presentation gsbd compiled 9-9-06[1]

8/8/2019 Presentation GSBD Compiled 9-9-06[1]

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Global Sourcing Global Sourcing A Strategic A Strategic Business Activity Business Activity

Group 1Group 1


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PresentersPresenters

Virendra Lamba Virendra Lamba Roll no 52 (Introduction)Roll no 52 (Introduction)Bedanta Choudhury Bedanta Choudhury Roll no 10 (G eneral Trends)Roll no 10 (G eneral Trends)Preetika Anand Preetika Anand Roll no 28 (Off shoring )Roll no 28 (Off shoring )

Satis h Menon Satis h Menon Roll no 43 (Backsourcing)Roll no 43 (Backsourcing)IP Bharti IP Bharti Roll no 16 (Cost Factors)Roll no 16 (Cost Factors)M CBhardwajM CBhardwaj Roll no 20 (Cost Factors)Roll no 20 (Cost Factors)

R K DattaR K Datta Roll no 37 (Value PropositionRoll no 37 (Value PropositionSunil Kini Sunil Kini Roll no 47 (Sourcing Issues)Roll no 47 (Sourcing Issues)Vandana Ray Vandana Ray Roll no 49 (Conclusion)Roll no 49 (Conclusion)


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IntroductionIntroduction

Global sourcing occurs when buyers purchase Global sourcing occurs when buyers purchase goods and/or services f rom sellers located goods and/or services f rom sellers located anywhere in the world. anywhere in the world.

Global Sourcing is best def ined as the process of Global Sourcing is best def ined as the process of identif ying, evaluating, negotiating and con f iguring identif ying, evaluating, negotiating and con f iguring supply across multiple geogra phies in order to supply across multiple geogra phies in order to reduce costs, maximize per f ormance and mitigate reduce costs, maximize per f ormance and mitigate risks.risks.


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Global Sourcing is a key ingredient f or cor porate Global Sourcing is a key ingredient f or cor porate survival. survival.

Low cost labour,Cheap international logistics

Less Regulated Operating Environments

Global sourcing helps companies reduce their costs by Global sourcing helps companies reduce their costs by 10%to 35%. 10%to 35%.

An engineer in the US costs $87 per hour, while the same skill set in India costs just $25.1. Asuccess f ul transition results in an instantaneous cost savings of 70%.

Sourcing decisions require companies to balance the Sourcing decisions require companies to balance the tradeo ff s tradeo ff s

Cost, Per f ormance and Risk


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Cost savings, however, are a oneCost savings, however, are a one--time return. This time return. This off shore move brings a host of new challengesoff shore move brings a host of new challenges.

Wage inf lation and attrition rates skyrocket as demand outstri ps the supply of talent. (Ireland is already priced out of traditional help desk services. Indias rates are nearly doubling annually, as f irms attempt to retain sta ff they have diligently trained.)

Companies are now looking beyond the oneCompanies are now looking beyond the one--time, time, costcost--based decision to move off shore and are based decision to move off shore and are broadening the sco pe of their global sourcing broadening the sco pe of their global sourcing strategy. strategy.

This includes expanding beyond the initial low-cost region into multiple locations around the world to mitigate inf lationary or geopolitical risks..


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Outsourcing is not synonymous with o ff shore The need is to explore a broader approach to achieving its development, production, and support goals

Discussions no longer center on cost.The need is to address more strategic challenges of productivity, quality, and sustainability.


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Four Four--phased development process phased development process Phase 1: Domestic purchasing only,Phase 2 : Foreign buying based on need

Phase 3:Foreign buying as part of the procurement strategy Phase 4: True global sourcing eff ort.


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The Fif th PThe Fif th P

Strategic procurement conce pt with an Strategic procurement conce pt with an international f ocus to reap economic international f ocus to reap economic

advantage.advantage.


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This shif t in pers pective raises a host of new questions :

Which markets off er the best short- and long-term potential ?What about the geopolitical risks in emerging markets ?Which partners provide the most stable coverage ?Can we f uture-proof our sourcing model ?

What about communications between partners and internal sta ff ?How will the global off ices react to the new team ?


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Global Sourcing Global Sourcing Trends in Global Trends in Global Sourcing Sourcing

Bedan ta Choudhur yBedan ta Choudhur y

Roll no .10Roll no .10


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Trends in Services Sourcing (1 /2)Trends in Services Sourcing (1 /2)

TheThe realreal secretsecret o f of sourcingsourcing successsuccess isis inin "right"right--sourcing"sourcing"Choosing and t hen success f ully implementing the right strategy f or each organization at a particular point in time.

AA trendtrend thatthat showsshows maturitymaturity inin thethe ITIT OutsourcingOutsourcing marketmarketandand continuedcontinued aboveabove--averageaverage growt hgrowth inin BPOBPOCompaniesCompanies f indingf inding newnew areasareas beyondbeyond thosethosetraditionallytraditionally consideredconsidered asas rightright f or f or outsourcingoutsourcing

HRoutsourcing (HRO)Procurement Outsourcing (PO)Finance & Accounting Outsourcing (F&AO)


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Manu f acturing SourcingManu f acturing Sourcing

An appropriate manu f acturing strategy could provide a competitive An appropriate manu f acturing strategy could provide a competitive advantage in terms of cost, delivery, quality, innovation, and advantage in terms of cost, delivery, quality, innovation, and f lexibilityf lexibilityThe location of manu f acturing has a strong implication on these, The location of manu f acturing has a strong implication on these,

primarily on cost, delivery and f lexibility primarily on cost, delivery and f lexibility The economic impact of suc h practices is under great dispute, The economic impact of suc h practices is under great dispute, Advocates claim that off -shoring has a positive impact on national productivity due to the access to cheaper services and products, Opponents ref er to the adversarial impacts of the resulting unemployment

Disputing the theorem that workers in the industrialized countries will be able to trans f er to higher, more value-added activities once the basic manu f acturing operations have been relocated.


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Multi SourcingMulti Sourcing

AA greater greater desiredesire f or f or improvedimproved operationaloperational e ff iciencyeff iciency andandacceleratedaccelerated growt hgrowth of of clientsclients businessesbusinesses isis drivingdriving thethesourcingsourcing strategystrategy

Theref ore organizations are looking increasingly at moreintegrated, less discrete sourcing o ptions.

CustomersCustomers areare increasinglyincreasingly s plittingsplitting upup dealsdeals t hatthat wouldwouldpreviouslypreviously havehave beenbeen putput withwith aa singlesingle vendor vendor withwith aa aimaimtoto receivereceive moremore f lexible,f lexible, bestbest--of of --breedbreed servicesservices..AA keykey issueissue withwith multimulti--sourcingsourcing isis thatthat:: makingmaking itit workworkrequiresrequires strongstrong butbut f lexiblef lexible governance,governance, andand moremore eff ort,eff ort,resourceresource andand skillsskills


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Business Process SourcingBusiness Process Sourcing

The core of BPO has traditionally been the outsourcing of f ront The core of BPO has traditionally been the outsourcing of f ront and middleand middle--off ices and which still represents over 70%of the BPOoff ices and which still represents over 70%of the BPOmarket. market. HRoutsourcing, in f act under pinned the continued growth of the HRoutsourcing, in f act under pinned the continued growth of the BPO market and is likely to f uel f urther growth in f uture. BPO market and is likely to f uel f urther growth in f uture. Procurement outsourcing has been slow to achieve traction but Procurement outsourcing has been slow to achieve traction but customers are coming to realize that it off ers the opportunity to customers are coming to realize that it off ers the opportunity to secure a potential double bene f itsecure a potential double bene f it

Savings on operational costs at the time of outsourcingSavings on goods and services procured through better re-negotiation with suppliers.

Typically, if a large organization's indirect spend accounts f or 20%Typically, if a large organization's indirect spend accounts f or 20%of revenue, and if an outsourcer can deliver savings on that of revenue, and if an outsourcer can deliver savings on that around the 10%mark, PO is an attractive proposition. around the 10%mark, PO is an attractive proposition.


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Global Sourcing Global Sourcing Offshoring Offshoring

Pr eet i ka Anan dPr eet i ka Anan d

Roll no . 28Roll no . 28


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Off shoringOff shoring


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Off shoring Off shoring An overviewAn overview

Off shoring Off shoring the process of relocating business the process of relocating business processes to lower processes to lower--cost overseas destinations cost overseas destinations is a is a growing activity. growing activity. 11 percent of the 1.46 billion jobs worldwide have the 11 percent of the 1.46 billion jobs worldwide have the

potential to be per f ormed remotely.potential to be per f ormed remotely.By 2008, total off shore employment will grow to By 2008, total off shore employment will grow to approximately 4.1 million.approximately 4.1 million.Experts predict that growth in the off shore marketplace Experts predict that growth in the off shore marketplace will continue at the rate of over 30% per annum.will continue at the rate of over 30% per annum.India continues to lead the global sourcing picture. India continues to lead the global sourcing picture. However, many new countries suc h as Canada, China, However, many new countries suc h as Canada, China, Czech Republic, Hungary, Ireland,P hilippines and SouthCzech Republic, Hungary, Ireland,P hilippines and SouthAf rica are entering the marketAf rica are entering the market


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Favorite off shore country is IndiaFavorite off shore country is India


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ComparisonComparison

0.32 0.791.85

3.27

28.24

12.2

5.13

29%27%25%

13%14%

11%

25%

0

5

10

15

20

25

30

Mexico Philippines China EasternEurope

Others Canada India

$ B

0%

15%

30%

45%

60%

75%

90%

% (CAGR)

2002 2005 2008 CAGR

Total Market Size ($ B)Total Market Size ($ B)

20022002 17.617.6

20052005 29.929.9

20082008 51.851.8


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Services being off shoredServices being off shored

Applicationservices

Businessprocess

outsourcing

Infrastructureservices

Consulting

Contact centers, collection services, KPO(research/analytics), mortgage processing,legal services, tax preparation, claimsprocessing

Architecture, IT strategy, process, quality,strategic sourcing

Monitoring, server mgmt., DBA, DT mgmt

Testing, App Dev, maintenance, productionsupport


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ITand BPO serviceITand BPO service

G lobal BPO Revenue G lobal IT Services Revenue

India Offshore IT Services Revenue

Total Offshore IT Services Revenue

India Offshore BPO Revenue

$ Billion

Total Offshore BPO ServicesRevenue

0

100

200

300

400

500

600

700

800

2004 2005 2006 2007 2008 20090

10

20

30

40

50

60

70

Source: neoIT


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Geographic TrendsGeographic Trends

United States United States It is estimated that 70%of off shoring comes f rom the US.Outsourcing market is expected to grow by average of over 9%over 2005-10.

A key driver will be increased adoption of BPO as companies prioritize the outsourcing of key business processes.

EuropeEuropeUKis the second largest client country f or off shoring services

UKremains the biggest market f or BPO deals and, generally across Europe, demand f or outsourcing is growing.


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Geographic TrendsGeographic Trends

AsiaAsiaSourcing market is supply-side driven.

Japan, remains the enigma of the sourcing market. According to a recent survey it is estimated that, 14.8%of Japanese cor porations have used IToutsourcing f or more than 3 years; 19.8% have considered IToutsourcing but decided against it; but a startling 50.9%of Japanese cor porations are not currently considering the use of IToutsourcing.


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Global Sourcing Global Sourcing Backsourcing Backsourcing

Sa tish Menon Sa tish Menon

Roll no .43Roll no .43


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BACKSOURCINGBACKSOURCING

Backsourcing is bringing f unctions that were Backsourcing is bringing f unctions that were outsourced back into an organization. outsourced back into an organization.

Like outsourcing, backsourcing is expensive and Like outsourcing, backsourcing is expensive and should only be done when a f ull investigation of the should only be done when a f ull investigation of the alternatives has been undertaken and the decision alternatives has been undertaken and the decision

to backsource is clearly the right one. to backsource is clearly the right one.


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Here are the Seven Practices of Backsourcing that Here are the Seven Practices of Backsourcing that should be considered.should be considered.

1. Ask, Why Did We Outsource ?1. Ask, Why Did We Outsource ?The f irst best practice of backsourcing is to understand why The f irst best practice of backsourcing is to understand why the f unctions were outsourced in the f irst place so that the the f unctions were outsourced in the f irst place so that the decision to backsource can be appropriately evaluated.decision to backsource can be appropriately evaluated.


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Good reasons to outsource include :Good reasons to outsource include :The f unction was nonThe f unction was non--core and it was outsourced to allow core and it was outsourced to allow adequate time to be spent on core f unctions. adequate time to be spent on core f unctions. To reduce costs. To reduce costs. To access the providers stateTo access the providers state--of of --thethe--art technology. art technology. To improve customer satis f action. To improve customer satis f action. To obtain a competitive advantage. To obtain a competitive advantage. To avoid capital expenditure. To avoid capital expenditure. To increase capacity. To increase capacity.


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2. Consider AllLegal Issues2. Consider AllLegal IssuesA key consideration when making the backsource decision is A key consideration when making the backsource decision is what the contract says about removing the outsourced business what the contract says about removing the outsourced business f rom the provider. Term of the relations hip, notif ication period is f rom the provider. Term of the relations hip, notif ication period is

required to remove the outsourced business, regulatory required to remove the outsourced business, regulatory requirements ?requirements ?

3. Gain Clear Commitment3. Gain Clear CommitmentThe decision to backsource should be made with the The decision to backsource should be made with the understanding that your organization has made a commitment to understanding that your organization has made a commitment to reinvest in this portion of your business. If this commitment is reinvest in this portion of your business. If this commitment is not clear, the backsourcing decision needs to be reevaluated. not clear, the backsourcing decision needs to be reevaluated.


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4. Figure Out What Has Changed 4. Figure Out What Has Changed Chances are very good that the systems, f unctions and Chances are very good that the systems, f unctions and processes you outsourced are considerably diff erent than processes you outsourced are considerably diff erent than the f unctions and processes you backsource. the f unctions and processes you backsource.

Theref ore, one of the most challenging hurdles to clear Theref ore, one of the most challenging hurdles to clear involves f ully investigating and understanding if the involves f ully investigating and understanding if the

knowledge base you had of the outsourced f unction is knowledge base you had of the outsourced f unction is still the knowledge base needed to backsource the still the knowledge base needed to backsource the f unction today. f unction today.


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5. Plan, Plan, Plan!5. Plan, Plan, Plan!Def ine your backsourcing team. Def ine your backsourcing team. Def ine the backsourcing requirements. Def ine the backsourcing requirements. Develop the backsourcing business plan and backsourcing Develop the backsourcing business plan and backsourcing sc hedule. sc hedule. Assess skills and readiness to success f ully backsource. Assess skills and readiness to success f ully backsource. Establis h a cooperative relations hip with the current provider and Establis h a cooperative relations hip with the current provider and def ine communication protocols. def ine communication protocols.

Clarif y roles and res ponsibilities and the legal relations hip with the Clarif y roles and res ponsibilities and the legal relations hip with the outsource provider. outsource provider. Maintain a relations hip with the outsourced provider of teamwork, Maintain a relations hip with the outsourced provider of teamwork, open communications, cooperation, and collaboration. open communications, cooperation, and collaboration.


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6. Communicate, Then Communicate More 6. Communicate, Then Communicate More Notif y the outsource provider of your decision to Notif y the outsource provider of your decision to backsource as early as possible and communicate backsource as early as possible and communicate in a way that begets a culture of cooperation. in a way that begets a culture of cooperation.

7. Focus Contingency Planning on Customer 7. Focus Contingency Planning on Customer Never f orget about the impact backsourcing can Never f orget about the impact backsourcing can have on the customer. Develop a contingency plan have on the customer. Develop a contingency plan to cover as broad a set of business continuity to cover as broad a set of business continuity issues as is realistic. issues as is realistic.


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Global Sourcing Global Sourcing Cost Factors Cost Factors

I P Bharti I P Bharti Roll no 16Roll no 16

M CBhar dwa j M CBhar dwa j Roll no 20Roll no 20


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Global Sourcing Global Sourcing Cost FactorsCost Factors

COSTCOST THEPRIMARY REASON FOR OUTSOURCING.THEPRIMARY REASON FOR OUTSOURCING.


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Other Cost FactorsOther Cost Factors

- Multiple Vendors

- Source directly f rom OEMs- Bulk Purchase ( Economy of Scale, Savings on ordering costs) However care need to be taken as

a) It adds to inventory costb) Storage f acility limitationsc) Risk of thef t and damaged) Risk of obsolescence


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Other Cost Factors (Contd)Other Cost Factors (Contd)Hidden Cost

High running / maintenance chargesNo / Poor af ter sales serviceCostly sparesProprietary TechnologyAttrition CostManagement cost

Recurring CostExchange RateCorrect use INCOTERMS


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While cost advantage was the initial attractionWhile cost advantage was the initial attraction

PROCESSPROCESS ACHIEVED SAVING ACHIEVED SAVING

Transaction ProcessingTransaction Processing 25% 25%--40%40%

Accounting / Contact Center Accounting / Contact Center ServicesServices

30%30%--40%40%

IT ServicesIT Services 25%25%--50%50%

Finance / InsuranceFinance / Insurance 40%40%--60%60%

Digital ContentDigital Content 30%30%--50%50%

Software/ ERP / AnalyticsSoftware/ ERP / Analytics 40%40%--60%60%Source: G ECIS, FT Outsourcing to India Conference November 2004

COST ELEMENTCOST ELEMENT US US INDIAINDIA SAVINGSAVING

USD / FTE / Year USD / FTE / Year ValueValue ShareShare ValueValue ShareShare On US CostOn US Costbasebase

Personnel CostsPersonnel Costs 42,92742,927 73.3%73.3% 6,3486,348 48.4%48.4% 85%85%

IT/ TelecomIT/ TelecomCostsCosts

2,4002,4004.1%4.1%

3,7703,77028.7%28.7% --57%57%

Office FacilityOffice FacilityCostsCosts

3,7003,7006.3%6.3%

1,9911,99115.2%15.2% 46%46%

Other G& AOther G& AExpensesExpenses

9,5719,57116.3%16.3%

1012.51012.57.7%7.7% 89%89%

Total CostTotal Cost 58,59858,598 100%100% 13,12113,121 100%100% 78%78%

Source: NASSCOM, Evalueserve AnalysisBlended rate for voice and non-voice operations

Signif icantly f avorable Signif icantly f avorable total transaction cost total transaction cost economicseconomicsGross savings on f actor Gross savings on f actor cost up to 78%cost up to 78%Net realized savings Net realized savings ranging between 25ranging between 25--60%60%

The above figures are indicative and the actual costs savings could vary by process; further the cost advantage may be partially offset by travel, transitioning and non-process communication costs

Source: McKinsey G lobal Institute


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Global Sourcing Cost FactorsGlobal Sourcing Cost Factors

GlobalGlobal sourcingsourcing costcost f actorsf actors cancan bebe segmentedsegmented intointo sixsixcategoriescategories ::

Material CostMaterial Cost

-- Price,Price, setu p,setu p, tooling,tooling, transactiontransaction andand other other costscosts relatedrelatedtoto

thethe actualactual productproduct or or serviceservice delivereddelivered..

Trans portation CostTrans portation Cost

-- TTrans portation, drayage, f uel surc harges and other f ees rans portation, drayage, f uel surc harges and other f ees included in a f reight rate. included in a f reight rate.


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Inventory Carrying CostInventory Carrying Cost

-- WWarehousing, handling, taxes, insurance, depreciation, arehousing, handling, taxes, insurance, depreciation, shrinkage, obsolescence, and other costs associated shrinkage, obsolescence, and other costs associated

withwithmaintaining inventories, including the cost of money or maintaining inventories, including the cost of money or opportunity costs.opportunity costs.

CrossCross--border taxes, tariff s, dutiesborder taxes, tariff s, duties

-- Of ten ref erred to as landed costs, which include duties, Of ten ref erred to as landed costs, which include duties, shipping, insurance and other f ees and taxes.shipping, insurance and other f ees and taxes.


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Supply &Operational Per f ormanceSupply &Operational Per f ormance

-- TThe cost of noncom pliance or under per f ormance, which, he cost of noncom pliance or under per f ormance, which,

if if not managed properly, can off set any price variance not managed properly, can off set any price variance

gainsgainsattained by shif ting to an off shore source.attained by shif ting to an off shore source.


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RecurringRecurring CostsCosts

-- ThereThere areare somesome major major recurringrecurring costscosts t hatthat needneed toto bebe monitoredmonitored..SomeSome of of thesethese costscosts areare intangibleintangible andand othersothers areare not,not, butbut allall cancanhavehave aa strongstrong impactimpact onon anyany globalglobal sourcingsourcing initiativeinitiative..

Price CreepEff iciency CostsManagement CostsAttrition CostCurrency Hedging


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PricePrice CreepCreep- The cost o f price creep is a tangible cost but may come as a

sur prise.

- Several vendors provide the lowest, most basic f iguresduring the bidding process and systematically add in costs a f ter the contract begins.

- Price creep can throw budgeting, ROIand cost calculations awry.

- To control price cree p, def ine f inal deliverables and terms be f orethe bidding process.


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Eff iciencyEff iciency CostsCosts

- Eff iciency cost is an intangible cost t hat is rarely captured.

- In any business relations hip, both partners o f ten work jointly toimprove productivity- that is, to make the processes and workmore eff icient.

- However, in many cases t he bene f its of higher productivity are notpassed on.

- This essentially means t hat you may be paying a higher rate, evenwhen the cost o f production has dro pped.


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ManagementManagement CostsCosts- As processes move o ff shore, organizations o f ten neglect to ca pture

management costs associated wit h eff ectively running the co-sourced process.

- It is diff icult to estimate t hese costs since t he time required de pends on t hecomplexity of problems and is o f ten s pread out.

- For example, many companies many not know, how do they calculate t headditional management time f or late night or early morning conf erencecalls ?

- When su pervising onsite sta ff , the time involved is of ten smaller since allprocesses are in one physical location. But with global sourcing,management costs are higher. Since top management usuallydevotes a lot o f time in the initial stages o f co-sourcing, costs are high.


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AttritionAttrition CostCost- Attrition costs are hidden costs.

- Loss o f talent not only means knowledge loss but alsoresults in additional costs f or training new personnel andlower productivity. Given the f act that global sourcing isgrowing at a rapid pace, human resources jum p jobs quickly.


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CurrencyCurrency HedgingHedging- Since costs are delivered f rom globally scattered locations, vendors

may incur costs related to f luctuating local currencies.

- These costs may be passed on to t he company by the vendor through a price increase.

- This cost is tangible but hidden and to kee p these costsdown it is best to kee p these o pen and known to bot h the parties andsettled in the best interest to bot h to keep the costs down in f uture.


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Global Sourcing Global Sourcing Value Proposition Value Proposition

R K Datta R K Datta

Roll no 37Roll no 37


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What is Value Proposition ?What is Value Proposition ?

Ev er y Ind ustr y is now d riv ing d own c osts and Ev er y Ind ustr y is now d riv ing d own c osts and d ev eloping prod uc ts and ser v ic es f aster to m eet d ev eloping prod uc ts and ser v ic es f aster to m eet new challeng es.new challeng es.

The need to prov id e m ore v alue to c usto m ers (higher lev el of prod uc ts and ser v ic e and red uc ed c osts) c an b e achiev ed thru G lob al S our c ing .


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How Global Sourcing creates value How Global Sourcing creates value

The emergence of worldThe emergence of world--class class service providers around the worldservice providers around the worldMultiMulti--tier suppliers, multiple tier suppliers, multiple country options country options -- enabling clients enabling clients to appropriately balance cost, to appropriately balance cost, control, quality & riskcontrol, quality & riskMaturing industry structure, Maturing industry structure,

highlighted by vendor highlighted by vendor consolidation and greater consolidation and greater standardization of inf rastructure standardization of inf rastructure elements.elements.

Highest use of technology domainHighest use of technology domain


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How Global Sourcing creates valueHow Global Sourcing creates value

To improve the f inancial position To improve the f inancial position through cost savings that contribute through cost savings that contribute directly to the bottom line. directly to the bottom line. Also makes companies more agile Also makes companies more agile

Organizations are leveraging the Organizations are leveraging the latest model of outsourcing latest model of outsourcing -- MultiMulti--sourcing sourcing -- benef it f rom the skills and bene f it f rom the skills and eff iciencies of multiple vendorseff iciencies of multiple vendors. . Access to huge trained pool of talent Access to huge trained pool of talent and end to end quality delivery.and end to end quality delivery.


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Other f actors in Value CreationOther f actors in Value Creation

Technology makes much of the work of the modern Technology makes much of the work of the modern organization placeless , paperless.organization placeless , paperless.

It no longer matters where inf ormation is processed, where accounting is done

Competition Competition As competition intensi f ies, organisations As competition intensi f ies, organisations must get more eff icient and more eff ective to survive.must get more eff icient and more eff ective to survive.


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Global Sourcing DriversGlobal Sourcing Drivers

In the current economic environment cost savings has become In the current economic environment cost savings has become an an important as pect.important as pect.At the same time, quality remains an important consideration f or At the same time, quality remains an important consideration f or companies.companies.Important avenue f or scarce skills.Important avenue f or scarce skills.Cycle time reduced due to multiCycle time reduced due to multi--vendors, multivendors, multi--sourcing activities.sourcing activities.Globally competitive environments Globally competitive environments barriers across geogra phic barriers across geogra phic regions reduced.regions reduced.

Save Costs Improve Quality Access Skilled Resources

Reduce Cycle-time

Source Globally


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India Value PropositionIndia Value Proposition

Indias telecom inf rastructure between Chennai, Mumbai and Singapore, Indias telecom inf rastructure between Chennai, Mumbai and Singapore, provides the largest bandwidth capacity in the world, with well over 8.5provides the largest bandwidth capacity in the world, with well over 8.5Terabits (8.5Tbs) per second.Terabits (8.5Tbs) per second.With more than 250universities, 1,500 researc h institutions and 10,428With more than 250universities, 1,500 researc h institutions and 10,428higher higher--education institutes, India produces 200,000engineering education institutes, India produces 200,000engineering

graduates and another 300,000 technically trained graduates every year.graduates and another 300,000 technically trained graduates every year.80 of the Worlds 117 SEI CMM Level80 of the Worlds 117 SEI CMM Level--5 companies are based in India.5 companies are based in India.Indias GDP growth has been growing consistently at over 7.5%year on Indias GDP growth has been growing consistently at over 7.5%year on year and makes it the f astest growing economies.year and makes it the f astest growing economies.Cheaper workf orce than their Western counter parts. According to Cheaper workf orce than their Western counter parts. According to Nasscom, The wage diff erence is as high as 70Nasscom, The wage diff erence is as high as 70--80 percent when 80 percent when compared to their Western counter parts.compared to their Western counter parts.RoundRound--thethe--clock advantage f or Western companies due to the huge time clock advantage f or Western companies due to the huge time diff erence.diff erence.


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WTO ComplianceWTO Compliance

Important FactorsImportant FactorsPace and sco pe of globalization Shif ting economic and trade policies Global sourcing as a means to control costs

TheThe WTOWTO isis thethe onlyonly internationalinternational organizationorganization dealingdealingwithwith globalglobal rulesrules o f of tradetrade betweenbetween nationsnations..Af ter Af ter 20052005,, allall quotaquota limitationslimitations havehave beenbeen lif ted,lif ted,changingchanging thethe f acef ace o f of globalglobal sourcingsourcing dramaticallydramatically..SourcingSourcing f romf rom anyany regionregion coveredcovered byby tradetrade agreementsagreements

f ormulatedf ormulated byby WTOWTO comescomes withwith potentialpotential signi f icantsignif icantadvantagesadvantages. .WhileWhile oneone s houldshould notnot expectexpect anan immediateimmediate improvementimprovementinin operatingoperating margins,margins, f ullf ull commitmentcommitment willwill bebe essentialessential totothethe globalglobal sourcingsourcing plansplans successsuccess. .


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Trade Agreements (1 /4)Trade Agreements (1 /4)

Broadly the trade agreements under WTOcover the Broadly the trade agreements under WTOcover the f ollowing areas which directly impact global f ollowing areas which directly impact global sourcing :sourcing :--

Benef its to importers- To f acilitate imports, imports must be allowed in without f urther restrictions upon payment of duties.

- Tariff bindings assure importers that their importing costs will not be increased by higher customs duties.


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Trade Agreements (2 /4)Trade Agreements (2 /4)

Rights of domestic producers and importers.Rights of domestic producers and importers.Some Agreements require the legislation of Some Agreements require the legislation of member member countries to provide certain rights to countries to provide certain rights to

domestic producers and importers under their domestic producers and importers under their legal systems.legal systems.Rights of exportersRights of exporters

The rights which the Agreements create in f avour of The rights which the Agreements create in f avour of exporters is the right to give evidence f or the levy of exporters is the right to give evidence f or the levy of antianti--dumping or countervailing duties during dumping or countervailing duties during investigations in importing countries.investigations in importing countries.


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Trade Agreement (3 /4)Trade Agreement (3 /4)

Using WTOdispute settlement proceduresUsing WTOdispute settlement procedures

Knowledge of systems enable business communities to help their government to take f ull advantage of the WTOmechanism to monitor implementation of the Agreements and to settle diff erences and disputes


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Trade Agreement (4 /4)Trade Agreement (4 /4)

Inf luencing NegotiationsInf luencing Negotiations

Negotiations with important implications f or trade are of ten held during the implementation stage, during periodic reviews to examine how the Agreements are operating.

Feedback f rom the business community also greatly assist governments in securing appropriate modif ications to the Agreements


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Global Sourcing Global Sourcing Road Ahead Road Ahead

Vandana Ra yVandana Ra y

R oll no 49R oll no 49


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Data Privacy and SecrecyData Privacy and Secrecy

Around the world, governments are reacting in diff erent Around the world, governments are reacting in diff erent ways to the issues posed by crossways to the issues posed by cross--border data trans f ers border data trans f ers and data security breac hes. and data security breac hes. Failures in data security in a sourcing transaction will likely Failures in data security in a sourcing transaction will likely lead to some combination of f ines, loss of customers, and lead to some combination of f ines, loss of customers, and

potential litigation. potential litigation. The real cost can be damaged reputation : it is neither The real cost can be damaged reputation : it is neither adequate nor acce ptable to say : "sorry, it was our adequate nor acce ptable to say : "sorry, it was our outsourcing vendors f ault that your account details got outsourcing vendors f ault that your account details got released". released". More attention than ever bef ore to strategies to anticipate More attention than ever bef ore to strategies to anticipate and prevent data security breac hes. and prevent data security breac hes. Going well beyond merely complying with the various laws Going well beyond merely complying with the various laws on data privacy and protection of the laws of the on data privacy and protection of the laws of the outsourced country.outsourced country.


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Road AheadRoad Ahead

DevelopingDeveloping globalglobal sourcingsourcing strategystrategy willwill bringbring enhancedenhancedcapabilities,capabilities, smoot her smoot her projectsprojects && greater greater controlcontrol of of thetheorganization'sorganization's destinydestiny..MajorityMajority of of thethe companiescompanies havehave clear clear plansplans totosignif icantlysignif icantly enhanceenhance their their investmentinvestment inin thethe off shoringoff shoringinitiativeinitiative..IncreasingIncreasing evidenceevidence t hethe termterm o ff shoringo ff shoring maymay soonsoon bebepasspass

pursuing a global sourcing strategy wit h the relentless pursuit o f low cost, high quality locations around t he globeresilience and t he assurance t hat they will not beheld hostage to skillshortages/ wage increases in any one location.


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ConclusionConclusion

Off Off --shoring is now deeply rooted and will continue to shoring is now deeply rooted and will continue to f orm part of many transactionsf orm part of many transactionsIn coming years, off shore and ons hore will become In coming years, off shore and ons hore will become inextricably blended.inextricably blended.Off shore delivery models have f orced su ppliers to Off shore delivery models have f orced su ppliers to become more pricebecome more price--competitive; clients are becoming competitive; clients are becoming more so phisticated and learning f rom their own and more so phisticated and learning f rom their own and others deals; and there are more external advisers to others deals; and there are more external advisers to advise on correct approaches. advise on correct approaches. The key to success f or companies considering sourcing The key to success f or companies considering sourcing projects is how to position themselves to maximize the projects is how to position themselves to maximize the

value on off er in the sourcing marketvalue on off er in the sourcing market


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Th ank You Th ank You

presentation gsbd compiled 9-9-06[1]

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