The Indian IT-BPO Industry and Latin America

April 2010

Ameet Nivsarkar, Vice President

Key topics

•Indian IT-BPO Industry –Trends and Perform

ance

•Looking ahead

•The Latin America experience

2

In the face of a global economic slowdown,

the IT-BPO exports industry displayed resilience to grow by

5.5 per cent in FY2010

Indian IT-BPO sector-Export * revenues

(USD billion) 9.6

10.0

47.1

49.7

5.5%

•India continues to take centre stage in

–51% of total sourcing m

arket

•Industry accounts for 25% of India’s

exports; 10.5% of services revenues

•Over 900 captives in India

25.8

27.3

11.7

12.4

FY09

FY10E

IT Services

BPO

S/W

prod and Engg

Source: NASSCOM Strategic Review 2010

* Excluding Hardware

•Over 900 captives in India

accounting for USD 10.6 billion; 650+

are Engineering design

•Engineering design services and

Product Development clocking USD

10 billion

•Transform

ation, new business

models, driving organization wide

efficiencies

Domestic Market is at an inflection point-

healthy growth of 12% in FY10

89

108

123

131

590

662

12%

Indian IT-BPO Domestic revenues* (INR billion) •6

0+ Large transform

ational deals in

telecom, Retail, BFSI, e-governance

•BPO continues to be the fastest

growing segment at 22%

•IT services to grow by 12%

378

423

89

FY09

FY10E

IT Services

BPO

S/W

products

Source: NASSCOM Strategic Review 2010

* Excluding Hardware

•IT services to grow by 12%

•Government IT spend estimated at INR

150 billion in 2009

•USD 9 billion business opportunity in e-

Governance over next 3 years

The industry continues to be an export led sector,

with foreign providers accounting for over 30 percent

of the total market

16.2

22.0

21.9

23.0

USD billion

47.9

62.9

79.4

73.1

Sourcing model 14

14

72

IT

Services

BPO

Foreign Captives

Foreign Providers

Indian Providers

Source: NASSCOM

31.7

40.9

47.5

50.1

16.2

FY2007

FY2008

FY2009

FY2010E

Domestic

Exports

30

20

50

55

7

37

EnggDesign

&Prod Devpt

BPO

The Industry added 90,000 jobs in FY10

•Industry directly employs nearly 2.3

mnprofessionals

•Greater efficiencies at play –

4%

employee growth for 5.5% revenue

growth in exports and 12% in

domestic

768

500

525

2,200

2,290

Direct Employment (‘000), FY09-FY10

4%

domestic

•70%+ workforce within 18-30 yrs

•Rapidly expanding into Tier 2 / Tier

3 cities –

currently operating out of

45+ locations

•58% employee workforce

originating from tier 2/3 cities

Source: NASSCOM Strategic Review 2010

958

993

738

768

FY09

FY10E

IT Services exports

BPO exports

IT-BPO Domestic

North America continues to be dominant market;

the BFSI segment registered significant uptick in demand

Europe

(exclud

ing UK)

12%

APAC

7%

RoW

2%

IT-BPO exports by geography, FY2010E

IT-BPO EXPORTS-GEOGRAPHY & VERTICAL

Other

2%

MPE

2%

Const &

Utilities

3%

T&T

3% Healthc

are4%

Retail

9%

BFSI

41%

IT-BPO exports by Vertical, FY2010E

7Source: NASSCOM

US

61%

UK

18%

100% = USD 49.7billion

Manufa

cturing

16%

Hi-

tech/Tel

ecom

20%

100% = USD 49.7bn

•While emerging market grew, North America

continues to be dominant and witnessed increased

growth in FY 2010

•Global banking M&A’shave led to significant uptick

in demand of IT-BPO services from the BFSI

segment this year

Key topics

•Indian IT-BPO Industry –Trends and Perform

ance

•Looking ahead

•The Latin America experience

8

INDIA VALUE PROPOSITION

India continues to hold on to its position as the

leading provider of talent at lowest cost

100

105

121

137

163

189

211

232

316

ASIAN COMPETITION-1.3X

EASTERN EUROPE

COMPETITION-2X

S. AMERICA COMP-3X

Operating costs per FTE in major offshoring

destinations relative to India, India=100

379

400

454

514

571

2557

2600

2789

2940

3114

FY06

FY07

FY08

FY09

FY10

Technical

Non Technical

3243

3454

3685

3000

2936

India Talent Outturn, FY06-10E, 000’

Post

Graduate

s, 6.90%

3 yr Engg

diploma/

MCA, 4.2

0%4 yr

Engg, 9.3

0%

Other

Graduate

s, 9.60%

Science

Graduate

s, 13.70

%

Commerc

e

Graduate

s, 15.60

%

Arts, 40.7

0%

India Talent Outturn Profile, FY10E

India

Philippines

Malaysia

China

Mexico

Romania

Hungary

Czech

Brazil

Source: NASSCOM, AICTE

INDIA VALUE PROPOSITION

Government and private enterprises working

in tandem to create a robust infrastructure ecosystem

4,644

5,806

7,543

8,455

3,544

4,379

6,321

7,214

Growth in number of STPI units, 2003-09

43 Tier 2/3 cities emerging; reducing pressure on

leading locations; on an average, 28% costs less than

leader cities

FY2003

FY2005

FY2007

FY2009

Operating Units

Exporting Units

303

345

532

FY2008

FY2009

FY2010

Growth in number of IT SEZs, 2008-10

Source: STPI

Going forward, rebound expected in W

orldwide

IT-BPO spend

Worldwide IT spending Growth (%)

5.1%

3.3%

3.1%

5.5%

5.6%

12.5%

7.3%

5.9%

7.0%

7.4%

Worldwide BPO spending Growth (%)

OUTLOOK-GLOBAL

Source: IDC

-3.3%

2007

2008

2009

2010

2011

2012

De

ce

mb

er 2

00

9 F

ore

ca

st

2.4%

2007

2008

2009

2010

2011

2012

De

ce

mb

er 2

00

9 F

ore

ca

st

IT indices, contracted in 2009, showing signs of stabilization, and even some

modest, early signs of recovery in latter part of 2009; Positive 2010 forecasts

Taking a longer term

view, global linkages

and irreversible demographic/economic

shifts at play

Macroeconomic and demographic trends

1Shifting centers of economic activity–GDP of Asia and Europe will converge

Working age population shrinking in key developed countries (e.g., Japan, Italy, US)

Social and environmental trends

2

Increased Internet and m

obile connectivity transform

ing the way people live and interact

Demand-supply gap in key natural resources creating need for resource efficient

solutions

Business and technology trends

Global economic crisis leading to m

ajor shift in industry structures and regulatory control

Corporate boundaries being redefined

Technology radically transform

ing the way traditional corporations and governments

function

3 4 5 6 7

Comparison of population shifts

70

80

90

100

Asia (except Japan)

Latin America

Japan

4.2

3.4

6.3

1.4

Middle East and Africa

Per cent

Est. GDP CAGR

Per cent, 1990-2025

Regional share of global GDP

207

222

US

40

41

UK

9 1213

38

54

Retiree (60+ years)

Working age (15-60 years)

Actual

workforce

requirement

in the US to

achieve 2.5%

Going forward, economic and demographic shifts

may lead to acute talent shortage in the western economies

0

10

20

30

40

50

60

1990

1995

2000

2005

2010

2015

2020

2025

Europe

North America

Japan

2.1

3.0

1.4

55

53

Germ

any

83

75

Japan

750

920In

dia

39

37

Italy

12

60

92

27

35

16 18

14

achieve 2.5%

GDP growth

year-on-year -

234 mnin

2020

2008

2020

Significant shift

Public sector /government-influenced entities will become a priority customer

base, to provide for ageing populations in developed economies

India’s technology and business services export s and domestic market –2020 Projections

EXPORTS, USD billion

The global sourcing industry in India

is likely to reach USD 175 billion, while the domestic outsourcing

industry is expected to reach USD 50 billion in revenues by 2020

50

DOMESTIC, USD billion

Growth m

ultiple

CAGR

40

India global sourcing

market 2008

175

India global sourcing

market 2020

4.2x

12.6%

India domestic

outsourcing market

2008

India domestic

outsourcing market

2020

12

50

4.4x

13%

Key topics

•Indian IT-BPO Industry –Trends and Perform

ance

•Looking ahead

•The Latin America experience

15

Latin America

•The global crisis and the consequent local resource and credit crunch

have made Latin American importers to look more towards less

expensive sources such as India

•The crisis has opened a new window of opportunity for Indian

companies to create long lasting partnerships

•There is a perceptible change in the mindset of the Latin Americans

towards India.

towards India.

•The economies of the region have withstood the shock of global crisis

with only moderate adverse impact because of their stronger

macroeconomic fundamentals and resilience.

•The Latin American market has undergone a paradigm shift coming

out of its boom and bust cycles and volatility. It is now set on a

sustainable course of stability and growth.

•It is a large market of 20 countries, 550 million people, 4.4 trillion

dollars of GDP, 8000 dollars per capita income and trade of 1.7 trillion

dollars.

16

India and LAC -partnership

•More then 10 leading firms (IT) already have a presence in LAC or are planning to start

operations in the coming year.

•Indian IT companies are employing over 10000 employees in the LAC region.

•Leveraging local market as well as 12/12 business model

Indian presence in LAC

•Its proximity with North America, India’s major market.

•Very good near shore option

How can Indian IT work with LAC?

•Very good near shore option

•Abundance of trainable human resources

•Cost structure that is comparable to India

•Multi lingual capabilities

•Spanish

•Portuguese

•Decent infrastructure

•GDC for serving European markets

•Good markets for some competitive home grown software products (Infy–Finnacle, i-Flex)

•Customize our end products & services as per needs of LAC customers

•Invest in increasing local operations

•Create local ‘brand’ that customers can associate with

•Emphasis on having as many locals fill in very m

any positions

Areas of partnership for Indian and firms with LAC companies

17

Some concerns that need to be

addressed

•Business visa & W

ork perm

its –

have cumbersome & time consuming process. In some cases it

takes 2-3 m

onths of processing time

•Rigid labourlaws that lead to increase on cost of employee

•Resourcing –

finding right people in new territory

•Training & Development costs

HR issues

•Simplifying Development Center (DC) set up.

Infrastructure issues

18

•Simplifying Development Center (DC) set up.

•Coverage across continent

•Expensive

•Time consuming

•Frequent power and water supply issues

Connectivity

•Withholding taxes

•Totalisationtreaty between nations

Taxation issues

Cultural issues

Thank You