IT Services IT Services Industries in Industries in

Developing NationsDeveloping Nations

Andrea NelsonJessica Cassano

Developing Developing CountriesCountries

Countries that are generally Countries that are generally characterized by low levels of characterized by low levels of industrialization, personal industrialization, personal incomes, educational incomes, educational attainments and health attainments and health standards standards

Source: home.ica.net/~drw/glossc-d.htm

IT Service IndustriesIT Service Industries

Although India and China are Although India and China are leaders in Offshoring for leaders in Offshoring for developing countries, other developing countries, other countries are setting up the countries are setting up the systems and infrastructure to systems and infrastructure to compete in this global compete in this global marketplace. marketplace.

Global Outsourcing Report: Global Outsourcing Report: Opportunity, Costs and Opportunity, Costs and

RisksRisks Costs (30%)Costs (30%) Risks (54%)Risks (54%)

– Geopolitical risk (10%)Geopolitical risk (10%)– Human capital risk (10%)Human capital risk (10%)– IT competency risk (10%)IT competency risk (10%)– Economic risk (6%)Economic risk (6%)– Legal risk (6%)Legal risk (6%)– Cultural risk (6%)Cultural risk (6%)– IT infrastructure (6%)IT infrastructure (6%)

Market Opportunity Rating (16%)Market Opportunity Rating (16%)

HofstedeHofstede StudiesStudies

Power Distance Power Distance Index (PDI)Index (PDI)

Individualism (IDV)Individualism (IDV) Masculinity (MAS)Masculinity (MAS) Uncertainty Uncertainty

Avoidance Index Avoidance Index (UAI)(UAI)

Long-Term Long-Term Orientation (LTO)Orientation (LTO)

Source: Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

CountriesCountriesPhilippinesPhilippinesThailandThailand

PhilippinesPhilippines CultureCulture

– Inequalities of power and wealthInequalities of power and wealth– Collective society, extended families, group Collective society, extended families, group

responsibilitiesresponsibilities– Male dominance in power structureMale dominance in power structure– Risk taking society, accepts changeRisk taking society, accepts change– Traditions are not impediments to changeTraditions are not impediments to change

WesternizedWesternized– English Speaking, neutral accentEnglish Speaking, neutral accent– Business laws and accounting practices are Business laws and accounting practices are

similar to U.S. similar to U.S.

Source: www.outsourcing.ph

Source: Philippines Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

Hofstede Studies Hofstede Studies ( Philippines)( Philippines)

Source: Philippines Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

ThailandThailand CultureCulture

– High levels of inequality of power and wealth High levels of inequality of power and wealth Not forced, cultural heritageNot forced, cultural heritage

Strict rules, laws, polices, and regulationsStrict rules, laws, polices, and regulations– Try to avoid uncertaintyTry to avoid uncertainty

Low individualismLow individualism– Loyalty to family is key, over-rides rules, lawsLoyalty to family is key, over-rides rules, laws

Less AssertivenessLess Assertiveness– Less competitivenessLess competitiveness

95% Buddhist values (LTO)95% Buddhist values (LTO)– Being mindful & aware of thoughts and actions, Being mindful & aware of thoughts and actions,

developing wisdom and understanding developing wisdom and understanding

Source: Thailand Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

Hofstede Studies (Thailand)Hofstede Studies (Thailand)

Source: Thailand Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

PhilippinesPhilippines Location:Location:

– Southeastern Asia, Southeastern Asia, between Philippine between Philippine Sea and the south Sea and the south China Sea , east of China Sea , east of VietnamVietnam

Population:Population:– 81,159,64481,159,644

Educational System:Educational System:– Similar to USASimilar to USA– Good system - more Good system - more

students enrolled in students enrolled in University than University than EuropeEurope

Major Cities:Major Cities:– ManilaManila

Source: www.computerworld.com (9/15/03); www.offshoreitoutsourcing.com

ThailandThailand

Location:Location: – Southeastern Asia, Southeastern Asia,

southeast of Burmasoutheast of Burma Population:Population:

– 66,444,37166,444,371 Educational System: Educational System:

– SchoolNetSchoolNet– Only 5,000 IT specialist a Only 5,000 IT specialist a

yearyear Major Cities:Major Cities:

– BangkokBangkok

Source: www.odci.gov ; CIA – The World Factbook; Digitizing a nation; Far Eastern Economic Review; Mar 8, 2001; 164; 9

PhilippinesPhilippines Religion:Religion:

– 83% Roman Catholic83% Roman Catholic– 9% Protestant9% Protestant– 5% Muslim5% Muslim– 3% Buddhist and 3% Buddhist and

otherother Language:Language:

– Pilipino (official Pilipino (official based on Tagalog)based on Tagalog)

– English (official)English (official)

Source: www.odci.gov ; CIA – The World Factbook

ThailandThailand ReligionReligion

– 94.6% Buddhist94.6% Buddhist– 4.6% Muslim4.6% Muslim– 0.7% Christian0.7% Christian– .1% other.1% other

LanguageLanguage– ThaiThai– Ethnic and regional Ethnic and regional

dialectsdialects– English (secondary English (secondary

language of elite)language of elite)

Source: www.odci.gov ; CIA – The World Factbook

PhilippinesPhilippinesLiteracy Rate:Literacy Rate:

– 94.6%94.6% Age 15 and over can Age 15 and over can

read and writeread and write

Life Expectancy: Life Expectancy: – 64.65 males64.65 males– 70.46 females70.46 females

Source: www.odci.gov ; CIA – The World Factbook

ThailandThailand Literacy Rate:Literacy Rate:

– 92.9% 92.9% age 15 and over can age 15 and over can

read and writeread and write

Life ExpectancyLife Expectancy– 69.65 males69.65 males– 74.37 females74.37 females

Source: www.odci.gov ; CIA – The World Factbook

PhilippinesPhilippines GDP per Capita:GDP per Capita:

– $390.7 billion$390.7 billion– GDP growth: 4.5%GDP growth: 4.5%

Government:Government:– 3 branches(Republic)3 branches(Republic)

PresidentPresident Congress/SenateCongress/Senate JudicialJudicial

Availability of Skilled Availability of Skilled Labor:Labor:– 380,000 college 380,000 college

graduatesgraduates– 15,000 IT graduates15,000 IT graduates

Source: www.computerworld.com (9/15/03); Global Ventures, Inc. – Global outsourcing report pg 36

ThailandThailand GDP:GDP:

– $524.8 billion$524.8 billion GDP per CapitaGDP per Capita: :

– Purchasing power parity Purchasing power parity - $8,100 - $8,100

GovernmentGovernment::– Constitutional monarchyConstitutional monarchy

Availability of Availability of Skilled Labor:Skilled Labor:– Nearly ¼ of firms are not Nearly ¼ of firms are not

operating at full capacity operating at full capacity due to skill shortagedue to skill shortage

Source: www.odci.gov ; CIA – The World Factbook

PhilippinesPhilippines

Government Support for IT ServicesGovernment Support for IT Services

– Tax holidayTax holiday– Business parkBusiness park– DeregulationDeregulation

Source: Global outsourcing report

ThailandThailand

Government Support for IT ServicesGovernment Support for IT Services

– Business ParkBusiness Park– DeregulationDeregulation– SchoolNetSchoolNet

Source: www.odci.gov ; CIA – The World Factbook

Piracy RatesPiracy Rates

Philippines:Philippines:– 71% software piracy71% software piracy– $69 Million in losses$69 Million in losses

Thailand:Thailand:– 79% software piracy79% software piracy– $183 Million in losses $183 Million in losses

Source: www.bsa.org/globalstudy

Philippines Technology Philippines Technology InfrastructureInfrastructure

3.3 Million land-line telephones3.3 Million land-line telephones 3.5 Million cellular telephones3.5 Million cellular telephones 93 Internet services providers93 Internet services providers

Source: Global Outsourcing Report

Thailand Technology Thailand Technology InfrastructureInfrastructure

6.6 Million land-line telephones6.6 Million land-line telephones 26.5 Million cellular telephones26.5 Million cellular telephones 15 Internet services providers15 Internet services providers 6.9 Million Internet users6.9 Million Internet users

Source: Going Global Ventures Inc., Global Outsourcing Report. pg 36

Size of IT services Size of IT services market (Philippines)market (Philippines)

2005 market growth 29%2005 market growth 29% 2.2% of GDP in 20052.2% of GDP in 2005 $1 Billion$1 Billion 30 Companies30 Companies 10,000 software programmers10,000 software programmers

Source: Going Global Ventures Inc., Global Outsourcing Report. pg 36

Size of IT services Size of IT services market (Thailand)market (Thailand)

Increased from $817 million in 1999 Increased from $817 million in 1999 to $1.5 billion in 2002to $1.5 billion in 2002

5.6% of population are Internet users 5.6% of population are Internet users (2001)(2001)

16% in Bangkok16% in Bangkok

Source: EIU ViewsWire; Thailand industry: Internet use is held back by rural poverty; Apr 28, 2003

3 Major Software/Service 3 Major Software/Service Providers (Philippines)Providers (Philippines)

SVISVI SPISPI AJK ConsultingAJK Consulting

Software Venture Software Venture InternationalInternational

Largest outsourcing company in RPLargest outsourcing company in RP– 2500 Employees2500 Employees– $40 Million in Annual revenues$40 Million in Annual revenues

Low costLow cost High qualityHigh quality IFC investmentIFC investment

Source: IFC Invest in largest Software Outsourcing House in the Philippines; Jul 2003

Outsourcing in Outsourcing in PhilippinesPhilippines

Overview: Strong educational system, low risk, Overview: Strong educational system, low risk, language compatibilitylanguage compatibility

Ondeo Nalco CompanyOndeo Nalco Company– Naperville, ILNaperville, IL

Reasons for choosing the PhilippinesReasons for choosing the Philippines– English-speakingEnglish-speaking– Low costLow cost– Joint developmentJoint development– Disaster recovery plansDisaster recovery plans

Source: www.computerworld.com 9/03

Assessing Risks to Ondeo Assessing Risks to Ondeo Nalco Nalco

Time differenceTime difference System securitySystem security Militant groupsMilitant groups

Source: www.computerworld.com

Internet penetrationInternet penetration

PhilippinesPhilippines– 4%4%

ThailandThailand– 2%2%

Global averageGlobal average– 5%5%

Source: EIU ViewsWire. New York Aug 1,2003; Digitizing a Nation; Far Eastern Economic Review; Mar 2001; 164, 9.

Information and Technology Information and Technology and E-commerce Council and E-commerce Council

(Philippines)(Philippines)

Failure of Congress to ratify budget Failure of Congress to ratify budget for e-commerce initiativesfor e-commerce initiatives

P1 Billion for ICT initiatives – rejectedP1 Billion for ICT initiatives – rejected Current President Arroyo orders Current President Arroyo orders

E-government fund E-government fund

Source: Computerworld Philippines. Metro Manila, Feb 16,2004 pg 1

E-commerceE-commerce

PhilippinesPhilippines~$2 to $3 Million (2000)~$2 to $3 Million (2000)

ThailandThailand~$31 Million (1999)~$31 Million (1999)

Source: EIU ViewsWire. New York Aug 1,2003.

Government RegulationGovernment Regulation

CAT (Communication Authority of CAT (Communication Authority of Thailand)Thailand)– Government regulation of Internet and telephone Government regulation of Internet and telephone

connectionsconnections– Monopolistic – high cost, poor quality, and Monopolistic – high cost, poor quality, and

generally unresponsive to consumers.generally unresponsive to consumers.

TOT (Telephone Organization of TOT (Telephone Organization of Thailand)Thailand)– 2002 – register as private companies2002 – register as private companies– 50% of each sold to the public50% of each sold to the public

Source: E-commerce emasculated; Far Eastern Economic Review; Sept. 21, 2000 pg26; www.business-in-asia.com/telecom_software_electronic.html

National Electronic and Computer National Electronic and Computer Technology Center( NECTC)Technology Center( NECTC)– Government agency responsible for development of IT Government agency responsible for development of IT

in Thailandin Thailand– Initiated SchoolNet (Internet services)Initiated SchoolNet (Internet services)

Electronic Commerce Resource CenterElectronic Commerce Resource Center– Set up by Ministry of Science, Technology and Set up by Ministry of Science, Technology and

EnvironmentEnvironment– Helps with awareness, training programsHelps with awareness, training programs

www.thaiecommerce.netwww.thaiecommerce.net– Government website to allow companies to sell online Government website to allow companies to sell online

at no costat no cost

E-commerce Resources E-commerce Resources (Thailand)(Thailand)

Source: Journal of Global Information Technology Management; 2003; 6,3, pg 72; Slow Progress; Asian Business. Nov 2000 pg 19

National Electronic and National Electronic and Computer Technology Computer Technology

Center (NECTC)Center (NECTC)

www.thaiecommerce.netwww.thaiecommerce.net

Software Park ThailandSoftware Park Thailand

Est. 1997Est. 1997 In 2003:In 2003:

– 50 Companies50 Companies– 17 Companies 17 Companies

with with International International LinksLinks

– $10 Million/yr in $10 Million/yr in incomeincome

Source: www.swpark.com

Major Software/Service Major Software/Service ProvidersProviders

– Companies include:Companies include: IBM (Thailand)IBM (Thailand) Oracle (Thailand)Oracle (Thailand) Intel (Thailand)Intel (Thailand) Sun (Thailand)Sun (Thailand) Microsoft (Thailand)Microsoft (Thailand)

Source: www.swpark.com

Risks of Doing BusinessRisks of Doing Business

PhilippinesPhilippines– Complex DisputesComplex Disputes– TerrorismTerrorism– Illicit DrugsIllicit Drugs– Typhoon BeltTyphoon Belt– TsunamisTsunamis– RebellionsRebellions– Declining MarketsDeclining Markets– ERAP FactorERAP Factor

ThailandThailand– Complex DisputesComplex Disputes– TerrorismTerrorism– Illicit DrugsIllicit Drugs– Typhoon BeltTyphoon Belt– TsunamisTsunamis– RebellionsRebellions– InflationInflation– Legal SystemLegal System

Source: Research Technology Management; Jul/Aug 1994; 37, 4; Forbes.com, DiCarlo, 5/22/03; Knight Ridder Tribune Business New. Wash.: Apr 26, 2005, pg 1

Benefits of Doing Benefits of Doing BusinessBusiness

PhilippinesPhilippines– Low costLow cost– English-speaking English-speaking – Tax BreaksTax Breaks– Requires very little Requires very little

capital for start-upcapital for start-up– Niche SpecialtiesNiche Specialties– Backup SiteBackup Site– Western InfluencedWestern Influenced

ThailandThailand– Low costLow cost– Requires very little Requires very little

capital for start-upcapital for start-up– Niche SpecialtiesNiche Specialties– Backup SiteBackup Site– Security risk is Security risk is

historically low historically low – Western InfluencedWestern Influenced

Source: Research Technology Management; Jul/Aug 1994; 37, 4; Forbes.com, DiCarlo, 5/22/03;

Conclusions for IT Conclusions for IT ManagerManager

Evaluate Technology InfrastructureEvaluate Technology Infrastructure Research Local IT Service ProvidersResearch Local IT Service Providers Government Initiatives/Tax BreaksGovernment Initiatives/Tax Breaks Assess Benefits vs. RisksAssess Benefits vs. Risks Partner with Firm for Niche ProductsPartner with Firm for Niche Products Consider Backup OptionsConsider Backup Options