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China IT Outsourcing
- 2. China: The Next Destination for Offshore IT
- 3. Safe Harbor Statement IMPORTANT INFORMATION FOR INVESTORS Cautionary Statement Regarding Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect Pactera’s current beliefs, expectations or intentions regarding future events. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of Pactera and are difficult to predict. All subsequent written and oral forward-looking statements concerning Pactera, or other matters and attributable to Pactera or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Pactera undertakes no obligation to publicly update any of these forward-looking statements to reflect events or circumstances that may arise after the date hereof. Building Smarter Companies Copyright 2012 All Rights Reserved 3
- 4. About Pactera Technology International
- 5. End to End Solution for Global 2000 Advisory Services Business Intelligence & Analytics Business Process Management Right Shore Delivery Model Consulting Customer Relationship Mgm’t Risk Management Enterprise Digital, Mobility & Cloud Solutions IP Driven Products & Solutions Research and Development Services Infrastructure Management Services Offshore Development Application Management Services Business Process Outsourcing Building Smarter Companies Copyright 2012 All Rights Reserved 5
- 6. Our Global Footprint Baltimore - DC London Global FTE: 23,000 EU & North America: 500 Asia Pacific: 500 China: 22,000 : East: --7000 South --5,000 Seattle Mid West --2,000 North --8,000 San Francisco Charlotte Headquarters CDCs Branch Office Sales Office San Jose Atlanta Barcelona San Diego North China Tianjin Beijing Dalian Changchun Qingdao Midwest China Tokyo Nanjing Xi’an Wuxi Wuhan East China Chengdu Shanghai Malaysia Changsha Hangzhou Singapore Guangzhou Dongguan Shenzhen Hong Kong Taiwan Melbourne South China Building Smarter Companies Copyright 2012 All Rights Reserved 6
- 7. Analysts & Press Global Top 10 Product Engineering and Mid- Tier ITO Vendor 2011 2011 “#1 China outsourcer for N. America/EU markets” 2011 2009 “Red Herring Top 100 Companies in Asia” Top 50 Language Services Providers” since 2009 2006 “Risk Management Award” – 2005 Risk Intelligence Award “Leader in Magic (Enterprise Risk Mgt) Quadrant of China EAS” - 2011 2010 Building Smarter Companies Copyright 2012 All Rights Reserved 7
- 11. Skilled Labor – Quantity vs. Quality Building Smarter Companies
- 12. Other BRIC countries as sourcing destinations Building Smarter Companies
- 14. Infrastructure Comparison Source: CLSA, 2010 Asia Pacific Markets Research Building Smarter Companies
- 15. Top Ten Asian Airports, as measured by air traffic Building Smarter Companies 15
- 16. Peace & Stability Index Source: Vision of Humanity, 2011 Building Smarter Companies
- 17. Multi-National Entry into China & Market Challenges
- 18. China Outsourcing: Type of work being outsourced Emerging competencies Consulting to move up the value chain. Offers significant market potential to drive future growth and expansion IT Services Services Offered Pactera core competencies R&D Services BPO Application RDS Outsourcing Infrastructure Outsourcing Beginning Evolution Growth Emerging Services Existing Services Building Smarter Companies
- 19. China IT Services: Drivers and Enablers Building Smarter Companies Source: KPMG, 2010
- 20. Drivers to Enter China The Economist Intelligence Unit 2011 Building Smarter Companies 20
- 21. Reasons Stated for Not Entering China The Economist Intelligence Unit 2011 Building Smarter Companies 21
- 22. China is Becoming a Viable Global Sourcing Destination 1. India 5. Indonesia 9. Philippines 2. China 6. Mexico 10. Chile 3. Malaysia 7. Thailand 11. Estonia 4. Egypt 8. Vietnam 12. Brazil China was #2 in A.T. Kearney's 2011 Top 12 Ranking for Offshore Location Attractiveness Frances Karamouzis from Gartner : By 2012, India’s dominant position as a offshore location will be significantly diluted by effective alternative destinations, from highs of 90+% to current 54% levels. By 2012, of all the BRIC countries, China will be the leading India-alternative offshore location for highly scalable resources, followed by Brazil Building Smarter Companies 22
Hinweis der Redaktion
- We have 23,000 employees around the world. This is actually a great example of the profile of a China-based IT services company. Generally what you see with Pactera, and most off-shore providers, is a handful of offices where major clients are based, such as Seattle, Charlotte (Bank of America), Helsinki (Nokia), and Tokyo (Olympus). And then you see the large number of offshore development centers, of which we have 21 in China.
- Just a little more shameless advertising – We are on the Gartner magic quadrant, and we have had case studies written about us at the business schools of Stanford and Insead Universities in France. In addition we are recognized by Gartner, IDC, IAOP, and so on.
- China has a fascinating history and much of its rise has been in the past 25 years. An interesting fact I came across recently – in 1985, China, with over a billion people, had less than 20,000 privately owned cars. Today, the number is 70 million, and if the country had the number of cars per capital commensurate with its GDP, then it would be about 160 million cars. This is all in the past 27 years, which is an amazing transformation. Much of the history most Americans are used to hearing about involves a communist nation that subsequently because a manufacturing powerhouse. Today, the country is as capitalist as any in the world, and while there is a strong central government, it supports and promotes private industry in order to advance the economic well-being of its people.
- Let’s talk about Tiered cities – China classifies its cities as Tier 1, 2 and 3, based on size, cost, and level of talent. The China State Council designated 21 cities as IT Services Outsourcing Model Cities equipped with anywhere from solid, to world-class IT infrastructure and telecommunications networks. As such, China is a country like any other with various levels of talent, and corresponding levels of cost. In addition, obviously the Tier 1 cities have exceptional levels of English language skills, gradually declining as you enter the Tier 3. But the cost can be generally 20% or more lower in the 2nd and 3rd tier cities. In Pactera’s case, we operate in all of them, because we want the flexibility to move work and labor as needed to maximize capabilities, while minimizing cost.
- So, the labor pool in China. Generally, when you have 1.3 billion people, it is not hard to imagine how a country can graduate 600,000 students with technical degress from universities each year which is nearly 2x India. So the labor pool is young, highly technical, and most importantly, they are much more stable than what is typically see in the Indian marketplace. In the slide above, you can see where the skilled labor is located- obviously like most countries, China has its hot cities and not-so-hot, with Tier 1 cities such as Beijing, Shanghai, Shenzhen, and Nanjing leading the pack. These are also the higher cost cities, so most companies choose a tier 2 city like Wuxi so they can capture high talent with a lower overall cost.
- Now let’s see how this compares to other BRIC outsourcing destinations. And the lower left is ideal – that is the high skill, low cost end of this graph. As you can see, many of the Indian cities like Bangalore and Pune are in the top middle – high cost, medium skill. Beijing and Shanghai are at the far right – medium cost, but highly skilled. Certainly many of China’s Tier 2 and 3 cities are lower on the skill scale.
- This is a good representation in the growth of the technology industry in China in general as measured by the growth of 56% in patent filings.
- Generally, the infrastructure in China is first rate, and being invested in rapidly. When discussing infrastructure, we are talking about the basics such as network and telephony, but also the road system, airports, security, and so forth that are required to make a specific location a productive one. Using the Tier 1, 2 and 3 city approach, China as a country is developing the physical and IT infrastructure to support large-scale technology growth starting with the Tier 1 and so on. With the level of investment, at this point the infrastructure in even the Tier 2 and 3 cities exceeds even the largest cities in India.
- This is just an interesting comparision of airports – and having just got back from Beijing, I can tell you the airport there is downright unbelievable. It is huge, modern, and very impressive. Air travel throughout China is about the same and very similar to the US….very safe, secure, and efficient. If you have your passport and visa handy, you can pretty much travel freely throughout the country just as if you were in the US.
- This is an interesting graph because it brings to your attention where China falls in terms of peace and stability. This is actually a measure of measures you may expect, such as war and terrorism, but also internal violence, crime, and so forth. Generally, China’s crime rates are significantly lower than most of the world. The US on this graph is one below India at 134.
- Let’s talk about what is being sent offshore to China – typically all things software and software development. As you see from this chart, it ranges from basic Localization to Offshore Development Centers, or ODCs, Application Testing, to full BPO. BPO runs the gamut from HRO to FAO to activities such as content management, imaging, etc.
- This is why countries seek to enter China – and interestingly, the primary reason is the desire to tap into the huge Chinese market. Cleary 56% of companies surveyed by the Economist want access to the market now and in the future.
- The number one reason to not enter China according to 42% of respondents is the fear of IP theft. So it makes sense to spend a moment and talk about this. China recognizes this as an issue, and they have taken significant and formal steps to control it. But it is important to understand that for commercial enterprises, this is not the problem you have come to hear in the news that is mainly around state-level concerns. IP protection is generally at the company level, and it is important to identify potential partners in China that have the security processes and certifications you require to ensure security. For Pactera, this includes access cards, biometric and fingerprinting controls, and restricted access for ODCs. In addition, Pactera maintains perimeter and intrusion detection systems among others. As evidence of our security level, we have achieved the top level of Microsoft’s 2011 security and compliance audit of their top 40 vendors. We are also SEI CMM Level 5, ISO 27001, and PIPA certified. All of these are similar certifications you should ensure are part of your security policies and standards for off-shore delivery centers.
- As you can see in this chart, China has become the 2nd largest sourcing destination after India. As Gartner states, the India marketshare is being eroded quickly by alternatives, with China leading the pack. If our clients are any indication, most companies are either trying to exit India due to labor and infrastructure challenges, or at least trying to diversify.