maximizing the returns of services globalization - neo … _airlines... · maximizing the returns...

© Atul Vashistha & neoIT 2005. All rights reserved

www.neoIT.com

5 December 2005

Maximizing the Returns of Services Globalization

Minimizing The Risk of Global Sourcing

Avinash VashisthaManaging PartnerneoIT

Author, The Offshore Nation

© 2005 Atul Vashistha & neoIT. All Rights Reserved.2

Agenda

Globalization PhenomenaThe Industry Today

Geographic Evolution

Globalization

Airlines and Related Landscape

Areas for Globalization

Savings Potential

The Next Wave

Globalization Lifecycle Management


The Industry Today

Globalization Matures

New Markets, New Suppliers

Risks Continue

Failures Publicized

Controversy

The TrendsThe Trends

MOVING BEYOND SLA’SMOVING BEYOND SLA’S

Strategic Impact

Value to Customer

Customer Quality Sensitivity

Customers Switching Costs

Barriers to EntryBarriers to Entry

Complexity EmergesComplexity Emerges Disappointments Surface

CulturalDifferences

ProcessOptimization and

Efficiency

Delivery Issues

ResourceUtilization

Disappointments Surface

Governance and Growth


Evolving Geographic Markets

Latin America is emerging as a viable nearshore destination for US companies. Mexico, Costa Rica, Brazil, Argentina and

Chile are improving infrastructure, supporting domestic IT & BPO industries

Asia Pacific continues to draw the bulk of demand from US companies with countries such as India and The Philippines exporting billions in IT & BPO services. The emergence of China as

a viable destination promises to stimulate increased flow

Central & Eastern Europe with its skilled labor pool has emerged as viable contender to Asian markets.

Russia leads the pack in IT and Engineering services and countries such as Poland, Hungary and Romania

are attracting captive operations of both multi-nationals as well as global service providers

Centres of Excellence EmergingCentres of Excellence Emerging

• India: IT & Back office• Philippines: Customer Support• China: Embedded software; Japan focus• Poland: European back office, German

language skills• Hungary: European back-office• Russia: Engineering services, Custom

development• Romania: Custom development, French

language skills• Mexico: Custom development, customer

support, Spanish language skills• Brazil: ERP support & maintenance• Costa Rica: Shared services• Canada: IT & Back office• Sri Lanka: Back office

• India: IT & Back office• Philippines: Customer Support• China: Embedded software; Japan focus• Poland: European back office, German

language skills• Hungary: European back-office• Russia: Engineering services, Custom

development• Romania: Custom development, French

language skills• Mexico: Custom development, customer

support, Spanish language skills• Brazil: ERP support & maintenance• Costa Rica: Shared services• Canada: IT & Back office• Sri Lanka: Back office

Large enterprises key thrust in 2006 will be around de-risking their globalized functions –

Operations spanning 3 different time zones

Large enterprises key thrust in 2006 will be around de-risking their globalized functions –

Operations spanning 3 different time zones


Globalization – neoIT’s Vision

HQ

F&A

HR

R&DS&M

Customer Support

IT

Captive

JV Third Party

Third PartyThird Party

Third Party

HQ

F&A

HR

R&DS&M

Customer Support

IT

Russia / India

India / Israel India / Eastern Europe

India

Present Organization Future Globalized Organization

Key functions of organizations will concentrate at different Centers of Excellence but would work seamlessly

Key functions of organizations will concentrate at different Centers of Excellence but would work seamlessly


Benefits Realized, Risks Remain

Risk ThermometerKey Benefits Realized

Inte

rnal

Ris

k

Infrastructure RiskLabor Pool RiskManagement Risk

Resource RiskOperations RiskBacklash

Exte

rnal

Ris

k

Cost Savings Financial RiskLegal RiskControl RiskLegalGovt. Support

Cultural RiskGeo-political RiskSocial RiskExit Risk

Improved Quality

Enhanced Productivity

Faster Time To Market

Access to Global Talent Pool

Future-ized Business Model


Agenda

Globalization Phenomena



Savings Potential

The Next Wave



Airlines & Related Landscape - ITO

ApplicationDevelopment &

Maintenance

Enterprise Integration

MainframeClient Server

Legacy Systems

BI & Data Warehousing

Services Being OfferedServices Being Offered

ERP, CRM

Global SuppliersGlobal SuppliersCompaniesCompanies

Web Services

IT Infrastructure


Airlines & Related Landscape - BPO

Customer Care

Loyalty Programs

Baggage Claims

Finance & Accounting

Services Being OfferedServices Being Offered

Rules Coding

Global SuppliersGlobal SuppliersCompaniesCompanies

Quality Checks

Dupes Handling


Other Airlines Those Who Have Globalized Their Services


Agenda



Areas for GlobalizationService Areas

Services Globalized

Savings Potential

The Next Wave



Areas of Services

Marketing ManagementLoyalty programsData MiningMarket Research Analytics

Finance & AccountsRevenue accountingRevenue and yield managementRefundsAccounts payable

Customer RelationsGeneral Sales callsRejection & queue handlingBaggage handling Ticketing, reservations and refundFare audits

AdministrationCrew planningSeatingCargo managementEngineeringIT Security support

HRBenefits administrationPayroll

Product EvaluationFacilities ManagementTPF Servicese-BusinessBusiness ConsultingBack-Office and Call-Center Operations

ERP, SCM, CRM SolutionsData WarehousingApplication Reengineering, Migration, and ConversionApplication DevelopmentApplication Maintenance and SupportGlobal IT Implementation

IT Strategy FormulationIT Architecture ConsultingIT Process Review and Planning

igence SolutionsCapacity PlanningEnterprise Application Integration (EAI)

OthersDistribution and Reservation SystemsRevenue and Costing Systems

AirportsAirline OperationsAirport ManagementGround HandlingTerminal Operations and WarehousingScheduling and ForecastingInventory Control Systems

AirlinesPassenger Reservation SystemsCargo Reservation SystemsDeparture Control SystemsFlight OperationsEngineering and MaintenanceEnterprise ApplicationsSales and MarketingFinance and Accounting

Bus

ines

s A

reas

Bus

ines

s A

reas

Business Intell

IT S

ervi

ces

IT S

ervi

ces

BPOBPO


Services Globalized

Source: SITA - Airline IT Trends Survey 2004


Agenda




Potential SavingsCase Studies

The Next Wave



Savings – Case Studies

Total savings in 2003 - $26 million

Fully loaded cost of Indian call center executive is $6000 while it’s $46,000 in US.

Year of Globalization – 2003Functions – Customer care (call center), 1000 seatsGeneral Sales CallsFrequent Flier service supportReject and queue handlingIncoming baggage service calls

Britannia has saved $1.2 million on its IT in the first 12 months of operation.

Year of Globalization – 2000Functions - Full support of the current BAL applications including Finance, HR, Engineering, Flight scheduling, Allocation and other business related software, Desktop applications, MIS systems, Intranet, Database administration.

Total savings - $23 million per year (40-60% reduction in cost). The center in Mumbai began to produce an additional revenue stream for BA by providing revenue accounting to as many as nine other airlines.

Year of Globalization – 1996Model – captive center in Mumbai (WNS)Functions – Customer relations and accounting

Services Being OfferedDetailsCompanies


Agenda



Potential Areas for Globalization

Savings Potential

The Next Wave

Client Trends

Supplier Trends

Future Trends



Client Trends - Priority Investments



Client Trends - Emerging Areas

RFID: Adoption of RFID for baggage handling, inventory management andasset trackingBar Codes: Implementation of bar code standards to replace expensive magnetic strip boarding passese – Ticketing: Greater adoption of e-Ticketing. Interline e-ticketing to gain momentum. IATA (International Air Transport Association) has set a cut-off date of 2007 for the end to paper ticketse – Commerce: A majority of airlines are also now undertaking B2B e-commerce transactions online - notably relating to spare parts purchases and engine/airframe and maintenance servicesCRM & Web- System Application: Common use kiosks will be a norm in near future. By using this common use kiosks passengers can check-in quickly irrespective of the carrier they are traveling with. (Most of them are dedicated to a particular airline now)Infrastructure Management: Network Management, Desktop Management, Database ManagementBack-Office Work: Procurement and Logistics, Supply Chain, Analytics


Client Trends – Key Obstacles



Future Trends - Global Competition

CHINAIT Services Exports (2004): $700MBPO Exports (2004): $300M

INDIAIT Services Exports (2004): $12.2BBPO Exports (2004): $5.2B

POLANDIT Services Exports (2004): $110 MBPO Services Exports (2004): $70M

CANADAIT Services Exports (2004): $ 8.2BBPO Exports (2004): $5.5B

MEXICOIT Services Exports (2004): $100MBPO Exports (2004): $200M

RUSSIAIT Services Exports (2004): $550MBPO Exports (2004): $25M

PHILIPPINESIT Services Exports (2004): $330MBPO Exports (2004): $800M

HUNGARYIT Services Exports (2004): $50MBPO Exports (2004): $25M

CZECH REPUBLICIT Services Exports (2004): $60 MBPO Services Exports (2004): $40M


Agenda


Potential Areas for Globalization

Savings Potential

Market Trends

Globalization Lifecycle ManagementDefining the Business Case

Offshore Lifecycle & Defining the Roadmap


Defining the Business Case

Company CultureAffinity for outsourcing & globalization including

past experiences

QualityNeed for consistent quality

and service levels

RiskManage stability, security, privacy,

volatility, etc.

ControlOwnership

preference as influenced by risk &

culture factors

Cost SavingsNeed for reducing cost or

fundamentally altering business model

CorporateStrategy

Business plan, goals and results expected-acquisition,

cost structure, growth, flexibility, risk aversion, profitability, cash etc.

SocialResponsibilityIssues related to job loss, globalization, employee upheaval,

etc.

Industry ActivityOffshore actions of

competitors and industry

players

Business Case

DevelopmentFramework

Business Case

DevelopmentFramework

Source: neoIT


Defining the Roadmap

Asking the right questions…

What: prioritizing the processes

Where: understanding and choosing a global location (onshore, offshore, nearshore)

How: deciding on an ownership model

When: building a migration plan

GlobalizationStrategy


Contact Information

Avinash VashisthaManaging Partner, neoITCo-Author, The Offshore [email protected]

+1- 925.918.0102 (US Cell)+91- 984.503.0405 (India Cell)

neoIT Global Headquarters2603 Camino Ramon, 2nd FloorSan Ramon, CA 94583 USA

neoIT Asia Headquarters210, Bellary Road Upper Palace OrchardsBangalore - 560 080 India

neoIT Philippines8/F Pacific Star BuildingSenator Gil Puyat Ave. cor Makati Ave.Makati City, Metro Manila, 1200, Philippines

maximizing the returns of services globalization - neo … _airlines... · maximizing the returns...

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