The World is Flat: Is business process outsourcing (BPO) more than just low-cost resourcing? BPO challenges and opportunities for Romania and your career. The World Is Flat: A Brief History of the Twenty-first Century is a best-selling book by Thomas L. Friedman analyzing the progress of globalization with an emphasis on the early 21 st century. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Overview • • • www. sistec-sbsol. ro Introduction into BPO Economic forces behind BPO Global forces behind BPO Market forces behind BPO Sourcing considerations BPO development: from low-end to high-end services BPO market BPO countries and their skills Romania’s value proposition for BPO SBsol BPO vision and strategy for market penetration Career opportunities for students and graduates Academy of Economic Studies 11 October 2007
Introduction into BPO www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
What about you? Offshore Value chain Insourcing ITES Onshore Vertical industries SSC Global delivery BPO FPO LPO Outsourcing Global sourcing MPO ASP KPO Captives ITO Nearshore Supply chain www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Outsourcing q Outsourcing became part of the business lexicon during the 1980 s and refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. Outsourcing is utilizing experts from outside the entity to perform specific tasks that the entity once performed itself. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Business Process Outsourcing q The transfer of management and execution of an entire business process to an external service provider, including technology, people, and process. In engaging BPO services, clients are buying access to executed business processes and business outcomes from their BPO providers. (IDC) q The delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics. (Gartner) q The transfer of a function previously performed (or considered to be performed) in-house to an outside provider. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Information technology enabled services (ITES) BPO is a part of the Outsourcing Industry. It is dependent on Information Technology, hence it is also referred to as Information Technology Enabled Services or ITES. q a form of outsourced service which has emerged due to involvement of IT in various fields such as banking and finance, telecommunication, insurance, etc. Some of the examples of ITES are medical transcription, back-office accounting, insurance claim, credit card processing and many more. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions BPO is often divided into two categories: q back office outsourcing, which includes internal business functions such as billing or purchasing, and; q front office outsourcing, which includes customer-related services such as marketing or tech support. The most common examples of BPO are call centers, human resources, accounting and payroll outsourcing. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Use of a BPO as opposed to an application service provider (ASP) usually also means that a certain amount of risk is transferred to the company that is running the process elements on behalf of the outsourcer. q BPO includes the software, the process management, and the people to operate the service. q ASP includes only the provision of access to functionalities and features provided or 'served up' through the use of software, usually via web browser to the customer. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Knowledge Process Outsourcing is a sub set of Business Process Outsourcing. q Ø Ø Ø www. sistec-sbsol. ro Legal Process Outsourcing Financial Process Outsourcing Medical Process Outsourcing Academy of Economic Studies 11 October 2007
Definitions …. . shore Outsourcing q BPO that is contracted outside a company's own country is sometimes called offshore outsourcing. BPO that is contracted to a company's neighboring country is sometimes called nearshore outsourcing, and BPO that is contracted within the company's own country is sometimes called onshore outsourcing (also called domestic outsourcing). q Offshore simply means: "any country other than your own. " The Internet and high-speed Internet connections make it possible for outsourcing to be carried out anywhere in the world, a business trend economists call globalisation (also termed global sourcing or global delivery). q Global sourcing: a corporate sourcing strategy that identifies and leverages those human resources and assets, regardless of geographic location, most appropriate for meeting the organization’s needs, often coming from both nearshore and offshore locations. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Captive centre / Shared Services centre q q Captives (centres), also known as offshore insourcing or offshore shared services centres, help organisations lower operating cost and improve overall performance. Shared Service Centres: shared services pull together scattered, autonomously run, internal services operations of an organisation into mega-service centres, which are structured as independent business with their own budgets and bottom-line accountability. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Definitions Supply Chain q A supply chain, logistics network, or supply network is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer. q Supply chain activities (value chains or life cycle processes) transform raw materials and components into a finished product that is delivered to the end customer. Supply chains link value chains. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic forces behind BPO www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors How much should we do ourselves and how much should we buy from others? David Ricardo 19 th Century Economist Ronald Coase 1991 Nobel Laureate, Economics Where should we focus our resources? www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors Organisational Boundaries and Efficiency • Ronald Coase asked, “…why is there any organisation? , ” in other words, why do firms exist? - Firms exist because the cost of a central authority organising transactions internally costs less than organising them externally in the marketplace • Ronald Coase also asked, “Why is not all production carried on by one big firm? ” - Because, at some point the cost of organising the next transaction internally will be greater than the cost of organising that same transaction in the marketplace • Thus, Ronald Coase defined the limit of the size of the firm using the concepts of transaction, or interaction, costs * Coase, Ronald, The Nature of the Firm, Economica, 1937 www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors Organisational Boundaries and Specialisation • • • Adam Smith stated, “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them…. . ” (The Theory of Absolute Advantage) David Ricardo replied that it’s more than absolute advantage; it’s the comparative advantage of focusing on the commodity in which a nation has a differential advantage and relying upon trade to obtain other goods * Even if a nation has an absolute advantage in commodities that it acquires through trade It’s a trade-off of opportunity costs, focusing on what you do best Thus, David Ricardo defined the benefits of specialization and the need to focus on core competencies * Ricardo, David, On the Principles of Political Economy and Taxation, 1817 www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors Expanding the Boundaries of Business 21 st century 20 th century Machine Bureaucracy • Integrated • Diversified Networked Organization • Disaggregated • Specialized Sawhney, Mohanbir, Kellogg School of Management, 2001 www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors The real economics of offshoring • Cost savings($0. 58) • Goods/services sold to India ($0. 05) • Profits from India Ventures($0. 04) $1. 00 • Taxes($0. 04) • Revenues($0. 20) • Local suppliers($0. 09) $1. 45 -1. 47 0. 450. 47 0. 67 0. 33 $1 previously Spent in US, now offshored to India… …delivers value to India …brings savings and returns to US… …creates new value from reemploying Us Labor. . . and makes the global pie that much bigger The Mc. Kinsey Global Institute finds that off shoring not only produces value for the countries that gain the jobs but also frees up capital in the United States for more productive uses. Most displaced workers find new positions within six months—possibly even in new ventures financed with money saved by off shoring work to cheaper labour markets. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors Policy dialogue: Pro’s The arguments in most of such studies follow the logic of mainstream economics and are quite straightforward. 1. By moving work offshore, firms are able to lower their production costs. 2. Some domestic workers will be displaced but the benefits from lowering production costs, captured by the firms and customers, far outweigh any costs to displaced workers. 3. Many of the displaced workers will actually be net beneficiaries because they will be “freed up” to do more interesting and lucrative work. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Economic factors Policy dialogue: Contra’s While these studies have some merit, they are incomplete in some respects: 1. they assume a very optimistic re-employment scenario for “freed up” workers, predicting short durations of unemployment and higher wages in their new positions. 2. most do not account for the lost wages due to unemployment in their models. 3. the studies do not capture difficult to measure effects such as the impact on future innovation and security. (For instance, evidence is already surfacing that many of our best and brightest college students are avoiding technology majors because of outsourcing. ) 4. they ignore the downward pressure on domestic wages for jobs that are competed across borders. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Global forces behind BPO www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Global forces Trends that are changing the rules in today’s business environment 1. The shift from domestic to global economy 2. The shift from manpower to technopower 3. The shift from company-led to consumer-driven market forces 4. The shift from an industrial economy to a knowledge economy 5. The transformation of the employer/employee relationship 6. New relationships and governance structures concerning vendors and supplier 7. Shortage of skilled labour in development nations www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Market forces behind BPO www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Market forces Why do companies outsource? Cost Effectiveness Access to High Quality Resources Focus on Core Competencies Drivers of Outsourcing Higher productivity & Better service levels Technology Expertise Domain Expertise www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Market forces Main reasons for BPO Reduce costs through simplification and standardization 93% Increase productivity and service excellence to customers 63% Enhance focus on business unit operations vs. back office processing 58% Support new business process capabilities 37% Reduce costs through wage and labour arbitrage 31% Improve capability to integrate new business 26% Other 5% Source: SBPOA online survey, 77 respondents, 2005 www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Market forces Perceived benefits of BPO Lower cost 75% Improve service quality 64% Greater business flexibility 54% Lower capital investments 70% Fewer people in function 45% Predictable outcome 42% Increased accountability 32% Source: SBPOA online survey, 172 respondents, 2005 www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO development From low-end to high-end services www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO development A trend with a long history Manufacturing operations have been relocating to reduce costs for over 50 years • Improvements in telecoms, IT and reductions in the cost of computing enabled the service sector to develop new operational models • Customer focus and direct channel acceptance fuelled the growth of call centres • Cost reduction was the primary driver predominantly through relocation and better wage deals in country • BPO goes beyond technology and applications delivering integrated processes and outcomes Evolution of the BPO market • Advanced financial analysis and accountancy processes IT jobs and functions Call centres and data processing Phase III 1980 s www. sistec-sbsol. ro Phase II 1990 s current Academy of Economic Studies 11 October 2007
BPO development Outsourcing: historical context BPO Increasing complexity of legal and regulatory environment 1960 s Intense competition from foreign automakers Mainframe computing allows for timesharing 1980 s 1970 s Banking & brokerage outsourcing Pay roll outsourcing www. sistec-sbsol. ro Need to install ERP systems on time and within budget 1990 s IT outsourcing Auto manufacturing outsourcing Competition drives companies to seek more cost effective ways to perform internal process w/o sacrificing quality 2000 s Customer Care, Human Resources Supply Chain outsourcing Academy of Economic Studies 11 October 2007
BPO development Offshoring opportunities across the organisation Past IT Non IT www. sistec-sbsol. ro Current & Near Future • Application Development & Maintenance • Simple coding and porting from one language to another • Fixing the Y 2 K problem • Customer Contact Services • Transaction Services • HR Data Processing • Medical Transcription • • IT Consulting • Product Development • R&D • Engineering Design Services Insurance underwriting, risk assessment and equity research • Intellectual Property Research • Data cleaning, Financial Analytics • Business and Market research Academy of Economic Studies 11 October 2007
BPO development The offshore ITES/BPO marketplace can be segmented into two distinct pieces: transactional and full service/transformational relationships Stragegy Core Process Non-core Process Corporate Strategy Transformational BPO HR: Information Mgmt, Performance Mgnt, Employee Administration F&A: Regulatory & Compliance, Tax Mngt. Customer Care: Customer extension / selection HR: Payroll Processing, Benefits Processing, Recruiting, Education & Training F&A: Billing, Accounts Receivable, Accounts Payable, Customer Care: Helpdesk, Customer Retention/Acquisition Transactional BPO Information Technology www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
KPO offers unlimited services Insurance Consulting I-Banking Industry Telecom/FS/Retail Underwriting & Asset Management Synthesized Equities IP Portfolio Strategy Reports Research Analytics Research Claims Analysis Global Financial Patent Analytics Research Analytics Design BPO for Settlement Contact Centers & Customer Support SM KPO BPO Contact Centers & Customer Support www. sistec-sbsol. ro clients Contact Centers & Customer Support Academy of Economic Studies 11 October 2007
BPO market www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO market Global offshoring of services is growing rapidly www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO market Offshore BPO service market ($ in billions) 2005 -2009 CAGR 61% $ 42. 9 Romania’s Value Proposition $ 30. 2 $ 20. 1 $ 12. 6 $ 6. 4 - Competitive labour cost - Valuable human capital - Multilingual - Reliable Infrastructure - Low risk - Solid economic fundamentals - Competitive taxation In 2005 Offshore BPO represented 5% of the total global BPO market, but is expected to represent 25% by 2009. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO market Sales & marketing is the smallest BPO market segment The growth of call centre outsourcing has attracted most of the attention because it involves significant numbers of jobs from the source countries www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO countries www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO countries BPO & Outsourcing destinations worldwide www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO countries BPO locations by stage of growth Malaysia Pakistan Asia Pacific South Korea Thailand Vietnam Australia China Philippines India Singapore Brazil Americas Chile Jamaica Mexico Canada Venezuela Czech Republic Europe, Middle East and Africa (EMEA) Bulgaria Russia Hungary Romania Ukraine Poland South Africa Infancy www. sistec-sbsol. ro Emerging Escalating Ireland Israel UK Established Academy of Economic Studies 11 October 2007
BPO countries Competing countries High Singapore Hong Kong Location attractiveness • Infrastructure - Communication - Basic infrastructure • Country risks/FDI incentives - Attractive incentives - Political environment • Time zone attractiveness Holland Size of circle corresponds to number of qualified workers Ireland Australia U. K. India Romania ? Philippines Mexico China Low www. sistec-sbsol. ro Capabilities of workers • Qualifications/capabilities • Foreign languages (primarily English) • Quality of work/work ethic • Cost differential High Academy of Economic Studies 11 October 2007
BPO countries Country specialisation by niche Russia: • High-End Software Engineering Ireland: • Packaged Applications • Localization • Product Development Canada: • Application Development • BPO • Contact Centers www. sistec-sbsol. ro Israel: • High-End Software • Learning Systems China: • Embedded Software • Hardware Services • Localization • Application Development Romania: • Application Development • Contact Centers • BPO Philippines: • BPO • Contact Centers • Animation • Application Development India: • Application Outsourcing • ITO • BPO • Product Development • Contact Centers Academy of Economic Studies 11 October 2007
BPO countries BPO landscape in India Large Multinational Corporations Pure Play Indian BPO companies v EDS WNS v Accenture EXL Service v IBM ICICI One Source v HP 24/7 Indian BPO Industry Segments Companies with Captive Facilities Indian Integrated IT-BPO providers AMEX Infosys BPO Fidelity Wipro BPO DELL HCL Microsoft Nipuna (Satyam) www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO countries Eastern Europe focusing on Near-Shore Off-shoring… • • Robust education system with ample supply of professionals for analytical work • Moderate, but increasing labor costs • Non-English languages • www. sistec-sbsol. ro Highly talented pool of engineers and scientists Proximity to European markets Academy of Economic Studies 11 October 2007
BPO countries BPO (incl. R&D) landscape in Romania Large Multinational Corporations v Accenture v HP Pure Play BPO companies v Siemens v Alcatel v Infineon v Oracle v Freescale v ACI Conectys Easy. Call Wipro Genpact Contact. Line Romanian BPO Industry Segments Companies with Captive Facilities Microsoft www. sistec-sbsol. ro Romanian Integrated IT-BPO providers Techteam Sistec-SBsol XL World Siveco Softwin Intrarom Romsys i. Quest Academy of Economic Studies 11 October 2007
Romania’s value proposition for BPO www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
BPO value proposition Romanian competitiveness on the global ITO & BPO market Romania has a long history of education and research in all fields of engineering and software: 116 universities, 36 have a computer science related faculty Romania’s location is an advantage in itself - major multinational IT companies are present in Romanian graduates are multi-lingual (1 st place in the Certificate of Proficiency in English exam at Cambridge University) and world class concerning their competencies Romania’s density of software graduates per thousand inhabitants is significantly higher than in USA, five times higher than in Russia and nearly seven times bigger than in India. www. sistec-sbsol. ro Made in Romania’s legal system and culture - similar to those in Europe and US. The cost of a skilled professional = 1/3 in US and Europe Academy of Economic Studies 11 October 2007
BPO value proposition Romania University graduates in Romania (by education field) high performances in international competitions Arts 2% high percentage of economic & technically competent professionals Education Engineering 21% 32% Medicine strong language skills: English, French, German, Italian, Spanish, Russian, etc. highest growth rate of IT specialists in the region large skilled labor force at comparatively low wage rates 6% Law Economy 12% 27% Total number of University graduates in 2003/2004: 110, 533 Source: National Institute of Statistics www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy Vision “Our Business Is To Improve Other People’s Business ” Sistec-SBsol Constantly tailor our services to the needs of our clients Assure the right people at the right place Provide high quality services using latest technology Market leader provider of BPO services in Central and Eastern Europe www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy SBsol’s value proposition goes beyond costs Proven business knowledge and capability to implement successful business solutions SBsol’s Value Proposition Organized according to international standards of methodology and procedures Stable technology infrastructure Access to a low cost, large and high quality labor market www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy Strategy Our potential Our goals Grow Build customer awareness abroad Specialize our offer and concentrate sales efforts Focus on markets in which we are successful Add new features to our services tailored to clients’ ever-changing needs Experience in retail & logistics business ( B 2 B, B 2 C), member of RTC Holding www. sistec-sbsol. ro Expand Focus on adding competitive value for companies who expect high quality services Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy Growth and development opportunities Increase business development momentum Penetrate a new market – – High potential due to a thorough IT background (sales & distribution on Romanian market) Easy to access, low-cost and multilingual services Meaningful top management involvement Quality reviews – – – Recruit local professionals Target at decision making level Tailored value propositions Invest in marketing growth strategy Strong growth of outsourcing market Promote our competitive edge Step up marketing and brand building efforts – – – www. sistec-sbsol. ro Increase visibility on the market Focused reputation building Create consistency in delivering services Networking via events/forums Build customer loyalty (action) existing customers (Romanian market) Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy Our focus Functional (Horizontal) Solutions Customer Interaction Services Order Management Knowledge Services Finance & Accounting HR Outsourcing Industry (Vertical) Solutions Retail & Distribution Transportation & Storage Telecommunication Travel & Accommodation Banking Insurance Healthcare & Pharmaceuticals www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
SBsol BPO vision & strategy INDUSTRY SPECIFIC KNOWLEDGE Travel & Consumer Travel planning Reservations Airline schedule changes ticket exchanges Air Frequent flyer benefits & promotions rental Car reservations Hotel Limousine reservations processing Order Product inquiries Account billing Technical support www. sistec-sbsol. ro PROCESS EXPERTISE Financial Services & Insurance Application processing Balance transfers Credit verification transfers Fund Identity verification origination Loan maintenance Loan Check ordering Customer retention Credit scoring HIGH PERFORMANCE Consumer Technology & Telecommunication Insurance Customer service transcription Sales office Back Account activation processing Cross-selling Change management. Conference calling service B 2 B office services Back Provisioning and High. Low delinquency collections support Tech Account activation Remote PC troubleshooting domaintenance Web Retention Academy of Economic Studies 11 October 2007
Sistec-SBsol’s career opportunities for students and graduates www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Career opportunities Start your career here! • Junior business development managers (marketing & sales) • Account managers • Sales managers • Customer service representatives • Customer sales representatives • Team leaders • Operational managers www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Career opportunities What we offer • Competitive salary • Personal development plan • Coaching on the job • CRM training • Sales training • Customer contact training • Job rotation • Inspiring management team • Encouraging of self development • 300 professional colleagues with IT & business competencies • International work environment www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Career opportunities Start for Success Traineeship Program www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Career opportunities Start for Success Traineeship Program If you … … are dynamic, determined and flexible … communicate and socialize easily … have positive attitude and result-orientation START now your career in IT solutions business development! Join now the Start for Success Traineeship Program and you’ll get: . . . professional training in IT solutions sales. . . membership in a team of over 300 specialists. . . work experience in an important IT company www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Career opportunities Start for Success Traineeship Program Apply now! Send your CV at traineeship@sistec-sbsol. ro Or leave your CV at our stand to Angajatori de Top job fare (Palace Hall, 26 -27. 10. 2007) Every CV received till 27 th of October will participate to a tombola. You can win: Ist prize: HP Notebook Dual Core IInd prize: PC Desktop with TFT monitor IIIrd prize: Fujitsu Siemens PDA Details on www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
Thank you for your attention! Looking forward to meeting you in the near future. www. sistec-sbsol. ro Academy of Economic Studies 11 October 2007
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