global sourcing: market trends & country analysis · pdf file• argentina •...
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Notes accompany this presentation. Please select Notes Page view.These materials can be reproduced only with official approval from Gartner. Such approvals may be requested via e-mail—[email protected].
Global Sourcing: Market Trends & Country Analysis
Frances Karamouzis([email protected])Vice President of Research Director
Gartner Inc.
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Management
Optimization Creation
Access
The Services Market Is Being Reshaped, Leading the Way to New Models
Business Outcome
Delivery
Value
IT Efficiency
SharedOne-to-Many
EnterpriseOne-to-One
AlternativeDeliveryModels
Global Delivery
Process Standardization
& Portfolio Rationalization
Overview of Parameters of Gartner Analysis of Global Sourcing
Supply Side
Academic
BPO, AO, Infrastructure - Optimized delivery structure: access to global resources, process maturity, global infrastructure, scale, support systems, security, business continuity/disaster recovery
Country Destinations
Industry/ Technical Trends
GDM Service Categories
IT Service provider analysis – for Global Sourcing we track close to 200+ providers. Traditional providers, offshore pureplay providers, niche vendors etc.
Actual buying patterns (for captives & vendors) of commercial and public sector entities. Business units leaders, CIO, Application Managers, IS leaders, Data Center managers
Country based analysis on viability, suitability and adoption levels of specific country options for Global Sourcing.
Industry-specific trends as well as disruptive technology trends that impact buyer or supplier issues in the market.
Buy Side
Primary focus is the ability of Academia to support the industry. Specifically to provide the right resources at the right time with the right skills at the right scale.
Top Global Sourcing Countries 2007Active
ParticipantsActive
ParticipantsLeader andChallengersLeader andChallengers
Potential Players
Potential Players
• Belarus• Bulgaria• Chile • Costa Rica• Dubai• Egypt• Estonia• Latvia• Lithuania• Mauritius• Morocco• New Zealand• Nicaragua• Northern Ireland• Singapore• Slovenia• Sri Lanka• Turkey• Uruguay• Vietnam
• Algeria *New*• Armenia• Bangladesh• Bahrain *New*• Columbia• Cuba• Dominican Rep• Ghana• Guatemala• Jamaica• Kenya *New*• Madagascar *New*• Malta *New*• Moldova *New*• Pakistan• Senegal• Saudi Arabia *New*• Thailand• Tunisia• Uganda *New*
• India• Argentina• Australia • Brazil• Canada• China• Czech Republic• Hungary• Ireland• Israel• Malaysia• Mexico• Philippines• Poland• Romania • Russia• Slovakia• South Africa• Spain• Ukraine
Note: Other than the leader, all countries are listed alphabetically within category= Change in category from 2006
Key Factors (Top 10)• Chindia trajectory• Domestic Demand side synergy• Positioning in “Innovation” Race• Achieving “truly” Global vendor
status• Service Category penetration (BPO,
Infrastructure and specialty areas)• Workforce Issues (attrition, middle
layer scarcity, diversity of workforce, localization issues, global resourcing)
• Infrastructure issues• Domain Competency• Relationships (Trust/Brand Factor);
Strategic Deals (Market Share That Matters)
• Depth; Breadth, Size
India Positioning in Future
Prediction: By 2012, India's dominant position as an offshore location will be significantly diluted by effective alternative destinations.By 2010, 30% of Fortune 500 enterprises will source from three or more countries (0.8 probability).
Charting the Course for India to 2012
Innovative & Creative
Purely Technical
Qualified Resources
Inadequate & Stagnant
(2007 Levels)World-ClassPhysical Infrastructure
India Today
Isolated ICT Islands Digital Chasm
ICT SuperpowerBrain Drain
Budget 2008Elections in 2009
Budget 2008
Elections in 2009
Elections in 2009
Defining MilestoneProgress on reforms
Budget 2008
Charting the Course for China to 2012China As Technology Innovator
China Today
High level of ICT-related patents and Chinese ownership of ICT Intellectual Property
Low level of ICT-related patents and Chinese ownership of ICT Intellectual Property
2007 Levels
The World's (Non-IT) Factory Isolation/Protectionism
China IncEntrepreneurial
Milestone –2008 Beijing Olympics
Post-2009 Chasscom created
ICT-related Patent Level in 2010
ICT-related Patent Level in 2010
Promotion of China-specific standards
Reduced government ownership of private assets in 2010
ICT-related Patent Level in 2010
2012
2012
2012
Government Involvement in EconomyMajor Reduction In Ownership Of
Private Assets
Pre-2009 Chasscom created
One China, Three Markets
$1,349Xinjiang
$937Xizang
$1,362Inner Mongolia
$719Gansu
$1,037Qinghai
$949 Ningxia
$4,465Beijing
$3,801Tianjin
$1,139Hainan
$2,374Guangdong
$2,495Jiangsu
$2,039Shandong
$2,885Zhejiang
$6,663Shanghai
$2,074Fujian
$1,963Liaoning
$1,556 Hebei
$935 Shaanxi
$1,158
$1,265Hubei$977Sichuan
$867Guangxi
$508 Guizhou
$811Yunnan
$1,098 Hunan
$1,102Shanxi
$1,141Henan
$1,396 Jiangxi
$936 Anhui
$1,317Jilin
$1,674Heilongjiang
Chongqing
Western RegionGDP per capita: $1,096
Population: 83.7 million
GDP per capita by Province*
* 2004 population and GDP data
Source: China Statistics Bureau, 2005
Inner RegionGDP per capita: $1,059
Population: 786 million
Coastal RegionGDP per capita: $2,457
Population: 424 million
• What you need:
• Different message
• Different distribution
• Different product
The Emerging Economy of Chindia
2003 2005 2010 2015
Bilateral India and China trade @$US9 billion
Bilateral India and China trade
@$US18.7 billion
Bilateral trade growing at 30% to 40%
China passed Japan as India trading partner
China will pass US as India's No. 1 trading
partner
Bilateral India and China trade @$US50 billion
China's PPP will pass
U.S.
India's PPP will pass Japan
Complementary Strengths of India and China
Services expertiseProcess/quality capabilityHR practicesHelp promote the "one China" viewGlobal client demandGovernment support "insights" for servicesIT industry bodies (NASSCOM / MAIT) insightsFinancial services and capital markets expertiseTraining Infrastructure
Large(r) market for ITInfrastructure for services companiesHardware expertise andcapabilityServices launching pad to Japan and South KoreaGlobal client demand Government support "insights" for hardware & semiconductorsBest practices in leveraging external investment & expertise to improve country's R&D capabilityBest practices in policy implementation
High growthFDI inflowGlobal IT presenceGlobal client interestLarge markets
What India can offer China
What China can offer India
Chindia Scenarios Framework
Fully Engaged
Nonexistent / Hostile
Geopolitical Alignment
Relationship Depth
Chindia Today
Ships Passing Rivals
ChindiaAll Talk & No Action
Discrete -competitive
Highly integrated & Collaborative
Scenarios for Chindia
Competition
Concurrence
Cooperative
Collaborative
Ships Passing Rivals
All Talk Chindia BlocLevel of Intimacy
Intensity of Geopolitical Alignment
Chindia TodayMilestone –Research Design & Development Collaboration
Milestone –Research Design & Development Collaboration
Milestone –Ideological Modernization
Milestone –Ideological Modernization
Milestone –Rural Development Collaboration
Milestone –Rural Development Collaboration
Milestone – India Elections 2009
Milestone – India Elections 2009
People PolicyPolitics Patents(Science)
Patterns (of Trade)
Policing(Military)
Milestone – 2008 Beijing Olympics
Expanding Service Categories via GDM
Global Footprint/Vendor LandscapeGlobal Footprint/
Vendor Landscape
M&A Activity Reshaping Global Sourcing OptionsM&A Activity Reshaping Global Sourcing Options
Workforce Issues Workforce Issues
Alternative DeliveryModels/AutomationAlternative DeliveryModels/Automation
Expanding Service Categories via GDMExpanding Service Categories via GDMThrough 2012, service
providers that fail to implement new business and service models will go out of business or will be acquired (0.8 probability).
Predictions with Highest Impact to Commercial Enterprise Buyers
Global Footprint/Vendor LandscapeGlobal Footprint/
Vendor Landscape
M&A Activity Reshaping Global Sourcing OptionsM&A Activity Reshaping Global Sourcing Options
Workforce Issues Workforce Issues
Alternative DeliveryModels/AutomationAlternative DeliveryModels/Automation
Expanding Service Categories via GDMExpanding Service Categories via GDM
By 2012, fewer than one-third of the Fortune 500 will have sourcing strategies that consider alternatives to labor-based delivery models to achieve their goals for growth, cost, speed and agility (0.7 probability).By 2011, 25% of new business software will be delivered as software as a service (0.7 probability).
Through 2010, workforce issues for service providers and captive centers will be the single largest operational inhibitors to capitalizing on market opportunities (0.8 probability).
Notes accompany this presentation. Please select Notes Page view.These materials can be reproduced only with official approval from Gartner. Such approvals may be requested via e-mail—[email protected].
Supply Side –IT Service Provider (Vendor) Landscape
Global Brands Hold Current Market Share but Collective Impact of Offshore Pureplays is Undeniable
Other Services Providers
46%
IBM - $40.6B2.4% AGR
EDS - $19.4B-0.5% AGR
Accenture - $15.7B13.1% AGR
Fujitsu1.2% AGR
CSC6.1% AGR
ADP10.6% AGR
Capgemini15% AGR
Lockheed Martin10% AGR NTT Data
3.1% AGR
SAIC20.2% AGR
• Avg annual growth rate of 6 leading I offshore pureplay> 35% AGR
• Avg annual growth rate of Top 10 global leaders 8.3% AGR
• Avg annual growth rate of Top 2 providers (IBM and EDS) <1% AGR2005 Worldwide Professional Services
$493 Billion — Five-Year CAGR: 7%Source: Gartner Dataquest IT Services Market Share Analysis, IT Professional Services Only
Targeted Lens of Vendor Landscape
1. IBM2. Accenture3. EDS4. CSC5. Deloitte6. Oracle7. CGI8. BearingPoint 9. SAP
10. TCS
1. IBM2. Accenture3. EDS4. CSC5. Deloitte6. Oracle7. CGI8. BearingPoint 9. SAP
10. TCS
Top 10 CSI Providers by Commercial Revenue Only
2005 NA Professional Services
$217 Billion: Five-Year CAGR – 7.8% North America Consulting & SI Services Market share (published Dec 2006)
Prediction: By 2010, the new Global Top 10 providers will include at least two India providers (based on commercial revenue).
M&A Activity Reshaping Global Sourcing Options
Global Footprint/Vendor LandscapeGlobal Footprint/
Vendor Landscape
M&A Activity Reshaping Global Sourcing OptionsM&A Activity Reshaping Global Sourcing Options
Workforce Issues Workforce Issues
Alternative DeliveryModels/AutomationAlternative DeliveryModels/Automation
Expanding Service Categories via GDMExpanding Service Categories via GDM
Offshore “pure plays” have executed more than 40 acquisitions between 2003 and 2006.Notable acquisitions by “traditional” providers include:• Capgemini – Kanbay• EDS – Mphasis• Fujistsu – Rapidgm• Oracle – iFlex• Keane – Caritor• CSC - Covansys
The relatively stable vendor landscape will change significantly, with new players, differentiators and casualties.
China: Emerging Buying and Selling Dynamics
Selective Penetration
Fast FollowerFirst-MoverFirst-MoverPragmatist Customer Base
Selective Penetration
Selective Penetration
Fast FollowerFirst-MoverGateway Customer Base
TBDFirst-MoverFast FollowerSelective Penetration
Product (R&D) Customer Base
Selective Penetration Over Time (limited focus on nearshore)
Selective Penetration
Considerable Challenges
First-MoverNearshoreCustomer Base
First-MoverFirst-MoverTBDFast FollowerDomestic Customer Base
Local, Native-Chinese, Product-Led ESPs
Local, Native-Chinese, Service-Led ESPs
India Pure-Plays
Large, Traditional, Global ESPs