outlook 2012: understanding the state of the industry in the coming year

Atul Vashistha Chairman Neo Group

Since 1999

Outlook 2012:

Understanding the State of the

Industry in the Coming Year

Atul Vashistha Chairman

Neo Group

www.GlobalSupplyRiskMonitor.com www.NeoGroup.com

15th December 2011

2 © 2011 Neo Group Inc. All rights reserved.

Reproduction of this document or any portion thereof without prior written consent is prohibited

Wages/ Hiring

M&A

Pricing

Trends 2012

Demand Outlook

Operating Models

Neo Group

Risk Management

Rising Geographies



-

ADVISORY

RISK MONITORING

RESEARCH

GOVERNANCE/ PROGRAM

MANAGEMENT SERVICES

NEO GROUP SERVICES

Exclusively focused on superior outcomes

through global services, outsourcing and related

issues



TRENDS 2012 MY VIEWS

• Demand outlook expected to improve in 2nd half

• Insourcing, managed services models dominate

• Professionalization of Outsourcing

• M&A continue but yield little benefits

• Pricing expected to be flat

• Hiring & Utilization will strengthen

• Wages will rise creating margin pressure

• New Geographies will take market share away from

traditional locations

• New opportunities: Cloud and Mobile



Optimal Demand Management

Innovation - key to transformation – beyond SLAs

Greater emphasis on collaboration

New and improved vendor partnering

Increasing focus on Risk & Governance

New destinations: moving beyond India

Professionalization of talent

Models evolve – insourcing, managed services, utility

Rise of the mid-sized buyer

BUYERS MATURING



BUYER TRENDS TO WATCH IN 2012 Operating Models going retro:

Frustrated with supplier rising costs, governance challenges and uneven performance, insourcing is being explored by more clients

Continued hiring and attrition challenges and overall governance requirements will accelerate buyers to move to managed services models

Professionalization of Outsourcing: Supplier management and governance challenges will help clients recognize the

need to have professionally trained managers.

Programs such as COP from IAOP, and workshops from companies like Neo Group will be leveraged more.

Recognition of clear differences in sourcing and managing the services category vs. product categories will lead to higher importance of sourcing leads and vendor managers.



SUPPLIER TRENDS TO WATCH IN 2012 M&A continue but yield little benefits

Wages will rise creating increased pressure on supplier margins

Pricing expected to be flat in spite of many upward pressures

Utilization will strengthen next year, increasing staffing challenges on fast ramp initiatives

Managed services move beneficial

Geographic expansion to serve diversified needs

↯ Local ↯ Global



TRAP UNCLEAR SUPPLIER DISTINCTION

No clear methodology adopted to distinguish suppliers; especially in a multi-sourcing environment

Perception that existing supplier/vendor best suited for all outsourcing functions, can be dangerous

In-depth analysis of supplier domain expertise and exposure critical to successful outsourcing

Establish effective framework to demarcate functions and processes a supplier is most suited for



TRAP NOT FOCUSED ON COLLABORATION

Maintaining a ‘Client-Vendor’ relationship instead of a ‘Partnership’ – not sustainable for long in a managed/shared services model

Joint involvement and participation of client in key operational activities of supplier is critical to business transformation

Sustained innovation becomes reality in collaborative relationships

Effective knowledge management between all stakeholders essential to gain competitive advantage

16-12-2011 10 10

© 2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

Proactive Risk Management is critical to continued growth of industry: Greater attention to the diversity of one’s geographic

portfolio Increased attention to monitoring of risk and

compliance related to disruption at supply locations and the supplier base

Real-time alerts and monitoring of events, and their disruptive impacts

Sorry for the plug but Neo’s Global Supply Risk Monitor web-service (globalsupplyriskmonitor.com)

NEED FOR PROACTIVE RISK MANAGEMENT



Rising Geographies take market share away from traditional locations but the

pie is growing:

New destinations continue to take a share of an expanding pie

Eastern Europe & Central and South America are surging

Buyers will increasingly utilize existing supplier's Global Delivery Models to

provide time zone coverage and realize true 24x7x365 support

Offshore players will continue to expand and/or setup operations in new

geographies, such as Brazil, Poland, China, Mexico, and Colombia etc

RISE OF NEW AND EMERGING

LOCATIONS



Vietnam

• Large workforce

• Large # of universities

graduate turnout

• Good IT Skills

• Promising IT labor market

Brazil

• High turnout of IT graduates

• Huge Labor pool

• Good people skills and

availability

• Quality human capital

• Capable for large operation


Russia

• Excellent programming Skills

• Large universities graduate pool

• Large IT workforce



Ukraine

• World class programmers

• Smart & hard worker

• Creative workforce

Czech Republic

• World class IT skills

• Very small IT graduate

• Very limited labor force

• Shortage of IT labor pool Romania

• Multi-Language Skills

• Highly Skill Worker

• Promising IT O & BPO

labor market

China


• Improving Project Manager Level

Skills

• Good number of colleges &

Universities


• Promising labor market

India


• World class IT skills

• Excellent IT education system


• KPO, BPO, Call Center skills labor pool

• Amazing IT labor market

Uruguay

• Limited IT workforce

• Small Population

• Higher end IT Skills

• Suitable for small operation

• Small IT graduate turnout

• Shortage of IT labor supply

Egypt

• Large labor force

• Good education

system

• Multi-lingual skills

• Potential labor market

Mexico

• Good education system

• Large IT graduate pool

• World class IT skills set

• Excellent bi-lingual skills


Israel

• Highly qualified IT

graduate

• Excellent IT Skills

• Suitable for small

operation

• Limited IT labor supply

Promising labor Pool

Belarus

• Excellent Software Skills

• Small Labor Force

• Suitable for Niche Operation

• Smart & hard worker

Poland

• Highest Universities in EE

• Large IT Workforce

• Largest Labor Pool in EE

• Excellent Education System

• Multi-lingual Skills Set

• Promising ITO & BPO labor market

Shortage of labor pool

Canada

• Excellent education system

• Productive IT workforce

• Capable for complex project


United States

• World class IT workforce

• Capable to manage most complex

project

• Excellent education system


Argentina

• Large labor pool

• Bi-lingual capacity (English & Spanish)

• Good for large contact center operation

• Stable workforce in the long-run

Colombia

• Large graduate pool

• Huge labor force

• Bi-lingual skills

• Promising Labor supply

Guatemala , Panama, Honduras,

Costa Rica, Peru, Chile

• Highly qualified graduate pool

• Good for higher end services

• Excellent bi-lingual

• Small workforce

• Limited labor supply

Philippines

• Large workforce

• Huge graduate pool

• Fluent in English

• Promising labor market

Malaysia

• Excellent IT skills

• Good education system

• Limited labor supply

CURRENT HOT SPOT: WORKFORCE PROFILE



Vietnam

• Embedded Software

• IT Services, R&D

• Software Testing

Brazil

• IT Services

• R&D, ADM

• Software Development

• Engineering Services

• Call Center

• Back Office Operation

Russia



• Product Development

• R&D, Systems Integration

• Web Development

Ukraine

• Engineering Services,

• IT Services


• Systems Integration

Czech Republic

• Infrastructure Management

• Multi-Language Call Center

• IT Services, R&D Romania

• Business Analytics,

• F&A BPO, HRO,

• Financial Analytics,

• IT Services, R&D

• Multilingual Contact

Center, Procurement BPO,

China


• F&A BPO

• IT Services,

• Product Development,

• R&D, Software Testing

• Clinical Trial

India

• Software Development


• IT Services


• Embedded Software & Services

• Clinical Trial

• Medical Transcriptions

Uruguay

• Call Center (Spanish)

• Infrastructure Management

• IT Services


Egypt


• IT Services

• Medical Transcription

Multilingual Call Center

• Product development


Mexico

• Back Office Operations,

• Call Center (English, Spanish),

• Embedded Services,

• Engineering Services,

• IT Services, R&D,


Israel

• Hi-Tech Services

• R&D

• IT Services

• Clinical Trials

Belarus



• IT Services


• R&D, Systems Integration

Poland

• Multi-Language Call Center

• Shared Services BPO

• F&A BPO

• IT Application Services

Canada

• IT Services

• R&D, ADM


• KPO, BPO Voice and Non-Voice

United States

• R&D




• ADM, IT Services etc

Argentina

• Bi-lingual call center services

• F&A BPO

• IT Services

Colombia


• IT Application

• Bi-Language Contact Center

Guatemala , Panama, Honduras,

Costa Rica, Peru, Chile

• Call center (English & Spanish)


• F&A BPO

• Financial Analytics

Philippines

• Call Center (English and some

Spanish),

• Contact Center, F&A BPO,

• IT Services, LPO,


Malaysia

• Call Center (English, Mandarin),

• F&A BPO, IT Services,

• Technical Helpdesk

CURRENT HOT SPOT: SPECIALIZED FUNCTIONS

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Atul Vashistha Chairman, Neo Group

[email protected]

www.NeoGroup.com

Neo Group Global Headquarters

6200 Stoneridge Mall Road, 3rd Floor

Pleasanton, CA 94588, USA

Amsterdam, Netherlands

Austin, Texas

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Bangalore, India

London, UK

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Sydney, Australia

© 2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

www.GlobalSupplyRiskMonitor.com

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