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Business Process Outsourcing and Offshoring (BPO) Business Process Outsourcing and Offshoring (BPO)

Contents • • • Defining BPO Background: South Africa’s window of opportunity Gaps South Contents • • • Defining BPO Background: South Africa’s window of opportunity Gaps South Africa need to address South Africa’s strengths, weaknesses, opportunities and threats The actions taken Sector support programme – – – Government assistance programme Talent development Marketing inititiative BPO standards 2 nd Economy interventions Telecommunication costs

Defining BPO – – – Payment services Finance and accounting Recruiting and staffing Hiring Defining BPO – – – Payment services Finance and accounting Recruiting and staffing Hiring administration Records management Benefits administration – HR/Administra tion – – Customer care Customer support Collections Helpdesk Telesales and telemarketing (Inbound/outbound) Web sales and marketing other SMA Payroll services – – Credit/debit card services Check processing EDI Other transaction processing – – – Billing services Accounting transactions Financial reporting and other Tax consulting and compliance Risk management Treasury/financial management – – Engineering Design Animation Network consultancy Business knowledge services – – Financial analysis (? ) Database marketing and customer analysis Biotech research Other non proprietary research Administration /General back-office – – – High end offshoring – – Data entry Document management Claims processing Tax management Asset management Other (correspondence and report production)

Background: South Africa’s Window of Opportunity – BPO&O global market is expected to grow Background: South Africa’s Window of Opportunity – BPO&O global market is expected to grow from $10 b to $50 -60 b by 2008 • 40 -50% of the growth in banking and insurance – Result in an additional 3 m jobs worldwide, • 200 -500 k will be contested by SA and other ‘tier 2’ players – SA is well positioned to exploit this opportunity • create 65 -100 k jobs, • attract $90 -175 m in real FDI, • GDP contribution of 0. 3 -0. 5%. • substantial positive effect on BEE, SMME and Geographic Equity with respect to job creation

Gaps SA needs to address • Talent availability: availability of managerial and agent level Gaps SA needs to address • Talent availability: availability of managerial and agent level talent • Cost of operation: SA is about $7 -8/hour/full time equivalent agent costlier than lowest cost centers, (e. g. , India, Philippines) • Risk of operation: Perceived issues exist around personnel security and crime rates in SA • Set-up assistance: setup assistance and time required to complete set up requirements • Regulations: Concerns have been raised by companies on the flexibility of the labour regulations. • Third party vendor landscape: Only 4 -5 scale players with experience of migrating international business are available in SA today • Marketing activities: Target marketing efforts conducted by provinces are not competitive in scale and sophistication

Strengths Weakness Opportunity and Threat Analysis (SWOT) • Strengths – Cultural and language familiarity Strengths Weakness Opportunity and Threat Analysis (SWOT) • Strengths – Cultural and language familiarity – Quality of business infrastructure – Economic and political stability – Quality of life and attractiveness of location – International connectivity – Adaptability – Entrepreneurial culture

SWOT Analysis • Weaknesses – Cost of operations (labour and telecom) – Inadequate government SWOT Analysis • Weaknesses – Cost of operations (labour and telecom) – Inadequate government support and investment (e. g. tax, incentives) – Talent gaps (agent and middle management) – Quality and cost of transport – Perceived security risk – Investor relationship management (marketing effectiveness) – Lack of scale vendors – Difficulty of set-up

SWOT Analysis • Opportunities – Demand surplus in the traditional BPO&O market as India SWOT Analysis • Opportunities – Demand surplus in the traditional BPO&O market as India and China face supply bottlenecks – Opportunity to offer specialised services in sophisticated industries (e. g. Financial Services) – A foundation of multi-language skills – A location proposition to regional (Africa-based) players – An alternative location for captive/vendors already present in 1 st tier locations e. g. , India – Exploitation of country synergies e. g. culture, legal, regulatory – Exploit existing relationships

SWOT Analysis • Threats – Pace of delivery against telecom deregulation agenda – Risk SWOT Analysis • Threats – Pace of delivery against telecom deregulation agenda – Risk of union resistance (cf. atypical employment) and constraining labour regulations (cf. overtime) – Inability to build a strong, coherent industry body – Inability to open up lower cost quality talent pools and build sufficient managerial capacity – Negative perceptions/uncertainty regarding gating criteria and issues such as HIV, BEE and crime – Exchange rate volatility

The actions taken • • • to exploit the opportunity have been largely coordinated The actions taken • • • to exploit the opportunity have been largely coordinated through a partnership between the dti and the Business Trust. under the direction and leadership of His Excellency, the Hon. Minister Mandisi Mpahlwa, MP. (The Minister of Trade and Industry and Director of the Business Trust). The partnership also include key private and public sector decisionmakers, namely: – Ms Thoko Didiza (Minister of Public Works and Director of the Business Trust), – Ms Elizabeth Thabethe (Deputy Minister of Trade and Industry), – Mr Derek Cooper (Chairman of Standard Bank and Director of the Business Trust) and – Mr Eddie Funde (Chairman of the SABC and Chairman of the industry body, Business Process enabling South Africa-BPe. SA). • Operations are directed by – Dr. Raymond Ngcobo (Chief Director for Strategic Competitiveness Unit, Enterprise and Industry Development Division of the dti), – Mr. Brian Whittaker (CEO of the Business Trust) and – Mr Mfanu Mfayela (CEO of BPe. SA).

Sector Support Programme – Five work streams were identified: • • • Government assistance Sector Support Programme – Five work streams were identified: • • • Government assistance and Support Talent development Marketing Industry mobilisation BPO&O standards – Additional work streams have been identified • Telecommunications pricing packages for the BPPO&O sector • BPO 2 nd economy strategy

GAS Programme • The GAS programme was designed to support the development of the GAS Programme • The GAS programme was designed to support the development of the BPO&O sector, through: – Providing incentives to enhance the competitive advantage – Close the cost gap for BPO&O operations when compared to other BPO destinations such as India and Philippines – Address market failures that result in the high cost structure • Approved in December 2006 by Cabinet – – Full roll-out in March 2007 The objective of the investment incentive is to attract BPO&O investment that creates employment opportunities. The grant is provided depending on the value of qualifying investment cost and employment creation. The grant ranges between R 37, 000 and R 60, 000 per seat and is offered to local and foreign investors establishing projects that aim primarily to serve offshore clients.

Benefits • INVESTMENT GRANT Employment Created Qualifying Investment Costs Per Seat Grant Per Seat Benefits • INVESTMENT GRANT Employment Created Qualifying Investment Costs Per Seat Grant Per Seat 200 – 499 At least R 74, 000 R 37, 000 – R 44, 600 500 > Greater than R 89, 200 R 44, 601 – R 60, 000 200 > Less than R 74, 000 R 37, 000 - R 52, 300 or 50% of agents’ salary costs for 2 yrs, whichever is lesser

Talent Development • The most critical element of a distinctive value proposition – the Talent Development • The most critical element of a distinctive value proposition – the ultimate basis for competition “TALENT AVAILABILITY” SA starts with a good foundation of trainable people, however considerable training is needed to deepen the talent pool There is a need for substantial government investment through • • – – • Company specific training and work readiness training Work Readiness Programme known as Monyetla is an initiative between the dti and the Department of Labour – – • aims to take unemployed matriculants or graduates through a process of learning work-readiness skills. in its pilot phase aiming to train 1000 learners at a cost of R 15 000 each The Training and Skills Support Grant is directed towards the cost of providing company specific training (as opposed to industry wide training) up to a maximum of R 12, 000 per agent. – The incentive grant is over and above the assistance obtained through the Sector Education and Training Authorities (SETAs) and is complementary to the BPO&O Investment Grant.

Previous and proposed initiatives Previous and proposed initiatives

Previous and proposed initiatives Previous and proposed initiatives

Marketing • To persuade the best companies to do business in S. A. and Marketing • To persuade the best companies to do business in S. A. and remain in S. A by: – Understanding and properly communicating the SA Value proposition. – Encouraging regional and industrial diversity – Ensuring a competitive environment ( one stop shop) – Removing Regulatory obstacles • The initiative straddles both targeted and broad-based marketing. – Targeted marketing focuses on attracting and securing selected high impact foreign investors, who will in turn create a groundswell of other investor interest. – Broad-based marketing encompasses the supporting of government and industry initiatives, to raise South Africa’s BPO&O global profile, with the aim of securing a dominant Tier 2 position.

BPO&O Standards • A set of 3 new standards geared towards service quality • BPO&O Standards • A set of 3 new standards geared towards service quality • Address Inbound and Outbound Contact Centres and Back. Office Processing Operations standards in four categories: • Leadership and Customer Service Management • Human Resource Management • Operations Management • Technical Resource Management • SA Bureau of Standards (SABS) is now turning these into national standards • ISO is interested in the standards for the first global standard for BPO&O

BPO in the 2 nd Economy • Need to shift from concentration in main BPO in the 2 nd Economy • Need to shift from concentration in main Metropolitan areas (JHB, DBN and CT) to ensure equitable distribution of benefit • New designated areas have been identified to direct some investment to depressed communities • Criteria for selection – Levels of unemployment and poverty – Availability of buildings – BPO potential in terms of local economic development – Availability of ICT Infrastructure – Talent availability and development

Identified sites Identified sites

Telecommunication costs • Working with Do. C on infrastructure for designated areas/ICT hubs • Telecommunication costs • Working with Do. C on infrastructure for designated areas/ICT hubs • Negotiating with Telkom for a developmental pricing framework – – Large offshore clients (>1000 seats) Domestic clients SMME’s Designated areas • Work is ongoing

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