Outsourcing to Offshoring The New Paradigm

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Outsourcing to OffshoringThe New Paradigm
Trends in Financial Services Industry World-wide

• Girija Pande
• Regional Director Head
• TCS, Asia Pacific
• Nov 9th, 2005

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Drivers Inhibitors of Business Technology
Trends in Financial Services in Asia Pacific
Drivers
Increased consolidation to improve
efficiency Increased Competition Business
expansion risk management requirements Demand
for efficiency, speed flexibility Economic
growth Ongoing security concerns
Source Gartner
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Drivers of Outsourcing/ Offshoring

• Digitisation, Disaggregation of services
  Cheaper Bandwidth drives Offshoring
• 44 of worldwide contracts signed this year used
  offshore location v/s 40 in 04 (TPI)

• Global Delivery Model has come of age
• Its no longer Just India there is no One size
  fits all
• Multi-location, near-shoring offshoring
  strategies involving newer destinations like
  Central Europe, Latin America, China South-east
  Asia

Its no longer whether to Offshore Its What to
Offshore, Where to Offshore, How Fast How to
Manage it Successfully?
Source NASSCOM, IDC
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Why Do Organisations Outsource?
Survey of Major Banks by Forrester
Not Only Cost Reduction !!
Source Forrester Research
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Trends in Outsourcing

• Offshoring to gather Increased Pace
• By 2008, offshore spending by financial services
  firms in Europe US to nearly double to more
  than US 2 billion
• Strategic necessity rather than tactical option,
  especially for Europe Japan who have been
  late-comers

• Offshore vendors provide more extensive services
• No longer simply servicing low-end technology
  services from offshore
• Offshore providers now play a larger role in core
  operations
• Larger more Strategic operations to be
  off-shored such as mortgage processing, insurance
  underwriting claims processing

FS firms now demand Strong Offshore Capabilities
Coupled with Consulting Services from their
vendors
Source Datamonitor, Gartner report
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Emerging Offshore Destinations

• Total value of outsourcing to India USD 17.2bn
  in 2004 estimated at 44 of the worldwide total
  
• Worldwide spend is forecast to reach USD 94bn by
  2008
• Value of work outsourced to India is forecast to
  reach USD 48bn by 2008

Source neoIT, NASSCOM
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Evolution of Processes Outsourced
Value Add
Medical Transcription
Data Entry
Time
Rapidly moving up the value chain of outsourcing
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Outsourcing Choosing the Right Location
Organisational Form
HIGH
Outsource to service provider located
nearby (nearshore) Example litigation support
Execute process in-house and onshore Example
Pricing, Corporate planning
Operational Risk
Codify/ Measure Quality ( Problem with Outsourced
Processes)
Offshore and outsource to service
provider Example data entry, transaction
processing
Use extended organization offshore, but conduct
frequent process audits Example Customer data
analysis, market research analysis
LOW
Structural Risk
Use Metrics (Problem with Providers)
Source HBR
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Outsourcing Choosing the Right Location
Organisational Form
HIGH
Execute process in-house and onshore Example
Pricing, Corporate planning
Execute process in-house and onshore Example
Pricing, Corporate planning
Outsource to service provider located
nearby (nearshore) Example litigation support
Use extended organization offshore, but monitor
closely in real timeExample supply chain
coordination, bioinformatics
Set up captive center offshore Example equity
research
Offshore and outsource to service provider over
time Example Insurance claims processing,
customer support
Operational Risk
Codify/ Measure Quality ( Problem with Outsourced
Processes)
Offshore and outsource to service
provider Example data entry, transaction
processing
Use extended organization offshore, but conduct
frequent process audits Example Customer data
analysis, market research analysis
Use extended organization offshore Example
telecollection, technical support
LOW
Structural Risk
Use Metrics (Problem with Providers)
Source HBR
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Future of Outsourcing

• Vendor Consolidation for integration of IT/ BPO
  Services

• Companies looking for well-established vendors
  who have Financial muscle, Global network
  Multiple service offerings for end-to-end
  services eg. IT, BPO, Engineering Services,
  Consulting, etc (eg. Oracle)
• Integration of IT-BPO contracts becoming more
  common

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Future of Outsourcing

• Decreasing Mega deals Single Vendor ? Best - of
  Breed Multi- Vendors

• Lower Capital Intensity
• Retention of fixed capital in-house

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The ABN Amro Deal
Multi-vendor
European Company
ABN Amro is handing off the bulk of its IT
operations to five outsourcing vendors under
contracts totaling more than 2 billion and
involving 3,200 jobs. In doing so, the Amsterdam
financial company is joining the ranks of
multinationals that are increasingly loath to
turn over their critical technology assets to a
single IT-services vendor. Instead, some CIOs at
global companies are enlisting a team of service
providers, hoping to reduce risk and get better
prices--even if it increases the complexity and
management challenges. .The landmark
engagement is expected to generate committed
revenues for TCS of over EUR 200 million over the
next five years. Leveraging its Global Delivery
Model, through centres in Latin America and
Hungary, TCS will manage a major part of ABN
AMRO's Application Support and Enhancement
services for its operations in the Netherlands,
Brazil as well as its Private Client Business
globally.
Global Delivery Model
Multi-million deal, Tier-1 Indian player
Source Cover Story, Information Week Sept 5,
2005 TCS Press Release
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Tata Consultancy Services

• Pioneered Indian IT Industry in 1968
• One of Asias Largest Software Services Co.
• Revenue 2.24 Billion USD in FY 2004-05
• Over 53,000 IT Consultants across 49
  nationalities
• Global Spread of 157 offices across 34 countries
• 33 Delivery Centers in 10 countries
• First Enterprise-wide both CMMi PCMM Level 5.0
  certified company in the world
• Clients include 7 of the Top 10 Fortune 500 US
  companies
• Substantial Investments in Training and Research
• Best Employer Award by Dataquest, 2005

Vision Global Top 10 by 2010
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TCS in China

• Presence
• Headquarters at Shanghai
• Global Development Centre at Hangzhou
• Sales/ Representative Office at Beijing

• The first and only organization in China
  certified at CMMI PCMM level 5
• First TCS Engineering Services Delivery Centre
  outside India
• Supporting multi-national customers in 3 poles
  US, Europe, APAC
• Chinese, English, Japanese Korean Language
  Capability

• Current Strength gt 250 Consultants
• 90 Local Recruits

The Vision Establish a World Class Solution
Delivery Capability
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Thank You!