Cultural challenges in outsourcing

Presentation 6.May 2010

Per Reinboth- Innovasjon Norge

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CHAOTIC DEMOCRACY

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FUNCTIONAL ANARCHY

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21ST CENTURY HEAD

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19TH CENTURY BODY

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HIGH TECHNOLOGY IN SOFT SKILLS

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Talent Pool for Knowledge Based Economy

India has one of the largest education systems in the world

• 311 Universities with over 15,600 colleges

• 3 million graduates every year

• 200,000 engineers every year

• 300,000 other technicians every year

• 150,000 R&D professionals every year

• 2,000 Graduates from Indian Institutes of Management and other top 10 Business Schools every year

• 84,000 Graduates from other Business Schools every year

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Indian IT Industry

• ITES exports grew from 17.7 bn US$ (2004-05) to US$ 23.4 bn(2005-06) – 32% growth

• As per NASSCOM review for 2005-06 revenues from US totalled 67%, Europe 25% and rest of the world 7.7%.

• Share of IT Software and Services Industry in GDP –

• Raised from 1.2% (1999-00) to 4.8% (2005-06)

• Majority companies adopted international standards: ISO, CMM,, etc.

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Global Comparison

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Major Players

India's Top Software companies

1 TCS

2 Infosys

3 Satyam

4 Wipro

5 IBM

India's Top BPO firms

1 Genpact

2 WNS

3 Wipo BPO

4 HCL BPO Services

5 ICICI One Source

6 IBM Daksh

7 Progeon

8 Aegis BPO Services

9 EXL Service Holdings

10 24/7 Customer

Top 4 companies have 80% market share

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India Based Service Provider Landscape

Category No. ofplayers

Share of India’s totalIT/BPO exportrevenues

Performance

Tier I Players 3-4 45% of IT Services4-5% of BPO

Revenues greater than USD 1 billion

Tier II IT Players 7-10 25% of IT Services4-5% of BPO

Revenues USD 100 million-USD 1 billion

Offshoreoperations ofGlobal IT majors

20-30 10-15% of IT Services10-15% of BPO

Revenues USD 10 million-USD 500million

Pure play BPOproviders

40-50 20% of BPO Revenues USD 10 million-USD 200million

Captive BPOunits

150 50% of BPO Revenues USD 25 million-USD 150million (top 10 units)

Emergingplayers

>3000 10-15% of IT Services5% of BPO

Revenues less than USD 100 million (IT)Revenues less than USD 10 million (BPO)

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Future Trends

• Increasing Labor costs

• Moving up the value chain

• Consolidation

• Manpower Shortage

• Outsourcing Backlash

• Engineering Services Outsourcing (ESO), Avionics and other opportunities

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Risk factors when you outsource to India

Time is not always an important element

Indians seldom express diagreement. Only done in an indirect manner. Avoid expressing direct disagreement.

Your priority can be changed according to the total business picture

Even if English is understood and spoken , the meaning can deviate

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Risk factors in outsourcing to India

Loyalty can be with the best paying party.

•Often solutions are 90% - good enough but not perfect.

•Your contact persom may change often

•Competence in your special field may be insufficient

•Direct communication difficult if you want to solve a problem

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Risk factors in outsourcing to India ctd.

• Secrecy agreements

• IPR could possibly be a problem

• Work processes different . India often has a hierachical system but ICT companies tend to change this to a flat or project oriented system.

• Communication. The remote working model

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Reduce risk and cost

Define the deliveries. (Terms of Reference)

Prepare yourself thorughly. Learn about the business culture and make quality control of your potential partners. You might be more dependant on your partner more than he will depend on you. Use Innovation Norway, delhi or other local adviser in the process.

Treat your potential partners with respect. This also goes for the potential key personell you will cooperate with.

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Reduce risk and costs ctd.

• Think long term and see the process in this perspective. You might have to offer some training to get the people on the right level of undrstanding.. Be prepared and plan for good people changing position and companies

• Travel extensively to get a first hand impression on both the the company and the environment it is working in. Invite personell to your company to give them a impression of your company how you work

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How can Norwegian companies use this advantage?

Work with the specialists! Get in touch with:

•Indian partner with a daughter/ company in Norway

•Norwegian partner with a daughter /majority ownership in India

•Go on your own and find a possible Indian partner directly.

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In general

Use common sense and show respect.

Accept that the culture is different and try to adopt.

Take your time to experience and understand the market and the culture before expecting big results. This investment will pay back

later.

Be patient