Offshoring Gopal KuchibhotlaFuture Look: Impact of Demographics & Migration on Offshoring and Vice Versa1Offshoring Key DriversGlobalization of services has become possible due to plunging telecom costs, near complete digitization of back office functions and rapidly rising share of substantially open economies encompassing nearly 80% of the worlds population.According to a European Central Bank estimate, developing economic markets will be the main source of global growth and will account for a majority of the worlds middle income population by 2007.G7 Corporations are attuned to these market factors and want to have a presence in these emerging markets.Source: ECB2Offshoring in Financial ServicesAccording to a survey by Deloitte Research, the worlds top 100 banks expect to transfer about $351 billion of their operations and two million jobs offshore over the next five years.3Offshoring of Jobs in PerspectiveA Forrester Report in 2002 that US alone will outsource 3.3 million jobs by 2015 touched a raw nerve, even though it was later pointed out that even if this number were to be taken at face value, it would amount to miniscule 0.53% of the 56.2 million jobs in 2002 in the nine occupational categories studied. (The Muddles over Outsourcing: Jagdish Bhagwati, Arvind Panagariya, T N Srinivasan)Offshoring exports about 250,000 US service sector jobs a year in an economy with 35 million job switches a year. (AT Kearney)Productivity growth that doesnt shift jobs but eliminates them, happening at the same time that offshoring took off, is a bigger issue. (AT Kearney)4 India consisten tly ranked as the preferr ed sourcing destinati on (AT Kearney, EIU, etc.) More than 50% of Fortune 500 companie s offshore to India A key factor in building Brand India Accounte d for 4% of GDP and 29% of exports in 2004- 2005. Project ed to grow to 7% of GDP and 35% of exports by 2008 -2009Source: neoITIndia The Preferred Offshoring Destination5Source: McKinsey Global InstituteThe India Advantage Cost SavingsApproximate savings of over USD 30,000 p.a 6Source: NCAER, Registrar general of IndiaSource: NASSCOM, US Census BureauThe India Advantage Resource Pools & DemographicsApproximately 60% of the 1bn population is economically active (15-59 years)60,000 management & 350,000 engineering graduates produced every year in India7Offshoring Evaluation ParametersSource: LogicaCMG, PA Consulting, EDS8Resources A Closer Look A survey by Hewitt Associates reports that Indians in white collar jobs had 13.7% average salary increase last year, the highest in the Asia- Pacific region. The attrition rates for the outsourcing industry are far worse and ranges from 20 to 40%. NASSCOM has warned that severe shortages in manpower could stall Indias BPO boom - the industry will be short of 82,000 workers by 2007. By 2009, the shortfall is expected to be around 206,000. According to industry estimates only 25% of graduates are employable 80% of job seekers in employment exchanges do not have any professional skills 9Educational ReformsAnalytic Model, PresentIntegrative Model, Future Vertical (In-depth) ThinkingLateral (Functional) Thinking Abstract LearningExperiential LearningReductionism - FractionizationIntegration - Connecting the Parts Develop OrderCorrelate ChaosUnderstand CertaintyHandle AmbiguityAnalysisSynthesisResearchDesign / Process / Manufacture Solve ProblemsFormulate ProblemsDevelop IdeasImplement IdeasIndependenceTeamworkTechnological - Scientific BaseSocietal Context / EthicsEngineering ScienceFunctional Core of EngineeringSource: Dept. of IT, Punjab Government10Improvement Opportunities Broadbase infrastructure improvements to Tier II, Tier III cities, and large towns (power, telecom, transportation). Government investment of Rs. 1 Crore towards creating offshoring infrastructure results in 100 130 jobs in BPO and 50 60 jobs in IT, as opposed to about 8 - 10 in agriculture (Dept. of IT, Punjab Government) Strong focus on general business, language and soft skills (including non -English foreign languages such as French, Spanish, German, Japanese etc.) Facilitate the creation of a domestic BPO industry to take advantage of regional purchasing power variations and establish a springboard for leveraging global offshoring opportunities. Strive for easier cross-border movement of personnel, possibly by linking this to greater market access for the developed countries India is an attractive market asIt is the only economy expected to grow more than 5% (Goldman Sachs - BRIC report) 6.5 to 7% GDP growth projected for the Indian economy, in the medium term (World Bank)Indias GDP to outstrip that of Japans by 2032 (Goldman Sachs BRIC Report)11Thriving on Offshoring Explore the wealth at the bottom of the pyramid the 3 billion people l