2011-LasVegas YumBrands Baumin-Lee.ppt...MNC Providers (Sykes, Teleperformance, Arvato, IBM, HP,...
Transcript of 2011-LasVegas YumBrands Baumin-Lee.ppt...MNC Providers (Sykes, Teleperformance, Arvato, IBM, HP,...
BPO Market: Global and China
China is Becoming Highly Dynamic Market
China CC Outsourcers are Emerging But Still Exploringg g p g
China Potential as Outsourcing Leader
Thousand, Hundred, & Ten Projects
China’s Contact Center/BPO Challenges/ g
China Providers Competitive Landscape
Strategies for Service Providers
About Dr. Baumin Lee
General manager, Yum! China Customer Service Center
Deputy director, China Call Center Industry Capability Development & Management CommitteeDevelopment & Management CommitteeAdjunct Professor of the Industrial and System Engineering Department, The Ohio State University Honorable Chairman, 95Teleweb Inc.C i M b SCP ifi i d dCommittee Member, SCP certification standard.Chief Auditor, China Call Center Professional Job certification.Deputy director, China Call Center Summit Committeep y ,Honorary Principal for Beijing Miyun Vocational SchoolCOPC certified call center managerTechnical Consultant, Call Center Professional Job Skills Certification Section Ministry of Information IndustryCertification Section, Ministry of Information Industry (MII), Beijing China Advisory Consultant, CRM Research Center, China Director, China Service Trade and Service Outsourcing Association
BPO Market: Global and China On the BPO front, Gartner reports that global sending reached $156 billion in 2007 and is expected to rise to $239 billion by 2012 – a CAGR of 9.0%.
The China BPO sector is growing very rapidly on the back of overall economic growth. Gartner’s projections see BPO spending in China almost tripling from $273 million in 2007 to $721 million by 2012, for a five‐year CAGR of 21.4%.
Analysts estimate that spending on global offshore outsourcing in 2011 will be triple 2005 levels. Growth rates in the Asia Pacific region already are impressive: The compound annual growth rate of outsourcing spending between 2005 and 2011 is aboutcompound annual growth rate of outsourcing spending between 2005 and 2011 is about 30 percent in this region compared with 21 percent in the United States
For now, though, most of China’s outsourcing business is near‐shore, with only a fraction in offshore outsourcing. By 2012, forecasts Gartner, the United States will still be the world’s largest client for outsourced services; it will account for about one‐third of worldwide demand for ITO services and more than half of overall BPO demand. A significant part of that spending will flow to China;
CHINA IS Becoming A Highly Dynamic MarketChina’s call center market took off since 1998 with an annual growth rate over 20%
Non‐paging market size reached 340 000 seats in 2007Non paging market size reached 340,000 seats in 2007
However past growth was largely driven by demands from administrative driven sector
Over 60% of the new CC demand comes from four pillar industries: Banking, Post Services, Telecom, and InsuranceDistinctive purchasing behavior identified for these purchases
Future growth will be propelled by service oriented and outsourcing segments
Service oriented segment expected to be 50% of total CC marketService oriented segment expected to be 50% of total CC marketOutsourcing market will grow at least 30% a year for the next few years
•However large variance exists for outsourcing segment growth
Overall, China CC market is expected to reach over 656,000 seats in 2012 and 710,000 seats in 2013
China CC Outsourcers are Emerging But Still Exploringp gCurrently, CC outsourcing business is quite new in China More than 400 companies providing merely about 50,200 seats in serviceOver 70‐80% supply concentrated in 4 major citiespp y j
Future outsourcing development is highly dependent on current player’s performance and strategiesPotential customers concerned about quality confidentiality information processingPotential customers concerned about quality, confidentiality, information processing ability, HR, and priceGlobal Economic crisis results in price sensitive market environmentGrowth will fluctuate widely according to the industry’s ability to satisfy customer concerns and requirements now
In the past few years, competition was minimum due to highly differentiated positions and large number of unexploited potential outsourcing customersand large number of unexploited potential outsourcing customers.
In medium term, Telco companies can be powerful and desperate competitors in the low‐end outsourcing marketThat might distort the industry profitability and trigger vicious competitionHowever high‐end outsourcing market might be intact
China CC Outsourcers are Emerging But Still Exploring p gCurrently, only low‐price/standard service vendors are more profitableUtilization, and therefore, long‐term customers, is the key for profitabilityHowever, high‐priced outsourcing solutions not widely accepted by the market, g p g y p y
But in the long‐run, we believe high‐end services will be valued by customersWe are encouraged by recent positive news on clients’ long‐term commitments to high end outsourcershigh‐end outsourcersWith more competition introduce into China market and enforced Government promoting service outsourcing , we believe it’s the direction
High‐end outsourcers can win the game by aggressively establishing long‐term client base, and targeting various outsourcing opportunities along the value chainIdentifying successful business strategies for new customer development is key to the companythe companyTelemarketing and value‐added information service most likely to be outsourced
China’s Potential As Outsourcing Leader
China Ministry of Commerce launched the 1000‐100‐10 project in 2006 –intend to generate $10B per year in outsourcing industry revenue by 2010
China outsourcing providers have a potent competitive advantage thanks to China’s proximity (both geographical and cultural) to Japan and Korea.
Benefiting from almost 30 years of economic reform, China has built a solid foundation for the opportunities ahead. The nation’s transportation, infrastructure have grown rapidly and improved consistently some achievinginfrastructure have grown rapidly and improved consistently, some achieving the quality seen in developed countries. High‐speed internet access is standard in all of China’s largest metropolitan areas, backed by an uninterrupted dual power supply.
China has huge domestic markets and growing ranks of well‐educated k d i ff i killworkers and its efforts to improve management skills.
Thousand, Hundred, & Ten Projects
Establishing 10 Service Outsourcing Base Cities
Establishing 10 Service Outsourcing Base Cities across China will ensure g gthat resources, suppliers, and potential customers are directed to designated centers, who will, in turn, receive direct support from both local and central Government.
Promoting the transfer of service outsourcing business of 100 world famous multinational companies to China
A i 100 l i i l l / b ild i ifi i hAttracting 100 multinationals to place / build significant contracts with Chinese Outsource providers will build a critical mass of demonstrable international capability, provide knowledge share, and to encourage MNC’s to work with local partners to establish outsourcing facilities orMNC s to work with local partners to establish outsourcing facilities or acquire delivery capability.
Establishing 1000 large / mid scale service outsourcing enterprises, with international qualities
China Service Outsourcing Cities Distribution MapDistribution Map
Thousand, Hundred, & Ten Projects
The Ministry of Commerce is determined to succeed and has recognized that building the environment for success has to take on many dimensions including:
Central Government Support, Direction and Leadership
Special funding
Training
Policy based Lending
E iExport insurance
Special support for Central and Western Cities
These areas are integral parts of the overall strategy.
China’s Potential As Outsourcing Leader
The government’s initiative is adding to the growing momentum. Indeed, China is rapidly becoming a key player in some corners of the outsourcing
t d t b t k t t it 2011 t tsector and appears to be on track to meet its 2011 target.
Chinese BPO companies have begun to prove their value to some of the world’s foremost financial services firms signing large‐scale contracts withworld s foremost financial services firms, signing large‐scale contracts with global clients such as banking leader HSBC and insurer Allianz among many others.
The government is wholly committed to developing a world‐class service sector, with outsourcing services at its core. China boasts an education system h h d h l l h f lthat reaches deep into Chinese society at every level, enhancing a future talent pool of unprecedented impact. Despite rising labor costs, China’s outsourcing firms still have, and will continue to have for some time, a low‐cost advantage.
China’s Contact Center/BPO Challenges
The outsourcing sector in China are still in the early stages of development. Clients are concerned about issues of trustworthiness and confidentiality; the
ti f Chi ’ i id d th l th thi k th i fexpertise of China’s service providers and the value they think they may gain from outsourcing.
Limited Chinese clients have understanding of outsourcing Limited Chinese clients have understanding of outsourcing
The talent crunch affecting China emerging BPO sector
A h h i h k d i f hi h f Among those who are now outsourcing, the key drivers of high performance are cost, service quality, intellectual property rights protection, workforce skills and industry expertise along with a high degree of comfort and familiarity with the use of outsourcing as an effective business practice.
The clear implication is that China’s goal of developing a successful outsourcing industry is heavily dependent on how quickly Chinese companies grasp the importance of outsourcing and its potential to enable high performance.
Fact Sheet on Outsourcing in China Client composition by Country – on average, about 44% of revenues for Chinese outsourcing providers come from U.S. and European clients. Just more than a third (36%) of revenues come from Japan and Korea with 20% from Chinese customersof revenues come from Japan and Korea, with 20% from Chinese customers.
Client composition by industry – The most represented industries are electronics and high technology as well as financial services. In the Unite States and Europe, the media and entertainment businesses are major customers for Chinese outsourcing services. In Japan and Korea, the chemicals industry is a big buyer. In China, government agencies and the communications industry are the major customers.y j
Best selling BPO services – Customer relationship management services are the most common BPO projects purchased by American, European and Chinese companies.
Best‐selling ITO services ‐‐ITO in China currently is outselling BPO, with a universal preference among consumers of all nationalities and industries for the following types of services: customized software development first, with software research and p ,development (R&D), software testing and software localization also in demand.
China’s Providers Competitive LandscapeLandscape1. MNC Providers (Sykes, Teleperformance, Arvato, IBM, HP, Accenture, Convergys)
• Strong brand name recognition, globalization capabilities, better industry kno ho and s fficient reso rcesknowhow and sufficient resources
2. Local Providers (CCID, Wicrosoft, 800TCS, PCCW, China Motion, 95Teleweb)
• Very divided market share and narrowly focused business models.
3. Telecom Carriers (China Telecom, China Netcom, China Mobile, Taiwan Telecom)
• Low cost strategy which can allow them quickly penetrate into low end market and simple services with strong capital resources and good relationship withand simple services, with strong capital resources and good relationship with regional government.
4. Indian Providers (TCS, Wipro, Satyam)
F ll t bli h d b i d IT t h l h b tt l d• Fully established business processes and IT technology, have better sales and marketing channels in USA and Europe. Better acceptance by Fortune 500 companies
5 ITO providers (Vanceinfo CDG ICSS NEUSOFT)5. ITO providers (Vanceinfo, CDG, ICSS, NEUSOFT)
• Has better experience in dealing with offshore businesses and deep understanding of specialized business processes
China CC User base Very Different From U.S.
Selected industry explanation
Telecom
•China telecom call center in estment is still q ite
Others
OutsourcingSecurityTV sellingNews & mediaAirline
Others
Outsourcing
• China telecom call center investment is still quite government driven. To promote “189” service line, MII demand call center at each city/county level
AirlineComputer/Tech
ManufacturingPost service
Insurance
Banking
TransportHealthcareUtilities
Remote shopping
Manufacturing
•Manufacturing CC usage still not widely adopted yet. Most state‐owned companies are unwilling and unable to invest in service
Mobile
Securities
Airline
Remote shopping
•Although remote shopping is the biggest CC user in
Fixed‐line Telecom
Technology
ManufacturingInsurance
ki the US, it’s merely the case here because of inconvenient payment, credit and delivery system. Also, shopping convenience in metropolitan area and general poor consumption power make remote shopping economically unsoundChi US
Banking
Telecom
remote shopping economically unsoundChina US
We need to look into the CC user base and come up with matching strategies
Source: Datamonitor; Interviews; online research; expert opinions; BCG analysis
CC Market Roughly Segmented Into 4 CategoriesAccording to Area of CC Usage, and Willingness to Outsource
Selected industry examples
Generic serviceHigh
Service‐oriented
OutsourcingTV selling
MessagingTravel
Willingness to
outsource
Admin driven
SecuritiesHome appliance
PublicationSimple order taking
Internet Shopping
Low
Admin‐drivenComputer/technology
Courier serviceTelecom
InsuranceCommunity service
Insurance
Bank
Post service
Utility
Core area Non‐core area
Area of CC usage
Three Criteria to Distinguish Core and Non-Core Area
Call Center’s impact to overall business‐ Core: When CC function is critical to the performance of the industry
Confidentiality requirement
Criteria
Co de t a ty equ e e t‐ Core: If the industry/functionality commands strict confidentiality
Call Center operational complexity‐ Core: If operating CC in this industry requires great sophistication
Industry
Core Area
• Securities•Courier service•Computer/technology
“Grey Area”
•Home appliance•Banking• InsuranceP bli ti
Non‐core Area (generic)
• Secretary service•Messaging•Directoryp gy
•Publication• Telecom•Traveling
y• TV selling•Utilities
Functionality • Technical assistance•Aftersales service
• Sourcing/supplier coordination
•Message delivering• Simple order takingAftersales service
•Customer complaint settlement
coordination •Customer inquiry settlement
• Telemarketing
Simple order taking
Many industries have both core and non‐core areas
Five Successful Strategies to Win Long-Term Clients…
Building relationship through periodic assignments
Outsourcers contact clients first for periodic assignments, such as telemarketing or promotion
1
call reception, and sell long‐term assignments when trust and relationships are built• Example: Guangzhou China Motion vs P&G
Provide “one stop shopping”Invite client’s equity investment23Provide one‐stop shopping
Outsourcers also provide, or have alliances to provide, other services that are compatible to call center service. So customers can get all they need from
Invite client s equity investment
Outsourcers ask an important client to make equity investment, in order to lock in the relationship and establish needed trust
Strategies proved
f l
2
one company• Example: Guangzhou Channel Beyond
L i i l i hiS k
trust• Example: Compaq‐Star, wuxianxunqi successful
4 5Leverage existing relationship
Outsourcers develop domestic multinationals clients leveraging overseas relationship
E l 800T l i M l
Serve overseas market
Outsourcers provide low‐cost services to Hong Kong, Taiwan or other overseas clients by leveraging low‐cost agents and language ability in China • Example: 800Teleservice v.s. Motorolaability in China• Example: Guangzhou Shenghua
…Each With Its Unique Advantage and DisadvantagesDisadvantages
Cons
L d t b i i t• Time consuming
i di i i h il
Pros
• Lowered entry barrier into potential clients
• Easier to build relationship and mutual trust
• Periodic assignments might not necessarily turn to long‐term commitment‐ example: Good telemarketing work for marketing dept. might not grant outsourcers opportunity at after sales service area
Building relationship through periodic assignments
1
• Lock‐in relationships• Shared risks
•Controlled by clients• Limited opportunities for other clients
‐ restrained growth
Invite client’s equity investment
2
• Increased customer satisfaction• Stronger advantages against all competitors at “one‐stop” area
• Strengths restrained in one particular area•Difficult to extend business to other areas
•Profitable business •Competition
Provide “one‐stop shopping”
Serve overseas
3
4 •Profitable business• Stable client relationship once obtained
•Generally low‐end services‐ clients only pursue “low‐cost”
•Difficult to acquire overseas clients
•Monopolized client base •Not a lot
Serve overseas market
Leverage existing
4
5• Familiar service standard• Leverageable software and management
•Not a lot• Bad service in China might deteriorate corporate’s relationship to the outsourcer
Leverage existing relationship
5
Restructuring for Better PerformanceMission
Go IPO in the next several years and establish dominance in BPO industry
Develop excellence service s capability in call center and data processing services
Retain best human resources Move into high value‐added service chain
Customer strategy• Focus on Japanese market and
HR strategy•Retain and promote the best
Operation strategy•Enhance call center operational
Japanese companies around China and Asia Pacific
• Explore Philippine market to establish English‐speaking capability and business alliance
people in the company•Create a customer‐centric organization
•Develop a talent pool in call center operation and
efficiency in moving toward self‐service and automation
•Aspire to efficient operation• Improve HR utilization rate• Implement call center bestcapability and business alliance
• Target high‐end Multinational companies in value‐added services such as customer profiling, channel management, l ti i ti
center operation and management
•Acquire new skill sets in different vertical market such as Financial, Supply h l d k
Implement call center best practices in every aspect of our operations
• Improve our security and disaster recovery processes to
l ’sales optimization chain, Sales and marketing, and data analysis
gain clients’ trust
Strategy for Service Providers Focus on value creation. Build service quality models that solve the unique problems associates with doing business in the world’s fastest growing economy.
Look to create collaborative partnerships that bring together diverse skills and experiences to solve local client problems. Partner with local and multi‐national providers to leverage specific relationships and enhance competitivenessproviders to leverage specific relationships and enhance competitiveness.
Build assets and offerings specific to solving problems unique to economies in hyper growth mode. Not only will this provide real competitive advantage inhyper growth mode. Not only will this provide real competitive advantage in China, it will be the key to delivering services, business models and cost structures that help drive the next generation of outsourcing in North America dand Europe.
Focus on delivering cultural and relationship synergy. Providers that truly understand their client’s business and work together collaboratively to deliverunderstand their client s business and work together collaboratively to deliver outcomes will enjoy the best results.
Strategy for Service Providers Build a business that first focuses on countries in Asia Pacific. This region will become the engine of the world economy and will fast become the cornerstone f b iof our business.
To be a serious contender in this market, service providers must continue to improve the fluidity of our business English and the strength of ourimprove the fluidity of our business English and the strength of our management skills. We must fully grasp the contract, legal and sourcing frameworks of Western MNCs. And although due diligence and security measures can limit many sources of risk exposure for our customers, we must continue to strengthen our legal system, improve IPR protection and seek to obtain international standards certification to lure reluctant global consumersobtain international standards certification to lure reluctant global consumers and establish China as a serious global outsourcing player.
Seek IPO to raise enough capital to acquire business knowhow and build international management team and sales channels outside of China