Impact of ICT on Globalization and Socio-Economic Development Avasant

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Strategic Advisors for the Global Economy "Impact of ICT on Globalization and Socio-Economic Development in Emerging Regions" March 2011 Anupam Govil President, Avasense & Partner, Avasant

About Avasant: 

About Avasant Based in Los Angeles, California, Avasant experts have performed over 1,000 engagements since 2001 across 40+ countries within three primary disciplines: Enterprise Optimization, Sourcing Advisory and Globalization Advisory services Avasant Headquarters Avasant Offices & Delivery Centers Enterprise Optimization – Avasant assists organizations with managing critical internal IT and Operations initiatives to drive efficiency and effectiveness of service delivery, capabilities acquisition and optimal cost savings Sourcing Advisory – Avasant assists public and private sector clients with navigating the complex transaction lifecycle of securing critical IT , Operations and Analytics managed services from global Tier 1 – 3 service providers by leveraging best practice contracts, service level frameworks and financial analysis Globalization Advisory – Avasant assists the governments and the supporting provider ecosystem of emerging markets with targeted economic development solutions designed to foster job growth, education, policy optimization, infrastructure development and global market awareness

About Avasant (2): 

IAOP World’s Best - Avasant has also been the recipient of several awards for excellence in Management Consulting and Sourcing Advisory. Avasant has been designated among the “World’s Best Outsourcing Advisors” by the International Association of Outsourcing Professionals (IAOP) in 2009 and 2010. About Avasant (2) Within Avasant’s primary disciplines: Enterprise Optimization, Sourcing Advisory and Globalization Advisory; are comprehensive solutions sets which have been hailed across the industry in recent years

Globalization Dynamics- How it is Evolving?: 

Globalization Dynamics- How it is Evolving?

Objective of Globalization is all about achieving a balance between Risk & Reward… : 

Objective of Globalization is all about achieving a balance between Risk & Reward… Country Risk Operational Risk Security Risk Compliance Risk Service Globalization Risk Return Cost Savings Process Improvement Capacity Increase Coverage Operational Flexibility Strategic Risk Reputation Risk Event Risk Credit Risk Effective Governance reduce the overall business risk Well defined Strategies improve the returns Effective program roll-out lead to improved engagement monitoring, reduces business risk and strikes the right risk-return balance…

Global Sourcing of IT and BPO services will continue to grow at a healthy rate…: 

Global Sourcing of IT and BPO services will continue to grow at a healthy rate… IT and BPO markets will continue to grow at a high rate in the next 5 years Worldwide Technology Related Spends Worldwide IT Services Spends Worldwide BPO Spends Global Sourcing Market and Potential Source: NASSCOM

Business Models have evolved and will continue to change rapidly…: 

Business Models have evolved and will continue to change rapidly… Clearly, the next 5 years will see a mix of traditional outsourcing with some experimentation on the cloud model. Cloud computing will make an impact, but will not replace traditional outsourcing Core legacy applications will continue to remain in-house and not move to the cloud model. High sunk costs on recoding will discourage the cloud model for core applications Pricing models of outsourced vendors will see high degree of innovation to compete with the ‘pay-per-use’ cloud model Providers will move up the value chain to offer end-to-end services including cloud computing. Assisting clients in creating private clouds could potentially be a litmus test before they adopt the public cloud model Buyers will find it easier to integrate the cloud approach with existing providers, thereby reducing risk and being cost effective Reduced regulatory concerns on data security and reliability will drive cloud computing to a success Impact Of Cloud Computing

Rapid Change Driving Industry Towards Globalization 3.0…: 

Rapid Change Driving Industry Towards Globalization 3.0… Cost Arbitrage Cost Arbitrage Skill Availability Cost Arbitrage Skill Availability Market Access Globalization 1.0 Globalization 2.0 Globalization 3.0 Competitive Advantage 1.0 Call Centers moved from Ireland to Australia to India in search of lower costs. 2.0 Realizing that skills are critical factor lead to call centers moving to Philippines to take advantage of skills in voice processes. 3.0 Globalization is now seen as a tool for competitive advantage. Increasing trend of moving centers to region such as Africa where market potential is rising Globalization is now looked at delivering more than just cost savings… Its being pursued now for gaining strategic market access Lets take example of the call centre industry:

Globalization 3.0- A case in point is entry of Airtel in Africa: 

Globalization 3.0- A case in point is entry of Airtel in Africa Airtel is the no. 1 cellular service provider in India Concerned over saturating market and increased competition, Airtel identified Africa as the next growth market and the revenue driver for future. Airtel a cquired Zain’s assets in Africa for $10.7 bn . Customer services by telecom firms in Africa has been abysmal whereas Airtel is known for its high customer services in India. Airtel proposes to improve the customer services in Africa. This presented a great opportunity for service providers to enter Africa Following its strategy of reliance on outsourcing as in India, Airtel outsourced the IT aspects of its operations in Africa to IBM and customer services to Tech Mahindra and Spanco. Airtel’s entry in Africa followed by service providers amply demonstrates the importance of gaining market access through globalization

Differentiating strategies among providers will be the key, when everyone looks the same…: 

Differentiating strategies among providers will be the key, when everyone looks the same… Efficient recruiting and hiring mechanism Strong brand image Effective training and development process Innovative retention policies and practices SEI/CMM, CMMi, ISO, Six Sigma, eSCM Process-focused, Process as part of corporate culture People’s orientation to quality Technology support Full process capability Platform based development New services – IMS & Cloud Computing Strong transition expertise (50% of transitions go over budget/time) Innovative Governance models Well thought out compliance approach Compliance with general regulations (SOX , etc.) Compliance with industry-specific regulations ( HIPAA , GLBA, etc.) Lower Cost Improve Delivery Performance Move to managed services from staff augmentation Business Alignment Strategy Staffing Quality Common Differentiating Factors Operations Compliance However, success in one geography will only drive service providers to continuously evolve and meet “Glocal” needs

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Cloud Computing Cloud computing is the provision of dynamically scalable and often virtualized resources that is delivered as a service Newer technologies such as Cloud Computing will be will soon take Globalization to the next level… Business view of Cloud Computing A user experience and business model Transparent IT & infrastructure Massively scalable Dynamically delivered Standardized Self Served Utility pricing model IT view of Cloud Computing An infrastructure management and services delivery method Secure Resilient Public and Private Enterprise class Virtualized Easily managed Economic Element Pay-as-you-go No Capex Architectural Element Simple environment Responsive to demand Secure shared resources Strategic Element Focus on core competencies, What you do best

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Executive Imperative : IT Sector Energy Demands account for 6 percent of total U.S. Emissions. The IT Sector is responsible for 2% of emissions world-wide Social Objectives like “Being Green” also will have to be addressed…

Emerging Markets Cannot Be Ignored: 

Emerging Markets Cannot Be Ignored

Some Interesting Facts…: 

Some Interesting Facts… US imports more oil from which region? Middle East Africa Which region witnessed the fastest mobile phone subscriber growth? Asia Africa U.S. oil imports pumped in Africa: 18.6% U.S. oil imports pumped in the Middle East: 17.2% Year-on-year mobile phone subscriber growth in Africa: 61% Year-on-year mobile phone subscriber growth in Asia: 25%

There are few basic factors that are analyzed to evaluate Global Sourcing geographies..: 

There are few basic factors that are analyzed to evaluate Global Sourcing geographies.. South Africa Mauritius The outsourcing landscape is an increasingly complex web of service providers and global service delivery locations. With time, the evaluation factors of buyers have evolved too Key Evaluation Factors Talent Pool Geopolitical risks Education Culture Local marketplace Industry Best Practice deployment Regulatory Environment & Incentives SAMPLE – For Discussion Purposes Only Ghana Kenya Egypt

Globalization 3.0 will require a new approach to evaluate the emerging geographies…: 

Globalization 3.0 will require a new approach to evaluate the emerging geographies… China India Africa GDP growth (real) % (2009 est.) 8.7% 5.7% 3.4% GDP Size, PPP Adjusted (2009 est.) $8.77 trillion $3.53 trillion $ 2.81 trillion GDP, PPP Adjusted, Share of World 12.5% 5.1% 4% Population (2010 estimates) 1,341 mn 1,215 mn 994 mn Labor Force (2009 estimates) 814 mn 467 mn Telecom Penetration 60% 55% < 40% Broadband Penetration 10% < 1% Negligible Banking Access (% of population) <35% <40% <10% Source : IMF, CIA Factbook, Government Websites, Avasant Research 52% Of World Population 22% Of World GDP Evaluate potential of large market and dynamics in local industries like Banking & Telecom…

Emerging economies have started getting their act together to compete globally…: 

Emerging economies have started getting their act together to compete globally… Source: World Economic Forum, 2010 Global Competitive Index Rankings for Select Economies Source: AT Kearney, 2009 Ranking of Outsourcing Geographies Emerging nations in Europe, Middle East, Africa and Asia offer significant advantages for the global sourcing industry Emerging nations have taken a number of steps to increase global competitiveness Significant scope for improvement exists and countries need to align growth strategies with other fast emerging and mature markets A number of nations are gaining traction as emerging IT/BPO destinations However, Skill Development Needs Significant Focus compared to market leaders such as India and China

Analyzing the Social Impact: 

Analyzing the Social Impact

Each region has its own characteristic and are at different phases of growth cycle...: 

Each region has its own characteristic and are at different phases of growth cycle... Mature locations such as India Philippines and China Presence of most global corporations Abundant talent pool Proactive government Incentives on their way out Rising costs makes it unsuitable for low end operations Explored locations such as Mexico, Brazil, Chile Strong in Non English support Presence of most global corporations Ideal for specific requirements and skills Talent availability high in certain pockets Unable to provide scale matching India / China Emerging locations such as Egypt, SA, Ghana The most unexplored markets Fast growing region – huge domestic market potential Untapped talent pool. Incentives and red carpet from governments Stability in political environment is a challenge in certain locations

Some of the key challenges in emerging economies is driving social growth…: 

Some of the key challenges in emerging economies is driving social growth… Source: Socially Responsible Outsourcing; Samasource

Globalization has had a significant positive impact on society…: 

Globalization has had a significant positive impact on society… Reinvestment into Society Direct : Indirect Job Creation Ratio 1:2.5 Snowball Effect on Other Industries Improved CSR / Green Initiatives Reduced “Brian Drain” – Retention of Talent Increased Pool of Educated Training Resource Pool Higher Consumer Confidence and Spending Improved Standard of Living Women constitute 35% of the outsourcing industry in India Gender Inclusivity Policies Improved Transparency Higher Accountability Reduced Capitalism Employee Friendly

The positive impact has provided opportunities for innovative solutions…: 

The positive impact has provided opportunities for innovative solutions… M-PESA, a small-value electronic payment accessible from ordinary mobile phones Adopted by 9 mn customers (40% of Kenya’s adult population) in less than 3 years Average of $320 million per month in person-to-person transfers. Half of the 16,900 retail stores providing M-PESA services are located outside urban centers. 25+ companies using M-PESA for bulk distribution of payments 75+ companies are using it for bill pay Innovative technology led solutions can provide significant opportunity to global companies

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Strategic Advisors for the Global Economy Thank You Anupam Govil Partner, Avasant President, AvaSense anupam.govil@avasant.com