Presented at the Bankers Association for Finance and Trades 13th Annual Conference on International

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(No Transcript)
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Atul Vohra
President Majesco Software, Inc. INDIA A
DYNAMIC MARKETPLACE
Presented at the Bankers Association for
Finance and Trades13th Annual Conference on
International TradeProspects for the Future
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India A Dynamic Marketplace
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India Offshore Advantage

• Rapid Scalability
• 1 Mn Graduates each year
• Depth in Legacy leading edge technologies
• Enables corporations to become more nimble
• Flexibility
• Vendors more flexible than employees variable
  cost models
• Rewarded by the markets

• Lower cost
• 5000 - 8000 annual starting salaries
• IT operation costs can be up to 20 of Bank
  Revenues
• High Quality
• 50 of worlds 74 CMM5 Companies are in India (20
  in US, 2 in China)
• Cost of Quality ranges from 20-60 of application
  budgets
• Predictable
• 92 of Mastek projects on-time v/s 30 industry
  average
• 1 Pressure point for O T Managers/Enterprise
  Users

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A cheaper source of code
Normalized cost structure, percent of costs
Process based entirely in the United States
50
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Labor costs
Process based entirely in India
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Statutory costs
Based on Morgan Stanley Dean Witter, Deutsche
Banc Alex Brown International Data Corporation
McKinsey analysis
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18
Markup or margins
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12
Infrastructure costs
Travel other expenses
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5
100
35
Total
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The Value Proposition

• 40-60 cost reduction for offshored process
• Labor cost arbitrage, the reason for cost
  savings, likely to exist for next 20-30 years

COST
Its not just about low costs
PRODUCTIVITY
QUALITY

• Faster turnaround time
• Time zone difference
• 24 x 7 service
• Learning effect/ specialization

• Well defined quantifiable quality and process
  metrics
• Access to highly qualified skill pool

The Value Proposition
Source Nasscom-McKinsey
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Significant Improvement in Quality and
Productivity
UK based Retail Bank
US Financial Services Co
Quality

• Number of correct transactions / Numberof total
  transactions percent

• Total satisfaction factor

• Established methodologies and processes for
  better performance
• Well defined quantifiable quality and process
  metrics
• Access to highly qualified skill pool

• UK facility

• US facility

• Skill level of the people employed in India is
  significantly higher than that in parent location

• India facility

• India facility

Productivity

• Number of transactions/hour
• Indexed to UK

• Average speed of answer

• Seconds

• Faster turnaround time
• Time zone difference
• 24 X 7 service
• Learning effect / Specialisation

• UK facility

• US facility

• India facility

• India facility

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India Challenges Resolution
Resolution
Challenges
Communication and Cultural Issues
Strong local presence and Partners governance
structure
Partners strength and collaborative model
maximizes synergies from its horizontal project
skills
Domain Expertise
Partners ePMO Tool enables greater
control.Options to dedicate/buy operations.
Loss Of Control
Low probability/Impact. Robust COB Plan
Geo-political concerns
Offshore has improved dramatically in past
3yrs.50 of 74 CMM5 companiesare now in India.
Majesco, for instance, has 100 reference able
A/Cs
Poor Prior Experience w/Off-shore
Allow focus on value-added work. Spirit of free
trade
Socio-political Issues
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Initial Outsourcing of Trade Services to India

• Large Multinational Banks (mostly US-based) have
  been the prime-movers in off-shoring of Trade
  Services to India
• Evolved in a two-stage process 1) Centralization
  of local trade operations within India
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  2) Offshoring of Trade Services
  operations from
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  other countries

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Trade Services Offshoring Key Enablers

• Standardized processing norms
• Based on Uniform Customs Practices for
  Documentary Credits (UCP-500) which were very
  well understood in India
• Internal standards that Banks themselves adopted
• Technology as a key enabler
• Imaging technology intensively used (Almost 100
  of work off-shored is image-enabled)
• Reducing bandwidth costs during the 90s
• Ready availability of Trade processing talent in
  India
• An active trade-finance market has been in
  existence in India for over 30 years
• Further boost since economic liberalization WTO

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Trade Services The Operations Ecosystem
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Trade Services Being Outsourced to India

• Receipt Scrutiny of Application dox
• LC Preparation and maintenance
• Booking of credit lines / collateral maintenance
• Credit administration
• LC amendments
• Scrutiny of Import dox (Verification
  Authorisation)
• Release of Payments against Bills
• SWIFT Messaging
• Processing of Direct Remittances (non LC based
  transactions)
• Nostro Accounts Recon (for trade related
  transactions)
• Compliance (UCP, ICC, Central bank norms, and
  Banks internal norms)

• Dox Negotiation (scrutiny of Documents)
• SWIFT messaging (standard and non-standard)
• LC confirmations and advise to Exporter
• Nostro Account Reconciliation (for trade related
  transactions)
• Payments to exporters (Tracking Recon.)
• Treasury transactions processing

• Daily tasks of GL entries/recon etc
• Periodic tasks of
• reporting/monitoring or
• testing/documentation

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FX Trading Settlement Opportunities

• Fx Back-office operations were being off-shored
  to India on the back of other Fx related
  transactions
• Funds Transfers / Remittances
• SWIFT Messaging (for Custodial transactions,
  Trade transactions Fx remittances)
• Some of the processes being off-shored to India
  were
• Mid-office functions (deal ticket entry trade
  tracking, trade confirmation, collateral
  valuation and management, etc.)
• Back-office functions (Clearing Settlement)
• Accounting functions
• Future Challenges
• Complex Fx products Derivative products (Swaps,
  Swaptions, Caps floors, etc.) have made
  settlement compliance complicated posing a
  fresh challenge to off-shoring
• OTC market A substantial portion of the Fx
  trade is non Exchange-traded and therefore
  non-standardized making it difficult to off-shore
• Reducing settlement periods

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The Opportunity

• Treasury outsourcing is increasingly
  significantly GTN survey expects gt50 of
  multinationals by 2004
• 71 is currently to banks but 29 is to others
• Best-in-class will move to India and captives
  will expand their offerings.
• If US Banks dont leverage the offshore
  opportunity, directly or through a service
  provider, they will get disintermediated

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CONCLUSION

• Just do it!