco Techno park, Casashore, Rabat, and ForeShore. Two additional techno parks are going to be created in the near future. There are strong incentives for start ups. The government ensures that it receives a Return on Investment (ROI) on projects. Companies normally pay 40 percent salary taxes. If they are BPO operators, they pay 20 percent. This means that it gets cut into half. Morocco has Spanish language capabilities which allowed it to attract a bpo service provider Atento and Dell established helpdesks in Morocco to serve its French and Spanish customers, creating about 1,500 jobs. The country currently has about 200 call centers, including 30 of significant size, that employ a total of over 18,000 people. www.globalservicesmedia.com

Expert Speak

Tunisia

Challenges

A website (www.bpovoice.com ) indicates that in Tunisia, ICT & outsourcing of services are the beneficiaries of a significant level of investment, amounting to some 3.5 Billion Euros for the period 2007-2011, compared to just 230 million Euros for the period 1992-1996. Tunisia, as a country, is strategically positioned as a gateway to Africa, Europe and the Middle East. Its population has French, Arabic and English speaking capabilities. Many European companies have set up BPO operations in Tunisia to capitalize in order for Tunisia to serve their French speaking customers. Tunisian engineers are said to be 80 percent lower than Europe cost wise. Alcatel’s R&D center in Tunisia was first tasked with assisting the company’s Paris and Milan centers in the development of products. It evolved later into an independent design and implementation center. SR Teleperformance, a multinational call center, currently employs about 1,000 workers in Tunisia that serve French clients. With 200 call centers, Tunisia is one of the leading call centers and outsourcing destinations in Africa and in the Arab world. There are procedures adopted by the government to strengthen investment in call centers and remote support centers, through the activation of the network structure of the Internet Protocol (MPLS) at the national level in addition to the extension of the El Ghazala (a pool of more than 3900 people: 2000 engineers, 140 teachers & researchers and 1700 students) which specializes in ICT activities and research. Tunisia seeks to attract 2,000 new outsourcing jobs by the end of 2010. It is envisaged that Tunisia could become a regional business hub for companies operating in the space and aeronautic sector as there are already 20 foreign companies that are currently operating in the sector, including major names such as Latecoere, Zodiac and Sogema.

n In sub-Saharan Africa the first challenge worth highlighting is Perception! Perception! Perception! A number of countries in the developed world still see Africa as backward and underdeveloped. My belief has always been that “Seeing is Believing”. I would encourage each Executive that is exploring location options to book a flight to Africa and touch the ground. The reality is definitely different from what Africa has been perceived. Many parts of Africa are on par with western standards from a professional business point of view, to world class infrastructure. n Education Linkages could be cited as another challenge, in the sense that some school leavers and university graduates have the qualifications yet at times, these qualifications are not directly suitable to meet the needs of the outsourcing sector. A process of training and skills development is sometimes required before the school leavers and graduates can be absorbed into the workforce. n Lack of tax breaks is seen as a hindrance by potential investors. The Tier 1 BPO destinations such as India offer tax breaks. Potential investors usually assume that all other countries follow suit. Yet, there are African countries that are vehemently opposed to tax breaks, who would not mind giving other incentives which could take the place of tax breaks and have the same effect on the bottom line. The inhibitors, in North Africa, according to Data Monitor are the following: n Perceived regional instability. There are misconceptions revolving around certain locations in North Africa and Eastern Europe. n Labour Availability. There is belief

81 GS Destinations Compendium 2010

that there is outward migration to the European Countries and that the labor pool is tightening sharply. The outsource backlash is seen to be a hindrance together with the concern over lost domestic jobs in Western Countries. n Corruption. Western Business practice is something that is relatively new in North Africa, according to Data Monitor. Across Africa (North Africa and subSaharan Africa), the similarity of value propositions has made it difficult to differentiate one location from another. The volatility of the currency is also cited as one of the challenges that make investors feel uneasy, however, interviewing current BPO investors reveals that they are able to mitigate the risks and make the necessary profits. Conclusion

The key reasons behind Africa’s growth surge as highlighted in the MGI report are improved political and macroeconomic stability and macro economic reforms. African governments increasingly adopted policies to energize markets. They privatized state-owned enterprises, reduced trade barriers, cut corporate taxes and strengthened regulatory and legal systems. As a result, six of the African countries mentioned above ( Egypt, Ghana, Tunisia, Mauritius, Morocco, and South Africa) are in the AT Kearney 2009 top 50 Global Services Location Index. This signals that Africa has the essential ingredients to be a force to be reckoned with in the global BPO space. The challenges identified are something that the various African stakeholders are engaging robustly on, ensuring that they are addressed in order to enhance the Africa value offering. GS Pumela Salela is a BPO/ITeS expert and a Consultant for the World Bank

www.globalservicesmedia.com

xperts Offshoring in the Latin American Region

Expert Speak

by Pradeep Udhas, Executive Director, IT/ITeS Sector, KPMG

Some key factors that make Latin America attractive today

merging economies across the world are trying to emulate the success India has achieved in providing outsourcing services. What started with the millennium bug, led to India being one of the top outsourcing destinations in the world. Availability of talented resources, a large pool of people speaking English, government support in the form of tax breaks and relatively strong IP/Data security related laws are some of the factors that worked in India’s favor. Countries in the Latin American (LAM) region namely Brazil, Argentina, Chile, Mexico, etc are being increasingly recognized as alternate destinations to India and China primarily due to the increasing demand for near shore outsourcing service providers. The blend of LAM’s geographical proximity to the US and existing cultural similarities between the two has increased the importance of the region. In recent times, leading BPOs/ outsourcing companies like Capgemni, TCS, Aegis BPO etc have expanded in the region not only with an aim to hedge their operations but also to exploit the local market. Some of the key factors that make the Latin American region attractive are as follows:

a Chiliean IT major is a key example of consolidation in the domestic market. The company has acquired Telsinc - a Brazilian IT services provider, NextiraOne – a Mexican IT company; and Bogota-based software developer Red Colombia. It plans to further invest USD 500 million in acquisition till year 2012.

Domestic Market

Spanish and Portugese are the two main languages spoken in the region which abodes well for companies that aim to target non English speaking clientele. For e.g.: the US has a fairly large Hispanic community, which can be targeted through this near shore alternative. The multilingual workforce in Argentina can also be effectively tapped for not

The LAM region is a significantly large market with 20 countries, 550 million people, 4.4 Trillion dollars of GDP, and 8000 dollars per capita income. Brazil alone is expected to account for an estimated USD 128 Billion worth of IT end-user spending in 2013, according to IT research firm Gartner. Sonda,

Local Talent Pool

A Heidrick & Struggles report indicates that of the ten LAM countries analyzed, for the report, Brazil, Chile and Costa Rica would be the leaders in terms of availability of local talent pool in 2013. Similarly, a TMC.net report indicates that Colombia’s call center and outsourcing industry is one of the fastest growing industries in the country - a testament to the availability of local talent. A majority of the countries in the region have a good education system in place with the top few countries having a literacy rate of over 90 percent. Currently, Mexico, Chile and Brazil have the best talent pool in the region. Chile is widely regarded as the most attractive environment for talent while Brazil has the best universities in the region. Language Skills

82 GS Destinations Compendium 2010

only the U.S. but also for markets in Europe. The number of non-indigenous European languages spoken in Brazil, Mexico, Argentina and Chile is very high.These include Spanish, Portuguese, English, French, and even some German (in Argentina). It is also noteoworth that many Japanese and Chinese migrated to Peru in the late nineteenth century as rural labourers, and now form an integrated part of Peruvian society. Wages

Latin American countries such as Brazil, Mexico, Chile and Argentina, have competitive wages and a good educational system. A KPMG-NASSCOM study titled “Emerging Destinations for Indian IT / ITES Industry” (2007) revealed that the minimum wage in the region was pretty low and rose from USD 2.8 per hour in 2005 to USD 3.2 per hour in 2006, with Brazil being the highest at USD 5.6 per hour. However, the IT wages were significantly higher at USD 8.7 per hour, with Chile and Mexico paying more than two times the rates paid in India. As wages keep rising in India, they could soon be at par with those in the LAM region, thus making it a much more level playing field. In conclusion, Mexico, Costa Rica, Brazil and Chile are the main countries to watch for offshoring related activities in the LAM. These countries have large number of investments coming in, a good availability in terms of local talent and enjoy the increasingly important near shore advantage. GS Pradeep Udhas is Executive Director with KPMG, heading IT/ITeS sector. www.globalservicesmedia.com

xperts India’s Global Expansion: Eyeing Latin America

Expert Speak

by Sumeet Chugani, Associate Attorney, Diaz Reus & Targ

ndia-based corporations and entrepreneurs are carrying their economic goals and didactic talents abroad, with an emphasis in entering other emerging markets. Latin America, which has displayed a steady spirit during the recent economic crisis and a strong potential for long term growth, has ascended to the top of India’s radar. Thousands of Indian-born companies seeking to expand their global footprint, while obtaining needed commodities to sustain India’s one Billion plus population, recognize the value of Latin America. India’s total investment into Latin America and the Caribbean reached upwards of $10B in 2009, while imports from the region hinged around $9.2B. Although this figure is minimal compared to Sino-Latin American trade, it illustrates that a bridge has been built between these two emerging regions. The Indian government is encouraging movement into Latin America through the signing of multiple regional Trade Agreements. India is currently a member of Mercosur, a trading block including Argentina, Brazil, Paraguay, and Uruguay. As well, India has entered into a PTA with Chile to further trade between the nations. The Indian Government, with a continuing view to promote economic cooperation between the regions, has set up Joint Commissions with other important trading partners in Latin America. For example, India and Mexico signed a ten year Bilateral Investment Promotion and Protection

Agreement in May, 2007. Indian companies continue to set up operations in Latin America in everything from technology, pharmaceutical manufacturing, energy and mining. India’s top software service exporter, Tata Consultancy Services Ltd., which currently employs over 7,500 Indian professionals in Uruguay, Argentina, Chile, Ecuador and Mexico, expects its Latin American sales to double to upwards of $1B within the next three years. Jindal Steel & Power Ltd. has already spent more than $3 B to develop more ironore mining within South America, with strong interest stemming towards the agricultural front. As well, Tech Mahindra’s Chief Executive Sanjay Kalra has repeatedly stated his firm’s strong interest in merging or acquiring Latin American companies. This is just the beginning. India eyes Latin America as the next frontier for growth and expansion. For example, just this month Ashok Leyland, a leading Indian commercial vehicles manufacturer, declared its desire to gain new opportunities in Latin America. Moreover, Tata Consultancy Services Ltd. continued to expand in the region by opening new offices in Lima, Peru to increase its IT, BPO and consulting services in Central and South America. India’s entrance into Latin America will obviously present challenges. Different languages, local taxation, complex laws, and political dynamics will pose risks to uninformed Indians entering the region. Those players which balance risk and reward will

83 GS Destinations Compendium 2010

undeniably benefit from this upsurge of Indo-Latin American trade and investment. As Latin America and India strive to reach their respective potential, businesses within each region will discover golden opportunities. GS Sumeet Chugani is Associate Attorney at Diaz Reus & Targ, LLP, a full-service international law firm focusing on trade, financial, commercial and corporate transactions, tax, immigration, litigation, and arbitration matters.

www.globalservicesmedia.com

Expert Speak

xperts The 2010 Legatum Prosperity Index™

InsideInside cover cover v1 25/10/10 v1 25/10/10 10:24 10:24 Page 1Page 1

The Scope of the 2010 Legatum Prosperity Index™

™ Rankings ™ Rankings The 2010 The 2010 Legatum Legatum Prosperity Prosperity IndexIndex

Personal Freedom Safety & Security

Social Capital Personal Freedom

Social Capital

3824 36 31 21 33 2644 33 42 23 23 2825 39 36 4837 46 35 52 41 8646 45 39 34 34 5440 6049 57 55 47 32 5045 4948 8772 6550 53 54 6659 10467 6747 77 51 2564 6460 4376

Safety & Security Health

Governance Entrepreneurship & Opportunity

2430 3120 3339 4436 4248 2359 2527 3647 3753 35 41 4150 4642 3976 3421 4058 4932 5575 3281 4549 4828 72 51 5067 5423 5931 6774 4779 51 61 6473 6024 7684

Health Education

84 GS Destinations Compendium 2010

30 20 39 36 48 59 27 47 53 41 50 42 76 21 58 32 75 81 49 28 51 67 23 31 74 79 61 73 24 84

Education Governance

n Entrepreneurship and opportunity correlate more closely to a nation’s overall prosperity than any other factor. While other foundations such as health and education, are critical, levels of entrepreneurship and access to new opportunities actually provide the best proxy to understanding how prosperous a society can be. n It pays to be a democracy. Twentythree out of the top 25 societies in

Entrepreneurship & Opportunity Economy

United 30 Arab United Emirates Arab Emirates Kuwait 31 Kuwait Chile 32 Chile Costa 33 Rica Costa Rica Hungary 34 Hungary Estonia 35 Estonia Israel 36 Israel Slovakia 37 Slovakia Croatia 38 Croatia Greece 39 Greece Panama 40 Panama Argentina 41 Argentina Lithuania 42 Lithuania Malaysia 43 Malaysia Trinidad 44 and Trinidad Tobago and Tobago Brazil 45 Brazil Bulgaria 46 Bulgaria Latvia 47 Latvia Tunisia 48 Tunisia Saudi 49 Arabia Saudi Arabia Kazakhstan 50 Kazakhstan Romania 51 Romania Thailand 52 Thailand Mexico 53 Mexico Belarus 54 Belarus Jamaica Jamaica 55 Belize Belize 56 Botswana Botswana 57 China China 58 Sri59Lanka Sri Lanka

Economy

30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59

Country

Country Overall Rank

Key Findings from the 2010 Legatum Prosperity Index

Overall Rank

Top 110 Countries in the 2010 he Prosperity Index™ assesses Strong ranking Strong countries ranking (Top countries 30) (Top 30) Average ranking Average countries ranking (Middle countries 50)(Middle Low 50) ranking Low countries ranking (Bottom countries30) (Bottom 30) Legatum Prosperity Index™ Rankings 110 countries, accounting for over 90 percent of the world’s population, and is based on 89 different variables, each of which has a demonstrated effect on economic growth or on personal 1 Norway 1 Norway 1 6 1 12 6 4 12 4 4 2 4 2 2 1 2 wellbeing. 1 Denmark 2 Denmark 4 1 4 2 1 5 2 17 5 6 17 66 26 2 2 The Index consists of eight sub-3 Finland 3 Finland 9 4 9 7 4 3 7 10 3 3 10 12 3 7 12 7 Australia 4 Australia 8 13 8 8 13 2 8 15 2 13 15 4 13 4 4 4 indexes, each of which represents a4 New 5 ZealandNew Zealand 17 14 17 4 14 1 4 19 1 7 19 3 7 3 3 5 3 fundamental aspect of prosperity: Sweden 6 Sweden 7 2 7 6 2 10 6 9 10 8 9 58 11 5 6 11 Canada 7 Canada 5 10 5 5 10 12 5 11 12 16 11 1 16 8 1 7 8 1. Economy Switzerland 8 Switzerland 2 11 2 1 11 29 1 3 29 12 3 1912 6 19 8 6 Netherlands 9 Netherlands 3 12 10 13 13 18 13 5 9 3 12 10 13 13 18 13 5 2. Entrepreneurship & Opportunity United 10 StatesUnited States 14 3 14 3 3 9 3 1 9 25 1 9 25 12 9 10 12 (E&O) Ireland 11 Ireland 22 7 22 14 7 15 14 14 15 4 14 7 4 10 7 11 10 Iceland 12 Iceland 38 9 38 17 9 6 17 2 6 1 2 8 1 14 8 12 14 3. Governance United 13 Kingdom United Kingdom 18 5 18 9 5 22 9 2022 2320 1523 9 15 13 9 Austria 14 Austria 12 16 13 17 8 15 23 15 14 12 16 13 17 8 15 23 15 4. Education Germany 15 Germany 13 15 13 15 15 25 15 6 25 20 6 1420 1614 15 16 5. Health Belgium 16 Belgium 16 21 16 16 21 18 16 12 18 19 12 1019 1910 16 19 Singapore 17 Singapore 6 8 6 11 8 30 11 2430 5 24 36 5 5436 17 54 6. Safety & Security Japan 18 Japan 11 19 11 20 19 2420 5 24 11 5 4211 3142 18 31 7. Personal Freedom France 19 France 19 2019 19 20 14 19 7 14 27 7 1727 4217 19 42 Hong 20 Kong Hong Kong 10 17 10 18 17 5318 3453 14 34 1614 2416 20 24 8. Social Capital Slovenia 21 Slovenia 34 2634 2726 16 27 16 16 9 16 22 9 3822 21 38 Taiwan 22 Taiwan 25 2225 37 22 7 37 26 7 1026 2810 5228 52 Each of the sub-indexes provides two22 35 Spain 23 Spain 33 2733 22 27 11 22 25 11 3825 1838 3518 23 important analyses: first, an economic24 Czech 24 Republic Czech Republic 26 2926 3029 2730 21 27 2821 3028 3230 32 Italy 25 Italy 29 3029 3230 19 32 18 19 3018 2730 3027 30 25 assessment, and second, an assessment26 Portugal 26 Portugal 40 2840 2428 2024 2720 17 27 2417 6324 63 South 27 KoreaSouth Korea 15 18 15 31 18 8 31 30 8 3330 6433 5964 59 of a country’s subjective wellbeing, or27 Uruguay 28 Uruguay 46 5246 2952 3729 4037 2240 1122 34 11 34 28 happiness. Poland 29 Poland 37 3837 35 38 2635 3226 21 32 3221 2532 25 29 3438 5536 52 21 5826 31 33 3623 2828 3239 4448 2146 5052 3986 3545 4534 6754 7560 4857 3347 4150 6549 4687 4365 4753 6966 23104 7667 8077 8525 5964 5643

3534 3655 4652 4158 2831 3936 2328 2932 3344 2221 6350 31 39 3835 4445 6167 5575 4548 4233 5041 4965 5646 5343 6447 5469 3723 6876 5880 9685 6659 7256

2435 2936 3746 4841 2628 3639 9023 3229 34 33 31 22 41 63 42 31 3538 5244 4961 7655 4045 4542 4450 71 49 4756 4353 7564 7954 6037 5368 5758 5996 9266 10172

5424 3429 2637 2048 5026 6836 8990 6332 3834 8631 3941 3742 7035 9052 2949 2576 4040 6745 9144 10371 5347 4943 10675 7279 7660 4553 4757 2159 10292 52101

3654 2834 6426 4520 5550 4368 1789 4063 4138 10086 3739 4737 4970 9090 7229 5625 8040 9267 6991 18103 3353 9449 20106 3972 2376 5145 5047 6021 27102 2952

36 28 64 45 55 43 17 40 41 100 37 47 49 90 72 56 80 92 69 18 33 94 20 39 23 51 50 60 27 29

www.globalservicesmedia.com

34 35 36 37 38 39 40 41 42 43 Strong 44 45 46 47 48 49 50 51 52 53 54 1 55 2 56 3 57 4 58 5 59 6 60 7 61 8 62 9 63 10 64 11 65 12 66 13 67 14 68 15 69 16 70 17 71 18 72 19 73 20 74 21 75 22 76 23 77 24 78 25 79 26 80 27 81 28 82 29 83 30 84 31 85 32 86 33 87 34 88 35 89 36 90 37 91 38 92 39 93 40 94 41 95 42 96 43 97 44 98 45 99 46 100 47 101 48 102 49 103 50 104 51 105 52 106 53 107 54 108 55 109 56 110 57

Hungary 34 Hungary Estonia 35 Estonia Israel 36 Israel Slovakia 37 Slovakia Croatia 38 Croatia Greece 39 Greece Panama 40 Panama Argentina 41 Argentina Lithuania 42 Lithuania Malaysia 43 Malaysia ranking Strong ranking (Top countries (Top 30) Average Trinidad 44 countries and Trinidad Tobago and30) Tobago Brazil 45 Brazil Bulgaria 46 Bulgaria Latvia 47 Latvia Tunisia 48 Tunisia Saudi 49 Arabia Saudi Arabia Kazakhstan 50 Kazakhstan Romania 51 Romania Thailand 52 Thailand Mexico 53 Mexico Belarus 54 Belarus Norway 1 Norway Jamaica 55 Jamaica Denmark 2 Denmark Belize 56 Belize Finland 3 Finland Botswana 57 Botswana Australia 4 Australia China 58 New 5 ZealandChina New Zealand Sri 59 Sri Lanka Sweden 6Lanka Sweden Mongolia 60 Mongolia Canada 7 Canada Vietnam 61 Vietnam Switzerland 8 Switzerland Morocco 62 Morocco Netherlands 9 Netherlands Russia 63 United 10 StatesRussia United States Philippines 64 Philippines Ireland 11 Ireland Colombia 65 Colombia Iceland 12 Iceland South 66 South United 13 Africa Kingdom UnitedAfrica Kingdom Paraguay 67 Paraguay Austria 14 Austria Dominican 68 Republic Dominican Germany 15 Germany Republic Ukraine 69 Ukraine Belgium 16 Belgium Indonesia 70 Indonesia Singapore 17 Singapore Namibia 71 Namibia Japan 18 Japan Macedonia 72 Macedonia France 19 France Peru 73 Peru Hong 20 Kong Hong Kong Jordan 74 Jordan Slovenia 21 Slovenia Venezuela 75 Venezuela Taiwan 22 Taiwan Uzbekistan 76 Uzbekistan Spain 23 Spain Ecuador 77 Republic Ecuador Czech 24 Czech Republic El 78 Salvador El Salvador Italy 25 Italy Algeria 79 Algeria Portugal 26 Portugal Turkey 80 South 27 KoreaTurkey South Korea Guatemala 81 Guatemala Uruguay 28 Uruguay Bolivia 82 Bolivia Poland 29 Poland Syria 83 Arab Syria United 30 United Emirates Arab Emirates Lebanon 84 Lebanon Kuwait 31 Kuwait Honduras 85 Honduras Chile 32 Chile Moldova 86 Costa 33 Rica Moldova Costa Rica Nicaragua 87 Nicaragua Hungary 34 Hungary India 88 India Estonia 35 Estonia Egypt 89 Egypt Israel 36 Israel Ghana 90 Ghana Slovakia 37 Slovakia Nepal 91 Nepal Croatia 38 Croatia Iran 92 Iran Greece 39 Greece Mali 93 Mali Panama 40 Panama Senegal 94 Senegal Argentina 41 Argentina Cambodia 95 Cambodia Lithuania 42 Lithuania Bangladesh 96 Bangladesh Malaysia 43 Malaysia Tanzania 97 Trinidad 44 and Tanzania Trinidad Tobago and Tobago Rwanda 98 Rwanda Brazil 45 Brazil Uganda 99 Uganda Bulgaria 46 Bulgaria Sudan 100 Sudan Latvia 47 Latvia Zambia 101 Zambia Tunisia 48 Tunisia Cameroon 102 Saudi 49 Arabia Cameroon Saudi Arabia Mozambique 103 Mozambique Kazakhstan 50 Kazakhstan Kenya 104 Kenya Romania 51 Romania Yemen 105 Yemen Thailand 52 Thailand Nigeria 106 Nigeria Mexico 53 Mexico Ethiopia 107 Ethiopia Belarus 54 Belarus Central 108 African Central Republic African Republic Jamaica Jamaica 55 Pakistan 109 Pakistan Belize Belize 56 Zimbabwe 110 Zimbabwe Botswana Botswana 57

55 4248 33 42 31 33 2831 2628 5026 5550 48 43 2359 23 23 3623 3936 3639 6836 4368 59 17 2527 2825 2828 2328 9023 8990 1789 27 40 3647 39 36 3239 2932 3229 6332 4063 47 41 3753 48 37 4448 3344 34 33 3834 4138 53 100 35 41 46 35 2146 2221 31 22 8631 10086 41 37 4150 52 41 5052 6350 41 63 3941 3739 50 47 4642 8646 3986 31 39 42 31 3742 4737 42 49 3976 45 39 3545 3835 3538 7035 4970 76 90 3421 34 34 4534 4445 5244 9052 9090 21 ranking Average countries ranking (Middle countries 50)(Middle 50) 61 ranking Low countries ranking29(Bottom countries 30) (Bottom7230) 4058 5440 6754Low 4961 7229 58 67 49 56 4932 6049 7560 5575 7655 2576 5625 32 80 5575 57 55 4857 4548 4045 4040 8040 75 92 3281 47 32 3347 4233 4542 6745 9267 81 69 4549 5045 4150 5041 4450 9144 6991 49 18 4828 4948 6549 4965 71 49 10371 18103 28 33 72 51 87 72 4687 5646 4756 5347 3353 51 94 5067 6550 4365 5343 4353 4943 9449 67 20 5423 53 54 4753 6447 7564 10675 20106 23 31 5931 6659 6966 5469 7954 7279 3972 39 74 67 104 23 37 60 76 23 23 1 6 74 1 12 67 4104 4 23 2 37 2 60 1 76 6 12 4 4 2 2 1 45 79 47 67 76 68 53 45 51 51 4 1 79 4 2 47 5 67 17 76 6 68 6 53 2 1 2 5 17 6 6 2 58 50 61 51 77 80 5880 57 47 50 9 4 61 9 7 51 3 77 10 3 10 1257 7 47 4 7 3 3 12 7 60 73 64 25 85 96 59 21 60 8 13 73 8 8 64 2 25 15 85 13 96 4 59 4 21 13 8 2 15 13 4 4 27 24 60 64 59 66 92 102 27 17 1424 17 4 60 1 64 19 59 7 66 3 92 3102 14 4 1 19 7 3 3 56 29 84 76 43 5643 72 101 52 29 7 2 84 7 6 76 10 9 10 8 72 5101 11 52 2 6 9 8 5 11 87 39 85 26 88 58 81 49 85 39 87 26 5 1088 5 5 58 12 81 11 49 16 11 1 16 8 1 10 5 12 8 81 68 62 77 62 8162 74 46 66 68 2 1162 2 1 77 29 3 29 12 74 1946 6 66 11 1 3 12 19 6 63 13 35 68 6368 93 70 69 100 13 3 1235 3 10 13 10 13 93 18 70 1369 5100 12 13 13 18 13 5 82 53 64 56 101 38 47 82 88 53 14 3 64 14 3 56 9 101 1 38 25 47 9 25 1288 3 3 9 1 9 12 81 55 82 52 69 5569 60 8160 85 56 82 22 7 52 22 14 15 14 14 4 14 7 85 1056 7 15 4 7 10 62 55 57 59 68 62 107 57 62 38 9 55 38 17 57 6 59 2 68 1 62 8107 1457 9 17 6 2 1 8 14 97 88 78 71 51 77 43 40 7840 8822 9720 5123 71 18 5 77 18 9 43 22 20 23 15 9 15 5 9 9 55 75 86 91 74 54 61 59 54 74 91 86 75 55 59 61 12 16 12 13 16 17 13 8 17 15 8 2315 1523 15 80 77 75 66 33 80 62 7562 7715 80 80 33 66 13 1580 13 15 25 6 25 2080 1420 1614 15 6 16 73 71 96 73 98 40 48 58 7158 7310 16 2196 16 16 73 1898 12 40 19 48 10 19 21 16 18 12 19 19 84 70 44 43 82 70 7070 8430 56 96 4496 6 8 43 6 11 82 30 24 5 24 3656 54 8 11 5 36 54 87 44 70 35 68 78 4478 8720 93 67 3567 70 11 1968 11 20 24 5 24 11 93 42 3142 19 5 11 31 71 71 61 86 98 6198 7120 71 19 43 50 81 86 19 20 19 19 14 7 14 27 43 1750 4281 7 27 17 42 72 82 62 69 66 57 98 62 57 66 69 62 82 72 62 98 10 17 10 18 17 5318 3453 14 34 1614 2416 24 51 42 42 83 93 70 4270 4227 5116 65 105 83105 34 2693 34 27 16 16 9 16 2265 38 26 9 22 38 95 78 46 56 65 96 54 7854 9526 80 4680 25 2256 25 37 65 7 96 26 10 2810 52 22 37 7 28 52 61 59 84 22 61 108 85 8485 64 5964 6125 6138 2218 35 33 27108 33 22 11 22 25 38 18 35 27 11 88 73 73 97 75 96 60 7560 9729 7330 7327 88 60 96 32 26 29 26 30 27 21 2821 3028 3260 30 70 65 61 81 104 89 8189 6130 84 6584 7018 58 104 30 29 30 29 32 19 32 18 30 2730 3058 19 27 67 72 79 45 74 45 7940 90 7290 6720 93 101 74101 63 40 28 2428 20 27 17 27 2493 63 24 17 24 83 57 51 108 95 69 53 51 53 82 5782 83 95 108 59 15 1869 15 31 8 31 30 33 64 59 18 8 30 33 64 84 77 88 71 48 65 7165 8852 88 7788 84 83 48 34 46 52 46 29 3729 40 2240 1122 3483 37 11 91 86 61 93 78 55 63 87 9387 6135 86 91 32 5521 7832 25 37 3863 37 35 26 3226 21 32 25 38 52 74 79 71 75 71 92 7992 7438 5234 86 99 7599 36 30 2430 38 34 35 2435 5486 36 24 24 54 89 79 51 92 99 70 83 9283 5136 7955 89 82 9982 28 20 3170 20 36 55 36 2936 3429 28 31 34 62 76 79 81 79 97 80 83 7983 7652 62 7937 8126 64 39 3397 39 2180 52 46 3746 26 64 33 21 74 71 66 89 76 97 104 63 8963 6626 7158 74 41 9748 7620 45 36 44104 36 26 58 41 48 20 45 44 68 83 87 41 102 94 85 83 8383 6828 4126 8750 55 48 42102 48 33 94 31 85 28 26 50 55 42 33 31 78 95 89 41 105 74 44 93 4193 8923 9536 7839 7436 105 43 59 2344 59 23 36 39 36 68 4368 23 77 69 63 78 95 72 84 7884 6328 6928 7723 109 95 17 27 2572 27 28 28 23 90 8990 17109 25 89 51 89 95 56 101 31 109 89 5689 9539 8932 5129 3132 101 40 47 36109 47 39 32 29 32 63 4063 36 87 87 92 94 84 44 100 96 9496 9248 8744 8733 4434 84 41 53 37100 53 48 44 33 34 38 4138 37 60 57 106 108 78 86 105 57105 60 99 108 106 100 41 3578 41 4686 21 2221 31 22 8699 100 35 46 31 86 76 57 85 108 76108 109 103 54 48 5748 37 50 4185 50 52 5052 63109 41103 3954 37 41 50 63 41 39 63 73 67 43 101 99 7399 104 97 63 97 43 6737 47 42 46101 42 86 3986 31104 42 3742 47 46 39 31 98 72 97 98 92 100 72100 90 9890 66 9866 9770 49 76 3992 76 45 3545 38 3538 70 49 39 35 35 94 90 91 95 109 46 66 95 9595 9134 9045 9444 4652 109 90 21 3466 21 34 45 44 52 90 9090 34 98 99 74 58 78 95 104 74104 9954 101 98101 7849 58 72 58 4095 58 54 67 6167 49 29 7229 40 61 96 58 107 94 97 5897 9660 105 64 84 107 56 32 4994 32 60 75 5575 76105 2564 5684 49 55 76 25 106 102 100 91 65 75 91 98 80 100 102 106 75 65 80 75 5575 5798 4880 45 40 40 80 55 57 48 45 40 40 92 91 21 92 83 9183 109 107 92107 108 92108 2167 92 81 32 81 47 32 33109 42 4542 67 92 47 33 45 81 68 91 73 103 102 68102 94 106 81106 73 9191 69 49 45103 49 50 4150 5094 44 9144 69 45 41 50 97 102 65 87 107 107 97107 100 100 65100 102 18 28 4887 28 49107 65 4965 71100 103 18103 48 49 49 71 73 82 93 82 101 82101 105 109 73109 85 93 33 51 7282 51 87 4687 56105 47 5347 3385 72 46 56 53 109 99 98 100 77 77 107 90 100 9865 9943 109 7743 7749 94 67 50107 67 6590 43 53 4353 49 94 50 96 94 102 103 106 99 79 107 99 106 103 102 94 96 107 79 20 23 5423 53 54 4753 6447 7564 10675 20106 89 90 103 108 106 104 104 94 89 39 31 5990 31 66103 69108 54106 79104 72104 3994 59 66 69 54 79 72 99 85 93 106 109 99109 108 108 103 93103 85 23 74 67106 74 104 23104 37108 60108 76 2376 67 23 37 60 103 105 105 106 110 110 102 69 103 53110 53 68110 68 76106 76 67105 67 47105 47 79 79 5169 51 45102 45 91 110 86 88 102 103 91103 105 110 110 5758 57 58 80102 80 7788 77 5186 51 61 61 50110 50 47105 47 110 88 110 110 110 101 107 110 104 88104 59107 96101 96 85110 85 25110 25 64110 64 73 73 60 60 2159 21

the Prosperity Index are electoral democracies, and the other two (Singapore and Hong Kong) are semi-democratic societies. n Changes in the “social fabric” of a country can lead to big changes in national prosperity. Shifts in tolerance, satisfaction with freedom of choice and other social attitudes and practices clearly have 85

9266 10172 3985 46 74 6970 8247 85 81 10762 9788 55 75 8080 5848 5684 6793 5043 7282 65 51 9578 61 59 8873 7065 93 67 83 57 8477 91 86 8652

10292 52101 8739 6646

27102 2952 2687 6866 13100 5388 8256 6257 71 51 6159 6633 7371 4496 7035 8681 9862 83105 4680 2261 9660 10458 74101 10895 4883 7855 7599

69 direct implications on100 national 8882 prosperity. 5685 57107 All of n Prosperity is about balance. 5197 5955 in the the top ranking countries 3380 Index perform well across7158all eight 9656 sub-indexes. 3567 8150 be n Material wealth cannot 6272 explained only by economic fac10565 8095 tors, and happiness cannot be 6161 explained only by subjective 6088

Destinations Compendium 2010

5870 10193 9583 8384 5591 9986

emotions. “Soft issues”, such as people’s perceptions of each other’s trustworthiness, have a strong positive correlation with economic performance and similarly “hard issues” such as higher levels of GDP per capita, have a strong impact on people’s life satisfaction. n Choice and opportunity matter more to happiness than making a lot of money quickly. Being free to choose the course of your life and experiencing the satisfaction that comes from pursuing new opportunities matter more than quickly making a lot of money. n Two Europes are emerging. In the overall rankings, the Baltic countries are rapidly falling behind the rest of the EU. Additionally, none of the four original so-called PIGS (Portugal, Italy, Greece, and Spain) score higher in prosperity than the remaining Western European nations. n Improved governance is emerging as a key driver of prosperity in SubSaharan Africa. The index shows that the most successful African countries owe their success to radical improvements in the quality of their governance, particularly in establishing confidence in the military and in the judicial system. n It’s hard to be prosperous as a large country. Of the 10 countries in the world with more than 125 million people, only the United States ranks among the top 10 27 29 countries in the Prosperity Index. 26 n Economic growth is not enough 68 13 for the BRICs. Despite being 53 regarded as leaders among 82 62 emerging economies, in order 71 61 to develop into prosperous 66 nations, the BRICs will have to 73 44 foster improvements in areas 70 86 beyond economic factors. GS

98 83 46 22 96 104 74 108 48 78 75

6659 7256 8549 74 81 7093 4738 8160 6268 8878 7586 8077 4840 8470 9387 43 71 8262 51 42 7854 5964 73 73 6584 6772 5782 7788 8661 5274

Expert Speak

Social Capital

8158 6277 6368 10156 5569 5957 4043 91 74 7562 9873 7082 4478 71 61 6966 4270 9665 8485 9775 61 81 9079 51 53 8871 9387 7992

5964 5643 4981 8162 9363 38101 6055 6859 7840 8691 7775 4098 7070 8744 71 71 6269 4242 5496 6484 7397 8461 7290 8251 8888 6193 7479

5888 7762 6835 5664 6952 5755 4377 7454 6280 7396 8243 7868 6198 6657 7093 6556 85108 7560 8189 7945 5369 7165 8763 9271

Social Capital Personal Freedom

88 62 35 64 52 55 77 54 80 96 43 68 98 57 93 56 108 60 89 45 69 65 63 71

4376 7684 84 Sri59Lanka The Sri Lanka Source: 2010 Legatum Prosperity Index™ Mongolia Mongolia 60 Vietnam Vietnam 61 Morocco Morocco 62 Russia Russia 63 Philippines Philippines 64 Colombia Colombia 65 South 66 Africa South Africa Paraguay Paraguay 67 Dominican Republic Dominican Republic 68 Ukraine Ukraine 69 Indonesia Indonesia 70 Namibia Namibia 71 Macedonia Macedonia 72 Peru Peru 73 Jordan Jordan 74 Venezuela Venezuela 75 Uzbekistan Uzbekistan 76 Ecuador Ecuador 77 El 78 Salvador El Salvador Algeria Algeria 79 Turkey 80GS Turkey Guatemala Guatemala 81 Bolivia Bolivia 82 Syria Syria 83

Personal Freedom Safety & Security

6460

Safety & Security Health

6024

Health Education

Education Governance

Governance Entrepreneurship & Opportunity

China

Entrepreneurship & Opportunity Economy

China 58

Economy

Country

58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83

Country Overall Rank

Overall Rank

™ Rankings ™ Rankings The 2010 The 2010 Legatum Legatum Prosperity Prosperity IndexIndex

Source: The 2010 Legatum Prosperity Index Brochure www.globalservicesmedia.com

Destinations Compendium 2011

One Stop Resource On Global Outsourcing Destinations

RELEASING NOVEMBER 2011 Inviting countries, cities, associations to take part in this initiative For more details, write to satishg@cybermedia.co.in

� Beijing 88

� Ho Chi Minh 109

� St. Petersburg 133

� Belfast 90

� Johannesburg 111

� Toronto 134

� Brno 91

� Kolkata 113

� Warsaw 136

� Budapest 92

� Krakow 115

� Buenos Aires 96

� Kuala Lumpur 117

� Ahmedabad, Bangkok, Bhubaneswar, Brasília 137

� Cairo 98

� Mexico City 119

� Chandigarh 98

� Prague 120

� Coimbatore 100

� Rio de Janeiro 122

� Colombo 101

� San José 124

� Curitiba 103

� Sao Paolo 126

� Dalian 104

� Santiago 128

� Guangzhou 106

� Shenzhen 130

� Hanoi 107

� Singapore 132

� Bucharest, Cape Town, Dubai, Glasgow City 138 � Guadalajara, Istanbul, Jakarta, Kyiv 139 � Montevideo, Moscow, Mysore, Nizhniy Novgorod 140 � Penang, Perth, Seoul, Taipei 141

* This section contains information about cities which have been extensively sourced from various published sources, government sites, and other Internet resources and their factual accuracy needs to be independently ascertained.

Beijing Financial Street

City Profile n Beijing

(Source: Wikipedia)

Beijing China

The Birthplace of China’s IT Industry

eijing, a metropolis in northern China, is the capital of the People’s Republic of China. This city has the advantage of a government that is enthusiastic about modern technology and supports software industry. Beijing is very much advanced and modernized, in terms of infrastructure, as most of China has a rich and authentic (power and telecommunications) base. The growth of Changping Software Park, Zhongguancun Software Park (zPark), and Beijing Industry University Software Park reflects this support. zPark, lodging some 130 companies, is one of the prominent national software industry bases in China. As regard to tax incentives, Beijing has some local facilities to encourage the software industry in the city (distinguished from those offered on a national basis): • Tax refunds on one-time investments, for the purchase of cars or accommodations, when hiring senior software management or senior technical personnel. • Exemption from individual income tax on government-funded awards given to senior software talent. Beijing has around 1 million software support staff. The employee supply is plentiful and is expected to increase further as the Chinese government is upgrading its IT education. This destination has 18 universities with engineering courses and ten with specific courses on programming. Importantly, it’s also home to Peking University (also known as Beijing University) and Tsinghua University (the Harvard and MIT of China, respectively). Both universities have engineering departments that produce outstanding university graduates. In short, Beijing is literally the birthplace of current and future software engineers. With a total number of 165,000 graduates, Beijing boasts of being headquarters of around 200 IT companies focused on global outsourcing. There are around 26,600 employees working in ITOs, 34,200 in BPOs, and 15,200 in KPOs excluding domestic outsourcing resources. Its been seen that quality education in Beijing is

88 GS Destinations Compendium 2010

Quick Facts City

Beijing

Region

East Asia

Country

China

City Population

22,000,000

City Average Monthly Entry Level Salary (in US$) per month (BPO)

$7,000

City Average Monthly Entry Level Salary (in US$) per month (ITO)

$7,350

City Real-Estate Cost

US$21.66 per square meter per month

Major Service Providers in the City

Microsoft, IBM, Sun, BEA, Oracle, Infosys, Wipro, Satyam, Bearingpoint, Accenture, Capgemini, HP, TCS, Unisys, and CapGemini

Primary Language Spoken

Mandarin Chinese

Other Languages Spoken

English, Japanese, Korean

GDP

US$173.7B

Time Zone

China Standard Time (UTC+8)

Currency Exchange rate

Yuan $1= 6.65 CNY

Unemployment

4.1 percent

higher than the rest of China. Approximately, 70 percent of the employees in the outsourcing industry have graduate degrees. Most of the university students choose their second language as English. Beijing has vantage over other cities in the areas of scale and technical expertise of the workforce, infrastructure, risk profile, and lower attrition; but its labor cost compared to other Chinese cities like Shanghai or Guangdong and Indian cities is 10-15 percent higher. Contributing 30 percent of the total Chinese outsourcing revenue, Beijing attracts revenue of $580M in IT and BPO sector from Japan (49.8 percent), United States and Europe (45.5 percent), India, Hong Kong, and others (4.7 percent). In regard to the financial www.globalservicesmedia.com

City Profile n Beijing

industry, Beijing is looked up as one of the most devel- encourage the outsourcing industry. According to the govoped cities in China. ernment policy, a company can benefit 0 percent income Also, this city is host to the country’s IT indus- tax for the first two years and 50 percent income tax for the try, which was born in Beijing’s designated industri- following three years after authorization. The authorized al park, Zhongguancun, near company can deduct employee’s Peking University and Tsinghua salary and training cost by 100 University. Known as China’s Contributing 30 percent of the percent from the revenue before Silicon Valley, this park contotal Chinese outsourcing rev- income tax. tinues to be a major center for According to the Tax Law of enue, Beijing attracts revenue electronics and computer-related China, the maximum deductindustries and pharmaceuticals- of $580M in IT and BPO sector ible salary is $144.291 per perfrom Japan, United States and son and maximum deductible related research. Some of the notable com- Europe, India, Hong Kong,etc. training cost is 1.5 percent of panies based in Zhongguancun the employee’s salary. The comSoftware Park are Microsoft, Sun pany is allowed to deduct its Microsystems, BEA, IBM, Oracle, Accenture, Lenovo, R&D cost by 150 percent from its taxable income of this P&G Process Design Center, BeyondSoft, Neosoft, year. For the self-developed software products, the VAT ComFrame, TCS, Infosys, Wipro, and Reuters. rate was 17 percent before 2010. However, the authorized Regardless of a drop in the country’s overall foreign company will get 14 percent VAT refunded immediately direct investment amid the global slowdown, Beijing rose when the VAT is paid. The imported equipments for the 7.7 percent year-on-year in January, 2009, according to the company’s own use is tariff free. Beijing Municipal Bureau of Commerce. The capital city’s The State Council of the Chinese government has foreign direct investment arrived at $700M in January, created 19 software parks under its ‘Torch Program’.The up from the $650M during the same period of last year. 2,100 companies within these parks account for over 80 A total of 90 overseas invested enterprises were approved percent of China’s total software sales. in January. Beijing not only has excellent connectivity to major The city also confronted with the collision of recession. global destinations, but also has one of the best telecom Most of the export-oriented outsourcing units have seen connectivity/bandwidth. reasonably big slowdown in new client deals this year. This is why the city is a major hub of China’s IT indusBeijing government has framed certain policies to try and is considered a Tier 1 city for outsourcing. GS

Snapshot

➤ A company can avail the benefit of 0 percent income tax for the first two years and 50 percent income tax for the following three years after authorization. The authorized company can deduct employee’s salary and training cost by 100 percent from the revenue before income tax. ➤ According to the Tax Law of China, the maximum deductible salary is $144.291 per person and maximum deductible training cost is 1.5 percent of the employee’s salary. ➤ Beijing rose 7.7 percent year-on-year in January, 2009, according to the Beijing Municipal Bureau of Commerce. This city’s foreign direct investment arrived at $700 M in January, up from the $650 M during the same period of last year. ➤ This city is host to the country’s IT industry, which was born in Beijing’s designated industrial park, Zhongguancun. 89 GS Destinations Compendium 2010

www.globalservicesmedia.com

Belfast Northern Ireland

The FDI Magnet of UK

raditional sourcing locations, which have been at the forefront of the outsourcing boom, will sooner or later reach a saturation point. Companies are now looking at different locations to consider for their outsourcing activities, and Belfast is a well-placed outsourcing destination amongst other places. Belfast, capital city of the Northern Ireland, is the most successful region in the UK at attracting Foreign Direct Investment. The city attracts largest number of software development projects in UK. Belfast is home to strong software, financial services, and telecom sectors. Students achieving first-class or upper second-class honors degree, have increased by 29pecent over the last decade from 4,012 to 5,165. The literacy is 99 percent in Belfast. This indicates that there is enough talent pool in Belfast. Also, labor costs are 15 percent lower than the UK average, while labor turnover is less than 8 percent. The unemployment rate for Belfast currently stands at 6.4 percent (the Northern Ireland rate is 6.6 percent). This compares with the UK average of 7.9 percent (December 2009). The GDP growth rate is 6 percent and the inflation is 4.8 percent. Gross Value Added (GVA) per capita provides a good comparative measure of productivity. It is compulsory for the UK businesses to register for VAT (value added tax), if sales of taxable goods and services provided in the previous 12-month period exceed £67,000 ($106,857.36). The number of VAT-registered businesses was 8,730 in 2009. New businesses can benefit from a variety of tax allowances and reliefs that cut tax bills. These include capital allowances for investment in equipment and premises and tax relief and credits for spending on research and development. Corporation and personal taxation are among the lowest in Europe. Capital allowances of up to 100 percent in the first year for small-to-medium sized enterprises (SMEs) are available, for expenditure on environmentally friendly plant and equipment. Also, tax credits for research and development are available to stimulate scientific innovation for small

90 GS Destinations Compendium 2010

Quick Facts City

Belfast

Region

Western Europe

Country

United Kingdom

City Population

268,323

City Real-Estate Cost

US$19.0884

Major Service Providers in the City

Microsoft, Citigroup, Bombardier Aerospace, Fujitsu, HCL BPO, L&T Infotech, MindEye Inc., TCS, Supervalu, SAP Research Center.

Primary Language Spoken

English

Other Languages Spoken

Spanish, French, Italian, or German

Literacy Rate

98 percent

GDP

US$12.1306782B

Time Zone

GMT/BST

Currency Exchange rate

British pound (sterling) $1=£0.627625

Unemployment

6.5 percent

medium-sized enterprises (SMEs). In addition to government support, ready access to a highly skilled and loyal workforce and the existence of an already thriving local industry has encouraged major companies such as Nortel Networks and BT to choose Belfast as a location for their software operations. Belfast’s ICT sector has grown rapidly over the past years. The principal areas of focus have been in the fields of software development, mobile communications, Internet, and e-commerce. The rapid growth of this sector owes much to a number of indigenous companies who have successfully tapped into international markets as well as the academic research and support that encourages further innovation and development in the sector. In 2009 over £500M ($797,327,654.98) worth of developments were unveiled, including a number of landmark buildings that opened their doors to the public again following extensive refurbishments. GS www.globalservicesmedia.com

(Source: www.kelioniumanija)

Brno

Czech Republic The Growth Engine of Southern Moravia

rno—Czech Republic’s second-biggest city by Quick Facts economic activities and third-largest city by City Brno area—is the capital of the South Moravian Region Eastern Europe Region. It is situated in the central part of Country Czech Republic Europe and within its 200-kilometer radius lie other imporCity Population 1,151,500 (Dec 2009 est.) tant European capitals: Prague, Vienna, and Bratislava. City Average Monthly Entry Level US$1,118 As the growth engine of the Southern Moravian region, Salary (in US$) per month (BPO) this city hosts a wide range of universities and institutions, City Average Monthly Entry Level US$1,574 and is the second-largest center of education in the Czech Salary (in US$) per month (ITO) Republic. The large number of universities here attracts gradCity Real-Estate Cost US$11–21 uates who prefer to remain here rather than move to Prague. Major Service Providers in the IBM, Accenture, Infosys, This region’s highly qualified workforce -talented information City Microsoft Innovation Center, technology professionals- is fluent in multiple languages. Red Hat, Grisoft, Atento, Czech Technical center, IBA Group, In recent years, Brno has become an investors’ base with SDE, Monster Worldwide, relatively new types of foreign investments such as technolProgeon, DSG International, IDS ogy parks, developmental and shared service centers, and Scheer, AVG Technologies voice service centers. This capital offers advantageous state Primary Language Spoken Czech and city support for investment and a qualified and adaptOther Languages Spoken Czech, German and Yiddish able workforce at favorable labor costs. Literacy Rate 97percent Brno achieves the second highest amount of FDI in the Time Zone GMT +0100 country, after Prague. With the arrival of foreign investment, Currency Czech Koruny (CZK) there has been a marked expansion in strategic services. Exchange rate $1= 18 CZK Czech Technological Park of Brno is a joint investUnemployment 11.35percent (Jan 2010) ment by the City of Brno and the British multinational firm P&O, in close cooperation with Brno Polytechnic University. It provides home to a number of leading com- intensifies with some locations becoming expensive and panies, including Honeywell Controls, Siemens, Star 21 some getting saturated, the Czech Republic has managed Networks, Bobst Eastern Europe, SGI, Bovis Lend Lease, to maintain its position as one of the world’s most attracSouthern Moravia Center for Innovation, Timken Czech tive locations for FDI. Republic, Vodafone Czech Republic, As per Ernst & Young European IBM Global Services Delivery Center Attractiveness Survey from 2009, Czech Republic, Control Techniques With the arrival of for- Central and Eastern Europe is considBrno, FEI Czech Republic, Phoenix eign investment, there ered to be the most attractive business Contact, ENERGO-PRO Czech, locations and rank ahead China, India, has been a marked CSC Computer Sciences, and Symbol expansion in strategic Russia, and Western Europe. The Czech Technologies. market of information and communiservices here. As competition between countries cation technologies (ICT) recorded a and regions for cross-border investment turbulent growth in recent years. GS

91 GS Destinations Compendium 2010

www.globalservicesmedia.com

Budapest Hungary

Europe’s City of the Future

he global ICT sector is presently undergoing Quick Facts a rash of mergers and acquisitions, and the City Budapest Hungarian ICT sector is no exception to this Region Eastern Europe trend. The main strengths of Hungary are its Country Hungary low employment costs, good IT and communication infraCity Population 3271110 structure and the profile of its capital city Budapest. Major Service Providers in Convergys, InfomatiX, Genpact, Budapest is split into two distinct sides: Buda and Pest. the City TCS BPO, Getronics, EPAM, Unisys, Buda side is more peacefully residential and quieter than Siemens, Synergon, Ericsson and Nokia, Cognizant, IBM, Sykes, the Pest side. Almost 60 percent of Hungary’s industry are GE, Diageo, IT Services EDS, focused around Budapest. ExxonVodafone, Mobil, GE, Dell, As per Financial Times’ fDi Magazine, Budapest ranks Capgemini, and Morgan Stanley third in European Cities and Regions of the Future Primary Language Spoken Hungarian 2010/11. This ranking is on the basis of cost effectiveness, Other Languages Spoken English, German quality of life, economic potential, infrastructure, business Time Zone CET (UTC+1) friendliness, human resources and FDI promotion strategy. Currency Hungarian forint (HUF) As a result of its liberalized investment policy, Budapest has Exchange rate a conducive economic environment. However, there is a Unemployment 9 percent substantial number of trained work force and highly qualified employees, still the employee compensations are low. Hungary upholds a healthy economic growth through region (Budapest). this post-EU accession period. In recent times, it has witSome of the notable companies based in Budapest are nessed a changeover from central economy to a market- Convergys, InfomatiX, Genpact, TCS BPO, Getronics, oriented economy. Its inflation figures have also dropped EPAM, Unisys, Siemens, Synergon, Ericsson and Nokia, in this period. Hungary continues to show a healthy eco- Cognizant, IBM, Sykes, GE, Diageo, IT Services EDS, nomic growth through this post EU accession period. ExxonVodafone, Mobil, GE, Dell, Capgemini, and Budapest offers a highly skilled and diverse workforce, Morgan Stanley. with broad language skills and technical and customer facLogMeIn - with its headquarters near Boston and its ing skill sets. This city has relatively low property costs and engineering base in Budapest- plans to tackle giants like has the reputation for strong technical/R&D skills. But, Cisco Systems, Microsoft, and IBM, with an easy-to-use the increasing labor cost is one of the major factors that has product for holding meetings and exchanging information become headache for most of the companies. over the Web. In a recent survey by According to a report pubMastercard Worldwide, Budapest lished late last year, 10,000 ranked third in the economic Hungarians were engaged in Almost 60 percent of and commercial environment Hungary’s industry is focused call centers in the Budapest categories. Moreover, unemployregion. Besides research centers, around Budapest. ment rate is the lowest (7.5 pertechnological parks also facilicent) in the central-Hungarian tate the clustering of high-tech

92 GS Destinations Compendium 2010

www.globalservicesmedia.com

City Profile n Budapest

For the city of Budapest, GDP per head (based on PPP) stood 8000 at approximately $35,000 in 2008. As per Prices an Earnings, 7000 Budapest has one of the lowest 6000 gross earnings. The average gross 5000 monthly salary is $1,264.33. The average pre-tax wage in 17–24 age 4000 group is approximately $851.878. 3000 In the past 15 years, Hungary 2000 has become a major address for foreign capital. Cumulative FDI has 1000 reached over $79,867,831,745.73, 0 whereas investment growth has Czech Slovakia Hungary Bulgaria Poland Romaina risen year after year. The figure Republic below shows FDI stock per capita Source: wiiw, FDI statistics, 2009, ICEG, 2010 in the CEE region, 2009. Budapest also boasts of the infopark, which is the first innovacompanies such as: T-Online, IBM, HP, Compaq, Black tion and technology park in Central and Eastern Europe. Hole Software, Ericsson, Tata Sons, Canon, GraphiSoft, Encompassing the 2007–2013 fiscal years, government is Microsoft, Thales Nanotechnology, Zalaegerszeg, Komárom exploiting different measures to promote broadband access – Foxcom, Nokia, etc. in the second national development plan in Hungary. The information, communications, and technology Hungary has made steady progress in eradicating (ICT) sector in Hungary has grown in recent years, and pirated IT materials from the marketplace since 2003the country has come forth as one of the most developed when Hungary was placed on the Priority Watch List for outsourcing markets in the region. This destination has a IP violations-composing primarily of patent and data service-based economy, with industry and agriculture conexclusivity issues. tributing less than 35 percent of GDP. GS 9000

Snapshot

➤ As per Financial Times’ fDi Magazine, Budapest ranks third in European Cities and Regions of the Future 2010/11. This ranking is on the basis of cost effectiveness, quality of life, economic potential, infrastructure, business friendliness, human resources and FDI promotion strategy. ➤ Budapest boasts of the infopark, which is the first innovation and technology park in Central and Eastern Europe. ➤ In the past 15 years, Hungary has become a major address for foreign capital. Cumulative FDI has reached over $79,867,831,745.73, whereas investment growth has risen year after year. ➤ Hungary has made steady progress in eradicating pirated IT materials from the marketplace, since 2003-when Hungary was placed on the Priority Watch List for IP violations.

93 GS Destinations Compendium 2010

www.globalservicesmedia.com

Buenos Aires aerial view

Buenos Aires Argentina

The Frugal Man’s Outsourcing Paradise

uenos Aires is the capital of Argentina. One of the largest cities in South America, it is the financial, industrial, commercial and cultural center. Also one of the world’s leading ports, it lies on the Parana River, near where the river enters the Atlantic Ocean. Buenos Aires is the second-largest metropolitan area in South America, after São Paulo. The city’s service sector is diversified and well-developed by international standards and accounts for 76 percent of its economy (compared to 59 percent for all of Argentina’s). With 14.4 million inhabitants, it has 38 percent of the nation’s population and 35 percent of the country’s economic activity. In the city, the workforce numbers about 1.4 million people, with about 36 percent involved in services, 18 percent in trade, 17 percent in manufacturing and about 12 percent in finance, insurance, and real estate. Buenos Aires, a recognized player on the global BPO scene, continues to be a frugal man’s paradise. This destination is growing at double-digit rates in terms of both volume and value of the electronic commerce and payment business. Currently, it is ranked 269 overall, most expensive place in the world for expatriates to live, out of 300 international locations. However, electricity is 30–60 percent less expensive than United States - the average cost for power is US$0.04 per kilowatt per hour. Property is affordable; the median sale price per square meter of office space is around $65 per square foot. Buenos Aires has a large talent pool and a number of reputed educational institutions, capable of supplying workforce to the IT–BPO industry. Argentina’s cultural closeness and linguistic similarity with Europe is an added advantage, as it allows the country to additionally tap business from markets in Europe. Spanish is the official language, but Portuguese and English are also spoken in the city, which provides multilingual services. English language skills of the population

94 GS Destinations Compendium 2010

Quick Facts City

Buenos Aires

Region

South America

Country

Argentina

City Population

14,400,000

City Real-Estate Cost

US$65 per square foot

Major Service Providers in the City

Microsoft, Intel, Motorola, IBM, Hewlett Packard, Wipro, TeleTech, TCS, Latin3, Sabre, Ceitech, Google, MCI, etc.

Primary Language Spoken

Spanish

Other Languages Spoken

English, Portuguese, Italian, German, French

Literacy rate

96 percent

GDP

$245B

Time Zone

GMT -0300

Currency Exchange rate

Argentine peso (ARS) ARS1.00 = USD 0.251889

Unemployment

9.1 percent

are becoming stronger, as education in English is being encouraged. The city has low attrition rates. As regards office space, Buenos Aires posseses Class A office space. However, vacancy rates are on the decline because of high demand leading to rising sales and lease rates. The city can serve US markets effectively as Argentina lies in the same time zone as the East Unite States. When speed of response and deadlines become an issue in projects, working with people in a similar time zone becomes a crucial component to a smooth and effective work process. This city’s time zone offers the added advantage- it is one hour ahead of Eastern Standard Time (EST-USA), 4-5 hours ahead of Pacific Standard Time (PST-USA), and 3 hours behind Greenwich Mean Time (GMT-UK). The IT–BPO industry (high-tech sector in general) is growing rapidly and has been prioritized and encouraged through incentives by government. The Software Law www.globalservicesmedia.com

City Profile n Buenos Aires

establishes that software production is to be considered as a This complex, energetic, and seductive port city, which productive transformation activity and accorded the same stretches south-to-north along the Rio de la Plata, has been priority and incentives as other industrial activities. the gateway to Argentina for centuries. Buenos Aires, one of the main markets in Latin America The growth of Argentina’s IT-BPO industry during and in the world, is the ninth most populated urban con- recession was adversely affected. However, in the last few glomerates in the world. It is the 13th urban center with years, a large number of multinational companies have set the largest income in dollars in the world, ahead of cities up their operations in Buenos Aires. This industry has been like Hong Kong, Miami or Sao growing rapidly since then, makPaulo, and its growth prospects ing it one of the fastest groware excellent. ing sectors in the economy. The Class A office space is on Unlike much of the rest of prominent services from Buenos the decline because of high the country, this city has a varied Aires include software developeconomy, which helps it main- demand leading to rising sales ment, call center, back-office and lease rates. operations (such as data processtain a degree of stability, despite ing) and creative services (such the rampant inflation that has as design and media services). often burdened the entire counBuenos Aires has seen a lot of movement and change try. This region maintains low debt levels and debt service due to the arrival of multinational companies establishing requires less than 3 percent of the total budget. their regional hubs and offices in the city. Global giants Known as the Paris of South-America, its GDP (Gross with the likes of Google and MCI have set up shop in this Geographic Product) almost triples the average income per region. capita in Argentina. GS

Snapshot

➤ The prominent services sourced from Buenos Aires include software development, call center, back-office operations (such as data processing) and creative services (such as design and media services). ➤ The Software Law establishes that software production is to be considered as a productive transformation activity and accorded the same priority and incentives as other industrial activities. ➤ Some of these incentives encapsulate: lower turnover tax rates and exemption from provincial taxes, benefits in municipal fees, access to financing with preferential terms and discounts on services such as electricity, gas, water and communications. ➤ Known as the Paris of South-America, its GDP (Gross Geographic Product) almost triples the average income per capita in Argentina. ➤ This city can serve US markets effectively as Argentina lies in the same time-zone as the East Unite States. 95 GS Destinations Compendium 2010

www.globalservicesmedia.com

Cairo Egypt

“The Victorious City” of the Middle East

airo—the capital of Egypt and the largest city in Africa—means “the victorious city”. The economy of Cairo was ranked first in the Middle East, and 43rd globally by Foreign Policy’s 2010 Global Cities Index. It is the chief commercial and industrial center of Egypt. The majority of the nation’s commerce is generated here, or passes through the city. Majority of publishing houses and media outlets and nearly all film studios are settled in Cairo, as are half of the nation’s hospital beds and universities. Increase in population of Cairo shows an upward trend. One-third of the total population is under 15 and nearly three-fifth is under 30. The positive implication is that the population is relatively young. The most populous metropolitan area in Africa, it ranks 16th among the most populous metropolitan area in the world. Majority of the population is Egyptians, with less number of foreigners. Cairo is the economic center of Egypt, with two-thirds of the country’s gross national product generated in the greater metropolitan area. Today, the majority of its work force is employed in service sector jobs, especially in government, financial services, and commerce. English and Arabic are commonly spoken in this destination along with German, French, Spanish, and Italian. Egypt is one of the world’s fastest growing locations for global outsourcing and services, and has seen huge investments in the last year, with companies such as EMC, Stream Global Services, and Sykes Enterprise, collaborating with Information Technology Industry Development Agency (ITIDA) and outsourcing their business in Egypt. It should be noted, Egypt is fast becoming one of the world’s most attractive locations for global outsourcing. Currently, most foreign companies -locating IT and BPO positions- in Egypt use Cairo as their base. Industries in Cairo have developed fast, churning out new job opportunities for the natives. This city has been recognized as one of the world’s top ranking offshoring 96 GS Destinations Compendium 2010

Quick Facts City

Cairo

Region

North Africa

Country

Egypt

City Population

78,866,635 (2009)

City Real-Estate Cost

$1,322 per square meter

Major Service Providers in the City

Oracle, Orange, Microsoft, C3, Convergys, EDS (HP), Raya Contact Center, Tamima, Xceed, Unisys, IBM, Vodafone, Alcatel-Lucent

Primary Language Spoken

Arabic

Other Languages Spoken

English, French, Italian, German, Spanish

Literacy rate

71percent

GDP

$328.1B

Time Zone

GMT + 2

Currency Exchange rate

Egyptian pound (EGP) $1= 5.77 EGP

Unemployment

11.4percent

cities. This destination’s multilingual workforce, business analytics, and testing services act as its strongest key functions. In addition, allure of this city is that it is a low- cost base, embraces the large supply of skilled multilingual agents, has an amazing geographical position and it is economically and politically stable. Egypt hopes to see a tenfold increase in exports from its growing outsourcing industry by 2020. It will boost its focus on information technology (IT) entrepreneurship and co-ownership of intellectual property. Egypt’s economy, buoyed by rising exports, could grow by 5.5 percent in fiscal 2010/11 and attract $10B in foreign direct investment (FDI) as it recovers from the global economic crisis. There are also extremely attractive tax breaks and associated financial incentives available to foreign companies, so Egypt looks attractive on price, too. The typical per-seat cost for a call center is around $15,000—a highly competitive figure. www.globalservicesmedia.com

City Profile n Cairo

From its inception, Cairo’s economy has been based on around 40 employees, but plans to expand to 300. One business park, designed for BPO and ITO delivgovernmental functions, commerce, trade, and industrial ery, is currently being built-in downtown Cairo. Maadi production. It is an outsourcing haven, with its vast dediPark will have the capacity for 45,000 employees in over cated technology and outsourcing park in Smart Village, 40 buildings in 2 million square meters. Operations and the development of Maadi Park, which will house in are expected to begin there later this year, with compleexcess of 135,000 employees. Smart Village, the Egyptian tion scheduled for 2012. As well as expanding capacity, ICT hub located in the suburbs of Cairo, offers facilities Maadi Park offers a more confor more than 35,000 people and venient location, being closer to is home to a growing number central Cairo and having better of regional and international Smart Village, the Egyptian transport links—it will be near technology vendors including ICT hub located in the suburbs the city’s metro network. While Vodafone, Ericsson, Microsoft, there are plans to build business and Oracle. Additional Smart of Cairo, offers facilities for Village offices are being planned more than 35,000 people and parks in other cities in Egypt, currently nearly all ITO and for Alexandria to accommois home to a growing number BPO work is located in Cairo’s date the countries fast-growing of regional and international Smart Village. ICT industry. Mobile phone Some major names, such as network operator Vodafone has technology vendors Oracle, Orange, and Microsoft 800 contact center agents in have set up captive operations in Cairo serving the domestic, UK, Cairo, while major IT outsourcAustralian, and New Zealand markets. Network technology provider Alcatel-Lucent has ers such as IBM and EDS (HP) have had presence here for 300 technical support staff in Cairo. Local contact center many years. The largest expansion plans are also Cairo centric, with outsourcing provider Xceed has 1,900 employees in Cairo supporting customers across Europe, the United States, the previously discussed Maadi Park location, which is Canada, and the Gulf. Satyam opened a center in Cairo in being developed currently. The options of where to locate July 2007, from where it does some application develop- are limited outside Cairo’s Smart Village, while there are ment. Wipro gained a presence in Egypt with the acquisi- plans to build other parks in other Egyptian cities, these tion of development center New Logic. Currently, it has are still in the planning phase. GS

Snapshot

➤ Cairo is the economic center of Egypt, it generates two-thirds of the country’s gross national product. ➤ Extremely attractive tax breaks and associated financial incentives are available to foreign companies. The typical per-seat cost for a call center is around $15,000—a highly competitive figure. ➤ The largest expansion plans are also Cairo centric such as Maadi Park location. Maadi Park will have the capacity for 45,000 employees in over 40 buildings in 2 million square meters. ➤ Egypt hopes to see a tenfold increase in exports from its growing outsourcing industry by 2020 and will boost its focus on information technology (IT) entrepreneurship and co-ownership of intellectual property.

97 GS Destinations Compendium 2010

www.globalservicesmedia.com

Chandigarh India

Building Social Infrastructure

handigarh is the first ‘planned’ city of India. Known for its architecture, urban planning, and ambient environment, it is one of the bestmanaged cities in India. It is very well-connected to all major centers of the region and New Delhi, capital of India. With a population of about $1.297M (2009), Chandigarh’s per capita income is the highest in India at $2,430.73 in 2007–08. Chandigarh’s strength lies in its social infrastructure, which has led to the growth of major IT companies in this city. Apart from infrastructure, its proximity to Delhi and lucrative IT talent pool attracts IT business centers. Major multinational corporations and Indian firms such as Dell, Infosys, Quark, Ranbaxy, Reliance, Satyam, IBM Daksh, ICICI Prudential (for software development), Taurus Agile, IndiWork Software Solutions Private Limited, Netgains Network Solution, Promatics Information Services, UniSolsInfosyatems, Voicepack Infotech Private Limited, Chandigarh Infotech center, Inde-Dutch System India and SmartData have offices in this destination. Infosys, one of the largest IT companies in India and the world, was amongst the first to set up operations in the city. In the last one decade, this destination has seen rapid growth and has been emerging as the “Knowledge Hub” of the north. Developed land, dedicated telecom bandwidth and telephone exchange, and other pivotal facilities such as banking and public transport makes it a highly suitable office space for MNCs and corporate alike. Chandigarh, “The Silicon Valley of North India,” has all the trappings of being a technology city—good living standards, cosmopolitan outlook, skilled manpower, and excellent infrastructure. These factors attract IT/ITES/BPO investments in the city. Chandigarh houses many institutes of higher learning, such as the Punjab Engineering College, Chandigarh Engineering College, Punjab University, and the Postgraduate Institute of Medical Research. The Chandigarh 98 GS Destinations Compendium 2010

Quick Facts City

Chandigarh

Region

South Asia

Country

India

City population

1.297 million (2009)

Major service providers in the city

Dell, Infosys, Quark, Ranbaxy, Reliance, and Satyam

Software exports

$182,371,022.91 (2009–10)

Software exports from RGCTP

$159,385,089.56 (2009–10)

Primary language spoken

Hindi, Punjabi

Administrative languages

English, Hindi

Literacy rate

81.94 percent (2001)

GDP

USD 2,177 Million (2006–07)

Time zone

GMT/UTC + 05:30 hour

Currency Exchange rate

Rupee (INR) 1USD = 45.3100INR

Administration has been working on the development of human resources and has set up bodies like the Chandigarh Training On Soft Skills (CTOSS) Programme and Society for promotion of IT in Chandigarh (SPIC). In Chandigarh, companies are mainly engaged in services such as Information Technology (IT), IT Enabled Services (ITES) consisting of inbound and outbound BPO and training center, search engine optimization and Internet marketing solutions, global IT solutions like software development and consultation (viz. delivering costeffective software solutions and web services to small and medium enterprises), E-Commerce, website designing & development and CMS programming solutions to clients in USA and Europe and sale and maintenance of server and desktops to customers from defense, banks, research institute, and central government offices. The IT companies in Chandigarh are mainly located in Rajiv Gandhi Chandigarh Technology Park (RGCTP) and at the DLF campus. RGCTP is a major step in the IT industry of Chandigarh. Several national and multinational www.globalservicesmedia.com

City Profile n Chandigarh

IT companies are generating investment and employment invest into Chandigarh. They aim to create an appropriate opportunities to the region by setting up shops here. industrial setup, improve the quality of the life of people, Now more than 10,000 professionals are working in set up the right kind of business climate for various sectors RGCTP and an investment of more than $ 219,466,300.10 of Chandigarh and contribute to the overall development has poured in. It is estimated that once completed, phase of the economy. I and phase II would provide direct employment to more In order to develop the requisite talent for Knowledge than 30,000 professionals, and an equivalent number Industry, a new state-of-the-art Education City is coming would be directly employed in phase III taking the fig- up in Chandigarh, which will have world-class educational ure of direct employment from RGCTP to more than faculty and excellent infrastructure. Following are other 60,000 professionals. Accordingly, the total investment for initiatives which will support Chandigarh is being an ideal RGCTP will cross $1.3B. outsourcing destination. In 2009–10, the total export value of Chandigarh’s softA Cyber Security Research Center (first of its kind ware industry reached $182.2M, which is $18.2M (about in the country) has been set up in collaboration with 11 percent) more than $163.8M posted in 2008–09. NASSCOM and Punjab Engineering College for conSoftware exports from RGCTP ducting high-quality research on alone aggregated $159.1M in cyber security issues involving 2009–10 against $135.2M in Chandigarh, ‘The Silicon Valley the academia, IT Industry, and 2008–09, up 18 percent. Exports government security agencies. of North India,’ has all the from the units located in other Apart from research on cyber trappings of being a technology security threats, it will also aid parts of Chandigarh, declined by about 25 percent to $ 22.9M city— developed land, dedicat- and advise the State Police of from $28.6M ed telecom bandwidth and tel- the neighboring states in cyber Sanjay Kumar, IT-cum- ephone exchange, skilled man- security matters. finance secretary, UT Society for Promotion of IT power, excellent infrastructure in Chandigarh (SPIC) has estabAdministration was quoted, and proximity to Delhi. “Defying the meltdown, the IT lished centers of excellence in units located in RGCTP regiscollaboration with Microsoft and tered a growth of more than 18 IBM. The students are trained percent in software exports in fiscal 2008–09. But those in Microsoft Certified programmes which help the IT located outside the technology park, registered a fall of Industry get trained manpower. more than 25 percent, pulling down the total growth C-TOSS, a programme for upgrading youths soft skills rate to about 11 percent. It is estimated that the software and make them suitable for employment by the IT-BPO exports from RGCTP will cross $987.1Mby the end of industry has been started. Free training is provided in all 2011.” government schools both in urban and rural areas enhanc“The best year for the industry was 2008–09 when it ing employability of students. Free training is also being registered an increase of 48 percent in software exports. imparted to school drop-outs from underprivileged secIn fiscal 2008–09, total software exports of IT companies, tions of the society under CITROP (Chandigarh IT Reach located in the RGCTP as well as outside, had risen to Out Programme). $164M from $110.5M in fiscal 2007–08, registering an All these policies by the government have made increase of 48 percent,”stated Mr. Sanjay Kumar. Chandigarh a preferred location for the IT/ITES/BPO Chandigarh Administration has been framing several companies. GS policies, from time to time, so as to motivate investors to

99 GS Destinations Compendium 2010

www.globalservicesmedia.com

Coimbatore India

Set to Scale New Heights

oimbatore is the second-largest city in the Quick Facts South Indian state of Tamil Nadu. This city is City Coimbatore the second-largest software producer in Tamil Region South Asia Nadu, next only to Chennai. It is also the highCountry India est revenue-earning district in Tamil Nadu. Major service providers in the Tata Consultancy Services, Wipro, Coimbatore is emerging as a IT/ITES destination due city Cognizant Technology Solutions, to an ideal combination of good business infrastructure Robert Bosch GmbH, Tata Elxsi, KGISL, and CSS Corp Pvt Ltd that includes telecom, power, quality of life, highly skilled Primary language spoken Tamil, English workforce, low-cost of living, low pollution, and rapid pace of infrastructure development. Other languages spoken Telugu, Kannada, and Malayalam Tata Consultancy Services (TCS), Cognizant Literacy rate 78 percent Technology Solutions, Robert Bosch GmbH, Tata Elxsi, Time zone GMT/UTC + 05:30 hour KGISL, and CSS Corp. Pvt Ltd have set up centers in the Currency Rupees (INR) city. IT major Cognizant was one of the first major players Exchange rate 1USD = 45.3100INR to start a development center in this destination, opened a techno-campus in 2009 with a capacity to employ 6,000 are three universities, five deemed universities, 25 engineerprofessionals. Its vice president, Vishnu Potty, admits to ing colleges, 14 polytechnics, more than 65 arts and science Coimbatore being a strong sourcing base for its operations colleges, 44 MBA institutions, and other colleges. It producacross India. es more than 30,000 engineering graduates every year, thus In August 2010, Tidel Park -a 56-acre IT park- was boasting of an excellent human resources pool. Retention of inaugurated in Coimbatore. IT and ITES companies talent pool has been a strong point for most of the players would occupy nine lakh sq ft space in Tidel Park. It is establishing a presence in Coimbatore. The IT majors hire 10 expected to provide employment to over 12,000 profes- percent–15 percent of their total recruits from Coimbatore. sionals in one shift. This campus would house three major Also, it has the entire infrastructure required for an IT companies—Wipro, TCS, and HCL, while more than industrialized economy. Many airlines connect Coimbatore 40 companies have shown interest to start operating out with metros namely Chennai, Bengaluru, Mumbai, Delhi, of this IT-SEZ campus. In addition, Tidel Park holds a lot Hyderabad, and overseas cities such as Sharjah, Singapore, of importance for small and medium enterprises (SMEs) and Colombo. The city is also well-connected by train to intending to conduct business from here, as operating major parts of India. from an SEZ will make them entitled to tax exemptions. Coimbatore looks all set to scale new heights as a preThis city has a high literacy ferred destination for corporate rate of around 78 percent which firms to expand their business is even higher than the national By 2014–15, the highest rev- presence. By 2014–15, average of 59.5 percent. One of enue-earning district in Tamil Coimbatore is likely to add close the major reasons for this high Nadu is likely to add close to to 100,000 jobs, which will in literacy rate is the strong educaturn contribute to the growth in 100,000 jobs tional policy of the government the per capita income of the and its world-class facilities. There city. GS 100 GS Destinations Compendium 2010

www.globalservicesmedia.com

Colombo Sri Lanka

The Backbone of Sri Lanka’s Economic Structure

olombo, former capital of Sri Lanka, serves as a major port and the largest financial center of the country. It is the backbone of Sri Lankan economic structure. Colombo has most of the amenities that a modern city possesses. Compared to other parts of the country, Colombo has the highest degree of infrastructure. This destination embraces considerably good stansards of electricity, water, transport,road network, etc. Majority of the city population possess good English language skills, which makes it ideal for financial, telecommunication, and healthcare sectors. Colombo now has the world’s largest pool of UK qualified English-speaking accountants.It has 90,000 graduates, according to Census and Statistics Dept. 2008. This destination offers a rapidly growing niche workforce which is low-cost, highly adaptable and loyal. Currently, over 50,000 are employed in IT and BPO industry and the workforce is growing at over 20 percent year-on-year. The workforce is stable with very low attrition rates ranging from 10 percent to 15 percent. A recent World Bank study revealed that the country’s labor costs ranked the lowest, in comparison to many other outsourcing destinations. Its labor cost is 15 percent to 20 percent lower than India. The total cost per associate can be as much as 30 percent lower in many cases. Also, there is a lower upward wage pressure than many established global sourcing destinations. In addition, this city’s geographical location, infrastructural facilities, direct access to Indian market, high quality standard of workforce, open economy, and various free-trade agreements make this place an attractive outsourcing destination. HSBC, WNS Global Solutions, RR Donnelley, John Keells Computer Services, Just in Time, Virtusa and Astron are some of the companies which have invested in this city. The growing IT-BPO industry in Colombo offers a unique advantage for small and medium enterprises (SME) to enjoy premium access to a high 101 GS Destinations Compendium 2010

Quick Facts City

Colombo

Region

South Asia

Country

Sri Lanka

City population

656,000 (2007)

Major service providers in the city

HSBC, WNS Global Solutions, RR Donnelley, John Keells Computer Services, Just in Time, Virtusa, and Astron

Primary language spoken

Sinhalese, English

Other languages spoken

Tamil

Time zone

UTC/GMT +5:30 hours

Currency

Sri Lankan rupee (LKR) 1 USD = 111.6196 Sri Lankan rupees

Exchange rate

quality talent pool. In September 2010, MphasiS opened their global delivery center in Colombo. “There were three main reasons to select Sri Lanka apart from other countries. One of the main reasons was the educational IT institutions and to build deeper roots with the talent supply chain in Sri Lanka. The other reason was that the Government of Sri Lanka has much enthusiasm for a sustainable economic growth. The keenness of the Board of Investment (BOI) played an important role in redefining the IT landscape in the country. This caused MphasiS to set up the global delivery center in Sri Lanka,” MphasiS CEO Ganesh Ayyar was quoted. “We want to surprise MphasiS by showing the capabilities of the Sri Lankan talent. The country s exports will be measured in Billions of dollars and replace the millions very soon. The employees that joined the company today should also focus on providing their best to prove that Sri Lanka can,” Board of Investment chairman Jayampathi Bandaranayake was quoted. The IT-BPO industry has been identified as a thrust industry by the government of Sri Lanka. Recognizing www.globalservicesmedia.com

City Profile n Colombo

the potential of this industry, the government has taken As part of a new FDI policy expected to be included a number of positive steps - providing fiscal and other in the country’s 2011 budget, Sri Lanka may scrap some incentives and concessions- to fast track the development tax concessions which had been offered to attract foreign of this sector. investors during the protracted war. The national level competency development programs Sri Lanka had targeted $1B in FDI in 2010, an optifocus on building Sri Lanka as a Center of Excellence mistic aim over the economy after the end of a 25-year (COE) for key domain areas. Software services sec- war. But the Board of Investment has said it may reach tor focuses on Telecommunication, Banking Financial only around $600M, almost the same amount that came Services and Insurance (BFSI) and Software Testing. The in 2009. BPO sector focuses on financial and accounting services, Sri Lanka’s BOI said that it will prioritize approvals investment research, engineering services, and UK-based of investment into specific sectors, as part of its thrust to legal services. revive the country’s economy, Earnings from exports of after the end of a three-decade IT-BPO sector of Sri Lanka have war. Foreign investments into The city’s geographical locashown a steady upward trend tion, infrastructural facilities, IT, outsourcing, tourism, agriduring the past decade. The culture, fisheries, education, industry has set a target of $ 2B direct access to the Indian mar- infrastructure, ports, and aviaket, high quality standards of tion will take precedence over in export revenue from IT-BPO sector by 2012. the workforce, open economy, all others. “For these particular Foreign direct investment sectors, we will give highest and various free-trade agree(FDI) into Sri Lanka fell 16.8 possible importance. We want ments make it an attractive percent to $208M in the first six to develop these sectors,” BOI outsourcing destination. months of 2010, compared to spokesman Dilip Samarasinghe $250M in the first-half of 2009. was quoted. In 2008, the country’s FDI hit According to World Bank, a record $889M, but fell in 2009 to $602M due to the Sri Lanka’s investment climate must be improved and cost global downturn. of doing business reduced, to attract the private investSirimal Abeyratne, a senior economics lecturer at the ment needed to speed up growth. Sri Lanka has been University of Colombo was quoted saying, “War was one ranked at 105 out of 183 countries in the World Bank’s part of a problem. Uncertainties are still there, and the latest cost of doing business index. It has been sliding economic policies are not favorable to foreign investments. down the ranking scale. So, the country needs to increase (Foreigners) are not certain about the macro economy in private investment to about 27 percent of Gross Domestic the long run. The reform process has not yet started, and Product, from the current 19 percent, to speed up ecothe government policy document itself is against foreign nomic growth to the levels needed to improve the lives of investments, blaming the open economic policies.” most people. GS

Know More www.globalservicesmedia.com

Curitiba Brazil

One of South America’s Rising Hotspots

uritiba, capital and largest city of Brazilian state of Parana, is an outsourcer’s dream. With a population of approximately 1.8 M (2009) people, Curitiba is the seventh-largest city in

Brazil. Favorably located among sourcing hotspots Sao Paulo, Buenos Aires, and Santiago, it has been making a name as a growing IT hub. In last two years, several large offshore outsourcing operations were established in Curitiba such as Accenture, HSBC Global Technologies, Siemens, ExxonMobil, Atos Origin, and Wipro. These outsourcing centers were attracted by the high quality of life, low wages, and excellent infrastructure support from the city. In March 2010, Wipro Technologies opened its new global delivery center, Curitiba Center, in the city. This destination was chosen for Wipro’s Latin America operation due to the available talent pool and the excellent infrastructure support that the city offers. Mayor of Curitiba, Beto Richa, made a statement that the city embraces best in life quality and infrastructure. “Wipro Technologies is an innovation company and a great employer brand, and its investments in Curitiba will bring even more knowledge to our city and state,” Beto was quoted. Curitiba is known for its strong infrastructure, attractive economy, and savvy urban planning. “You can get anywhere in the city in less than 25 minutes by car. And the quality of life is so good that we can attract professionals even from Sao Paulo and Rio, who often don’t mind the lower wages here,” Jacques Depocas, Global Head of Center Operations at HSBC Global Technologies was quoted. According to Depocas, Curitiba also has one of the best banking and financial service systems in the world, one of the reasons that HSBC is set up here. The cost of living is also estimated at up to 30 percent lower than in larger Brazilian cities. Curitiba has a very educated workforce, with a 96 103 GS Destinations Compendium 2010

Quick Facts City

Curitiba

Region

South America

Country

Brazil

City population

1,851,215 (2009)

City real estate cost

Apartment for buying: US$ 1,105.39 per square meter Apartment (1 bedroom) for rent: US$ 295.67per square meter

Major service providers in the city

Accenture, HSBC Global Technologies, Siemens, ExxonMobil, Atos Origin, and Wipro

Primary language spoken

Portuguese (official)

Other languages spoken

German, Italian

Literacy rate

96 percent

Time zone

UTC-3 (UTC-3)

Currency Exchange rate

Real (BRL) 1 USD = 1.67964 Brazilian Real

percent literacy rate. It has 55 higher education institutions, with five universities. About 157 technical courses are given by 88 institutions. Curitiba has the highest percentage of English schools per capita in Brazil. Thus, there is a sizeable talent pool. This destination is famous as an IT-friendly city. The tax incentives and support from the city really helps to build a good business environment. The Curitiba Offshore Center, an association of the local IT companies in Curitiba, provides valuable support and information for US firms considering setting up there. In addition, municipal government has established the Curitiba Technopark—specific regions in the city, that integrate and interconnect universities, IT companies, and R&D institutions in both public and private sector. There are incentives for larger companies to locate in the Technopark such as a reduced sales tax to 2 percent and a 10-year exemption of real estate and other municipal taxes. GS www.globalservicesmedia.com

Dalian China

Handling 80 percent of Japan’s Outsourcing Business

he beautiful coast city of Dalian is located in the southern tip of China’s northeast region. Dalian has a population of about 6 million (2009). It is the most developed city in the northern region of China, where the most talented of the 130 million Chinese citizens seek jobs. Dalian boasts of the largest concentration of software outsourcing enterprises in China. This destination was established by the Ministry of Commerce of China, as the service-outsourcing base of the country. In 2009, total industrial output of software industry in Dalian exceeded $60.2B and export value of service outsourcing industry amounted to US$1.4 B. Dalian’s software industry has developed rapidly. From 1999 to 2009, the annual growth rate was 53.32 percent. Sales profits are 72 times higher than a decade ago and export volumes too are 41times higher than a decade ago. Dalian is a well-suited destination for both BPO and IT outsourcing for the following reasons : it is the financial center of northeast China and has a large number of foreign banks; it offers a good engineering education at the well-known Dalian University of Technology, which is especially useful for software companies looking for new employees, it is close to Japan and Korea and its geographic location gives it an advantage in attracting good outsourcing opportunities. Dalian Hi-Tech Zone and Dalian Software Park are the two areas where IT and BPO companies have setups. There are over 500 enterprises in the Dalian Software Park, 41 percent of which are foreign-funded. Thirty-seven Fortune 500 companies including IBM, HP, Accenture, Panasonic, Sony, Hitachi, NTT, Oracle, AVAYA, NEC, Fidelity, BT, etc. have established bases in Dalian. Many Japanese and Korean companies have also set up centers due to the language capabilities. Major IT companies based in the software park are: • US companies: BearingPoint, Citibank, Dell, Accenture, Fidelity Investments, Genpact, HP, IBM,

104 GS Destinations Compendium 2010

Quick Facts City

Dalian

Region

East Asia

Country

China

City population

6 M (2009)

City average entry level salary (in US$) per month (ITO)

Average annual salary is $7,056 (2009)

Major service providers in the city

Fortune 500’s Intel, Starbucks, Volkswagen and Bosch GROUP, Toshiba, Panasonic, LG, STX, and BT

Software and service outsourcing revenue of Dalian HIDZ

RMB 17.7 B (2009)

Export value from the software and service outsourcing sector in Dalian HIDZ

US$ 510 M (2009)

Primary language spoken

Standard Mandarin

Other languages spoken

Dalian dialect

GDP

USD 55.5 B (2008)

Time zone

UTC/GMT +8 hours

Currency Exchange rate

Renminbi (RMB or CNY) 1 USD = 6.64151745 Chinese yuan

Oracle Corporation, etc. • C hinese companies: China Software & Service (CS&S), Neusoft Group, Neusoft Institute of Information, New Touch, DHC, Hisoft, etc. • European companies: British Telecom (UK), SAP (Germany), Oostsourcing (A joint venture of Akyla 40 percent, Better Be 40 percent, Insight 20 percent, Netherlands) • Japanese companies: Alpine, Fujitsu Device, Hitachi, NEC, Panasonic, OMRON, Sony, Sumitomo Wiring Systems, Yokogawa Electric, HAL Film Maker, Jtekt, MI Communication, etc. • Other companies: Satyam (India), Wistron (Taiwan), Konica Minolta, DHC, Lüshun South Road Software www.globalservicesmedia.com

City Profile n Dalian

Industry Belt Demonstration Room, etc. outsourcing industry in Dalian. Most of the IT workAs the core area of software and information service ers come from the numerous engineering schools of the industry in the city, Dalian Software Park is now progress- universities in Dalian and other cities in the area, including toward the ‘Service Outsourcing Center of Northeast ing Dalian University of Technology, Dalian Liaotong Asia.’ University, Northeast University, etc. “The rapid growth of our software park in the past decDalian now handles 80 percent of Japan’s outsourcing ade can be attributed to effective government support, the business. Dalian also is unique among similar Chinese concentrated industrial cluster, the internationalized qual- cities in the software industry business because of its busiity system, and improvements in our training system,” Gao ness operations model. Instead of operating strictly as a Wei, president of Dalian Software Park Co Ltd (DLSP) state-owned business, Dalian Software Park operates as a was quoted. government-facilitated, privately run enterprise. Dalian High-tech Industrial Development Zone The Software School at the Dalian University of (Dalian HIDZ) consists of six areas including the Software Technology is China’s biggest software demonstration Park. It is surrounded by universities and other educational engineering school. The Dalian Neusoft Institute of institutions. The fact that a large number of universities are Information is among the earlier software institutes establocated near Dalian HIDZ has proven useful for software lished at the university. development companies looking to recruit new employees However, this city is still not at par with top outsourcing who can speak Japanese, Korean, or English. The pil- destinations like India and Philippines. It faces some challar industries of Dalian HIDZ lenges in outsourcing. Though include software and informarunning an outsourcing business tion services, biotechnological in Dalian is cheaper overall, the In July 2010 the Finance research and production, and city struggles with providing a Ministry of China, announced competitive labor pool and still medicine and new materials. business tax exemption of In the first-half of 2009, lacks infrastructure compared the software and service out- 5 percent for outsourcing com- to other locations. Investment sourcing industries of Dalian costs in Dalian, especially labor panies in 21 cities in China, HIDZ generated revenue of costs, are relatively high when that will extend to the end of compared to those of other cit$266,445,877.84 accounting for 2013 90.3 percent of Dalian’s total. ies in Liaoning. Also, the area The export value from the softsurrounding Dalian is less develware and service outsourcing oped than the coastal areas of sector in Dalian HIDZ rose 34.9 percent year-on-year and China in the east and south. exceeded US$ 510 M. Dalian still lags behind Beijing and China in software With an aim to expanding outsourcing business and research and development (R&D) capabilities. Dalian’s compete with India’s dominance in outsourcing indus- outsourcing business still is mostly focused on Japan, try, in July 2010 Finance Ministry of China, announced while its share of the global outsourcing industry is much business tax exemption of 5 percent, for the outsourc- smaller. ing companies that extend to the end of 2013.These tax Still, Dalian is well on its way to a stronger competitive exemptions apply to all companies offering information position. “In the near future, the best opportunity for technology outsourcing (ITO), business process outsourc- development in China lies in technology and services outing (BPO) and knowledge process outsourcing (KPO) in sourcing. We will make good use of our solid foundation 21 cities in China. and geographic advantage in our efforts to make Dalian In June 2010, the 8th China International Software the leading city of the global outsourcing industry,” Xia, and Information Service Fair (CISIS) was held at Dalian Dalian’s mayor, was quoted. GS World Expo Center, attracting more than 700 companies and over 20 countries and regions from around the world. The fair held six theme forums on the service outsourcing, software innovation, industrial trends, patent protection, project management and project innovation, of which the IT project management forum and the project innovation forum was held for the first time this year. More than 60,000 people are working in the software 105 GS Destinations Compendium 2010

www.globalservicesmedia.com

Western-style buildings on Shamian Island (Source: Wikipedia)

Guangzhou China

China’s Software Export and Innovation Base

s the capital city of Guangdong Province, Guangzhou is the political, economic, science, technology, educational and cultural hub of the province. It is the prominent coastal city in South China. Guangzhou’s location is advantageous; it has a wide service range, complete infrastructure and good city environment, which are desirable for the business development of software enterprises and software professionals. The major industries promoted in the zone include logistics, international trade, computer software and processing industry. In 2009, Guangzhou’s GDP touched ¥911.28 B ($133.5 B), and the per capita income was ¥89,498 ($13,111). Guangzhou is a national software industry base and a national software export and innovation base. Out of the top 500 companies, 35 have established software enterprises in Guangzhou in the fields of data treatment and embedded software development, banking, insurance, telecom, etc. This destination enjoys a superior position in the development of application software and system integration in addition to basic software (including system software and supporting software). The investment attractiveness of Guangzhou has led to the setting up of IBM’s software innovation center, Microsoft’s (China) industrial base, Intel’s international security data solution center, Baishigao’s design center, etc. here. Besides the German RIB Group and Trans Cosmos from Japan have established software R&D, outsourcing, and training programs in Guangzhou. In 2008, there were 385 direct investment projects in Guangzhou. The total investment amounted to $16 B with FDI totaling $5.9 B. The amount of FDI China received climbed up for the fifth consecutive month in the end of 2009, up 103 percent year on year to $12.1 B. In recent years, Guangzhou annually invested over RMB500 M in the construction of software parks, which

106 GS Destinations Compendium 2010

Quick Facts City

Guangzhou

Region

East Asia

Country

China

City Population

10,334,500 (2009)

City Average Monthly Entry Level Salary (in US$) per month (BPO)

$6,000

City Average Monthly Entry Level Salary (in US$) per month (ITO)

$10,000

City Real-Estate Cost

US$3014

Major Service Providers in the City

IBM, Guangdong Visoinsky, HSBC Software, BEA, Cagemini, PCCW, TWO Group, China Elite Info, HDPG, Sierra Atlantic

Primary Language Spoken

Cantones, Putonghua,

Other Languages Spoken

English

Time Zone

CST

Currency Exchange rate

Renminbi (RMB) $1= 6.65 CNY

function as the software and hardware environment suitable for the software industry concentration. The manufacturing industry has a big demand for software and IT services, which helps software industry to develop fast. It is anticipated, that the software industry will have over 2000 software enterprises with an annual growth of 35 percent for software export and with an export value of $1.2 B. Guangzhou Software Park has been a national outsourcing base since 1999 and is the second-largest software industry base in the nation, after Beijing. The city’s ties with its southern neighbor, Hong Kong, has made Guangzhou a prime outsourcing center for Hong Kong’s IT demands, customer service, and call centers.It is anticipated, that the software industry will have over 2000 software enterprises with an annual growth of 35 percent for software export and with an export value of US$1.2 B. GS www.globalservicesmedia.com

Hanoi Vietnam

Promising Destination for Domestic and Foreign Investors

anoi, the capital of Vietnam, is the national political and administrative center, the hub of culture, science, education, economy and international relations. Because of its geoeconomic and political significance, it is regarded as a promising destination for both domestic and foreign investors. Hanoi and Ho Chi Minh City account for over 90 percent of the outsourcing revenues of Vietnam. According to Hanoi Department of Planning and Investment, in the first nine months of 2010, the city’s GDP growth rate was estimated at 10.6 percent, about 1.86 times higher than the same period in 2009. Hanoi is expected to gain 2010 GDP growth rate of over 10.5 percent. Therefore, the city is trying to reach the economic growth rate of 11 percent–11.5 percent. Figures by the General Statistics Office (GSO) of Vietnam showed that in the first nine months of 2010, Hanoi’s trade gap reached nearly $10M, a two-fold increase from the city’s export turnover. Specifically, over the first nine months of 2010, total export value of Hanoi businesses reached an estimated $5.59B, a 19.5 percent rise compared to the same period last year. The GSO stated that Hanoi’s export turnover of the whole year of 2010 will likely hit $ 7.644B, up 20.8 percent. Pham Quang Nghi, secretary of the Ha Noi Party Committee, articulated that Hanoi would take the lead in luring foreign investment and that there have been more than 8,000 projects worth a total committed capital of $18B in the last few years. Vietnam’s Ministry of Information and Communications has drafted a plan to develop the country’s IT industry. The plan envisages that Vietnam would be among countries with the most attractive outsourcing industry and Hanoi would be in a group of 10 emerging cities for outsourcing. The plan also aimed to attract over $5B in foreign investment for the information technology industry. IBM, GEMALTO, Teleperformance, Deloitte, Siemens, and FPT Software are among the key companies based in 107 GS Destinations Compendium 2010

Quick Facts City

Hanoi

Region

Southeast Asia

Country

Vietnam

City population

6.5 million (2009)

City real estate cost

Land to buy: $5,000 per sq m (2008) Apartment space to buy: between $300 and $1,000 per sq m (2008)

Major service providers in the city

IBM, GEMALTO, Teleperformance, Deloitte, Siemens, FPT Software

Primary language spoken

Vietnamese

Other languages spoken

Northern Vietnamese

Literacy rate

97.9 percent (2009)

GDP growth rate

10.6 percent (Jan–Sep 2010)

Time zone

ICT (UTC+7)

Currency Exchange rate

Dong (VND) 1 USD = 19,655.7 Vietnamese dong

Unemployment

3.24 percent (2009)

Hanoi. FPT Software had announced in October 2010 that it would invest $57M in a software park at the Hoa Lac Hi-tech Zone in Hanoi. The project is expected to generate 8,000 jobs, mainly in the software sector. FPT Software said that within the next 4 years, 80 percent of its production will be conducted under outsourcing contracts and the remaining will focus on products, services and solutions for the domestic market. The city of Hanoi has a population of 6.5M. Vietnam’s large population shows a developing and potential market. Besides, cheap production costs combined with the government’s support have been making Vietnam the most outstanding competitor in terms of price. It is a center of abundant intellectual and talented human resources. Here, there are more than 80 percent www.globalservicesmedia.com

City Profile n Hanoi

of scientists and managers in the country. According to Institute of Technology) have educational collaboration a recent report by Ministry of Science and Technology, with well-known universities all over the world. Vietnam has about 3,000 to 4,000 new IT students Vietnam has advantages over other countries in the every year, of which half are software developers. Known region due to its low labor costs and good location for for their skills and diligence, Vietnamese IT students transporting products to other countries in Southeast Asia emphasize potential of the future software industry in and other parts of the world. Vietnam. The business environment in Vietnam has become With its advantageous geographical position and more friendly. This has been affirmed by chairman and because it is an intersection of many land roads, railways, CEO of the Japan External Trade Promotion Organisation and air routes -from and to many provinces and localities (JETRO), Yasuo Hayashi. After India and China, Vietnam in Vietnam, as well as many other countries in the world- is Japan’s biggest outsourcing software partner. Hayashi Hanoi is becoming a national transaction center and an stressed that more and more Japanese enterprises pay important international transaction center. attention to Vietnam when they expand their operations Over the past 20 years, Foreign Direct Investment overseas. (FDI) in Hanoi has recorded enormous encouraging Vietnam now stands sixth among the economies Japanese achievements, making fundabusinesses want to expand their mental changes in the city’s sociosale activities in the next 3 years. economic life. Yet, a number of It has also jumped two places to Hanoi and Ho Chi Minh City problems have also emerged in stand at fifth place among the account for over 90 percent FDI attraction and realization, markets where Japanese partners of the outsourcing revenues of wants to expand research and particularly the risk of unbalVietnam. anced economic development, development (R&D) activities. overloaded infrastructure, enviHowever, Hayashi said, that sevronmental pollution, unhealthy eral Japanese enterprises are still competition and business, conflicts between employers concerned about business risks in Vietnam, especially risks and employees. froma good the country’s infrastructure and incomplete “Other outsourcing conferences do not have mix ofpoor Buyers and Sellers. In 2008, the registered FDI reached a record high of legal system. Most of the time it is lot of sellers. So I think, it’s a good mix, you get to hear from $5,091M, of which $1,456M was realized. In 2009, given Vietnam needs to create the most favorable conditions the buyers which is very important” . corporations so that they can produce and the negative impactsprospective of the global crisis, Hanoi, like many for foreign other-Global cities and provinces, saw a sharp2010 decrease in the export hi-tech products here. Know More Services Conference Attendee amount of projects, committed and realized capital. Vietnam faces some obstacles such as Internet connecThe first ones who recognized this potential and started tions, sometimes, can be painfully slow since there is no outsourcing to Vietnam were small- and medium-sized fiber-optic broadband network. Another drawback is the software companies in the United States. Vietnam realized lack of fluent English speakers, though this problem can that to receive such attention and to build a dedicated be tackled as most communication is via e-mail. core of IT experts, there many things have to be done to Helping balance out these deficiencies are the country’s support IT education in Saigon, Hanoi, and other cities low wages -programmers earn about one-tenth what comwith potential in IT development. The famous universi- puter programmers make in the United States -, a young ties in Hanoi (Hanoi University of Technology, Vietnam and highly motivated workforce and low staff turnover National University Hanoi, Post & Telecommunications rates of about 5 percent. GS

27 January, New York

108 GS Destinations Compendium 2010

Know More www.globalservicesmedia.com

Ho Chi Minh City Hall

Ho Chi Minh City Vietnam

Home to Vietnam’s Software Parks

o Chi Minh City (HCMC) is the largest city of Vietnam. It has a population of 7.163 million with a literacy rate of 97 percent. With a rising economy, well-educated populace, and modern facilities, it is considered the economic, cultural, scientific, and technological hub of Vietnam. It is the safest, fastest-growing city in Southeast Asia and is quickly becoming an important hi-tech center of the region. The economic growth of the city is apparent in the increase of GDP per capita: in 2006 the GDP per capita of the city was $730, in 2007 it was $ 2,100, and in 2009 it was $2,800, compared to Vietnam’s average level of $1,042 in 2009. Although the economic growth of the city between 2005 and 2010 averaged just 11 percent, lower than the set target of over 12 percent, because of the global financial crisis and economic recession, it is still a high growth rate compared to the general context. Outsourcing to Ho Chi Minh City generally falls into application development and maintenance, product development and testing. Major IT companies operating in Ho Chi Minh City include IBM, Intel, France Telecom,Telstra, Compaq, Siemens, Fujitsu, Acer, Hewlett Packard, Oracle, Paragon Solutions, Cyrus Intersolf, etc. It is home to 3 successful Export Processing Zones, 15 industrial parks, 2 software parks, and 1 hi-tech park. These parks—the Quang Trung Software Park (QTSC), Saigon Hi-Tech Park, and the Tan Thuan Export Processing Zone—include software enterprises, dot.com companies, and software training schools. In addition, these parks provide residencies and favorable taxation for workers. The QTSC software park has been in operation for 9 years with a total area of 430,000 square meters designated for software production, research, training, development, and distribution. When it was established in 2001, QTSC attracted about 20 companies. Now more than 100 companies are in the park with 57percent of them being foreign-invested companies. In 2009, the park reported 109 GS Destinations Compendium 2010

Quick Facts City

Ho Chi Minh City

Region

Southeast Asia

Country

Vietnam

City population

7.163 million (2009)

Average annual salary of software programmer (in US$)

US$15,000– US$20,000

Major service providers in the city

IBM, Intel, France Telecom,Telstra, Compaq, Siemens, Fujitsu, Acer, Hewlett Packard, Oracle, Paragon Solutions, Cyrus Intersolf

Total revenue from QTSC software park

US$100 Million

Primary language spoken

Vietnamese

Other languages spoken

Chinese, English, French

Literacy rate

97.9 percent

GDP per capita

$2,800 (2009)

Time zone

UTC/GMT +7 hours

Currency Exchange rate

Vietnamese Dong (VND) 1 USD = 19,565.44 Vietnamese Dong

Unemployment

5.45 percent

total revenues amounting to $100M. The QTSC software park is working towards attracting more local and foreign companies to invest. Chu Tien Dung, general director of QTSC, said the company would make use of their experience acquired over the years to map out a long-term development strategy. “Our three main goals are to attract the biggest enterprises and nurture small ones to turn the park into Vietnam’s biggest software producer; supply high-quality human resources to help the sector take off; and create a favorable business environment to help firms thrive,” Dung said. QTSC has become a well-known software park brand in the country. “As for future development plans, I think, it’s necessary to build a chain of Quang Trung Software www.globalservicesmedia.com

City Profile n Ho Chi Minh City

Cities in other cities and provinces or even in foreign Lack of fluent English-speaking professionals is another countries to further promote the QTSC brand,” Le Manh problem. Ha, director of the HCMC Department of Information While corruption remains a matter of concern in and Communications, said. “When the QTSC brand Vietnam, government leaders say they are working to is well developed, it will certainly attract multinationals reduce red-tapism and bureaucratic processes. Most large whose satellite companies can follow suit by setting up companies that outsource to India and the Philippines, shop at QTSC.” however, know how to handle this hurdle. The largest software park in Vietnam, the Thu Thiem Vietnam may still be some years away from gaining Software Park, is scheduled to come up by 2012 in Ho the prominence of an India, Philippines, or China, but it Chi Minh City. has definitely emerged as a serious player in outsourcing These IT parks will help the city in particular and market. Vietnam in general to be an outsourcing place for other The Vietnamese government plans to invest about enterprises in developed countries. $58M in developing the software technology and digital Ho Chi Minh City boasts the best infrastructure in the industry by 2012. This plan will create favorable condination, including modern transportation and telecommuni- tions for domestic IT companies to develop. cation systems. It is also the country’s center of higher eduVietnam hopes its information and communications cation. There are over 80 univerindustry will comprise 8–10 persities and colleges with a total of cent of the gross domestic prodThe largest software park over 400,000 students. The outuct in the next 10 years, accordsourcing companies draw most ing to the government’s ICT in Vietnam, the Thu Thiem of their staff from graduates of Software Park, is scheduled to Development Strategy. Under HCM City National University the strategy, Vietnam will strive come up by 2012 in Ho Chi and the University of Technical to become one of the world’s top Minh City. Education. Ho Chi Minh City 10 high-tech outsourcing destihas a young population with 65 nations for software and digital percent of people below 35 years content production. Vietnam of age. Salaries and cost of living in the city are lower than plans to develop 15 information technology parks to capital Hanoi. support the country’s developing information and comHowever, foreign direct investment (FDI) flows into the munication technology industry by 2020, according to the city have declined in 2010. According to the Department Ministry of Information and Communications. of Investment and Planning of Vietnam, FDI into Ho Chi The software industry of Vietnam experienced a 40 Minh City in the first 4 months of 2010 is estimated at percent surge with revenues of $880M in 2009. The gov$526M, a drop of nearly 17 percent compared to the same ernment is also implementing a plan to improve human period in 2009. resources in the sector. The government aims to have 30 The 4-month figure only accounted for 6.26 percent of percent of Vietnamese students ready to meet the outthe full year’s target, the department said. The city has tar- sourcing demands of foreign markets by 2015. geted $8.4B in FDI for 2010, or one-third of the national Deputy Minister of Vietnam, Tran Duc Lai, said the FDI target. new information technology will offer special preferThe global outsourcing business relies largely on the ences to investors, in addition to offering specific tax quality of service that is provided, rather than the talent incentives under legislation that took force in September pool, and in this respect Vietnam has still a long way to go. 2009. GS

Know More www.globalservicesmedia.com

(Source: www.aroundaboutcars.com)

Johannesburg South Africa

Corporate Headquarter of South Africa

ohannesburg is the epicenter of South Africa’s financial services industry. The city is one of the 40 largest metropolitan areas in the world. It produces 16 percent of South Africa’s GDP and accounts for 40 percent of Gauteng’s (one of the nine provinces of South Africa) economic activity. The service and other industries include IT, real estate, transport, banking, broadcast, print media, private health care, transport, and a vibrant leisure and consumer retail market. There exists a large skill base that can be absorbed into growing the BPO skills base. Johannesburg generates 16.5 percent of the country’s wealth and employs 12 percent of the national workforce. More than 70 percent of South African companies have their headquarters here. Many global companies such as Microsoft, Call Center Nucleus, IBM Innovation Centers, Accenture, Mahindra Satyam, SAP, Lenovo, P&G, BeyondSoft, TCS Design House, Direct Channel Holding, etc. have set up their strategic business units here. According to DIT (Durban Institute of Technology), ITeS-BPO export is expected to reach $12.4B by 2010 from $11.7B in 2009. South Africa has gradually established itself as a viable player in the global BPO market. Although South Africa is not competing against tier-one players such as India, China, and the Philippines at present, it is increasingly becoming more attractive as a tier-two destination. With strong industry leadership and government support, this position can be strengthened in a significant manner. Outsourcing activity within the local market is increasing. This is attributed to the increased awareness of cost savings and improved efficiencies associated with outsourcing. South Africa unlike other locations such as India and Philippines has a well-established domestic outsourcing market. As a result, the country is considered to be a new player in the global offshore outsourcing market. Since 1996 Johannesburg has shown positive real GDP growth, which has outpaced the national growth rate.

111 GS Destinations Compendium 2010

Quick Facts City

Johannesburg

Region

South Africa

Country

Middle East and Africa

City Population

7,550,000

City Average Monthly Entry Level Salary (in US$) per month (BPO)

$1,000–$1,100

City Average Monthly Entry Level Salary (in US$) per month (ITO)

$1,500–$1,600

City Real-Estate Cost

$125 per square feet

Major Service Providers in the City

Microsoft, Call Center Nucleus, IBM Innovation Centers, Accenture, Mahindra Satyam, SAP, Lenovo, P&G, BeyondSoft, TCS Design House, Direct Channel Holding, etc.

Primary Language Spoken

Afrikaans

Other Languages Spoken

English, Ndebele, Pedi, Sotho, Swazi, Tsonga, Tswana, Venda, Xhosa, and Zulu

Literacy Rate

82 percent

GDP

Johannesburg alone accounts for 16 percent of South Africa’s GDP.

Time Zone

BST (UTC-3)

Currency

South Africa Rand $1 = 6.98 ZAR

Unemployment

25.3 percent

This can be ascribed to the dominance of the fast-growing financial and business services sector in Johannesburg’s economy, which has consistently outperformed average growth rates. When Johannesburg’s growth is compared to that of other metros, the city consistently outperforms its counterparts. Its economy is much larger than any of the others and its Gross Value Added in 2004 was R204 B. The financial and business services sector, which has always been the cornerstone of the city’s economy, has become relatively more important. Its economy is growing www.globalservicesmedia.com

City Profile n Johannesburg

faster than the population growth rate. Johannesburg is Johannesburg is a city in economic transition and it has creating a substantial number of new jobs in the right sec- grown from a mining town into a financial and manufactors. Factors that will improve the distribution of income turing capital, and later into a financial and services capita include a steady and strong growth in employment in the and it now faces the toughest challenge of all—becoming right sectors such as permanent formal sector jobs in sec- a knowledge capital. There is a transition underway in the tors that pay above-average salaries and have retirement, economy of Johannesburg, away from low-skilled work, medical and other benefits; and an increase in broad-based and towards high-skill, service-based enterprise—which Black Economic Empowerment to increase the owner- requires access to advanced services such as telecommuship of wealth. Johannesburg has nications, and high reliability 1.5-million economically active of basic services such as electricpeople out of a total population ity. Johannesburg is the largest Unlike India and Philippines, of close to 3 million. single metropolitan contributor South Africa has a wellAn underconstruction to national economic product. established domestic 24-hour center coming up in National average growth in gross outsourcing market. Johannesburg will provide domestic product has been 1.8 another 3,000 new jobs. The percent over the last 10 years, new project in Johannesburg will and Johannesburg has marginalbe operational in the ensuing 12 to 14 months, giving the ly outpaced that growth with an average 2 percent growth country’s BPO sector the much-needed boost and help it per annum over the last decade. to generate revenues worth over R7.4 B during 2010. The The city’s economy is dominated by four sectors, three City of Johannesburg has the highest number of call cent- of which are service sectors. The four key sectors are as ers - more than 360- employing some 35,000 call center follows: agents in outsourced and captive (in-house) call centers in • financial and business services; ICT, financial services, banking, tourism, hospitality and • retail and wholesale trade; business-to-business. • community and social services; and The use of wireless technology for data and communi- • manufacturing sector. cations is on the increase. It is cheaper, easier to use and costs less in infrastructure set up as well as maintenance. All taxation is handled through the South African Revenue For this Johannesburg needs to offer broad bandwidth in Service (SARS). South African residents have been taxed on conjunction with wireless technologies. It should be noted their worldwide income. This includes the income of a forthat about two-thirds of South African companies use SAP eign-controlled company. Certain types of income from software. outside South Africa are exempt and credit is allotted for During recession, South Africa’s Johannesburg Stock foreign taxes paid. The tax year is 1st March to 28th (or 29th) Exchange fell by 31 percent last year in mid-November. February. Employees’ tax is deducted at source (pay-as-youAs a result, a lot of investors withdrew their investments. earn) and paid by employers to the authorities monthly. The Since then South Africa’s currency has depreciated touch- tax thus deducted is a credit against the employee’s total tax ing R9/$ for the first time in 6 years. liability as assessed by his or her annual tax return. GS

Snapshot

➤ Johannesburg produces 16 percent of South Africa’s GDP and accounts for 40 percent of Gauteng’s (one of the nine provinces of South Africa) economic activity. ➤ This city has the highest number of call centers - more than 360- employing some 35,000 call center agents in outsourced and captive (in-house) call centers in ICT, financial services, banking, tourism, hospitality and businessto-business. ➤ According to DIT (Durban Institute of Technology), ITeS-BPO export is expected to reach $12.4B by 2010 from $11.7B in 2009. ➤ During recession, South Africa’s Johannesburg Stock Exchange fell by 31 percent last year in mid-November. As a result, a lot of investors withdrew their investments. Since then South Africa’s currency has depreciated. 112 GS Destinations Compendium 2010

www.globalservicesmedia.com

(Source: www.infobengal.com)

Kolkata India

IT Hub of Eastern India

olkata, formerly known as Calcutta, is the main business, commercial, and financial hub of eastern India. The capital of the state of West Bengal, the city has in recent times been transformed to a major information technology hub in India. More and more businesses are setting up office in Kolkata, including international giants such as IBM, Texas Instruments, Cisco Systems, Intel Asia Electronics Inc, Deloitte, Sun Microsystems, Honeywell, PwC, HSBC Global Technology, Capgemini, Atos Origin, Foster Wheeler, Siemens, Novell, AIG, Skytech, Lexmark, and ABN AMRO Bank. Leading the way in growth have been the Kolkata-based companies such as Serenus Infotech, Intelliant Technologies, Alumnus Software, Metalogic Systems, TCG Software, Data-Core, UshaComm, RS Software, among numerous others. Other big Indian software firms have already made Kolkata their hub of operations for the eastern region of India. Of these Wipro, TCS, Tech Mahindra, ITC Infotech, HCL Technologies, Cognizant, Genpact, Tata Interactive Systems, CMC Limited, NIIT Technologies, Moser Baer Ltd., Aditya Birla Minacs, and Sonata Software leading the way. Kolkata, being the dominant metropolitan city of eastern India, has attracted major software and telecom firms across India and abroad to set up their development center here. The Eastern Region Council of NASSCOM, the premier trade body and the chamber of commerce of the IT-BPO industries in India, is situated in Kolkata. Owing to the recent boom in the economy of Kolkata and also the state as a whole, West Bengal is now the third fastest growing economy in the country and the city’s IT sector is growing at a rate of 70 percent per year—twice the national average. In 2009, Kolkata’s GDP grew to $150B, the third highest among Indian cities. With its huge economy and cheap

113 GS Destinations Compendium 2010

Quick Facts City

Kolkata

Region

South Asia

Country

India

City population

4,580,544 (2001)

City real estate cost (US$ per sq. ft)

Commercial office space for sale: US$ 226.46–US$ 294.39 per sq ft

Major service providers in the city

Pricewaterhouse Coopers, IBM, TCS, Cognizant, Skytech, Lexmark, AIG, and HSBC

GDP

USD 150 Billion (2009)

Primary language spoken

Bengali

Other languages spoken

English, Hindi

Time zone

UTC/GMT +5:30 hours

Currency Exchange rate

Rupees (INR) 1 USD = 45.3100 INR

living expenses it is one of the world’s major centers of business in GDP PPP (purchasing power parity) terms. Several IT-SEZ and IT parks have come up in the city, attracting software corporations and foreign direct investment in Kolkata. Kolkata today boasts of 3 Software Technology Parks (STP), with more coming up. The 2,50,000 square feet standard design factory with modular Software Technology Park I and the 100 percent exportoriented 60,000 square feet, state-of-the-art Software Technology Park II house some key IT players from Europe and the Silicon Valley. Privately-owned IT facilities, like Infinity and Bengal Intelligent Park, have attracted big IT companies too. At the operational level, the government has ensured ease of operations in Kolkata through Webel (West Bengal Electronics Industry Development Corporation), which acts as a single-window support center for all IT investors in the state. Webel helps companies obtain built-up space on rent/lease and in the purchase of land. It also www.globalservicesmedia.com

City Profile n Kolkata

interacts with government bodies to help procure last- park,” Buddhadeb Bhattacharjee said. mile connectivity, to get power connections and interacts “Ten thousand high-end jobs will be created in with the local municipality to reduce the company’s Kolkata when the park becomes operational,” said the exposure to bureaucratic problems. Webel has set up an CM. “We are trying to set up more such IT parks at IT “Incubation Center” to properly utilize the huge pool Durgapur, Siliguri, and Kharagpur that will generate of human resources and knowledge competencies that the more software jobs for fresh graduates in the state,” added state possesses. This center provides a platform for aspiring the chief minister. and talented software and telecom professionals in Kolkata West Bengal IT minister, Debesh Das said, “The Park to float their own IT-start ups. The IT incubation center is a key milestone in the progress of the state’s indushelps turn viable ideas from talented professionals into trial development especially given that it will lead to the business propositions. creation of 50,000 indirect jobs over and above the 10,000 In October 2010, the chief minister of West Bengal direct ones.” Buddhadeb Bhattacharjee laid the foundation stone of East HCL Infosystems would set up a center of excellence Kolkata IT Park at Nonadanga, in the IT Park that would serve Kolkata, with an aim to attract as the company’s regional headmore IT biggies and generquarters. Over 1,500 are expectWith its huge economy and ate more employment in West ed to be employed at the hub. cheap living expenses Kolkata Rolta chairman K.K. Singh said, Bengal. The East Kolkata IT Park “We are going to set up a softis one of the world’s major will be the fourth such endeavware research and development centers of business in GDP or of the West Bengal governunit here. We will invest Rs 250 PPP terms. ment. The earlier ones include crore ($55.02M) and expect to IT hubs at Salt Lake, Rajarhat generate 5,000 jobs.” and Bantala. “Our largest IT West Bengal has been one of companies are in Salt Lake, where 80,000 people work. the fore-runners among Indian states in attracting FDI in Around 10,000 employees are working in the Rajarhat recent years. FDI flow into West Bengal has led to develarea. Then there is the IT park in Bantala. Now we have opment of infrastructure in the state. The IT companies one in Nonadanga,” said the CM. in the state have been given special status so that they can Approximately 1 million square feet of space would improve the infrastructure. FDI has also boosted the real be developed in the East Kolkata IT Park. The IT Park is estate industry in West Bengal. Unemployment had been expected to be fully operational within 2 years. The park a major area of concern for West Bengal. With the inflow would have a Regional Skill Development Center and an of FDI, vast opportunities of employment have opened up Infrastructure Management Center, along with network- in this state. ing, hardware, and telecom laboratories to help generate Kolkata houses 12 universities and numerous colleges more employment. affiliated to them. The city is home to many nationally and “Several top IT companies, like Rolta, HSBC Electronics internationally reputed colleges and institutions aimed at Data Processing Limited, and HCL Infosystems have supplying a highly-skilled workforce. Kolkata also has the already evinced interest in setting up their facilities in the lowest attrition rates. GS

Snapshot

➤ Kolkata and also the state as a whole, West Bengal is now the third fastest growing economy in the country and the city’s IT sector is growing at a rate of 70 percent per year—twice the national average. ➤ In 2009, Kolkata’s GDP grew to $150B, the third highest among Indian cities. With its huge economy and cheap living expenses it is one of the world’s major centers of business in GDP PPP (purchasing power parity) terms. ➤ In October 2010, the chief minister of West Bengal Buddhadeb Bhattacharjee laid the foundation stone of East Kolkata IT Park at Nonadanga, Kolkata. ➤ HCL Infosystems would set up a center of excellence in the IT Park that would serve as the company’s regional headquarters. Over 1,500 are expected to be employed at the hub. 114 GS Destinations Compendium 2010

www.globalservicesmedia.com

Krakow Poland

Europe’s “Silicon Valley”

rakow, the second-largest city of Poland, is one of Poland’s most important economic centers. Krakow is the technology hub for Central and Eastern Europe. It is sometimes referred as Europe’s “Silicon Valley.” The city is the corporate seat of international banks, associations supporting business activities, and chambers of commerce. Krakow is perceived as an appropriate place to conduct investment and economic activity. Key service providers in the city are IBM, Capgemini, HCL, Hewitt, LogicaCMG, Philip Morris International, AES, Microsoft. In total, firms from the outsourcing sector employ 16,000 workers in 50 centers within the city. Outsourcing specialties of Krakow are: business analytics, finance and accounting, human resources, and multilingual contact centers. Krakow offers attractive business opportunities and the amount of direct foreign investments is constantly increases. The largest foreign investments in Krakow are in banking, industry, and trade sectors, and over the recent years in IT, financial and telecommunications services. Apart from the European companies, there is also considerable US investment. The largest investments in Krakow and the region include those from Affiliated Computer Services, CapGemini, PwC Polska, IFS Poland, Airline Accounting Center (Lufthansa Group), IBM BTO Business Consulting Services, Hewitt, Centrum Finansowe Tesco, Electrolux, Shell, Philip Morris, Exult, KPMG, Google, Motorola, IBM Krakow Software Laboratory, Delphi Polska, and ComArch. Kraków Technology Park (KTP) is one of the significant determinants of Krakow’s investment attractiveness. KTP was established in 1998 as a special economic zone covering a total area of 122.35 ha. Main investors in the Kraków Technology Park are: Motorola Inc., RR Donnelley, AMS, ComArch SA, AZ-Soft SA, AlcroBeckers AB, ABM SOLID SA. Entrepreneurs investing in the KTP can avail of income tax exemptions. Capital expenditures above 2 million Euros ($2.6M) used to entail

115 GS Destinations Compendium 2010

Quick Facts City

Krakow

Region

Central Europe

Country

Poland

City population

755,050 (2008)

Major service providers in the city

IBM, Capgemini, HCL, Hewitt, LogicaCMG, Philip Morris International, AES, Microsoft

Primary language spoken

Polish

Other languages spoken

English, Japanese

Time zone

UTC/GMT +1 hour

Currency Exchange rate

Polish Zloty (PLN) 1 US Dollar = 2.87936 Polish Zloty

Unemployment

2.8 percent (2008)

zero income tax over the first 6 years and 50 percent reduction thereafter till 2009. At the same time, investments under 2 million Euros warrant income tax exemptions matching expenditures. There are also other incentives such as bigger depreciation write-offs. KTP is the city’s high-tech powerhouse providing industrial base for Krakow’s 15 higher education institutions and over 140 research centers. Investments pertaining to IT, electronics, communications, software and hardware, material engineering, biotech, genetics, etc. are encouraged in the Park. The Krakow Technology Park consists of 4 separate areas: the 36-hectare Jagiellonian University Technology Park, the 30-hectare Technology Park of the Krakow University of Technology, the 35-hectare Sendzimir Steelworks Technology Park, and the youngest 21-hectare Tarnow Industrial Cluster. Krakow metropolitan area is an attractive place as a labor market with approximately 1.5 million residents. Highly motivated people with excellent qualifications are on the job market and are ready to work immediately. The employment costs are lower in Krakow than elsewhere (for www.globalservicesmedia.com

City Profile n Krakow

example, 30percent less than in Warsaw). Compared to the firms. Google, IBM, Motorola, ABB, SABRE, Delphi, other parts of the country Krakow has many advantages Fujitsu all have R&D centers in the city. for businesses wanting to locate here, like high availability There’s a lot of offshore BPO from CapGemini, of IT specialists and executive staff, high productivity at IBM, Motorola, Shell, ACS, Fortis Bank, UBS, Comarch, low labor costs and flexibility and excellence, advanced Unicredito Bank, Tesco, International Paper, HSBC, foreign language competence, friendly environment for Lufthansa, StateStreet, HCL, Philip Morris, Hewitt, science and research and strong business connections. Alexander Mann, Hitachi, Accounting Plaza, EDF Energy, Another advantage of Krakow is its convenient geo- UPM-Kymenne, etc. graphic location, on the crossroads of important transportaIBM is one of several large corporations massively tion routes. Transportation accessibility of the city is being building its presence in the city. Since 2002, IBM has constantly improved by the executed infrastructural invest- boosted staff in Krakow ten-fold, to more than 900 people, ments. Convenient train connections with Warsaw and at a facility that provides finance and accounting services other major cities and an international airport with numer- to business customers. Another 200 people work at an ous domestic, European, and Pan-European connections are IBM software lab founded in 2005. all very significant to the efficient conducting of business. Many European IT companies outsource their software The intellectual potential of Krakow is created by 22 development to Poland because no communication, culuniversities, nearly 20,000 academic lecturers (includ- tural, territorial, or quality issues occur there. Most Polish ing approximately 1,800 procompanies are much closer than fessors), and 210,000 students their Asian counterparts—geoin higher education, more than Krakow has many advantages graphically, culturally, and in the 30,000 new graduates a year, way they do business. Poland is for businesses wanting to 8,000 IT sciences students, and only an hour ahead of the UK, 5,000 mechanical engineers. locate, like high availability of so communication is quicker, IT specialists and executive Major universities of Krakow are simpler, and more reliable than AGH University of Science & staff, high productivity at low it is with a country in another Technology, Cracow University labor costs and flexibility and time zone. Wages are significantof Technology. There are 8 unily lower in Poland than in the excellence, advanced foreign versities in Krakow with IT UK and Western Europe. And language competence,etc. degrees. Krakow has a plentiful Polish IT professionals have very group of highly skilled personstrong academic background nel in all modern sectors of the which guarantees the highest economy, and it attracts investors that represent various level of IT developers’ education. industries. The unemployment rate in Krakow ranks A further advantage is that Poland is now a well-estabamong the lowest in Poland and it had slipped below 3 lished member of the EU, meaning there are no legal percent in 2008. obstacles to cooperate with Polish IT companies both “We chose Krakow because of the multiplicity of tal- remotely and on site. GS ents and resourcefulness of knowledge, which the city can offer,”Kristof Kloeckner, vice-president of IBM Software Group was quoted as saying. “We see an objective in opening similar centers in places where there is an opportunity to employ top specialists in their fields. Krakow is such a location,” Artur Waliszewski, Director of Google Polska, was quoted as saying about the opening of the research and development center in Krakow. The economic significance of Krakow is reinforced by the demographic potential of the region—approximately 8 million people live within a 100 km radius of the city. This constitutes an accessible potential market. An additional advantage is the fact that 60percent of the inhabitants of the city are people under age 45. Krakow is emerging as a key R&D center for many US 116 GS Destinations Compendium 2010

www.globalservicesmedia.com

KL’s symbol, the Petronas Twin Towers (Source: wikitravel)

Kuala Lumpur Malaysia

The Gateway to the ASEAN Market

he Malaysian business process outsourcing (BPO) industry would be worth roughly US$ 2 Billion by the year 2012 at current pace. Kuala Lumpur and its surrounding urban areas form the most industrialized and economically, the fastest growing region in Malaysia. Kuala Lumpur is the capital and second-largest city of Malaysia in terms of population. Malaysia’s strong talent pool and advantages have placed it among the top three Shared Services Outsourcing (SSO) destinations in the world. Kuala Lumpur is an ethnically diverse city with a well-educated, multicultural, multilingual population. Even if the official language is Bahasa Malay, most people speak good English. Malaysia’s outsourcing and shared services (SSO) industry is likely to undergo a consolidation of sorts as it seeks to reinvent itself in the face of stiff competition in the global market. The city remains the economic and business center of the country. Kuala Lumpur is a center for finance, insurance, real estate, media, and the arts of Malaysia. Kuala Lumpur is rated as an alpha world city, and is the only global city in Malaysia, according to the Globalization and World Cities Study Group and Network (GaWC). The total current employment in Kuala Lumpur is estimated at around 838,400. The tertiary or service sector forms the largest component of employment in Kuala Lumpur, representing about 83 percent of the total compared to 71 percent in the KLC (entire Klang Valley Region, also known as Greater Kuala Lumpur or Kuala Lumpur Metropolitan Area). The tertiary sector comprises finance, insurance, real estate & business services, wholesale & retail trade, restaurant and hotel, transport, storage and communication, utilities, personal services, and government services. Being strategically positioned as the gateway into the ASEAN market and having market-oriented economy, supportive government policies, and a large local business community that is ready to do business with international

117 GS Destinations Compendium 2010

Quick Facts City

Kuala Lumpur

Region

Southeast Asia

Country

Malaysia

City Population

1,809,699 (2009)

City Average Monthly Entry Level Salary (in US$) per month (BPO)

US$800–1,000

City Average Monthly Entry Level Salary (in US$) per month (ITO)

US$1,200–1,600

City Real-Estate Cost

RM720 per square feet

Major Service Providers in the City

IBM, Oracle Corporation, Ericsson, Samsung, DiGi, Intel, Hewlett Packard, Accenture, Nokia, etc.

Primary Language Spoken

Bahasa Malaysia

Other Languages Spoken

Cantonese, Mandarin, and Tamil. English

Literacy Rate

97.5 percent

GDP

Kuala Lumpur along with other cities contributed 62.7 percent to the national GDP

Time Zone

MST (UTC+8)

Currency

Malaysian ringgit (RM) $1= 3.1 MYR

Unemployment

2.8 percent

corporations, Kuala Lumpur is a highly competitive manufacturing and export base. The 2011 budget has been announced against the backdrop of a robust growth of 7 percent expected for this year from 6 percent forecast earlier and set to expand by 5-6 percent next year, buttressed by a superlative showing of the ringgit regionally. Incentives have been given to boost the capital market through issuance of three new stockbroking licenses to eligible local, foreign, or joint-venture companies to raise retail market participation. As for the East Coast Economic Region (ECER), RM178 million ($57.3M) has been allocated to develop industrial parks and other areas. www.globalservicesmedia.com

City Profile n Kuala Lumpur

The Gross Domestic Product (GDP) for Kuala Lumpur is projects in the IT field and provides incentives and grants estimated at RM73,536 million ($23.7B) in 2008 with an for relevant projects. average annual growth rate of 5.9 percent. The per capita Insofar as Kuala Lumpur is the capital of the nation, its GDP for Kuala Lumpur in 2008 was RM48,556 ($15,650) economic catchments encompass the entire country. The with an average annual growth rate of 5.9 percent. present range of human activities in the city, its infrastrucThe city has a large number of foreign corporations and ture and buildings, its parks and monuments, its spectrum is also host to many multinational companies’ regional of social, spiritual, recreational and entertainment facilioffices or support centers, particularly for finance and ties, and its concentration of governmental and nonaccounting, and information governmental institutions are technology functions. Moreover, manifestations of the city’s funcmost of the countries’ largest tion as the capital of the nation. Malaysia’s outsourcing and companies have their headquarshared services (SSO) industry With the relocation of federal ters based here. government administrative funcis likely to undergo a consoli- tions to Putrajaya, some diminuOther important economic activities in the city are educadation of sorts as it seeks to tion of this role is likely to be tion and health services. Kuala felt, but the city will remain the reinvent itself in the face of Lumpur also has advantages stiff competition in the global economic and business center of stemming from the high concenthe country. This is due to the market. tration of educational institufact that Kuala Lumpur and its tions located within its boundaconurbation (KLC) form a ries, providing a wide range of region that is the most industricourses. There has been growing emphasis to expand the alized and economically the fastest growing in the country. economic scope of the city into other service activities such Furthermore, the development of the Kuala Lumpur as research and development that supports the rest of the International Airport at Sepang, the creation of the MSC, economy of Malaysia. The tourism sector also plays an which includes Putrajaya and Cyberjaya, and the expanimportant part in the city’s economy, providing income, sion of Port Klang have reinforced the national and interemployment and expanding business opportunities. As national economic significance of the city. As an internaan extension of this, many large worldwide hotel chains tional business center, Kuala Lumpur vies with cities such have presence in the city. Kuala Lumpur is the fifth most as Singapore, Bangkok, Manila and Hong Kong for privisited city in the world, with 8.94 million tourist arrivals mary position in the Asia Pacific Region. In realizing its in 2008. vision to become A World-Class City, Kuala Lumpur must Multimedia Super Corridor, Malaysia (MSC) is an address the regional, national and international perspecimportant component of the Malaysian e-strategy. It is tives, embrace the opportunities presented and define its a dedicated 15 x 50 km corridor outside Kuala Lumpur specific role. GS that aims to attract global ICT companies to undertake research, develop new products and technologies, and export from this base. Conceptualized in 1996, the MSC is envisioned to become a global test bed for ICT applications. It is also intended to be the ideal growth environment for Malaysian ICT small and medium enterprises (SMEs) seeking to transform themselves into world-class companies. To attract the targeted companies, the Malaysian government has committed to the following four promises: a Bill of Guarantees, world-class infrastructure, a suite of cyber laws, and incentives. Some of the notable companies based in Kuala Lumpur are IBM, Oracle Corporation, Ericsson, Samsung, DiGi, Intel, Hewlett Packard, Accenture, Nokia, etc.. Kuala Lumpur is a very attractive place for foreign investment due to its high infrastructure and human capital standards, as well as the robustness of its internal market. The city welcomes investments and productive 118 GS Destinations Compendium 2010

www.globalservicesmedia.com

(Source: media.photobucket.com)

Mexico City Mexico

BPO Boom Causing Ripple Effect Throughout Mexican IT Industry

exico City is the capital and largest city of Mexico. Known for being the most populated Spanish-speaking country in the world, Mexico boasts of a free market economy. It is the world’s 12th largest economy and has the highest per capita income within Latin America. The recent boom in business process outsourcing (BPO) is not only creating much-needed jobs, but is also having a ripple effect throughout Mexico’s IT industry. Mexican IT firms are suddenly flexing their muscle on a global stage. Mexico has enviable human capital with respect to BPO services such as contact center. Moreover, there is active support from the Mexican government. Huge government incentives to set up contact centers may touch all the right buttons with the contact center outsourcers companies and in-house shared services organizations. As an “alpha” global city, Mexico City is one of the most important financial centers in North America that is located in the Valley of Mexico. Mexico’s GDP plunged 6.5 percent in 2009 as world demand for exports dropped and asset prices tumbled. However, with Mexico’s economy and GDP per capita both growing at high rates now, in which Mexico City’s GDP is set to at least double within the 2010–2020 decade according to numerous economic reports. Mexico’s trade regime is among the most open in the world, with free trade agreements with over 50 countries, including the United States, Canada and the EU. Mexico City is responsible for generating 21 percent of Mexico’s Gross Domestic Product, and the metropolitan area accounts for 34 percent of total national GDP. Government officials expect the economy to grow 4–5 percent in 2010. The principal taxes payable by individuals and by corporations operating in Mexico and, in certain cases, by foreign companies, are those levied by the federal government. State and municipal governments 119 GS Destinations Compendium 2010

Quick Facts City

Mexico City

Region

Central America

Country

America

City Population

112,468,855 (July 2010 est.)

City Real-Estate Cost

US$5.31 per square feet (Class A) and US$4.79 per square feet (Class B)

Major Service Providers in the City

Tata Consulting, MindTree, NoShore Group, Indra, Genpact, Neoris, Softtek, ACS

Primary Language Spoken

Spanish (92.7percent)

Other Languages Spoken

Spanish and indigenous languages (5.7 percent), indigenous (0.8 percent), unspecified (0.8 percent)

Literacy Rate

91.4 percent (2009)

GDP

$1.465 Trillion (2009 est.)

Time Zone

CST (UTC-6)

Currency

Mexican Pesos (MXN) $1 = 12.26 MXN

Unemployment

5.5 percent (2009)

have more limited tax powers and are not authorized to levy general corporate income taxes. The federal corporate income tax rate is 35 percent. There are no state taxes on corporate net income. A value-added tax (VAT) at the general rate of 10 percent is payable on sales of goods and rendering of services, rents, and imports of goods and services. Some of the notable companies based in Mexico City are Tata Consulting, MindTree, NoShore Group, Indra, Genpact, Neoris, Softtek, ACS. Mexico City is a very attractive place for foreign investment due to its high infrastructure and human capital standards, as well as the robustness of its internal market. The city welcomes investments and productive projects in the IT field and provides incentives and grants for relevant projects. GS www.globalservicesmedia.com

(Source: media.photobucket.com)

Prague

Czech Republic The IT Capital of Central Europe

rague is indisputably becoming the capital of Central Europe. Many large companies have their regional headquarters here and the city is an enticing investment location, despite being more wealthy (and therefore expensive) than many Western counterparts. Prague is the capital of Czech Republic (CR). Prague has a strategic location in Europe; it’s centrally located and has easy transport links. Prague is often considered the heart of Europe. The capital city of Prague is the largest city of the Czech Republic. Its area is 496 sq km, which is only 0.6 percent of the CR’s territory, but with the population of 1,212,097 inhabitants (2007) it represents 11.7 percent of the total population of the CR. Prague then markedly dominates the population structure in the Czech Republic. Prague has a well-developed transport and telecommunications infrastructure. It has a highly skilled and educated workforce. Much of the working population is qualified to degree level or higher. Prague ranks among important and developed regions even within the entire EU. After the 1990s a very fast transformation in a wide range of socio-economic areas has taken place in Prague. The city has become an attractive territory for investors especially among foreign economic entities, for whom it is a mark of good reputation to acquire residencies within Prague. There has been a substantial improvement in the quality of connection of Prague to European and the worldwide communication network. There is a stable and manifold labor market and potential of labor force with above average qualification. Quality background of educational, scientific, and research institutions plays an important role too. There are 800,000 employees in Prague. The number of foreign residents in Prague has been increasing in spite of the country’s economic downturn. As of March 2010, there were 148,035 foreign workers living in the city

120 GS Destinations Compendium 2010

Quick Facts City

Prague

Region

Eastern Europe

Country

Czech Republic

City population

1,212,097 (2007)

Major service providers in the city

Accenture, Cap Gemini, Siemens, Honeywell, Sun Microsystems.

Primary language spoken

Czech

Literacy rate

99 percent

GDP per capita (recalculated - in purchasing power standards)

€ 42,800 (PPS) (2007)

Time zone

UTC/GMT +1 hour

Currency Exchange rate

Czech Koruna (CZK) 1 USD = 18.1970375 Czech Koruna

making up about 18 percent of the workforce, up from 131,132 in 2008. Approximately one-fifth of all investment in the Czech Republic takes place in Prague city. Prague’s economy accounts for 25 percent of the Czech Republic’s GDP making it the highest performing regional economy of the country. According to Eurostat (statistical office of the European Union), in 2007, its GDP per capita in purchasing power standard was 42,800 € ($58,380). Prague was ranked the fifth best-performing European NUTS 2 level region at 172 percent of the EU-27 average. The city boasts skilled IT workforces and centers of excellence set up by major multinational corporations such as Accenture and Cap Gemini. Extraordinary advance of Prague in economic performance per capita is due to several key factors, namely, high rate of commuting to work (in 2008 amounted to 18.5 percent of all employees in Prague), the concentration of gross value added generated by the government sector, the concentration of most of the services sector (banking, insurance, telecommunications), a higher price level which is not reflected in the regionally different conversions of www.globalservicesmedia.com

City Profile n Prague

GDP at purchasing power parity and high compensations mounting crime, bad environment, overloaded transport, of employees. and increased costs of living for the population. Accenture’s Europe Business Process Outsourcing Prague is still a little cheaper than most European Delivery Center in Prague was established in 2001. capital cities for essentials such as food and transport. But Currently, the Prague Center employs more than 1,500 for luxury goods like electrical appliances, cosmetics and accounting, HR, and administration professionals and fashion, prices are higher here than elsewhere. plans call for expanding the facility in phases. Some In 2008 inflows of foreign direct investment in Czech well-known multinational companies have established Republic were roughly $10.73B. By U.S. Embassy estiresearch and development facilities in Prague, among them mates, the United States is among the top 5 investors in Siemens, Honeywell, or Sun Microsystems. the Czech Republic. FDI have contributed significantly In October 2010, Cisco announced the opening of its to the CR’s economy’s strength. The stock of FDI in the Prague Center of Excellence, which uses the latest technol- country amounts to around 50 percent of GDP. ogy in providing sales and partner coverage to 27 countries Despite broadly favorable economic performance, longin Central and Eastern Europe and the Commonwealth term unemployment remains high. Thus, the Czech of Independent States (CIS). Republic must continue to The center is serving some 350 address the structural problems partners and 2,500 customin the labor market. Prague is an enticing investers in 27 countries. According Important remaining issues ment location, despite being to Alexander Winkler, general that still need to be addressed manager, Cisco Czech Republic, include: restoring the long-term more wealthy (and therefore “Cisco is investing in the Czech sustainability of public finance more expensive) than many Republic as part of our long-term through reforms in health and Western counterparts. commitment to the country. We pension systems; improving the have been present in the Czech functioning of the labor market market since 1995, and over the to increase labor mobility; and past 15 years have established several regional functions in continually improving the business environment. Prague. We have chosen the Czech Republic, and in particAccording to the medium-term state budget for 2012 ular Prague, for the Center of Excellence activity due to the and 2013 of the Czech government, the Czech economy availability of educated talent, excellent communications could grow by almost 4 percent in 2013. In 2009 the infrastructure, and the fact that it is an attractive location Czech economy fell by 4.1 percent and the average yearfor team members, both local and international.” on-year inflation was 1 percent. Unemployment calcuPrague has a lower unemployment rate than the rest of lated by the International Labour Organisation (ILO) was the country. Even though jobs have declined in the manu- 6.7percent on average in 2009. facturing sector, Prague still holds the largest industrial For 2010, the Finance Ministry expects the economy to center in the Czech Republic. expand by 1.6 percent. The year 2010’s growth should However, what cannot be forgotten are weaknesses: mainly be pulled by foreign trade. GS Snapshot

➤ Approximately one-fifth of all investment in the Czech Republic takes place in Prague city. ➤ Prague’s economy accounts for 25 percent of the Czech Republic’s GDP making it the highest performing regional economy of the country. ➤ In October 2010, Cisco announced the opening of its Prague Center of Excellence, which uses the latest technology in providing sales and partner coverage to 27 countries in Central and Eastern Europe and the Commonwealth of Independent States (CIS). ➤ According to the medium-term state budget for 2012 and 2013 of the Czech government, the Czech economy could grow by almost 4 percent in 2013. 121 GS Destinations Compendium 2010

(Source: www.gumbopages.com)

www.globalservicesmedia.com

Rio de Janeiro Brazil

Attractive for High-value Services

razil has Rio de Janeiro—this seems to be one of the important selling points for outsourcing to the country. The political situation in Rio is favorable for outsourcing. The services sector constitutes the prominent portion of GDP (65.52percent). Especially after the discovery of oil in the Campos Basin, Rio has been pulling in more companies and investments. Rio stands second nationally in the financial and services sector. Rio de Janeiro has 8 out of 10 of the country’s top science and technology schools; it produces a large number of postgraduates and PhDs every year. This enhances Rio’s attractiveness for high-value services. It has expertise in BPO and call centers; there are science and technology business parks; there are government financing, R&D credits, etc. The state has internationally recognized research centers, which form highly skilled technicians. The Fund for Social and Economic Development (Fundes) is aimed at funding working capital for new businesses or expansion of enterprises already installed. Rio’s economy boasts of a respectable number of IT professionals and highly qualified workforce. A new employment and income generation plan is the recent approval of the bill establishing the Ecological and Economic Zoning (EEZ) in Rio de Janeiro. The presence of a large number of universities and research centers of excellence and a basic infrastructure (major telecommunications hub in the country) makes the capital a major pole of Information Technology. Brazilian currency in recent years has become a stable currency, and is strong against the US dollar and the Euro. Chinese companies have been investing in Brazil by building telecommunications and infrastructure projects. China continues to fuel Brazil’s economic growth. The economic slowdown seems to have brought the two countries closer together. Time zone, U.S. like culture, and an expanding software industry with a more than ample supply of IT

122 GS Destinations Compendium 2010

Quick Facts City

Rio de Janeiro

Region

South America

Country

Brazil

City Population

14,392,106

City Average Monthly Entry Level Salary (in US$) per month (BPO)

$330–$360

City Average Monthly Entry Level Salary (in US$) per month (ITO)

$420–$440

City Real-Estate Cost

$500 per square foot

Major Service Providers in the City

Telemar, BR Distribuidora, Embratel, etc.

Primary Language Spoken

Brazilian Portuguese

Other Languages Spoken

English, French, Spanish, and Russian

Literacy Rate

90 percent

GDP

US$ 46.9 Billion

Time Zone

BST (UTC-3)

Currency

Reais (BRL) $1 = 1.71 BRL

Unemployment

9.5 percent

professionals are the major strengths of Rio. The average price of commercial rent in Rio is around one-third of the price in Mumbai and Moscow. Key service providers operating in Rio are Telemar, Petrobras, AES Communications, Light, Furnas, InfiNet Wireless, Comtex, DBA Engenharia de Sistemas Limited, etc. As regards call center and eBPO services, Rio is the headquarters of three of the six largest telecom companies in Brazil. It should be important to note that application development and maintenance is the specialty of Brazilian IT programmers. The main outsourcing center in Brazil, other than Rio de Janerio, is Sao Paulo. The National IT organization is the Sociedade de Usuários de Informática e Telecomunicações. Brazil is the largest economy in South America and is www.globalservicesmedia.com

City Profile n Rio de Janeiro

fast emerging as a prominent player in the services globali- companies has been part of the country’s economy for zation arena, on account of its huge technical talent pool decades. As a result, the country has a strong IT labor and nearshore advantage. Brazil has accomplished excel- pool with deep industry specific expertise. Revenue comes lence in applications management, infrastructure managed mainly from IT services, with 73 percent related to services, and security technology development along with development, a higher proportion than in other countries. The Brazilian government has its aim set to become multilingual BPO capabilities. Rio de Janeiro has the second-largest GDP in Brazil, one of the three key global IT centers in the world. Its goal- to increase IT-BPO exports behind São Paulo and is the 30th from $2.2B in 2008 to $3.5B by richest city in the world with a 2010- is close to being achieved. GDP of $152B. Time zone, U.S. like culture, To help drive development they It has a comparatively smaller and an expanding software have implemented numerous pool of educated English speakindustry with a more than initiatives, including favoraers than India or Canada. The 2016 Olympic Games are com- ample supply of IT profession- ble tax reductions, government sponsored venture capital funds ing to Rio de Janeiro and is als are the major strengths and IT education support. expected to generate about $40B of Rio. As of 2014, there will be of investments. Rio is also one of about $200M worth of tax genthe host cities of the 2014 FIFA eration in Rio. The expected World Cup. As per Brasscom, IT-BPO sector in Brazil comprises investment in the city by 2010–2012 is $91B. Due to the about 7 percent of Brazil’s GDP and it is still growing at a upcoming international sporting events to be held in the good pace. After more than four decades of development, city, besides investments from the private sector, there will Brazil has grown to become the eighth largest market in be significant improvements in security. All this demonthe world. Growth forecasts for the IT-BPO segment have strates that there will be a great future ahead for the city in remained high despite the global economic crisis, turning terms of professional growth and economic developover $v59.1B in 2008. Large Brazilian and multinational ment. GS

Snapshot

➤ Rio de Janeiro has the second-largest GDP in Brazil and is the 30th richest city in the world with a GDP of $152B. ➤ Rio stands second nationally in the financial and services sector. ➤ The Brazilian government aims to become one of the three key global IT centers in the world. Its goal- to increase IT-BPO exports from $2.2B in 2008 to $3.5B by 2010- is close to being achieved. ➤ As of 2014, there will be about $200M worth of tax generation in Rio. The expected investment in the city by 2010–2012 is $91B.

123 GS Destinations Compendium 2010

www.globalservicesmedia.com

San Jose Costa Rica

Bridging the US and Latin America

an Jose is Costa Rica’s capital and the largest metropolitan city. It is the seat of national government, the focal point of political and economic activity, and the major transportation hub of Costa Rica. The population of San Jose is 346,000. The majority of the IT activity and free trade zones in Costa Rica takes place in the San Jose metropolitan area and the adjacent cities located in the provinces of Cartago, Heredia, and Alajuela. San José has been able to attract FDI in IT-enabled services because of the country’s location; the legacy of past investments in human capital and infrastructure, a stable political system, attractive tax and tariff conditions in the Free Zones (FZs) combined with pro-active foreign investment promotion through CINDE (foreign investment promotion agency). San Jose has a strategic location, as a bridge between the United States and Latin America, as well as the Atlantic and the Pacific. Proximity to the United States reduces the delivery time for goods exported to the United States, and it is a strategic asset for near-shoring of IT-enabled services, especially given similar time zones. San Jose is known for its labor force, its business environment and the lifestyle it offers resident executives and investors. The city’s strategic location, political stability, and business incentives, have all contributed to millions of dollars in investment from multinational companies such as Intel, Hewlett-Packard, and ArtinSof. Intel has the most significant technology park in San José. Intel’s decision to build a microchip assembly and testing facility in San José played a huge role in the magnitude and nature of foreign investment flows to Costa Rica, as it put the country on the map for transnational corporations in the high-tech sector. San José is among the least expensive cost-of -living cities in the world and second only to Quito, Ecuador in the Americas. San José’s prices are the second lowest 124 GS Destinations Compendium 2010

San Jose – Quick Facts City

San Jose

Region

Central America

Country

Costa Rica

City population

346,000

Major service providers in the city

Intel, Hewlett-Packard, ArtinSof

Primary language spoken

English

Other languages spoken

Spanish, Vietnamese, Chinese, and Tagalog

Time zone

UTC/GMT -6 hours

Currency Exchange rate

Costa Rican Colon (CRC) 1 US Dollar = 520.253 Costa Rican Colon

among the cities of the Americas; the cost of goods and services is among the lowest in the world. San Jose’s cost of living ranks close to the middle when compared to 118 cities worldwide. The cost of living in Guatemala City or Pamama City is about 14 percent higher than in San José. In 2009, 29 foreign companies entered or enhanced operations in the country, accounting for more than $304 Million in investment and creating 5,729 jobs, according to the CINDE. Costa Rica is the safest place in Central and South America for multinational companies to conduct business. Foreign investors remain attracted by Costa Rica’s political stability and high education levels. Costa Rica’s major economic resources are its fertile land and frequent rainfall, its well-educated population, and its location in the Central American isthmus, which provides easy access to North and South American markets and direct ocean access to the European and Asian continents. After experiencing positive growth over the previous several years, the Costa Rican economy shrank slightly in 2009 (-2.5 percent) due to the global economic crisis. The economy has experienced a rebound in 2010 with a 3.6 www.globalservicesmedia.com

City Profile n San Jose

percent GDP growth rate. Costa Rica enjoys the region’s Rica, Foreign Trade Promotion Office (PROCOMER) of highest standard of living, with a per capita income of the country organized the “Costa Rica Investment World,” about U.S. $10,569 (2010 est., PPP), and an unemploy- an international investment promotion fair, in April 2010 ment rate of 6.7 percent. in San Jose. The event attracted more than 105 foreign According to AACCLA (Association of American investors and provided networking and education through Chambers of Commerce in Latin America), Costa Rica’s a series of panels focused on Costa Rica’s investment envilabor force has been rated as the most productive and ronment and target sectors. fast learning in Latin America. Costa Rica’s workforce is Despite its many advantages, Costa Rica is not a perfect also extremely well trained and IT-proficient. Education sourcing destination. One criticism is that its workforce is mandatory and free until (2.1 million) is too small for the the ninth grade, and strongly multinational IT and BPO maremphasizes computer and techket it’s targeting. San Jose with a Intel’s decision to build a nology skills. The result is that population of 346,000 is the microchip assembly and testing only city in Costa Rica that can Costa Rica has one of the highfacility in San José played a est literacy rates in the American support a decent-sized outsourccontinent (95.8 percent), and is huge role in the magnitude and ing operation, as compared to a great value proposition for IT other cities none of which have nature of foreign investment outsourcing firms. A considerapopulations over 70,000. “It’s a flows to Costa Rica ble number of people have some small country and that doesn’t knowledge of English, a result work well for a growing compaof the introduction of foreign ny,” Mario Chaves, CEO of language instruction in primary schools in 1994 and the Avantica Technologies, an IT services provider, was quoted prevalence of English-speaking tourists. as saying “We didn’t want to rely on our ability to grow Costa Rica also provides stability- economic, political only in Costa Rica, so we looked at outside locations.” His and with respect to capital-labor relations, again mostly company Avantica currently has around 200 employees. due to the social democratic model and strong institutions He’s looking to hire another 200, which he admits is difdeveloped in the past. Costa Rica’s main universities are ficult in Costa Rica. “Not that it can’t be done. Intel’s the University of Costa Rica, in San Jose and the National operation has around 4,000 workers in Costa Rica, HP has University of Costa Rica, in Heredia. Costa Rica also has 6,500 and Procter & Gamble has 1,350 – but you need several private universities. those kind of hefty resources to attract that talent,” he had To attract more foreign companies to invest in Costa said. GS

Know More www.globalservicesmedia.com

São Paulo The “Brazilian locomotive”

ão Paulo is Brazil’s bustling economic and financial center. São Paulo has a metropolitan population of about 20,500,000 (2009 est.). It is the world’s third-largest city and the largest in South America. This city is also the most prosperous in Brazil, with the highest per capita income and overall standard of living. São Paulo has evolved from a small village into one of the world’s top cities. Its proximity to the United States makes it distinctly more accessible than more distant Asian locations. São Paulo, therefore, qualifies as a “near-shore” location for the US market, along with Canada and various Caribbean countries. São Paulo is Brazil’s most important business center. With the country’s best infrastructure and a highly skilled labor force, it can be called the “Brazilian locomotive,” that drives the national economy. Almost every major industry in Brazil is based there, and 15 percent of Brazil’s gross national product is generated in here. The city currently has almost 60 percent of call center positions in the country. São Paulo with its ideal location and growing economy has become a big draw for many foreign investors. The Economic Commission for Latin America (ECLAC) says Brazil is the top recipient of FDI in Latin America. In November 2010, Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, announced that it is growing its BPO footprint in Latin America with the expansion of its delivery centers in the Campinas region of São Paulo. São Paulo has the greatest number of higher education and research institutions in the country. The city has 3 state and 3 federal universities, aside from a number of private institutions. As a result, São Paulo features a great number of skilled and highly qualified professionals capable of developing the most complex applications. The city’s solid technological base also enables professionals to deal with technological innovations. São Paulo has one of the

126 GS Destinations Compendium 2010

São Paulo – Quick Facts City

São Paulo

Region

South America

Country

Brazil

City population

20 million (2009)

Cost of renting office space (Annual rent)

$100 per sq ft

Average programmer’s salary (in BRL)

R$ 1,000–R$1,800

Graduate’s salary (in BRL)

R$2,500–R$4,000

Major service providers in the city

HP, Accenture, Unisys, TCS, EDS, Deloitte, Motorola, Intel, Nortel Networks, TIBCO, Stefanini IT Solutions, Kaseya

Primary language spoken

Portuguese

Other languages spoken

Japanese, Spanish, Korean

Time zone

UTC/GMT -3 hours

Currency Exchange rate

Brazilian Real (BRL) 1 USD = 1.71996 Brazilian Real

Unemployment

15.5 percent

highest concentrations of software university graduates in Latin America. Brazil—with its 250,000 IT professionals, 23,000 annual IT graduates, and infrastructure capable of supporting double-digit growth—is at the heart of the IT services supply chain in the Southern Hemisphere. In fact, most major U.S. players including HP, Accenture, and Unisys have an escalating presence in Brazil, which has been largely unaffected by the recent global economic slump. In June 2010, IBM announced plans for its first South American research center in Brazil, as part of its strategy to sell technology and services to large, fast-growing emerging nations. Indian outsourcers such as Satyam, Infosys and Wipro have been aggressively expanding in Latin America. Tata Consultancy Services (TCS), for example, has 3 global delivery centers, including an Oracle center of excellence www.globalservicesmedia.com

City Profile n São Paulo

and more than 1,500 employees working in Brazil. EDS, are companies that are stopping exports because they are Deloitte, Motorola, Intel, Nortel Networks, TIBCO, unable to find skilled labor,” says Rafael Moreira, from Stefanini IT Solutions, Kaseya, Politec, and Nokia have the Ministry of Development, Industry and Overseas offshore centers in São Paulo. Commerce (MDIC). Intel’s Latin American headquarters, Intel Brazil, is The country’s objective is to increase its income six-fold located in São Paulo and is primarily focused on sales and from software exports and tech services that amounted to marketing. The Intel office in São Paulo is the largest Intel $3B in 2009. That means an increase in the IT contribusales office in Latin America. tion to national GDP from 3.5 percent in 2010 to 5.3 According to the Brazilian Association of Information percent. Technology and Communication Companies In 2008, IT-BPO market of Brazil turned over $59.1B, (BRASSCOM) Brazil’s offshore outsourcing market hit including exports and in-house IT. Brazil’s IT-BPO sector $1.4B in 2008, rising 75 peris among the strongest and most cent in a single year. Brazil’s mature in the world. Combined recognition as one of the most In November 2010, Capgemini with the communications sector promising and rapidly emerging it accounts for about 7 percent announced that it is growing its of Brazil’s GDP. Large Brazilian economies makes it a natural destination to evaluate for IT BPO footprint in Latin America and multinational companies services. with the expansion of its deliv- have been part of the country’s By 2020 Brazil hopes to be economy for decades. As a result ery centers in the Campinas one of the world’s top 4 in offthe country has a strong IT labor region of São Paulo. shore IT, turning over $20B. But pool with deep industry speto achieve that goal the country cific know-how. Revenue comes will need to overcome a number mainly from IT services, with 73 of challenges—one of which is to train 300,000 IT special- percent related to development, a higher proportion than ists in the next 10 years to reduce the cost of labor. in other countries. High rate of student dropouts from IT graduate courses The Brazilian government aim to increase IT-BPO conferences not have a good ofinBuyers Sellers. and “Other high taxesoutsourcing are other barriers. There is an do imbalance exports frommix $2.2B 2008 toand $3.5B by 2010 is close Most of the it is The lot of sellers. So I think, a good mix, hear fromthey have between supply andtime demand. professional graduate toit’s being achieved. To you help get driveto development does the not buyers meet company demands, which because is hevery entersimportant” the implemented numerous initiatives, including: favorable prospective . work market unprepared. “We need to produce profes- tax reductions, government-sponsored venture capital Know More -Global Services Conference 2010 Attendee sionals on a large scale and quickly with a curriculum funds, and IT education support. that meets company needs. Today firms are in great need Brazil’s economy boomed at a 9 percent annual rate of programmers costing less. As they are unable to find in the first quarter of 2010, its fastest pace in at least 14 them they hire specialized graduates, which in turn drives years. Economists now see Brazil’s gross domestic product up labor costs. An average programmer earns between R$ expanding more than 7 percent this year, putting it among 1,000 ($576.5) and R$1,800 ($1037.5) while a graduate the fastest-growing in the world. earns between R$2,500 ($1,441) and R$4,000 ($2,305.6). With brisk growth and considerable natural resources, Training capacity is a large bottleneck of Brazil. There the country is becoming a global heavyweight. GS

27 January, New York

Know More www.globalservicesmedia.com

Santiago Chile

The Magnet for Americans

hile’s steady economic growth has transformed Santiago into one of Latin America’s most modern metropolitan areas, with extensive suburban development, dozens of shopping centers, and impressive high-rise architecture. It has very modern transport infrastructure. Santiago has the attributes that have made emerging markets attractive to outsourcers, such as cheap wages, dependable, state-of-the-art infrastructure, and government incentives. Santiago contributes around 45 percent to the total GDP. Santiago is the capital and the largest city of Chile. It is considered as the administrative, industrial, commercial, financial, and cultural nerve center of Chile. The city has a population of 5,822,316 with 95.7 percent literacy rate. Chile has a workforce of about 7.2 million, 3.1 million of which is in Santiago, In addition to the United Nations offices, Santiago is home to many international company headquarters for Latin America, and the city is often the first choice for Latin American investment. In recent years, due to the strong growth and stability of the Chilean economy, many multinational companies have chosen Santiago as the place for their headquarters such as HP, Reuters, Procter & Gamble, Intel, Coca-Cola, Unilever, Nestlé, Kodak, BHP Billiton, IBM, Motorola, Microsoft, Ford, Yahoo! among others. Polaris Software Lab, a specialist in Information Technology (IT) for the financial sector, opened a new Latin American development center in Santiago in 2009. Polaris has identified Latin America as an integral growth market for its expansion strategy. “Santiago offers qualified professionals at competitive (salaries),” said Cristian Basauri, the company’s senior vice president for Latin America. “We are going to recruit local talent to understand the market. On this basis, we will implement our products and insert ourselves into the local system,” explained Kartik Kaushik, CEO for America. 128 GS Destinations Compendium 2010

Quick Facts City

Santiago

Region

South America

Country

Chile

City real estate cost

Apartment for sale: US$1,720 per sq m

Major service providers in the city

Polaris Software Lab, Politec, Evalueserve, TCS, Accenture, Capgemini, Equifax, Citigroup

Combined IT-BPO export

$300–$350 Million (2008)

Primary language spoken

Spanish

Other languages spoken

English

Literacy rate

95.7 percent

Time zone

UTC/GMT −4 hours

Currency Exchange rate

Chilean peso (CLP) 1 USD = 476.8 Chilean pesos

Unemployment rate

10.8 percent (2009)

Other companies that have set up their operations in Santiago are: the Brazilian IT company Politec for SAP solutions; Evalueserve for market research, equity and IT analysis; TCS for back office functions and software application development; Accenture for IT consulting; Capgemini for financial services, BHP Billiton, and Shell. In 2009, US company Equifax opened a software lab in Santiago. Equifax selected Santiago because of the “safety of the city and country, political and economic stability, and the knowledge of its young professionals,” says Mario Godoy Zanni, CEO of Equifax Chile. Santiago also is a magnetic place for Americans, he adds. “There’s always someone from Atlanta visiting.” Andre Schenkel, the director and senior vice president of Citigroup’s Chile Technology Services Center says Santiago is “extremely safe by South American standards.” It’s a livable city. Citigroup has clients in New York who spend 2 hours on a train to get to work. “I have a 7-minute walk,” Schenkel notes. Citigroup recently expanded its www.globalservicesmedia.com

City Profile n Santiago

workforce there to 125; most are developing new financial literacy levels and strong educational system make these software tools. Oracle has a 200-person IT office, with 75 graduates well suited for the IT and KPO industry. The working on software development. It plans to double its government has introduced various programs to improve staff in Chile before 2011. English language skills that include mandatory English Costanera Center is a mega project in Santiago’s languages from 5th grades in the school to university financial district. This includes a 280,000-square-meter level. On the other hand, CORFO, the investment pro(3,000,000 sq ft) mall, a 300-meter (980 ft) tower, 2 office motion agency of Chile has created a national register of towers of 170 meters (558 ft) each, and a hotel 105 meters English speakers where interested individuals are evaluated (344 ft) tall. When completed in 2012 it will be the tallest on “Test of English for International Communication” building in Latin America. (TOEIC) score, a test that measures the capability to perThe city has good infrastructure for the IT-BPO indus- form in a bilingual working environment. try. It offers a large and ready talent pool. A large number There are over 130 IT-BPO companies in Santiago. of companies source Spanish language call centers and The major IT-BPO services sourced from Santiago include BPO services from the city. The government of Chile pro- IT services, customer support, finance and accounting, vides financial and other support for high-end industries human resources, marketing, and technical support. The and setting up an IT-BPO business in Chile is fairly easy. combined IT-BPO export from the city was between The city is very well situated for $300M and $350M in 2008. near-shore business due to simiThe World Economic Forum lar time zone and cultural affinranks Chile highest among all IT salaries are lower in Chile ity with the United States. Latin American countries in its Favorably located in the mid- than they are in Mexico, anoth- Global Competitiveness Index, dle of the country, Santiago is a citing such factors as the availer near-shore option for outshort distance from 2 major ports ability of scientists and engisourcing engineering work and has an international airport neers. Chile has a wide business offering departures to 187 destinetwork of free trade agreements nations. In addition, the city has with countries in Asia, Latin efficient transport infrastructure, major banking institu- America, the European Union, and the United States tions, and highly regarded universities. Santiago’s telecom which provides Santiago with a great opportunity as an infrastructure is the best in Latin America with high speed outsourcing destination. connectivity. In 2008 Chile’s outsourcing industry brought in $843M Santiago offers significant cost advantage in terms of in revenue, of which $169M were from ITO and $198M competitive wage-rates, and lower operating and living were from BPO services. Chile will be exporting $5B in costs compared with other cities in the Americas. On aver- services by 2015 according to current projections. age, IT salaries are lower in Chile than they are in Mexico, While Chile is rising, there is little fear of it toppling another near-shore option for outsourcing engineering India or its Latin American neighbors as an IT hub. The work. Wages tend to be on par with those in Brazil, but software services sectors in Brazil, Mexico, and Argentina rent averages 40 percent less in Santiago than in São Paulo. are much larger than Chile’s $820M sector. Tech centers The Chilean government also offers incentives, including elsewhere in Latin America are expanding rapidly because grants for IT outsourcers. of their much larger labor forces—Chile’s entire workforce Santiago is the educational hub of the country and over of 7 million is smaller than the metropolitan populations 22,000 graduates enter the workforce each year. The high of São Paulo or Buenos Aires. GS Snapshot

➤ There are over 130 IT-BPO companies in Santiago. The major IT-BPO services sourced from Santiago include IT services, customer support, finance and accounting, human resources, marketing, and technical support. ➤ Santiago offers significant cost advantage in terms of competitive wage-rates, and lower operating and living costs compared with other cities in the Americas. On average, IT salaries are lower in Chile than they are in Mexico. Wages tend to be on par with those in Brazil, but rent averages 40 percent less in Santiago than in São Paulo. ➤ Santiago is the educational hub of the country and over 22,000 graduates enter the workforce each year. ➤ The World Economic Forum ranks Chile highest among all Latin American countries in its Global Competitiveness Index, citing such factors as the availability of scientists and engineers. 129 GS Destinations Compendium 2010

www.globalservicesmedia.com

Shenzhen China

The China- Hong Kong Link

henzhen is a coastal city in southern China. Shenzhen is fourth on the Chinese mainland in terms of economic power and one of the cities that has generated the biggest economic returns. In 2009, Shenzhen’s economy maintained a healthy momentum of development. GDP grew by 10.7 percent to $120B, according to the city’s development and reform commission. Its per capita GDP grew to $13,581, topping the country. Due to the global economic crisis, Shenzhen’s foreign trade volume dropped 10.4 percent compared with the previous year to $270.155 B, but still ranked first among the nation’s large and medium-sized cities. The city has set a goal of 11 percent GDP growth for itself in 2010. Shenzhen hosts 15 percent of China’s IT industry. More than 400 of the world’s 500 largest companies have their offices in the city. Shenzhen is a huge software and IT services outsourcing base. The city is already well recognized internationally as a software and IT city and companies worldwide see this region as a place to locate when looking at China outsourcing. A number of domestic and foreign outsourcing service companies take Shenzhen as an international business base to accelerate the expansion of business such as IBM, Evans, Da Zhan, Peng Kai, Freeborders, CS&S, Huawei, ZTE, and Tencent. Shenzhen Software Park is an important vehicle established by the government to support the development of software industry of the city. The Park was founded in 1996 with an area of 11.5 sq km. The Park is integrated with Shenzhen Hi-tech Industry Park in the Nanshan district of Shenzhen. The Shenzhen municipal government has also built the necessary ancillary infrastructure required to support the Software Park, including housing, hospitals, training and education facilities, libraries, and recreational facilities. This, in turn, has attracted to the Park a large number of

130 GS Destinations Compendium 2010

Quick Facts City

Shenzhen

Region

East Asia

Country

China

City population

14 million

GDP per capita

USD 13,581

Major service providers in the city

IBM, Oracle, HP, Microsoft, Siemens, Zensar

Primary language spoken

Mandarin

Other languages spoken

Cantonese, Chinese, English

Time zone

UTC/GMT + 8 hours

Currency Exchange rate

Chinese yuan (CNY) 1 U.S. dollar = 6.63979762 Chinese yuan

Unemployment

2.6 percent (2009)

well-known domestic and international technology companies. Many of them, such as King Dee, Kingdom, Tencent, MCM, Kejian, Oaking, Guanri, Liming, Aspire-Tech have become tenants of the Park. Bank of China, China Mobile, ChinaSoft, NeuSoft, Powerise, HuaSheng, QiMing, as well as IBM, Oracle, HP, Microsoft, Siemens, Zensar, Bank of Switzerland, and Orange Communications have invested in research and development facilities within the Software Park. The Shenzhen Software Park and its member companies have targeted 3 major segment of the software export market: software exporting and outsourcing, embedded software, and IC design. Many multi-national software companies have used the Park for their software and IC design outsourcing needs. IBM operates a global services delivery center along with its global procurement center there. Oracle created the Oracle Technology Resource Center in the Park to perform integration to the Oracle platform. More than 1,500 software enterprises are settled in the Shenzhen Software Park, collectively employing over 100,000 engineers. www.globalservicesmedia.com

City Profile n Shenzhen

Shenzhen Software Park’s offshore Development Center 50,000 students on campuses citywide. The area has been focuses on the high-end of ITO and BPO projects in the a magnet for IT engineers from all over the country. There areas of BFI (banking, finance, insurance), TWU (telecom, are about 800,000 engineers working in IT/high-tech wireless & utilities), and MRD (manufacturing, retail, and related areas. The average age in Shenzhen is less than 30. About 88 distribution). percent of the total population is between the ages of 15 The city has well-developed communication infraand 59, thus forming one of the youngest labor forces in structure, including designated trunks for international the country. Labor costs are also substantially lower than in gateway. Shenzhen is a link between the Chinese mainland neighboring Hong Kong. and Hong Kong and a transport During the first 8 months of hub in coastal southern China. 2010, China’s software business Shenzhen is located less than 45 The Shenzhen Software Park achieved revenue of CNY828.6 minutes away from downtown and its member companies Billion ($124.7B), a year-onHong Kong. The city has an have targeted 3 major segment year increase of 29.8 percent international airport that conof the software export market: and the growth rate was 8.8 nects to 18 international cities. percent higher than the same Shenzhen is the terminal stasoftware exporting and outtion for the important Beijingsourcing, embedded software, period of 2009, according to China’s Ministry of Industry and to-Shenzhen railway route. In and IC design Information Technology. order to attract more businesses During Jan–Aug 2010, and accommodate the growing China’s software export was demand of the population, new roads and railways projects such as the Guangzhou- $14.4B, a year-on-year increase of 26.4 percent. The Shenzhen Coastal Expressway and the Shenzhen-Hong growth rate was 14.6 percent lower than the same period Kong Express Rail Link are under construction and are of last year, but 3.7 percent higher than that in the firsthalf of 2010. Its export of software outsourcing services expected to be completed in 2012. The city leads in high-tech, financial services, foreign was $1.75B, a year-on-year increase of 30.4 percent and the growth rate was 6.7 percent lower than the same period trade, shipping, and creative cultural industries. There are 10 universities located in Shenzhen, with of last year. GS

Snapshot

➤ Shenzhen hosts 15 percent of China’s IT industry. More than 400 of the world’s 500 largest companies have their offices in the city. ➤ About 88 percent of the total population is between the ages of 15 and 59, thus forming one of the youngest labor forces in the country. Labor costs are also substantially lower than in neighboring Hong Kong. ➤ In 2009, Shenzhen’s economy maintained a healthy momentum of development. GDP grew by 10.7 percent to $120B, according to the city’s development and reform commission. Its per capita GDP grew to $13,581, topping the country. ➤ Due to the global economic crisis, Shenzhen’s foreign trade volume dropped 10.4 percent compared with the previous year to $270.155 B, but still ranked first among the nation’s large and medium-sized cities.

131 GS Destinations Compendium 2010

www.globalservicesmedia.com

The Merlion, a national symbol of Singapore (Source: Wikipedia)

Singapore City Singapore

Growing Into the “Trusted BPO Hub of the Region”

ingapore is a country that is often mentioned for outsourcing. Singapore is growing at doubledigit rates in terms of both volume and value of the electronic commerce and payment business, and is closest to its clients in a region that has highest growth potentials. The nation is thinking big in terms of being a BPO hub in Asia. The Singapore government as well as its lead strategy planning and executing agency, the Economic Development Board, are hard set to push the small island nation in Asia to develop into a “trusted BPO hub of the region”. The Singapore government has committed to develop the nation into a high value-added BPO hub. Singapore recently leapt into first place in the global IT economy rankings produced by nonprofit Tech-Economy.org, surpassing the United States and Sweden. Singapore earned top marks for its freetrade policies and visionary government. Singapore boasts of a well-educated population with a highly skilled workforce and a strong pool of senior managers. It has a world-class telecommunications infrastructure and very stable political and economic environment. Singapore is competitive for high-end requirements. Because its infrastructure is so strong and its business environment is so favorable, it has fared well as an outsourcing location for data center operations and network management. Although labor rates are relatively high, they are lower than those in the United States. Singapore is recognized by international agencies such as World Economic Forum, Political and Economic Risk Consultancy and Business Environment Risk Intelligence as one of the most conducive places in the world to do business. To date, over 7,000 multinational corporations (MNCs) have established a presence in the country, of which 60 percent have chosen to make Singapore their regional headquarters. Many have also chosen to site their global or regional IT hubs in Singapore. Singapore is the world’s fourth leading financial center and a cosmopolitan world city, playing a key role in

132 GS Destinations Compendium 2010

Quick Facts City

Singapore

Region

East Asia

Country

Republic of Singapore

City Population

5,076,700 (2010)

City Average Monthly Entry Level Salary (in US$) per month (BPO)

$1,500–$1,900

City Average Monthly Entry Level Salary (in US$) per month (ITO)

$2,300–$3,300

City Real-Estate Cost

$859 per square foot

Major Service Providers in the City

Citibank, Credit Suisse First Boston, Hewlett-Packard, IBM and Microsoft,

Primary Language Spoken

English

Other Languages Spoken

Malay, Mandarin Chinese, Tamil

GDP

S$74,925M (2010)

Time Zone

SST (UTC+8)

Currency

Singapore dollar (SGD) $1 = 1.29 SGD

Unemployment

3 percent

international trade and finance. After a contraction of 6.8 percent in the 4th quarter of 2009, Singapore claimed the title of fastest-growing economy in the world, with GDP growth of 17.9 percent in the first half of 2010. Singapore has great IT infrastructure and has been often used for a regional data center hub. With its available talent pool, infrastructure, and environmental advantages, Singapore is rapidly transforming into one of the favorite cities for investment in the Southeast Asia region. Singapore will continue to focus its efforts towards attracting highend vertical-focused activities such as those in the financial services industry, IT operations and business continuity and disaster recovery functions. With all these qualities, Singapore is well positioned to be the trusted hub for strategic IT-enabled activities such as global and regional CIO functions, innovation centers, and technology development centers. GS www.globalservicesmedia.com

Palace Square, as the main square of the Russian Empire it was the setting of many events of great historical significance (Source: Wikipedia)

St. Petersburg Russia

New Entrant into Product Development Sector

ften called the Northern Capital of Russia, Quick Facts St. Petersburg is one of the country’s major City St. Petersburg business centers. Its close location to Western Region Eastern Europe Europe also makes it attractive for foreign Country Russia businesspeople. The fourth-largest megapolis of Europe, its City Population 4,596,000 (2010 est.) geopolitical, intellectual, economical, cultural, and historiCity Average Monthly Entry Level $6,000 cal advantages are unique. Salary (in US$) per month (BPO) In the product-development sub category, the city of City Average Monthly Entry Level $10,000 St. Petersburg has figured as a new entrant in the emerging Salary (in US$) per month (ITO) city space. Unlike IT-BPO companies, product-developCity Real-Estate Cost $96.87 per square feet ment companies have a very niche market. The educaMajor Service Providers in the Luxoft, Intel, Sun Microsystems, tional structure of St. Petersburg is capable of generating City Sovkomflot, Petersburg Fuel skills required to make the city one of the most potential Company and SIBUR outsourcing cities for product development. The strong Primary Language Spoken Russian, English presence of offshored product-development companies Other Languages Spoken Estonian or Finnish such as Reksoft and DataArt displays the growing activities Literacy Rate 99.4 percent in this space. The city is known as an established destinaTime Zone MSK/MSD (UTC+3/+4) tion for engineering and R&D services. St. Petersburg also Currency Russian Ruble (RUB) has expertise in areas such as R&D, health-care services, $1 = 31.05 RUB engineering services, etc. Unemployment 9 percent Local governments provide additional incentives to IT companies. For example, St Petersburg allows IT compa- the coming years. St. Petersburg is a strong leader in the nies that have invested more than $1.8M in the city to ratings of the most investment-attractive regions of Russia. enjoy a reduced profit tax rate of 20 percent (normal rate Its great intellectual, scientific, and personnel potential 24 percent) and companies whose investment in the city and stable development in the previous years gives the city exceeds $5.6M additionally enjoy 50percent concession a comfortable atmosphere for business start-up and develon property tax. opment. The government is trying to encourage economic St. Petersburg is well ahead of the other regions of growth and assist the business community in the city. North-West Federal Region by the basic indices of social With an increasing amount of foreign interest and and economic development, especially in civil construc- investment in St. Petersburg, the city is fast becoming tion and trade. A lot has been rich along with its inhabitants. done for the development This has a great effect on property St. Petersburg has expertise of the transport complex, prices, which has driven skywards improvement of the industry in areas such as R&D, health- over the past few years. As per the structure, attracting tourists, World Bank, Russia’s economy care services, engineering and culture development. All will see a robust recovery in 2010, services, etc. these actions have set the base but unemployment will remain for steady economic growth in high. GS

133 GS Destinations Compendium 2010

www.globalservicesmedia.com

Toronto’s skyline from the island (Source: http://pages.interlog.com/~gilgames/toskyln.htm)

Toronto Canada

The ICT Hub with Depth and Variety

oronto is the technological heart and soul of Canada. The city’s vital Information and Communication Technology (ICT) bunch has been providing more than $20B annually to the

economy. Toronto is the commercial, distribution, cultural, financial, entertainment, and industrial center of Canada, as well as the banking and stock exchange center of Canada. It should be noted that many world-leading high-tech companies are drawn to Toronto to invest and grow their operations. It is the country’s main wholesale and distribution point. Ontario’s wealth of raw materials and hydroelectric power has made Toronto a chief center of industry. According to the Branham300 (2009), of the top 250 Canadian ICT companies, 40 percent are headquartered in the Toronto region. Over the past few years, the City of Toronto together with other orders of government, has been working in close association with ICT industry stakeholders to produce a strategy for this strategic sector with the aim to become and be recognized globally, as one of the five most advanced, creative, and fruitful locations in the world for ICT research, education, business, and investment by 2011. ICT Toronto, a multi-stakeholder partnership was produced to function as an advisory and reference group and potential ICT think tank to carry out the ICT Strategy. Toronto’s leading economic sectors include aerospace, transportation, media, arts, film, television production, publishing, finance, business services, telecommunications, software production, medical research, education, sports industries, and tourism. The Toronto Stock Exchange— the world’s eighth largest in terms of market value—is headquartered in the city. Toronto is Canada’s prominent media market, and the fourth largest media center in North America (behind New York City, Los Angeles, and Chicago). Toronto is a major international center for business and finance. By and large, Toronto is regarded as the financial capital of

134 GS Destinations Compendium 2010

Quick Facts City

Toronto

Region

North America

Country

Canada

City Population

2,503,281

City Average Monthly Entry Level Salary (in US$) per month (BPO)

$2,000–$2,400

City Average Monthly Entry Level Salary (in US$) per month (ITO)

$2,200

City Real-Estate Cost

$2 to $3 per square feet.

Major Service Providers in the City

Accenture, Cognizant, EDS, Infosys, LogicaCMG, TCS, Unisys, etc.

Primary Language Spoken

English

Other Languages Spoken

French

GDP

$248 Billion

Time Zone

EST (UTC-5)

Currency

Canadian dollar $1=1.01 CAD

Unemployment

9.44 percent

Canada. The city is an important center for the media, publishing, telecommunications, information technology, and film production industries; it is home to major companies such as Research In Motion, BCE, Thomson Corporation, CTVglobemedia, TELUS, Celestica, Nortel Networks, CGI Group, Softchoice, MTS Allstream, Aastra Technologies, Open Text, Mitel Networks, Shaw Communications, CAE, MacDonald, Dettwiler and Associates, and Rogers Communications, etc. In terms of employment, the service side of the ICT cluster is the largest, followed by development and manufacturing. The City of Toronto has over 50 percent of all ICT companies located in the Greater Toronto region. The city distinguishes on two key location factors, offering strong competitive advantages including labor force availability, and market accessibility. www.globalservicesmedia.com

City Profile n Toronto

The Toronto region leads North America in offering a and Ontario’s provincial tax exemptions provide some diverse, talented pool of Interactive Digital Media services. of the most magnanimous R & D tax benefits for busiThe digital media industry consists of more than 950 com- nesses. The City’s taxation measures are expended to panies employing about 16,000 people and approximate maintain and increase necessary programs and services revenue of between $1.1 Billion and $1.2 Billion annually that are vital for a prosperous Toronto. After a solid ecoin Ontario. A number of major corporations are estab- nomic growth and inflation in the first half of 2007, the lished in the city, including the Hudson’s Bay Company, economy began to go through slower growth since the Manulife Financial, TD Canada Trust, Canadian Imperial second half of 2007 due to the global ripple effects caused Bank of Commerce, Royal Bank of Canada, Scotiabank, by the sub-prime mortgage crisis in the United States. As Bank of Montreal, Celestica, Four Seasons Hotels, Rogers of June 15, 2010, the goods and services tax (GST) rate Communications, MDS Inc., and many others. has been 5 percent. The level of Taxation in Canada is Toronto, with a population of 2.48 million people (5.5 average among Organisation for Economic Co-operation million in the GTA—Greater Toronto Area) is acclaimed and Development (OECD) countries. Approximately as one of the most multicultural cities in the world and 70 percent of the Canadian government’s income comes is graded as the safest large metropolitan area in North from taxation, the rest from investments, tariffs, and fees. America by Places Rated Almanac. Corporations functioning in Ontario are generally taxed Toronto’s overall employment in 2009 was 1,291,200 at a rate of 30 percent. down by 1.4 percent from 2008. During the past year, By way of equivalence, there is a combined rate of taxagrowth was found in half of the major employment sectors, tion that is less than the combined statutory U.S. federal wherein the services sector grew by 0.9 percent. Despite and state tax rates as follows: the slowing economy, Toronto continues to be a suitable place for new startups and relocations from elsewhere. Canada Ontario Combined Annual sales for the ICT cluster amount to over $32.5 General 19.0% 12.0% 30.0% Billion, whereas the annual exports for this cluster are Manufacturing and processing 18.0% 10.0% 28.0% over $6.2B. Toronto’s GDP is $138B. The unemployment Small business 11% 4.50% 15.5% rate is 9.99 percent, and the total labor force amounts to 1,487,960. Toronto is a world leader in digital microwave Source: http://www.toronto.ca/invest-in-toronto/tax_rates.htm (2010 Corporate Income Tax Rates). transmission, satellite communications services, and data distribution networks. Toronto ICT potency lies in software and systems devel- In this context, it is advisable to note that the corporations opment, manufacturing, and ICT services. Toronto ICT operating in this location collect employment insurance Cluster is the largest in Canada and third largest in North premiums and Canada Pension Plan (CPP) contribuAmerica. Globally focused manufacturers and develop- tions, from both the employer and the employee, to provide support for loss of employers produce software, hardware, ment (including maternity leave) new media, and communications solutions that permeate and act ICT Toronto, a multi-stakehold- and retirement. There are also as accelerator in all areas of the er partnership functions as an employment insurance premiums to be paid by both the employee economy. Toronto has more than advisory and reference group and the employer. 5,000 ICT companies. Toronto’s competitive advanWith a total number of and potential ICT think tank to tage dwells on its depth and vari130,511 graduates as of 2008, carry out the ICT Strategy ety of its ICT operations. With this city has a substantial potenits world-leading renowned posttial of human resources to serve secondary education, R&D, expert talent pool, high-perdifferent sectors. The Canadian Association of Internet Providers (CAIP) formance infrastructure, and supportive government inihas grown to represent ISPs (Internet Service Providers) tiatives, Toronto is a natural place where information-oriof all sizes from across Canada. Although there is still a ented companies can invest and excel. Additionally, there great chance to enhance the number of its members— are some important grounds to outsource services to something the organization is actively engaged in—its Toronto because of the following facts: reduced capital current members already supply almost 90 percent of the expense, improved IT performance and reliability, reduced Internet connections to Canadian homes, schools, and IT overhead, a technology edge over competitors, and businesses. Moreover, Canada’s federal R & D system access to different skills and technology as needed. GS 135 GS Destinations Compendium 2010

www.globalservicesmedia.com

Warsaw City Center (Source: Wikipedia)

Warsaw Poland

Assuring a High Return on Investment

ot on the heels of many of the countries in the region joining the European Union (EU) earlier this year, European-based companies are not only looking at Central and Eastern Europe as an outsourcing destination, but also to open offices there. Warsaw is the city that can expect the biggest influx of companies over the next five year. Warsaw comes top for low cost of staff and best value for money of office space. Warsaw has a flourishing economy virtually free of unemployment. It provides an appealing business environment with a full array of modern business services and well-groomed professionals familiar with western standards. It is the financial center of Eastern Europe and an important consumer market. It has become the focus of foreign investments and a driving force in the growth of the entire country’s economy. Out of approximately 244,000 companies registered here, 98.5 percent are private. Warsaw enjoys first place nationwide in terms of percentage of companies with foreign capital registered. One great advantage of Warsaw is its labor market. 20 percent of the Warsaw population boasts a university degree. In the current economic condition, companies are seriously looking to retain their core talent and processes while attempting to reduce costs in non-core business operations. These usually include financial operations as well as HR, procurement processes, and IT, the latter being frequently outsourced to a third-party provider. Warsaw has the biggest engrossment of electronics and high-tech industry in Poland. In Warsaw, one can clearly discover how the city is taking full advantage of the magnificent and unparalleled chances originating from the emergence of free market and the development of democracy. Moreover, it should be noted that Warsaw is one of the fastest growing cities in Europe. The investment boom is visible all over in Warsaw. Warsaw’s average apartment price is down 10percent from the peak of Q2 2008. As per a latest report, Warsaw could get an additional Billion Euros ($1.35B) from Brussels in 2011–2012 as 136 GS Destinations Compendium 2010

Warsaw- Quick Facts City

Warsaw

Region

Eastern Europe

Country

Poland

City Population

1,711,466 (2009)

City Average Monthly Entry Level Salary (in US$) per month (BPO)

US$1,700

City Average Monthly Entry Level Salary (in US$) per month (ITO)

US$2,000

City Real-Estate Cost

US$21–22 per sq m per month

Major Service Providers in the City

Hewlett Packard, Accenture, Avon, Dimar, HP, IBM, Maersk, Sitel, Tschibo, TNT Express, France Telecom, Transcom, ABN AMRO, Cili Group, CTM Teleperformer, Thomson, Quest-Tek, etc.

Primary Language Spoken

Polish

Other Languages Spoken

German, English

Literacy Rate

99 percent

GDP

US$33,000

Time Zone

CET (UTC+1); Summer DST (CEST) (UTC+2)

Currency

Zlotych (PLN; symbol zł) $1 = 2.87 PLN

Unemployment

5.1 percent

reinforcement for the country’s dynamic economic growth in recent years. According to Article 41 of the Polish VAT Act of 11 March 2004, the basic VAT rate on goods and services in Poland is 22 percent. This rate applies to most types of services. The number of state-owned enterprises is decreasing on a regular basis and the number of companies with foreign capital growing. The largest foreign investors are Daewoo, Coca Cola Amatil, and Metro AG. Those investing in Warsaw can be sure of a very high rate of return on capital invested—a rarity in large cities, and a developed, absorbent consumer market. GS www.globalservicesmedia.com

Ahmedabad, India

flourishing IT industry, excellent IT infrastructure, internationally famed institutes such as IIM, DA- IICT, and more set against the backdrop of a supportive government ensure that Ahmedabad is slowly becoming a preferred outsourcing destination. This city encapsulates a rich pool of English speaking workforce, that is 40 percent cheaper in comparison to other Indian metros. In addition, the crime rate here is low thereby providing a secure environment. The city also has a healthy supply of Grade A office spaces here. The state government is actively endeavoring

to promote the growth in IT industry. A successful example is the development of Info-City, an IT hub providing a comprehensive platform to IT/ITES companies to set up their operations. Having a remarkable IT policy it is on the right side of legal and security issues. The 3rd Eye Voice IT SEZ, the city’s first IT/ITES special economic zone (SEZ), is set to become operational in March 2011. Around a 100 small companies functioning from different locations under Software Technology Park of India (STPI) scheme are planning to shift into the upcoming Rs 550 crore project. GS

Bangkok, Thailand

hailand has set a challenging target – to be one of the world’s top three countries for outsourcing by 2013, building a 4-Billion-baht industry. In line with this, an outsourcing association was formed in 2009. The Thai IT Outsourcing Association, or TITO. Bangkok, capital of Thailand, dominates the country’s economy. On the outsourcing map, the city is climbing up the ladder. In the short term, it is looking at animation and digital content outsourcing, which fits in with Thailand’s creativity profile, and other fields such as database management outsourcing services, accounting business

process outsourcing and COBOL programming and development outsourcing. Majority of the country’s universities are located in or around the capital. A large pool of computer literate and English speaking professionals, good IT skills, work practice adhering to ISO standards, good broadband connection ensure that outsourcing to Bangkok is a profitable option. On the flip side, Thailand is not the cheapest of locations. Also it is beginning to face a shortage of engineers, among other skilled workers as many have obtained jobs overseas. GS

Bhubaneswar, India

he economic liberalization policy adopted by the Government of India in the nineties resulted in the metamorphosis of Bhubaneswar, capital of Odisha. It drew large investments in the field of telecommunications, IT and higher education. It is home to Infosys, TCS, The Finland telecommunication company, Gennum Corporation, Pricewaterhouse Coopers Pvt. Ltd., Mahindra Satyam and Genpact among others.The city’s lucrative talent is a result of over 60 engineering colleges present here. Most of the

outsourcing firms are here planning on expanding their setup. Future plans of Infosys call for investing $60M in Bhubaneswar for its second project. Many firms have planned long-term investment plans for Bhubaneswar. For example, Genpact has announced to set up a BPO center in the city, which is expected to generate 3,000 jobs. Similarly, MindTree Consulting’s new project for the city is likely to create 5,000 jobs in Bhubaneswar. However, these two projects are behind schedule. GS

Brasilia, Brazil

amed for its fighting spirit, stamina and skill on the football pitch, Brazil is set to show the same qualities in the field of outsourcing. In their quest for a suitable offshore location, buyers search with a checklist encapsulating labor costs, political, economical and social risks amongst others. Brasilia gives a comforting answer to most of these check points. This city is excellent in many outsourcing sectors such as e-commerce, financial sector, games and software management.

137 GS Destinations Compendium 2010

Brasilia is armed with a valuable labor pool which is cheaper in comparison to almost all other South American or European countries. However, India and China are still a step up when it comes to cost advantage. In addition, there is also a lack of IT professionals with good communication (English) skills. Government and industry traders are working towards rectifying this problem by developing copious training programs that focus on English speaking. GS www.globalservicesmedia.com

Bucharest, Romania

nce known as ‘Little Paris’, Bucharest’s talent pool has made it the ‘almost’ perfect land for outsourcing. Praiseworthy resources backed with not so praiseworthy government policies makes this city ‘almost perfect.’ Proficiency in English, French and German, excellent IT skills, job commitment, low absent rate coupled with low costs has ensured buyers prefer Romanian workforce. On the export front, this city embraces strong hold in R&D outsourcing, security and embedded software development and mechanical engineering outsourcing.

Bucharest houses Genpact, Wipro and Teleperformance’s - three of the largest outsourcers- largest operations in central and eastern Europe. The downside of this city is that the Romanian state does not recognize outsourcing activity as a distinct business. The absence of separate recognition spells that outsourcing activities have to fit in with other activities recognised by the government. However, Romanian government is working towards making the city better suited for outsourcing. For this, it is enhancing rural broadband access. GS

Cape Town, South Africa

conomic center of the Western Cape Province, Cape Town has over the years established itself as a preferred outsourcing destination. BPeSA Western Cape was founded in 2001 to promote and develop the IT-enabled services industry in Cape Town, with a strong initial focus on contact centers. It operates both as a specialist investment promotion agency for business process outsourcing (including call centers) and as a regional trade association and networking body for the industry. Several big names like TeleTech and Royal Dutch Shell

have their call canters here. The allure of Cape Town, South Africa’s capital, is strong government support, state backed incentives – start-up and expansion grants and discounted telecommunication prices, time zone compatability with Europe and a favourabe exchange rate. In addition, English is the primary language for over one million residents of the capital. Thus, there are little issues with accent for customers in UK. However, the labor costs of English speaking workforce are double in comparison to Philippines and India. GS

Dubai, UAE

erceived as a trading hub and shopping paradise, Dubai is slowly but swiftly establishing its foothold in the global outsourcing market. This development has been characterized by copious government initiatives. One such initiative being Dubai Outsourcing Zone (DOZ) – the first free zone in the world-which is aiming at making this destination the perfect base for outsourcing operations. Recently, DOZ, a member of TECOM Investments, announced a partnership with the Arab Outsourcing Forum for the second consecutive year. DOZ and Arab

Outsourcing Forum have joined hands to support the business requisites of Middle East region. Despite strong support from Dubai’s authorities, buyers find labor costs expensive. However, in order to ensure higher costs do not play show stopper, the Dubai government offers benefits such as 100 percent tax-free environment for 50 years, no corporate tax, no income tax, no custom duty, 100percent foreign ownership, no restriction on profit or capital repatriation and reduced real estate cost. GS

Glasgow, UK

lasgow city boasts of having the largest economy in Scotland with the third largest GDP per capita in UK, after London and Edinburgh. The call center industry started mushrooming here since the 1990s. Today, a large percentage of Scotland’s call center employees are employed in Glasgow. One of the attractions of Scotland, is its proximity to London. Also, there is a pool of educated human resource as the city is a major center of higher education and

138 GS Destinations Compendium 2010

academic research. The Customer Contact Association, the professional body for the Call Center, Contact Center, and Customer Service Industry in the UK, is headquartered in Glasgow. Dell’s second largest business center outside the US is based at Glasgow’s City Park. Eaton has had its shared service center operations in Glasgow since 1997 because of its reputation as a financial services center with a skilled and multilingual workforce. GS

www.globalservicesmedia.com

Guadalajara, Mexico

uadalajara, capital of the Mexican state of Jalisco, has the second largest economy and industrial infrastructure in Mexico. This city contributes 37percent to Jalisco’s total gross production. Electronics and information technology sectors have gifted this destination the title ‘Silicon Valley of Mexico’. It is Mexico’s main producer of software, electronic and digital components. General Electric, IBM, Intel Corporation, Freescale Semiconductor, Hitachi Ltd., Hewlett-Packard,

Siemens, Flextronics, TCS and Jabil Circuit have operations based in the city. Guadalajara is host to good universities and educational centers thus producing a talent pool of valuable human resource. Also, its proximity to US, reduced tariffs under NAFTA, treaty rules facilitating bilateral trade, favorable exchange rates and good infrastructure brings this destination to the list of top 100 outsourcing cities. GS

Istanbul, Turkey

stanbul, Turkey’s largest industrial center generates 21.2 percent of Turkey’s gross national product and contributes 40 percent of all taxes collected. This second largest city in Turkey produces 27.5 percent of the country’s national product. The allure of Istanbul lies in its ample and low-cost workforce, availability of large number of qualified people who are fluent in German language, low staff turnover, flexible labor laws, low set up and operation costs

and proximity to Europe. Its weaknesses include the fact that the call center sector is not yet totally recognized by the government. As Siemens Business Services and Lufthansa serve their customers from Istanbul, it is becoming the ‘backyard’ of German speaking countries. About150 call centers are situated in Istanbul. The banking industry employs about 40percent of the workforce, followed by mobile telephone service suppliers. GS

Jakarta, Indonesia

ndonesia aspires to rival India and China in the outsourcing gamble and it’s relying on Jakarta, its capital and largest city. However, in order to accomplish its aspirations, this destinatiaon needs to cover up its pitfalls. Jakarta offers one of the brightest students and programmers who have proven their worth in numerous competitions. On the language front, all students get a minimum of six years of English language, making every

graduate capable of reading and writing this language. Although, the wages are relatively low there is a shortage of manpower. Recently, this destination was in news as Minister of manpower and transmigration Muhaimin Iskandar plans to rearrange existing outsourcing work contract system. The reason being, current system was considered to cause losses to workers. GS

Kyiv, Ukraine

yiv, the capital and largest city of Ukraine, is home to many high-tech industries and higher education institutions . Barclays Capital, announced in June this year that it has chosen Kyiv as the location for its third global technology center. Kyiv’s exceptional technical talent coupled with strong analytical skills made this the chosen city. Also, for Western European and North American citizens there are no visa compulsions here. Approximately 50 percent of the graduates in the capital are hired to provide professional services to European

139 GS Destinations Compendium 2010

customers. This destination is well tailored to conduct services with Western European countries. However, issues such as communication and employee retention have been causing inconvenience to the buyers. Kyiv has the highest salaries for IT employees as compared to other Ukranian cities like Kharkov, Donetsk, Dnepropetrovsk, Lvov. Kyiv hosted the IT Business Forum dedicated to promotion and development of the Ukrainian software development and outsourcing market in 2009. GS www.globalservicesmedia.com

Montevideo, Uruguay

late entry on the outsourcing map, Uruguay’s capital Montevideo already houses eminent players such as Tata Group, TCS, Accenture, IBM, HP, Towers Watson and Sabre Holdings. Credit goes to the capital’s technically able workforce. The geographic location (GM-3) of Uruguay gives it an added advantage in doing business with US and east cost. Also, the government policies – exporting software from Uruguay has no taxesencourages the development of this industry. Uruguay and in particular Montevideo are noted for a high standard of living at a low cost.

The country’s main technology park, Zonamérica, is located in Montevideo where tax exemptions under the Free Zone system are granted. IT and consulting services are provided from Montevideo to more than 30 clients. English is not widely spoken in this city. However, it boasts of a small percentage of bilingual IT professionals. Some 37 percent speak English. On the legal front, absence of specific incentives for the outsourcing service sector is seen as a missing link for the industry’s growth. GS

Moscow, Russia

oscow encompasses good human IT- resources, developed infrastructure and a significantly large pool of OSD providers. Man power geared up with latest technical skills is available at low costs. The competitive advantage of this city is its R&D skills. However, there are few disadvantages attached to this city, legal issues being intellectual property rights, export and import, taxation, labor and currency law. Also, Russia does not have any agency that provides CMM (Capability Maturity Model) assessment, which is a

model of process maturity for software development. In addition, the cost of infrastructure is high. Moscow is the world’s fourth most expensive city for expatriates, according to the Worldwide Cost of Living Survey 2010 from Mercer. Nokia Siemens Networks announced plans in September this year to set up a Global Network Operations Center (GNOC) near Moscow. The company plans to make a significant investment over a period of five years to develop the center. GS

Mysore, India

he second largest city in the state of Karnataka, Mysore’s proximity to the ideal outsourcing destination Bangalore makes it a preferred destina-

tion. Since 2003, IT companies have cast their footsteps in this city. Today, Infosys has established one of the largest technical training centers in the world and Wipro has set up its Global Service Management Center (GSMC) at Mysore.

This city pays huge importance to the education sector. It houses University of Mysore, whose alumnus include N.R. Narayana Murthy, National Institute of Engineering, prestigious B-Schools such as SDMIMD, JSS Center for Management studies and Bhavan’s Institute of Management. Vast and affordable talent pool, good infrastructure and supportive government ensures outsourcing to this destination is profitable. GS

Nizhny Noygorod, Russia

ourth largest city of Russia, Nizhny Noygorod is the economical and cultural center of Volga-Vyatka economic region. This city is home to 25 scientific R&D institutions that emphasis on telecommunications, radio technology, theoretical and applied physics. In addition, there are 33 institutes focusing on higher education such as Nizhny Novgorod State Medical Academy, Nizhny Novgorod State University, Nizhny Novgorod

140 GS Destinations Compendium 2010

Technical University, and Nizhny Novgorod Institute of Information Technologies. Thus, it comes as no surprise that this destination ranks amongst the leading Russian cities in regard to quality of software R&D providers. Tecom, Devetel Ltd., MERA Networks, RealEast Networks, Auriga and Teleca are the outsourcing software developers that cater to telecommunication vendors. Also, Intel has opened its R&D center here. GS

www.globalservicesmedia.com

Penang, Malaysia

alaysia’s second smallest state Penang is the third-largest economy amongst the states in Malaysia. This destination houses key outsourcing players such as IBM, Idea Capital, Intel, Motorola, MoBif, Citicorp, Agilent, JABIL Shared Service Center, DELL, Seagate, National Instruments, PMC Sierra. Education plays a significant role in this city as it has 33 universities and private colleges. Thus, there are plenty of English speaking developers available. However, in comparison to China and India the labor cost is expensive.

Government policies -no income tax for up to 10 years, investment tax allowance, no duties on import of multimedia equipment for Malaysia Status Companies -are encouraging. GS

Perth, Australia

icture perfect Perth takes pride in being placed eighth in The Economists 2010 list of Worlds Most Livable Cities. Once known as the City of Lights, it encapsulates fantastic weather, lovely beaches, grand golf courses, good infrastructure and friendly inhabitants. The capital and largest city of Australia, Perth dominates the Western Australian economy. Also, it houses four public and one private university churning out educated workforce. Thus, there are many driving factors for outsourcing firms - access to cheap skills, cultural match

between the vendor and client, English-speaking population, and proximity to worlds top markets and Government support. The Perth managed services sector is saturated with providers including ASG, CSC, Empired and Fujitsu, which benefit from lengthy government contracts, with still more coming in, like CSG. GS

Seoul, Korea

he Seoul Special City, capital and largest city of South Korea, ranks 10th on the chart of top ten global cities in the Global City Index of 2010. This city accounts for only 0.6percent of South Korea’s land, yet it generates 21percent of the country’s GDP. Equipped with highly technological infrastructure, this destination is headquarters for Samsung, LG, Hyundai, Kia and SK. Home to a large number of universities-Seoul National University, Korea University and Yonsei University- it

produces educated resources. However, English is an issue. Outsourcing centers face difficulties in finding manpower with language compatibilities. The future looks bright for Seoul as South Korea’s IT market is projected to strengthen in 2010. Also, South Korea plans to invest $341.1M by 2013 for developing local software industry. GS

Taipei, Taiwan

s the capital of Republic of China, Taipei is the nucleus of rapid economic development in the country. It is the largest city of Taiwan, that holds one of the world’s largest foreign exchange reserves for over $352B. The GDP per capita of Taipei is 48,400, the second highest in Asia. On the education front, 20 universities have campuses located in this city. These include National Chiao Tung University (NCTU) - Taiwan’s oldest

141 GS Destinations Compendium 2010

university,National Taiwan University (NTU), National Taiwan Normal University, Mandarin Training Center and more. Thus, it generates a talent pool of valuable workforce. This destination is performing well in manufacturing outsourcing space. Credit goes to its growing outsourcing orders for notebooks and PCs. In addition, Taiwan’s cellphone shipment is expected to rise 23.8percent to hit 26.26 million. GS By Smriti Sharma www.globalservicesmedia.com

Destinations Compendium 2011

One Stop Resource On Global Outsourcing Destinations

RELEASING NOVEMBER 2011 Inviting countries, cities, associations to take part in this initiative For more details, write to satishg@cybermedia.co.in