Extending India's leadership in the global IT and BPO industries: NASSCOM-Mckinsey Report 2005
NASSCOM-Mckinsey Report 2005
Extending India's leadership in the global IT and BPO industries
study reiterates the fact that IT and BPO industry is the growth driver of the Indian economy
defines winning strategies & imperatives for extending India's leadership in the global IT and BPO industries
highlights that significant untapped potential exists in global IT and BPO market
for BPO players, NASSCOM and McKinsey have jointly developed a benchmarking framework called Process360o to help providers identify key operational gaps
NASSCOM, the premier trade body and voice of the software and services industry in India, and McKinsey & Company, the leading management consulting firm, released the findings of'NASSCOM-McKinsey Report 2005- Extending India's leadership in the global IT and BPO industries.'
Based on the industry's experience over the last three years and the changing nature of customer needs, the report underlines the fact that a new approach needs to be followed by Indian IT companies in the coming years, to extend their global leadership position. NASSCOM-McKinsey Report 2005, like the previous reports (NASSCOM-McKinsey Report 2002 and NASSCOM-McKinsey Report 1999), will help set the agenda for the IT and BPO industry.
The NASSCOM-McKinsey Report 2005 assesses the evolving landscape, lays out the strategic and competitive factors that will influence India's global standing in the IT and BPO industries, and describes the growth opportunities that companies should explore.
Elaborating on the report, Mr. S. Ramadorai, CEO, TCS and Chairman, NASSCOM said, "Today the Indian IT and BPO industry is estimated to be USD 22 billion. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world. Extensive innovation by various industry stakeholders could accelerate the growth in export revenues and increase India's share in the global market substantially in the near future. In order to achieve this, we will require breakthrough collaboration by industry players, central and state governments and NASSCOM."
"Sustaining industry leadership will also require Indian players to continue driving the frontiers of operational excellence. For BPO players, NASSCOM and McKinsey have jointly developed a benchmarking framework called Process360o to help providers identify key operational gaps. The Process360 framework enables tangible improvements in cost, quality and speed/flexibility by analysing 14 different operational areas," he added.
Said Noshir Kaka, Partner, McKinsey & Company, "Our research suggests that the total addressable market for global offshoring is approximately $300 billion, of which $110 billion will be offshored by 2010. India has the potential to capture more than 50 per cent of this opportunity and generate export revenues of approximately $60 billion by growing at 25 per cent year-on-year till 2010. Inherent advantages like abundant talent supply, strong cost- and-leadership oriented companies, regulatory support, scaleable high-quality infrastructure, and a growing domestic market have been instrumental in driving the growth of this sector."
This could contribute 1 per cent per year to GDP growth, directly employ approximately 2.3 million people, provide indirect employment to another 6.5 million workers and pay for a massive infrastructure build-out by 2010. The industry could alone account for over 44 percent of export growth over the next five years.
Added Ramalinga Raju, Vice-Chairman, NASSCOM, and Chairman, Satyam Computer Services, "India has the potential to further accelerate export growth and achieve an additional $15-20 billion in export revenues. However, achieving this growth will require innovation across multiple dimensions like, business model innovation and knowledge innovation. It is also important for companies to focus on innovation since traditional growth engines such as call-centers and application development and management (ADM) are likely to face increasing price and competitive pressures."
"But, sustaining India's leadership is going to be no easy task," stated Jayant Sinha Partner, McKinsey & Company. He reasoned that three key issues could prove to be stumbling blocks if not systematically addressed. "First, the skills and quality of the workforce need to be improved, since only 25 per cent of technical graduates and 10-15 per cent of general college graduates are suitable for employment in the offshore IT and BPO industries respectively. Second, as margins come under pressure, companies must be able to continuously improve operational excellence, in addition to innovating and developing new service lines. And lastly, urban infrastructure needs immediate attention, as offshoring companies' deal with bottlenecks ranging from power to cafeterias. Further growth will have come to from entirely new business districts outside of Tier I and Tier II cities," he affirmed.
Furthermore, sustaining India's leadership will require breakthrough collaboration between the industry, central and state governments, and NASSCOM. A few imperatives that need to be addressed by the central and states governments include: (i) deregulating higher education and setting-up focused-education-zones to improve the country's educational system, (ii) drawing-up master plans to build 10-12 integrated townships with associated urban infrastructure like roads, international airports, and land development through public-private partnerships and innovative financing. And finally, ensuring free trade in services through the Mode 4 negotiations at WTO and establishing select agreements with countries.
Industry dynamics suggest at least four possiblewinning approaches for the next five years:
Global Champion: Full-service global IT and BPO provider offering multiple service lines and integrated solutions to large global companies
IT specialist: A focused IT-oriented service provider with a top five position in at least three or four major industry verticals and cross-industry service lines (such as infrastructure management services)
ADM (Applications Development & Maintenance) factory: One of the top three global low-cost providers of applications development and maintenance services through a "lean" operating environment built on a manufacturing mindset and superior scalability of operations
Specialist BPO providers: Three types of specialised BPO providers appear possible:
An operator of industry-standard transaction or platform-based services e.g., card processing;
A top three custom BPO services provider with distinctive capabilities in transition, process automation and re-engineering of customer processes;
A top three global player providing highly skilled services such as chip design, aerospace engineering, or chemical plant engineering
These four winning approaches will emerge over the next 3 to 5 years requiring companies to make deliberate choices about investing in specific horizontal and vertical IT and BPO capabilities and rewiring sales, solutioning and delivery accordingly. Companies that expect to earn superior returns over a sustained period will adopt one or more of these winning approaches and focus relentlessly on creating a recognized world-class platform.
Source: Nasscom
Extending India's leadership in the global IT and BPO industries
study reiterates the fact that IT and BPO industry is the growth driver of the Indian economy
defines winning strategies & imperatives for extending India's leadership in the global IT and BPO industries
highlights that significant untapped potential exists in global IT and BPO market
for BPO players, NASSCOM and McKinsey have jointly developed a benchmarking framework called Process360o to help providers identify key operational gaps
NASSCOM, the premier trade body and voice of the software and services industry in India, and McKinsey & Company, the leading management consulting firm, released the findings of'NASSCOM-McKinsey Report 2005- Extending India's leadership in the global IT and BPO industries.'
Based on the industry's experience over the last three years and the changing nature of customer needs, the report underlines the fact that a new approach needs to be followed by Indian IT companies in the coming years, to extend their global leadership position. NASSCOM-McKinsey Report 2005, like the previous reports (NASSCOM-McKinsey Report 2002 and NASSCOM-McKinsey Report 1999), will help set the agenda for the IT and BPO industry.
The NASSCOM-McKinsey Report 2005 assesses the evolving landscape, lays out the strategic and competitive factors that will influence India's global standing in the IT and BPO industries, and describes the growth opportunities that companies should explore.
Elaborating on the report, Mr. S. Ramadorai, CEO, TCS and Chairman, NASSCOM said, "Today the Indian IT and BPO industry is estimated to be USD 22 billion. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world. Extensive innovation by various industry stakeholders could accelerate the growth in export revenues and increase India's share in the global market substantially in the near future. In order to achieve this, we will require breakthrough collaboration by industry players, central and state governments and NASSCOM."
"Sustaining industry leadership will also require Indian players to continue driving the frontiers of operational excellence. For BPO players, NASSCOM and McKinsey have jointly developed a benchmarking framework called Process360o to help providers identify key operational gaps. The Process360 framework enables tangible improvements in cost, quality and speed/flexibility by analysing 14 different operational areas," he added.
Said Noshir Kaka, Partner, McKinsey & Company, "Our research suggests that the total addressable market for global offshoring is approximately $300 billion, of which $110 billion will be offshored by 2010. India has the potential to capture more than 50 per cent of this opportunity and generate export revenues of approximately $60 billion by growing at 25 per cent year-on-year till 2010. Inherent advantages like abundant talent supply, strong cost- and-leadership oriented companies, regulatory support, scaleable high-quality infrastructure, and a growing domestic market have been instrumental in driving the growth of this sector."
This could contribute 1 per cent per year to GDP growth, directly employ approximately 2.3 million people, provide indirect employment to another 6.5 million workers and pay for a massive infrastructure build-out by 2010. The industry could alone account for over 44 percent of export growth over the next five years.
Added Ramalinga Raju, Vice-Chairman, NASSCOM, and Chairman, Satyam Computer Services, "India has the potential to further accelerate export growth and achieve an additional $15-20 billion in export revenues. However, achieving this growth will require innovation across multiple dimensions like, business model innovation and knowledge innovation. It is also important for companies to focus on innovation since traditional growth engines such as call-centers and application development and management (ADM) are likely to face increasing price and competitive pressures."
"But, sustaining India's leadership is going to be no easy task," stated Jayant Sinha Partner, McKinsey & Company. He reasoned that three key issues could prove to be stumbling blocks if not systematically addressed. "First, the skills and quality of the workforce need to be improved, since only 25 per cent of technical graduates and 10-15 per cent of general college graduates are suitable for employment in the offshore IT and BPO industries respectively. Second, as margins come under pressure, companies must be able to continuously improve operational excellence, in addition to innovating and developing new service lines. And lastly, urban infrastructure needs immediate attention, as offshoring companies' deal with bottlenecks ranging from power to cafeterias. Further growth will have come to from entirely new business districts outside of Tier I and Tier II cities," he affirmed.
Furthermore, sustaining India's leadership will require breakthrough collaboration between the industry, central and state governments, and NASSCOM. A few imperatives that need to be addressed by the central and states governments include: (i) deregulating higher education and setting-up focused-education-zones to improve the country's educational system, (ii) drawing-up master plans to build 10-12 integrated townships with associated urban infrastructure like roads, international airports, and land development through public-private partnerships and innovative financing. And finally, ensuring free trade in services through the Mode 4 negotiations at WTO and establishing select agreements with countries.
Industry dynamics suggest at least four possiblewinning approaches for the next five years:
Global Champion: Full-service global IT and BPO provider offering multiple service lines and integrated solutions to large global companies
IT specialist: A focused IT-oriented service provider with a top five position in at least three or four major industry verticals and cross-industry service lines (such as infrastructure management services)
ADM (Applications Development & Maintenance) factory: One of the top three global low-cost providers of applications development and maintenance services through a "lean" operating environment built on a manufacturing mindset and superior scalability of operations
Specialist BPO providers: Three types of specialised BPO providers appear possible:
An operator of industry-standard transaction or platform-based services e.g., card processing;
A top three custom BPO services provider with distinctive capabilities in transition, process automation and re-engineering of customer processes;
A top three global player providing highly skilled services such as chip design, aerospace engineering, or chemical plant engineering
These four winning approaches will emerge over the next 3 to 5 years requiring companies to make deliberate choices about investing in specific horizontal and vertical IT and BPO capabilities and rewiring sales, solutioning and delivery accordingly. Companies that expect to earn superior returns over a sustained period will adopt one or more of these winning approaches and focus relentlessly on creating a recognized world-class platform.
Source: Nasscom
posted by Manoj Jain @ 3:02 AM
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