© 2012 Duke CGGC

OFFSHORE SERVICES GLOBAL VALUE CHAIN

Conferencia Deslocalización de servicios y cadenas globales de valor: ¿Nuevos factores de cambios estructurales en América Latina y el Caribe?

Santiago, Chile18-19 de Octubre de 2012 1

Karina Fernandez-Stark Center on Globalization, Governance & Competitiveness (CGGC)

Duke University

© 2012 Duke CGGC

Infrastructure

Software

Network Management

Applications Management

Applications Development

Applications Integration

Desktop management

CRM (Customer

Relationship

Management)

HRM(Human Resource

Management)

ERM (Enterprise

Resource

Management)

Marketing &

Sales

Finance &

Accounting

Procurement,

Logistics and

Supply Chain

Management

Training

Payroll

Recruiting Contact

Centers/Call

Centers

Talent

Management

Content/

Document

Management

ITO Information Technology Outsourcing

BPOBusiness Process Outsourcing

KPOKnowledge Process Outsourcing

Horizontal ActivitiesVertical Activities a

Industry specific b

Banking, Financial

Services and

Insurance (BFSI) Ex. Investment research,

private equity research,

and risk management

analysis

TelecommunicationsEx. IP transformation,

Interoperability testing and

DSP and multimedia

ManufacturingEx. Industrial Engineering

and sourcing and vendor

management

Retail eComerce and Planning,

merchandising and demand

intelligence

Health/Pharma

Ex. R&D, clinical trials,

medical transcript

Others

Travel &

TransportationRevenue management

systems, customer loyalty

solutions

Business Consulting

Business Analytics

Market Intelligence

Legal Services

EnergyEx. Energy Trading and Risk

Management , and Digital

oil field solutions

ERP (Enterprise Resource Planning): manufacturing/operations, supply chain

management, financials & project management

Infrastructure Management

IT Consulting

Software R&D

Va

lue

Ad

de

d

LOW

HIGH

Offshore Services Global Value Chain

2

© 2012 Duke CGGC

Offshore Services: Global Supply and Demand

3

Demand for Offshore Services (%)

51.1%

US & Canada

30.6%

EU-15

16.2

%

Asia-

Pacific

50

3015

2

2.1% Rest of the World

Source: CGGC based on Everest & Datamonitor

45% of the

industry market

Same number of

call centers

employees than

India

© 2012 Duke CGGC

The Size of the Offshore Services Industry

(estimates)

Estimates of the Offshore Services Market Size

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010

Year

Billion

(U

S$

)

OECD

NASSCOM

BCG

• Difficult to quantify the industry no accurate data & limited country level tracking

• Industry growing & evolving rapidly

• New activities -most dynamic not included, such us innovation

US

$ b

illio

ns OECD

US$ 252.4 bill

BCG

US$ 281,3 bill

NASSCOM

US$ 117.5 bill

Source: CGGC based on OECD 2008, NASSCOM 2009, Boston Consulting Group 2007.

© 2012 Duke CGGC

Offshore Services Potential

• Activities previously reserved for rich nations or in-house • Creating more jobs, specifically in developing countries

• One of the world’s fastest growing industries Reduce company costs and find new talent• Almost unlimited potential Services from any industry

© 2012 Duke CGGC

Examples of Upgrading Trajectories

6

Entry into the value chain Upgrading within the BPO

segmentBroad Spectrum Services

Upgrading to KPO Activities Industry Specialization

© 2012 Duke CGGC

Offshore Services Upgrading: India, Philippines

and Chile

7

India

1990s – 2010 Early 2000s Mid to late 2000s

Philippines

Early 2000 Mid 2000s Late 2000

Chile

2000-2008 2007-2010 2010

© 2012 Duke CGGC

Human Capital: Essential Element for Upgrading

in Offshore Services

• Human capital has been found to be a key determinant of

value creation, competitiveness, and success in service exports

from developing countries

• One of the most important factors MNCs take into

consideration when relocating services operations is to ensure

the labor market has cost competitive, qualified workers

• Developing countries must work hard to supply the necessary

human capital to sustain industry growth today while also

preparing the future labor force to upgrade the industry.

8

© 2012 Duke CGGC

9

Upgrading and Workforce Development

BPO KPOITO

       Skill Level

Value Chain

Segments

Job Profiles

Job Profiles and Upgrading

© 2012 Duke CGGC

Upgrading Trajectory: Entry into the Value Chain

10

En

try in

to t

he

Valu

e C

hain

Call centers hire people with high school diplomas or Bachelor’s degrees. Further skills training is provided by the company or private training institutions.

Skills Preparation

Short technical training

Institutions Private sector Government

© 2012 Duke CGGC

• Interpersonal and language skills are highly

valued in this sector

• High competition for talent has resulted in shift

from individual spending on education and

training to firm-based training

• Tax incentives and public subsidies for

education are increasingly used to attract

offshore operation centers

11

GVC Upgrading & Workforce Development:

Select Findings

© 2012 Duke CGGC

Center on Globalization, Governance & Competitiveness- Duke University

http://www.cggc.duke.edu

Karina Fernandez-StarkSenior Research Analyst

karina.stark@duke.edu

THANK YOU FOR YOUR ATTENTION!