Transcript Anupam Khanna_Nairobi SET Workshop April 2015

KENYA AS A SERVICES HUB
The role of services in economic transformation
#SupportingEconTransform
India’s Fabled IT/ITeS Services
Lessons for Kenya and Other Countries
Dr. Anupam Khanna
Nairobi, April 28, 2015
The Role of Services in Kenya’s Economic Transformation
Kenya Vision 2030 – SET Workshop
Trends in World Exports and Indian Exports of
Goods and Services in current USD (Index=100 in
1990)
3
Trends in Service Exports of India Since 1990
2000-01 Service Exports = $16,268 million
1990-91 Service Exports = $4,551 million
Insurance
2%
Transportati
on
22%
Misc Services
(Bus, Fin, etc.)
22%
Software+M
isc Services
(Bus, Fin,
etc.)
44%
Software
Services
41%
Travel
22%
Travel
32%
2010-11 Service Exports = $1,31972 million
Transportation Insurance
2%
13%
Misc Services
(Bus, Fin, etc.)
26%
Software
Services
48%
Travel
12%
4
Transportation
12%
Insurance
2%
Sophistication of Services Exports
5
Exports of Computer & Information Services
(US$ billions)
60
Exports of Computer and Information Services, 2000-2012
Ireland
50
India
40
30
United Kingdom
20
China
10
Philippines
0
2000
2001
2002
2003
2004
2005
2006
2007
Source: World Trade Organization Time Series on International Trade (2013)
6
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2008
2009
2010
2011
2012
2013
IT-BPM industry – the India story
Strong growth in industry revenues
A UNIQUE INDUSTRY
From USD 100 million in FY 1992 to USD 118 billion for FY 2014
• A truly global
industry
Contributing to economy
• Mission critical in
nature
4% (Value-Added) of GDP; 23-25% of exports; 7% of FDI share
Large private sector employer
Direct – 3+ million, Indirect – 9.5 million; Women – >30% of
workforce; Foreign nationals – >100,000
• Skill based industry
Leader in the global sourcing landscape
• Young industry:
average age 26-27
55% share of the global sourcing market; Large pool of IT-BPM
companies – 5000+
• Constantly evolving
value proposition
Emerging as an innovation hub
• Best practices – HR,
quality, security
Catalysing business transformation for global clients; Start-ups
creating innovative solutions
17-Jul-15
• Ever changing
technology
environment
7
Worldwide IT-BPM Spend Crosses USD 2 Trillion;
Global Sourcing Market Growing 2X of Global Spend
Worldwide IT-BPM spend
Global sourcing market
USD billion
USD billion
655
IT services
8-9%
3.1%
635
2013: USD
2.2 trillion
168
5.7%
BPM
159
Growth:
4.5%
392
124-130
134-140
53-55
55%
48-50
(2013)
5.9%
Packaged software
370
81-85
996
Hardware
India’s* share
951
76-80
4.8%
Up from 52%
in 2012
1,390-1,400
ER&D
1,375
2013
~1.5%
2012
• BFSI, manufacturing, healthcare offset reducing
government IT spend
• New lines of businesses, CMOs, SMBs, emerging
geographies/verticals driving IT adoption
2012
IT Sourcing
2013
Business Process Sourcing
• Buyers seek more platform solutions for specific
industry, geographic, and regulatory needs
• Outsourcing services based on cloud platform and
cloud model increasingly become the trend
* IT outsourcing numbers exclude ER&D; hence, not comparable with previous years Source: Booz & Company, Everest Research, IDC, NASSCOM
Brief history of Indian IT-BPO revenue
USD billion
86.0
76.0
69.1
59.4
47.5
50.1
40.9
31.7
24.2
18.2
13.4
9.8
6.3
8.2
9.9
13.2
Exports
28.8
32.0
21.9
31.7
32.0
23.8
16.2
Domestic
Source: NASSCOM
17-Jul-15
9
32.0
Brief history of Indian IT-BPO direct
employment
Figures (‘000)
450
365
285
180
205
500
527
562
826
601
876
637
918
676
956
635
738
770
877
958
1,003 1,153 1,295 1,411 1,500
415
513
FY2003 FY2006 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014E
IT-BPO Domestic
BPO exports
IT Services exports
The industry added 194,000 jobs in FY2013
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* Excluding Hardware
Source: NASSCOM
10
Evolution of the Industry Reinventing & Transforming in a Short Span
IT-BPO
Product and
Service
Offerings
Business
needs
 Data Entry
 Customer
support
 Software
development
 ADM
 Transaction
Processing
 Scalability
 Lower operating
costs
Late 80’s-Mid 90s
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 Y2K contracts
 ADM
 IT support
 Integration
projects
 Legacy migration
 Y2 K deadlines
Late 90s
 New service lines
such as KPO, LPO
 Large scale ADM
 Access to new
capabilities
 Accelerate time
to market
Early 2000s
 IT strategy and
consulting
 High-end
services –
analytics
 Engineering
design services
 Domain
expertise
 End to end
services
 Product
innovation
 End to end
product
development
 Business
transformation
 Access to R&D
capabilities
 Value creation
Mid 2000 to
present
Going
Forward…
11
Scale and complexity
End-to-end
Development
Discrete Processes
Services Portfolio Continually Expanding
IT Services
• ADM
• Infrastructure
outsourcing
BPM
• Customer
support
• Integration
• Transaction
processing
• Software
testing
• Knowledge,
legal services
• OSPD
• Data
management
• IT strategy &
consulting
• Analytics
Engineering
R&D
• CAD/CAM
• Embedded
design
Software
Products
Internet &
eCommerce
• Enterprise
solutions
• eCommerce
platforms
• Platforms
• Online
marketing
• Design and
R&D
• Apps
• Product
engineering
• B2C products
• SAAS
• Social media
technology
and solutions
• Content and
search
Only country in the world with the capability to provide complete end to end
services in IT, BPM, Products and ER&D
Source: NASSCOM
Offshore Services Global Value Chain
Source: CGGC (2010)
13
Business Model of an Indian Offshore
Services Provider
Headquarter: Corporate offices
where most of the important
administrative functions of the
organization are carried out. It is
not uncommon for offshore
services providers from
developing countries to have
delivery centers attached to
their headquarters.
• Delivery center: The facility
where services are developed
tailored for each client and
executed. These offices are
almost always located in
developing countries.
• Customer support offices:
These are principally sales and
customer service offices. They
provide a direct point of contact
with the client to develop an
understanding of client needs.
Source: CGGC, 2010
GIC Set-ups in Major Offshoring Locations
Capabilities of the Locations Compared
Capabilities across locations
Locations
Voice
KPO*
Locations comparison based on 10 dimensions*
Business
Processes
China
Philippines
Language
Data/IP Security
and Privacy
4
Global and Legal
Maturity
Labor Pool
2
0
Mexico
Brazil
Government
Support
8
6
India
Poland
10
Cultural
Compatibility
Infrastructure
Chile
Political and
Economic
Environment
Costa Rica
South
Africa
Sri Lanka
Educational
System
Cost
India
Philippines
China
Poland
South Africa
* Top 5 countries have been selected based on current outsourcing activities and
overall rating based on 10 parameters across locations
Source: Deloitte Analysis, Gartner: Country Analysis for Offshore Services, World Economic Forum (2012-13), NASSCOM
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Competitiveness in Service Value Chains
Source: Drake-Brockman (2011)
• Human Capital
• Intangible Assets
• Digital Infrastructure
• Institutional Quality
• Domestic Regulations
• International Connectedness
• Stakeholder Involvement
• Policy focus
17
17-Jul-15
Entrepreneurial Startups Infusing Energy &
Innovation
Diverse start-up landscape (Number of firms)
Emerging players
~1,000-1,200
~500
eCommerce
Small sized
~15,000 players
~400+
Education
250+
MPE, Retail,Travel
& Hospitality
120-150
Telecom, Real
Estate
Manufacturing
100+
Agriculture,BFSI,
Energy, Govt,
Healthcare
Increase in start-ups focusing on solutions around SMAC
~150-200
Hardware and
Devices
~750-800
Internet/Web
~800-900
• ~3X growth in new firms set up post 2005
• Bengaluru – one of the Top 20 startup ecosystems
globally
• Verticals- Education & retail gained significant traction
SMAC
Collaboration between large companies and startups
Source: NASSCOM
INDUSTRY STRUCTURE
Industry landscape changing as model evolves for
different ownership segments
By Size
FY2006
FY2008
FY2012
Large
3-4
Mid-sized
30-40
Emerging
Large
Large
7
11
Mid-sized
Mid-sized
75-80
85-100
100-120
Emerging
Small/start-ups
300-350
>3000
Emerging
~450-600
Small/start-ups
Small/start-ups
>3500
>4000
By Ownership
Updated numbers
GIC
FY2006
ISP
MNC
GIC
FY2008
ISP
Large: Rev > USD 1 billion; Mid-sized: Rev USD 100 mn- 1 bn, Emerging: Rev USD 10 million- 100 million; Small/Start ups: Rev<=USD 10 million
12-14%
MNC
10-12%
10-11%
GIC
MNC
FY2012
ISP
Inclusive ITeS Innovation
Examples
• Mobile Financial Services: EKO
• Mobile Phones for Data and Text
• Rural Development: Ekgaon , Nano Ganesh
• Health Diagnostics (Avoidable Blindness): 3nethra
• Public Health (Maternal & Child Health): e-Mamata
• Travel Services: iXiGO
• Unique Identification System: Aadhar
“SMAC” (Social Media, Mobility, Analytics and Cloud) --Reshaping the
Future of the Indian IT Industry
Mobile payments Smart cities
mBanking
Connected Health Pivot merchandising
mHealth Smart Buildings mGovernance Platform-as-a-Service
SMAC, is becoming a business reality
Drivers/ factors contributing to the
changing landscape of Technology
Social, mobility, analytics and cloud are reshaping
the business, the consumers and all traditional
approaches, Indian Industry has seen till now
 Movement towards the next orbit of innovation with
consumerization of IT
Transformation
Remodelling business processes
through harmonizing technology
advancement
Opportunity to move to higher-margin business
by offering creative solutions
 Help businesses grow dynamically instead of
increasingly cutting margins for typical IT contracts
Client- specific outcomes
A meaningful change in the business
requirements i.e., end-to-end solutions
Launching luxury product lines that comprise the
SMAC suite of technologies to go the next level
 Huge potential for revenue generation
IDC Indian IT vendors expected to generate over
New paradigm for business
Efficiency, Enhanced customer
experience, Reduced time to market,
Connectivity, IT Consumerization
Impact is highly evident
• Create a new digital
operating model and
transformation to a
permeable enterprise
• Engagement with a
growing digital ecosystem
• Empower enterprises to
embrace emerging
technology trends and to
benefit from the value
expectations of customers
• Innovative thinking in
business and enterprise
architectures
$225 billion in SMAC related revenue by 2020
Journey to the Cloud continues; enthusiasm for Big Data, Mobility and Social Analytics also remains strong
Technology can transform India’s ability to provide
basic services
Basic services
Potential technology and services’ solutions
Healthcare
50% of Indians do not have access to primary healthcare –
technology can provide it at half the cost
Financial
services
80% of Indian households are unbanked – technology can
enable access for 200 million families
Education
India faces a 3-fold shortage in teachers – technology can
address this through remote solutions (e.g., virtual
classrooms, recorded lectures by senior faculty, modular
multimedia content)
Public
services
India suffers from a leakage of 40-50% in public food
distribution – technology can ensure transparency
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Factors Supporting Entry & Competitiveness
• Facilitating Infrastructure for Knowledge Economy
• Vibrant Innovation System
• Easy Movement of People (including Cross-Border)
• International Connectivity (Hard & Soft Infrastructure)
• Telecommunications, Airports
• Global Standards, Interoperability
• Conducive Business Environment (Stable, Predictable)
• Effective Talent Management Ecosystem
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17-Jul-15
Policy Implications
• Industrial (more broadly, Development) Strategy
• New Avenues (Entry and Diversification)
• Small- and Medium-Enterprises
• Foreign Direct Investment (including “Captives”)
• Focus on Technological Spillovers to Move Up Ladder of “Sophistication”
• International Trade Policies & Agreements
• Mode 4 Services
• Cross-Border Data Flows
• Skill Development
• Tax Regime and Fiscal Issues
• Transfer Pricing
• Government Critical to Shaping “Demand” or Ecosystem
• Advance Market Commitment (e.g. Laptops for Students)
• Platforms (e.g. Aadhar)
• Incentives and Regulation
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17-Jul-15
A Concluding Thought
Support
Planning,
Do Not
Paralyse It
25
13-Feb-12
KENYA AS A SERVICES HUB
The role of services in economic transformation
#SupportingEconTransform