Preliminary Study for the

Corporate Services Segment of the

IT-BPO Industry

Caesar Parlade 3 April 2013

A Report on the CSS Survey, Focus Group Discussions, and the 14 November 2012 Workshop

By

George Francisco & Caesar Parlade

Published by

Information and Communication Technology Office With the support of the

Business Processing Association of the Philippines

Survey and Focus Group Results

Profile of survey participants

Geographical regions served

USA

Philippines

UK

Asia

Europe

ANZ

India

Others

64%

36%

Business model

Captive

3rd Party

Average number of years in business: 9 years Average Headcount: 2,200 staff

Horizontal Activities

Val

ue

ad

de

d

Information Technology Outsourcing

Knowledge Process Outsourcing

Business Process Outsourcing

Software R&D

IT Consulting

Software • Enterprise Resource

Planning • Applications Development • Application Integration • Desktop Management

Infrastructure • Applications Management • Network Management • Infrastructure

Management

Business Consulting Business Analytics

Market Intelligence Legal Services

Enterprise Resource

Management

• Finance & Accounting

• Procurement,

Logistics & Supply Chain Management

• Content/

Document Management

Human Resource

Management

• Training

• Talent management

• Payroll

• Recruitment

Customer Relationship

Management

• Marketing & Sales

• Contact Centers/ Call Centers

Banking, Financial Services, & Insurance

Others

Retail

Health/ Pharma

Travel & Transportation

Energy

Telecommunications

Manufacturing

Vertical Activities

Source: Gary Gereffi and Karina Fernandez-Stark, Duke University

Finance & accounting

Procuremet & logistics

Document management

Training

Talent management

Payroll

Recruitment

Marketing & sales

Business consulting

Business Analytics

Market Intelligence

Legal Services

Software R&D

IT Consulting

Enterprise resource planning

Applications development

Applications integration

Desktop management

Application management

Network management

Infrastructure management

Financial services

Manufacturing

Telecommunications

Energy

Travel and transportation

Health & pharma

Retail

Other

Key Services Offered

Profile of survey participants

Significance of location decision factors

4.31

4.15

4.08

4.00

3.92

3.85

3.77

3.62

3.54

3.31

3.31

3.23

3.00 3.50 4.00 4.50

Skills availability

Gov't policies

Tax & customs incentives

Cost arbitrage

Cultural adaptation

Risk management & BCP

Effective industry associations

Telecoms & connectivity

First-rate CBDs

Expatriate friendliness

Experience in the country

Parent company developments

Talent availability is paramount but government policies, tax and customs incentives and cost figure highly

Challenges that can reverse gains

3.92

3.75

3.67

3.67

3.58

3.50

3.42

3.42

3.25

3.17

3.00

2.67

2.50

2.00 2.50 3.00 3.50 4.00 4.50

Skills availability

Legal & contractual enforcement

Data privacy & regulation

Cost & Philippine currency trends

Incentives & policies in other host countries

Risk management & business continuity

Corruption and government bureaucracy

Support services

Global quality standards

Physical infrastructure

Natural calamities

Global rationalization & consolidation

Geography & time zone

Challenges stem from many areas – contracts, data privacy, currency, incentives, corruption – but dependable talent supply is the biggest concern

Philippine operations outlook

4.00

3.92

3.92

3.85

3.78

3.77

3.67

3.50

3.33

3.18

2.85

2.50 3.00 3.50 4.00 4.50

Technical staff availability

Philippine peso appreciation

Facilities & utilities cost trends

Managerial talent availability

Salaries & personnel cost trends

Host legal, regulatory & governance

ICT infrastructure

Home legal, regulatory & governance

Industry associations

Parent-company strategy

Geographical challenge

Technical and managerial talent, currency appreciation and facilities are medium- to long-term concerns

Opportunities in 2013

Healthy headcount

growth

Broader service offering

Higher value work

More clients

Increasing complexity

Navigating Roadmap 2016

Training, training, training!

Stable policies, incentives, and currency

Focus on talent pool

Offshoring and Outsourcing Trends

Maturing offshoring solutions

Knowledge Process

Business Process (Core)

Business Process

(Support)

Captive Third party

The offshored segment of the value chain is increasing in value-add, complexity, and geographical spread

Total value of large contracts is levelling off

o TCV is down 13% in the 1st half of 2012

Legal disputes rising

Some work is coming back in-house

Fewer long-term deals

Weakest growth in Europe

Clouds in the outsourcing sky

Countries have begun specializing in different parts of the service production ecosystem

Offshore service delivery

The population factor City City Population State

State Population

Bangalore 8,730,000 Karnataka 61,130,000

Mumbai 12,480,000 Maharashtra 112,373,000

Delhi 11,008,000 National Capital Region 22,200,000

Chennai 8,696,000 Tamil nadu 72,140,000

Hyderabad 7,750,000 Andra Pradesh 84,656,000

Pune 5,050,000 Maharashtra 112,373,000

Chandigarh 1,025,000 Punjab 27,704,000

Kolkata 14,618,000 West Bengal 88,800,000

Makati, Taguig & Mandaluyong 1,504,500 Metro Manila 21,050,000

Cebu City 2,551,000 Cebu Province 4,170,000

Davao City 2,275,000 Davao del Sur 3,152,000

Sta. Rosa 285,000 Laguna Province 2,670,000

Iloilo City 425,000 Iloilo Province 1,806,000

Bacolod City 730,400 Negros Occidental 2,396,000

Demographic dividend

BPOs do not bring inclusive growth

BPOs provide jobs, but the impact is limited given the scale of the workforce utilized, and its bias toward educated labor. The huge employment needs of the unskilled labor cannot be met.

Norio Usui Asian Development Bank

Strategy Framework

Talent Development Strategy Framework

Objectives

• Quality

• Immediacy

• Sustainability

• Scalability

• Sourcing

efficiency

Sourcing • Higher recruitment rate • Shorter hiring time • Lower attrition • Overcome problem in

hiring managers and specialists

Competitive conditions

• Diversity of companies

• Appreciating peso

• Graveyard shift • Call center

stigma • Fixed statutory

incentives • Satisfactory

telecoms infra • Disparate

quality of universities

• High proportion of GICs

• Weak global demand

Training & development • Improved generic skills

Language proficiency Problem solving Office behavior & values,

productivity Cultural intelligence Negotiation skills Project & quality management

• Timely professional updates

Expressed Needs

Standards & communication • Teachers • Students • Schools • Industry programs • Information network

Industry – academe partnership

• Student internships • Teacher immersion programs • Curriculum redesign • BPO Leaders career day

Finishing school/ Continuing Professional

Education • Public courses • Online courses • Custom/ in-house courses

Cultivating employability skills in secondary and tertiary

education

Development Areas

Talent development strategy

Broad Adaptable

Integrated Scalable

Sustainable

Talent development is urgent

Current

Stop-gap measures needed

Broad Adaptable

Integrated Scalable

Sustainable

Current and emergent needs

Improve the employability of graduates

Broadening near hire training options

Current and emergent needs

Better functioning recruitment markets

Establishing and publishing standards

Current and emergent needs

Arresting a worsening attrition rate

Non-cash incentives, career planning, geographical dispersion

Current and emergent needs

Training in employability skills

Current and emergent needs

Continuing professional education

Upgrading the skills of current staff recognizing current market demands

Competitive conditions

Graveyard shift

High proportion of

GICs

Heterogeneity

Appreciating Peso

Talent concentration in NCR

Weak global demand

Chronic shortage in teachers

Telecommunications infrastructure

Stable incentives

Competitive conditions

Development areas

Public Sector

CS Segment

Academe

Tripartite Partnership

Development areas

Public Sector

CS Segment

Academe

• Public private partnership council

• Student internship programs • Teacher immersion programs • BPO Leaders career day • Curriculum redesign

Development areas

Public Sector

CS Segment

Academe

• Near hire finishing schools • Continuing professional

education • Employability skills in secondary

and tertiary education

Standards and communication

Talent management, skills and performance standards

Talent development chain metrics

Publication through BPAP

Program metrics

Next wave cities

Specialization Branding

Optimized resource

commitments

Load balancing with NCR

Scale vs. specialization City Rank City Population State State Population

Bangalore 1 8,730,000 Karnataka 61,130,000 Mumbai 2 12,480,000 Maharashtra 112,373,000 Delhi 4 11,008,000 National Capital Region 22,200,000 Chennai 5 8,696,000 Tamil nadu 72,140,000 Hyderabad 6 7,750,000 Andra Pradesh 84,656,000 Pune 7 5,050,000 Maharashtra 112,373,000 Chandigarh 25 1,025,000 Punjab 27,704,000 Kolkata 26 14,618,000 West Bengal 88,800,000

MTM 3 1,504,500 Metro Manila 21,050,000 Cebu City 8 2,551,000 Cebu Province 4,170,000 Davao City 70 2,275,000 Davao del Sur 3,152,000 Sta. Rosa 84 285,000 Laguna Province 2,670,000 Iloilo City 93 425,000 Iloilo Province 1,806,000 Bacolod City 94 730,400 Negros Occidental 2,396,000

Dublin 9 1,804,000 Leinster 2,505,000 Krakow 10 1,400,000 Lesser Poland Voivodeship 3,268,000 Shanghai 11 23,020,000 Shanghai Municipality 23,020,000

Next wave cities

More ideas !

Which idea exactly?

Product space New products develop from common building

blocks as existing products

1965

2008

Your comments are welcome

Does the report capture the current state of the Corporate Services Segment of the IT-BPO industry?

How should a Strategy particular to the Corporate Services Segment be developed vis-a-vis an overall IT-BPO Strategy for the country?

Does the report describe the key issues, resources, and stakeholder interests that need to be addressed in a Strategy for the Corporate Services industry?

Are the elements of a Strategy complete and organized in a clear Framework?

Does the proposed Framework serve as a workable starting point for the discussion and formulation of a Corporate Services industry Strategy?

Thank you!