Issuu on Google+

Case Study and Sample Slides China BPO Location Feasibility Study

Disclaimer This document is the proprietary and exclusive property of Sutherland Global Services except as otherwise indicated. No part of this document, in whole or in part, may be reproduced, stored, transmitted, or used for design purposes without the prior written permission of Sutherland Global Services. The information contained in this document is subject to change without notice. The information in this document is for information purposes only. Sutherland Global Services® disclaims all warranties, express or limited, including, but not limited, to the implied warranties of merchantability and fitness for a particular purpose, except as provided for in a separate software license agreement. All confidential or proprietary information contained in Sutherland’s response shall at all times be and remain the sole and exclusive property of Sutherland Global Services, Inc.

©©2013 GlobalServices Services Inc., rights reserved. Privileged and confidential information of Sutherland Global 2010Sutherland Sutherland Global Inc., All All rights reserved. Privileged and confidential information of Sutherland Global Services Inc. Services Inc.

www.sutherlandglobal.com


Disclaimer The Sample contains excerpts from a study conducted by Sutherland Global Services for a client. The Sample may not contain all the pages of the original document.

This Sample has been prepared by Sutherland Global Services, Inc. or its associates or affiliates (“Sutherland Global Services”) exclusively as an illustrative sample only and is sent to authorized recipients solely for the purpose of evaluating Sutherland Global Services’ support service capabilities. This Sample should not be considered as an offer to sell, a solicitation to buy, or an endorsement or recommendation of any company. Sutherland Global Services does not guarantee the accuracy, completeness or other characteristics of the data / information of the report. This Sample may not be reproduced or distributed (in whole or in part) to any third party without the express prior permission of Sutherland Global Services. Sutherland Global Services may also have (or have had) arrangements with entities whereby Sutherland Global Services receives or is in receipt of information relating to the subject matter of this Sample that is confidential or proprietary to a third party, and hence may not be utilized. Accordingly, Sutherland Global Services may be in receipt of relevant information that is not reflected in this Sample.

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

2


China BPO Location Feasibility Study Client • The client, a BPO major, was evaluating expansion into the Chinese market to serve BPO market demand for the Japanese and Chinese market

Client Ask • The client recruited Sutherland Research to conduct a detailed market assessment and feasibility study that included location identification, investment assessment and operational break-even analysis

Sutherland’s Solution • The research was structured in three sections – market assessment, competitive landscape, and lastly, drawing up the P&L and hence, break-even analysis • Considering the dearth of publicly-available customized research, Sutherland Research had to connect with CXOs/senior managers from leading competitor firms (both local and international) to identify key trends such as the share of domestic/international clients, voice/non-voice BPO processes, key languages supported, pricing for varied client types, cost of resources with different language capabilities, etc. Location feasibility in terms of tax and other incentives offered in different provinces, availability of talent pool, direct and indirect costs, cultural issues, etc. were detailed out based on primaries with already-established companies in that province , government authorities and secondary research • To address language challenges, mandarin language interpreters/translators were hired, which ensured insightful primaries

• Benefits to the Client • Based on the research, Sutherland Research identified the probable locations alongside their pros and cons and profitability impact, which assisted the client in firming up its entry strategy

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

3


Global BPO Attractive Destinations (other than India) The 2010 KPMG study of assessment of alternative outsourcing destinations to India ranked China as the most attractive destination against nine emerging BPO destinations in the world BPO Offshore Destinations’ Attractiveness Scores (2010)

Weighted Score

China

Philippines

Poland

Malaysia

Egypt

Cost/Rate

Talent Availability

Outsourcing Maturity

Business Readiness

Technology Infrastructure

Social and Cultural Fit

25%

20%

20%

10%

15%

10%

1.36

1.13

1.60

0.45

0.81

1.41

1.02

1.80

0.41

0.95

0.97

1.40

1.36

0.83

1.39

0.96

Total

Rank

0.53

5.88

1

0.38

0.28

5.29

2

0.52

0.65

0.73

5.21

3

0.60

0.67

1.11

0.52

5.09

4

1.00

0.40

0.8

0.41

4.95

5

Key Observations • •

China tops the list of BPO alternative outsourcing destinations to India. China’s score was driven by its impressive business and educational development, supported by provincial governments, coupled with the sheer size of its domestic market However, for English voice-based work, China may not (yet) be the destination of choice for many companies

Source: KPMG, 2010

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

4


Why China? China is one of the fastest growing offshore BPO destinations in the world; its share in the global offshore BPO market is expected to reach 15% by 2015 from the current 5% Share of China Offshore BPO (2011-2015)

• China’s share in the global BPO market is expected to reach 15% by 2015

Expected BPO Growth Rate (2011-2015) • Growth in the China offshore BPO market is among the highest in the world

% Share

% Growth Rate

100% 80% 60%

85%

95%

40% 20% 0%

15%

5% 2011

2015 China

Others

35% 30% 25% 20% 15% 10% 5% 0%

29%

5%

Global

China

“… China is still in the early stages of maturity unlike in India where large companies are present in BPO segment…” XXXX, Group Head – Chengdu Delivery Head, Wipro “… We haven't quite reached the take-off point that we saw in India yet, it is just starting to happen…” XXXX, President, Next Horizon Source: Sutherland Secondary Research

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

5


Overall

Domestic

International

China BPO Market – Domestic Vs. International Almost two-thirds of China’s BPO market catered to domestic clients in 2010, which is estimated to shift towards the international market by a miniscule 5% by 2015 China BPO Market (USD Bn) (2006-2015) 30.0

Growth 2006-2011

USD Bn Domestic

25.0

Key Observations Growth 2011-2015

25.1

International

20.0

38%

25%

32%

62%

22%

27%

15.0

15.0

36%

9.1

10.0

5.0

0.0

7.5 5 3.2

32% 68% 2006

33%

34% 64%

32% 68% 2008

67%

66%

2010

2011

2013

2015

• Although outsourcing penetration in China is low, the domestic BPO market dominates the demand for BPO services in the country, primarily due to: – Large size of the Chinese economy: China is the world’s second largest economy (USD6.9 Tn in 2010) after the US – Limitations (language, culture) in serving large Western (the US and Europe) outsourcing markets  China lags far behind India and Philippines in serving the US and Europe markets • However, as Western investment in China accelerates, companies are finding an increasing need to have their operations serviced in China by firms with local market expertise (fueling domestic demand)

“…The biggest challenge is how to take our domestic success overseas, how to bypass cultural barriers. China was closed to the outside world for a long time and it is still not easy for us to understand the overseas market and culture” … XXXX, Founder and CEO, Neusoft Source: IDC (2008), KPMG (2010), Sutherland Primary Research

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

6


BPO Profitability – Cost Comparison Direct cost of FTE for English-speaking talent in China is very high as compared to other BPO destinations – India & Philippines Operating Cost / FTE per year for English Voice Work (USD ‘000)

BPO Average Salary Increase (%) per year

Cost per FTE (USD ‘000) 35.0

Average Salary Increase (%)

33 16 30

30.0

15

14 25

12

25.0

12

12

11

10 20.0

8

16 14

15.0

10

18

17

10

14

13

8.5

8

7

6 10.0 4 5.0

2

0.0

0 China Tier-1

India Tier-2

Philippines Tier-3

China Junior Level Employees

India

Philippines Middle Level Employees

Senior Level Employees

Source: Assochem, Zinnov Research, Sutherland Research Analysis Note: Junior Level: Up to 2 years’ experience, Middle Level: 2-5 years’ experience, and Senior Level: More than 5 years’ experience

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

7


Language Capabilities English-speaking population is only 0.83% of total population # of Speakers of Non-Chinese Language in China

Language Skills

10.0

English • While China currently has a large number of English speakers, quality of their English can be questioned • In China, English is a compulsory language from the third grade, although the quality of instructions varies greatly, and most Chinese citizens do not speak it well • In 2006 and 2007, the Ministry of Education (MOE) sanctioned two groups of 65 colleges and universities to improve the overall quality of English teaching at the college level • To further deepen the reform in education, in 2010 the MOE expanded 35 colleges as English teaching reform demonstration sites and allocated about RMB200,000 as financial support to every demonstration site

2.0

Korean • About 2 million Ethnic Koreans live in China • In addition, the popularity of Korean pop culture attracts many Chinese to learn the Korean language

0.9

Japanese • There are 870,000 Japanese learners in China, making up 29.4% of total overseas Japanese learners around the world

Source: Exploredia.com, SmithStreet, Sourcingline

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

8


Talent Pool across China Provinces Jiangsu Province ranks 6th in terms of Higher Education graduate density & 1st in the number of regular HEIs in China. At 2,819 students per 1,000 inhabitants, Jiangsu has 29% more graduate students as compared to the China average of 2,189 Province

# of Students per 1,000 Inhabitants – 2010 Higher Education (HE)

Senior

# of Regular HEIs

% Difference from China – Total (for HE)

China Total

2,189

3,499

0%

Beijing

6,196

2,363

183%

82

Tianjin

4,412

2,776

102%

45

Shanghai

4,300

1,878

96%

62

Shaanxi

3,208

4,931

47%

66

Hubei

2,906

4,155

33%

94

Jiangsu

2,819

3,527

29%

126

Jilin

2,716

2,944

24%

48

Liaoning

2,672

2,900

22%

94

Heilongjiang Chongqing

2,447

2,881

12%

73

2,413

4,000

10%

52

2,101

Source: Ministry of Education, China, Sutherland Research

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

9


English-taught Programs in HEIs There are 34 Universities/HEIs in China offering English language courses across various subjects – most of these courses are engineering and science oriented Courses

# of HEIs / Universities with English-taught Programs

Doctor’s Degree

Master’s Degree

General Scholar

Senior Scholar

Beijing

6

Y

Y

Y

Y

Engg, Science, Literature, Medicine

Shanghai

5

Y

Y

Y

Y

Engg, Science, Research, Geology

Hubei

5

Y

Y

Y

Y

Education, Science, Architecture

Nanjing

3

Y

Y

Y

Y

Education, Literature, Science

Jilin

2

Y

Y

Y

Y

Education, Literature, Science

Jiangsu*

2

Y

Y

Y

Y

Engineering, Science

Shandong**

2

Y

Y

Y

Y

Literature, Education, Accounting & Management

Chongqing

2

Y

Y

Y

Y

Engineering, Science & Literature

JiaoTong

1

Y

Y

Y

Y

Engineering & Management

Tianjin

1

Y

Y

Dalian

1

Y

Y

Liaoning

1

Jiangxi

1

Y

Y

Y

Y

Economics, Science

Hunan

1

Y

Y

Y

Y

Finance, Engineering & Science

Shaanxi

1

Y

Y

Engineering & Science

Province

Y

Major Areas of Study

Medicine Y

Y

Engineering & Science Engineering & Science

* Enrollments - ~75,000 (including undergraduates and post-graduate students)

** Offers bachelor’s degree courses also

Source: Ministry of Education, China, Sutherland Research

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

10


Suzhou City Overview The city has a well-instituted compulsory primary education system, with nearly 99% of school-age children enrolled in schools Suzhou Education Infrastructure Overview # of Universities

Student Population # of Secondary School Graduates Annually

18 tertiary institutions & 2 post-graduate institutions 166,800 undergraduates & 8,537 post-graduates

11,900 from secondary & vocational schools

# of First Degree Graduates Annually

39,700

# of Post-Graduate Degree Graduates Annually

166,800 undergraduates & 8,537 post-graduates

Foreign Languages Taught

English & Japanese (in Suzhou International Education Park)

English Language Schools in Suzhou • • • • • •

Boland School EF English First Jordan's Language School Lynch Language Centre Suzhou Singapore International School Westbourne Academy

Major Universities in Suzhou • • • • • •

Changshu Institute of Technology Silicon Lake College Soochow University Suzhou Institute of Trade & Commerce University of Science and Technology of Suzhou Xi’an Jiaotong-Liverpool University

• Mandarin is spoken throughout the city with low prevalence of Cantonese Language Capabilities in Suzhou

• Low to moderate English skills, however, English is becoming popular as a foundation for business and is taught widely in schools in Suzhou • Japanese skills are available for small- to medium-scale non-voice work; low to moderate English skills • The Suzhou dialect ‘Wu’, considered as one of the elegant languages of China, is diminishing in popularity and fluency due to population migration patterns and generational change

Source: Ministry of Education, China, Everest Research, Sutherland Research

© 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

11


Thank You

Š 2013 Sutherland Global Services Inc., All rights reserved. Privileged and confidential information of Sutherland Global Services Inc.

www.sutherlandglobal.com December 31, 2013

12


Competitive_Intelligence_Competition_Analysis_for_the_BPO_Market_in_China_M