diversifying your sourcing strategies through nearshore alternatives
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Presentation by Eric Hochstein of Ontario Ministry of International Trade and InvestmentPresented at Global Sourcing Council's Conference at Steven's Institute of TechnologyTRANSCRIPT
Diversifying Your Sourcing Strategies Through Nearshore Alternatives
Eric HochsteinOntario Ministry of International Trade
and InvestmentGlobal Sourcing Council
February 9, 2009
Ontario: The Nearshore Component of Your Global Delivery Strategy• Captive and Outsourced Contact Centers
– Customer Service– Technical Support
• Business Process Outsourcing (BPO) and Shared Services– Human Resources Outsourcing (HRO)– Finance and Accounting Outsourcing (FAO)
• IT Outsourcing (ITO)– Help Desk– Network Administration
• Applications Outsourcing– Software Development
Ontario: An Important Nearshore Sourcing Destination
The Next Generation:Knowledge Process Outsourcing
(KPO)
•Product Development and Innovation•Research and Development•Other Knowledge-based Processes
Proximity to US• Easy Access• Time Zones
Compatibility•Business Practices•Language•Culture•Quality of life
Government Programs • Powerful R&D Incentives• Hiring/Training Incentives•Business Immigration
Ontario’s Nearshore Advantage
Top Tier Talent •Educated
•Dedicated and Available•Business Savvy
Competitive Costs • Exchange Rate Arbitrage
• Salaries & Benefits• Low Business Taxes
• National Health Insurance
Low Business Risks
•Political and Economic Stability• Security & Privacy
•IP Protection
Source: Statistics Canada; Canadian International Merchandise Trade (12/2007)
Well Located in North America
Over 60% of the US population lives within a two-hour flight to Toronto
Source: Greater Toronto Marketing Alliance (122007)
Ontario’s Capital – Toronto
• Third largest financial centre by employment in North America
• Headquarters of the 5 largest domestic banks
• 85% of the 41 foreign banks in Canada are headquartered in Toronto
• 6 of the top 10 life insurance companies have their Headquarters in Toronto
• The Greater Toronto Area (GTA) generates 20% of Canada’s GDP
• The Toronto Stock Exchange is the 7th largest in the world based on Market Cap
Source: The Economist 'Pocket World in Figures, 2007' (12/2007)
Canada Ranked Third Among Best Places to do Business
1. Denmark
2. Finland
3. Canada
4. Singapore
5. Ireland
6. Netherlands
7. United Kingdom
8. United States
9. Switzerland
10. Hong Kong
11. Sweden
Source: United Nations, Human Development Report 2007/2008…statistical update 2008
UN Human Development
IndexIt is about creating an environment in which
people can develop their full potential and lead productive, creative
lives in accord with their needs and interests.
Rank
Country
1 Iceland
2 Norway
3 Canada
4 Australia
5 Ireland
6 Netherlands
7 Sweden
8 Japan
9 Luxembourg
10 Switzerland
11 France
12 Finland
13 Denmark
14 Austria
15 United States
94 China
102 Philippines
132 India
1,813
1,142 1,103
735
610531
466 465408 399
0
400
800
1200
1600
Cal
iforn
ia
Tex
as
New
York
Flo
rida
Illin
ois
Pen
nsylv
ania
Ohio
New
Jer
sey
Onta
rio
North C
arolin
a
Bil
lio
n U
S $
Top ten by GDP
Ontario: Ninth Largest Jurisdiction in North America
Figures for 2007, Ontario’s at PPP.Source: US Bureau of Economic Analysis, June 5, 2008 Ontario Ministry of Finance, OECD
Sourcing Trends• Megadeals > Multisourcing
– More Suppliers, Smaller Contracts
• Global Suppliers– Establishing “best shore” locations
• Changing (Maturing) Drivers– Co$t > Resources, Quality and Co$t
• Companies Requiring More Predictable Returns and Must Avoid Risk
Certain locations make sense for specific applications– One Size Doesn’t Fit All
Source: Statistics Canada *Month of November 2006 (1/2007)
OffshoreOffshore Strengths Strengths
Best Kept Best Kept In-HouseIn-House
Ontario’s Ontario’s Sweet Spot for Sweet Spot for OutsourcingOutsourcing
Hig
hly
Eff
icie
nt
Hig
hly
C
rea
tive
Freestanding Highly Interactive
Global Sourcing StrategyCreating the Portfolio
Canada’s Quality is Recognized
“U.S.-based buyers apparently believe that what they may give up in terms of cost savings by going to Canada is more than compensated by the gains they make in terms of proximity, communications and culture.” DiamondCluster International, 2006 Global IT Outsourcing Report
American companies outsourcing their IT prefer the nearshore Canadian value proposition as an alternative to offshore options, according to new research from IDC… The study also discovered quality is more important than cost savings when outsourcing IT.“Global Sourcing Trends Necessitate Considerations of Nearshore Sourcing in Canada” (IDC, March 2004)
Ontario’s Outsourcing IndustryStrong and Successful Providers
IBM Global Services
The Takeaway
The Right ResourcesThe Right Resources• World-class Talent Pool•Exceptional Technological Infrastructure
Competitive Costs/Powerful IncentivesCompetitive Costs/Powerful Incentives• Attractive Salaries & Benefit Packages• Low Total Cost of Engagement • Valuable R&D and Hiring incentives
Lowest RiskLowest Risk• Political/Economic Stability• Legal Protections• Security (IP & Data)
Easy to do BusinessEasy to do Business•Close Proximity•Same Time Zones•Same Language
•Not everything for everyone•Do the right thing in the right place•Key Component of a Global Delivery Strategy
•Not everything for everyone•Do the right thing in the right place•Key Component of a Global Delivery Strategy
Thank You!
Eric HochsteinOntario Ministry of International Trade and Investment