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A Passage To India



A dedication

To India which prepared me for the world And, America which opened the world

- A personal guide to offshoring in India by Atul Vohra



India: The recent beginnings

McKinsey Quarterly Report, 2001



India: The rest of the story

A history that is 3000 years old, and, one in the making.Western man is semitic in religion, greek in philosophy, roman inpolitics, saxon in morality and Aryan (Indian) in language ( MaxMueller circa 1850)By 1500 A.D. Emperor Aurangzeb s revenues in India were 10x thoseof his contemprary,Louis XIV of France

By 1900 India was still a top 5 economy with the third largest railnetwork and 2.5% of world tradeBy 1990 India was a bottom 5 country with 90 years of zero/negativeper capita income growth, the largest number of poor and illiterate, amixed up economic model, rampant intellectual and capital flight and,near insolvency.2004 India is on fire among the fastest growing economies, theworld s back office and a strong influence in the arts, culture andfashion. As Tom Friedman says, India is now giving the world ZippiesIndia Shinning is not just a slogan but the reality



India: The rest of the story ,continued

The Indian paradox continues-for everything you can say, theopposite also holds true it is like wonderland: everyone seems mad and everything is bizarre, upside downThe promise comes with unending frustrations of population,pollution, public apathy.

Yet India can not be ignored for economic, political and spiritualreasons. It is like Hotel California-you can check out, but neverleave.And, therefore you need a guide to understand India and profit from it.

This presentation is about understanding the potential and ways to mine it.



India: Offshore Potential

High Quality In IT 50 of world s 70 CMM5 Companies

are in India Cost of Quality ranges from 20-60% of

IT application budgets Similar data emerging for contact centers

and business processing outsourcing (BPO) units Lower cost $5000 - $8000 pa starting salaries Advantages in service and

manufacturing sectors Quality in services related to vedic

heritage,not physical infrastructuredependant.Predictable 90% + of IT projects on-time v/s 30%

industry average #1 Pressure point for Operation &

Technology Managers/Enterprise Users

Rapid Scalability 3 Mn+ Graduates each year Depth in Legacy & leading edge

technologies Estimate Indian users a generation

ahead of US mainstream Enables corporations to become more

nimbleFlexibility Vendors more flexible than employees

variable cost models Rewarded by the markets



The India Advantage

Scale 300 Million EnglishSpeaking Middle Class by2010

Educational System &Focus on Quantitative AbilityWork ethic in the IT/ITESindustry

Powerful Demonstrationeffect of successfulIndians in India andoverseas

Commitment to QualityIntellectual PropertyProtection & EnforceabilityGovernment Support Eco system & Industrymomentum from $11 bn in2002 to $70 bn in 2008(McKinsey Estimates)



India s Strategic Advantage is based on three key factors

Str a tegic Advan t a ge

Govt. Support



Overall

People Factor Infrastructure Factor Environmental Factor

Skill BaseAvailabilitySkills mix

Work attitudeCost AdvantageEmployee cost Productivity

Institutional Support Training Labor Laws

TelecomIPLC Costs Skills mix

Speed of deployment PropertyTransportationPowerBanking and Finance

Govt fiscal incentives Simplicity of tax structure

FDI policyPolitico-Legalenvironment Economic environment



As a result, India present a compelling outsourcing case

Firms in the US cansave between 30%-60% of their

processing costs byoutsourcing to India

Long Term Econ



The talent pool in India gives it a significant edge . . .

Placed second to US in size &availability of skilled and Englishspeaking manpower

Availability of a large pool of DataEntry Operators and Accounting Professionals for back officeoperations

Availability of a large number of IT Professionals to provide ITsupport

Presence of over 11,000recognized educational institutions apart from other unrecognized andother vocational training institutes

Manpower



India Offshore Opportunities

IT-Application development and maintenanceIT Infrastructure monitoring and hosting IT Product development BPO Contact centers BPO Processing-payments, claims, applications BPO Administration-transcription, digital assets management BPO Content-research, animation, graphics, analytics BPO Engineering, design, and Project Management BPO Healthcare-radiologists, drug testing, and researchManufacturing-generic drugs, autos



India: Challenges &Resolution

R esolution

Develop US strengths andbuild in the offshore team

Domain Expertise

Challenges

Loss Of Control Transparency andprocesses including ePMO

Tools and interpersonal ties.

Managing USpolitical, labor and

social issues

Invest in retraining, higher value activities, ownership of

Indian firms andcommunities. Enable opening

of Indian market.

Fear Of Workingwith Overseas Mgt.

Understand and build Indo USpresence ands capability.Learn to manage offshore



The BPO industry is critical for Indian economy from amacro economic perspective

Currently, IT and BPO services together account for 2% of theIndian GDPShare of GDP expected to go up to 7% by 2008IT and BPO sectors expected to contribute 20% of the GDPincremental growth between FY2002 and FY2008

Share of foreign exchange inflows expected to grow from 8% in2002 to 30% by 2008Will employ over 2 million people directly by 2008Will generate indirect employment for an additional 2 millionpeople



OFFSHORING-A Mega trend for our times

O- Offshore or OssifyF- Fit and Feel (of the partner)F-Friend not Foe (or vendor)S-Start Smart( Real commitment, not an invisible pilot)H-Hi Tech and Hi touch (Processes and teams)

O-Oversight not out-of sight ( Transparency)R-Risk Management not eliminationI-Incentivize collaboration (goal and reward alignment)N-Nimble( flexibility and speed the greatest pay-offs)G-Globality for greatness!



Offshoring-Doing the right thing and doing it right

Develop key supplier relationships-look for compatibility andchemistryBuild internal buy-in, champions and visibilityBuild a roadmap which shows real commitment while managing the risks of knowledge, critical dependency, sovereign risk etc.

Work as One team-goals, systems, rewards and recognitionLook at onsite-offshore as an integrated model. Monitor theratio and reinvest in both.Establish multi level relationships not a single point salesperson/purchasing officer face-off.

Strategically assess the buy vs. build issue. Revisit every 2-3years.



Thank YouThank You



The Government has also shown commitment to promote the sector

100% income tax exemption (up to 2010)100% FDI Permitted

Setting up of Software Technology Parks (STP) to facilitate/support Infrastructure requirements

Repatriation of income permittedDuty free imports of goods

Exemption from payment of excise duty

Capital gains on VC investments exempt from tax

Task forces set up for BPO services

Govt. Role



and Telecom infrastructure, which was cited as a weakness in thepast, is no longer an issue

Bandwidth supply will shortlyoutstrip demand (Q2FY04)

-Huge network build outs byprivate operators

Prices for domestic and internationalbandwidth have halved in the last 12months

Private Operators are expected todrop prices further

Domestic Connectivity Pl ay ers S ystem C apa cit y

SEA-ME-WE-2 1 Gbps SEA-ME-WE-3 20 Gbps FLAG 10 Gbps SAFE 80 Gbps

Network i2i 8.4 Tbps Dishnet DSL 7.86 Tbps

International Bandwidth



The remote future-estimates of $50-70 billion by 2008(BEST IN A GRAPH)

Segment

IT Applications and SystemintegrationProducts and technology

BPO

Estimate $ billion ( SourceNasscom)

30

10

25

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