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Establishing A Global Footprint…

Establishing A Global Footprint…. Alvin Carmen Eric Winsie. Why go global . Company Drivers. Maintain Leadership. Quality Leadership. Maintain Growth Rate. Growth. GO GLOBAL. Customer Satisfact ion. Extend Service Capabilities. Profitability. Generate

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Establishing A Global Footprint…

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  1. Establishing A Global Footprint… Alvin Carmen Eric Winsie

  2. Why go global Company Drivers Maintain Leadership Quality Leadership Maintain Growth Rate Growth GO GLOBAL Customer Satisfaction Extend Service Capabilities Profitability Generate New Business

  3. Language Capabilities is the Key Outsourcing needs in other languages WHERE To Go? Customers’ Needs Business in European and other countries of existing and potential customers US, UK, Canada Customers India Operations Call centers, Back Office, IT etc. - English & Spanish

  4. Which is the Most Lucrative Language(s)? Let’s use the Healthcare Industry as an example?

  5. Language • Demand-side Factors • Market potential Where? Revenue • Industry Behavior Factors • Competition Cost • Supply-side Factors • Size of talent pool • Labor cost • Infrastructure • Regulatory favorability • Leadership

  6. Demand – Market Distribution Source: World Bank (World Development Index)

  7. Market Distribution by Languages Source: World Bank (World Development Index), Ethnologue, Team Analysis

  8. Outsource Market Size Ratio

  9. Current Market Size Assumption • Global Healthcare Outsource Market = $36 bn in 2006 Source: World Bank (World Development Index), Ethnologue, EDS, Gartner, Team Analysis

  10. Estimated Revenue We set target revenue of (setting up) an operation for European-language-speaking customers to be $US 22 mn at the end of the third year. Assumption • Global Healthcare Outsource Market = $36 bn in 2006 • Growth Rate = 8% ’06~08 • vCustomer’s Share in Market Growth = 5% • Starting Revenue = $36 bn * Target Market Ratio * Market Growth * vCustomer’s Share in Market Growth Source: World Bank (World Development Index), Ethnologue, EDS, Gartner, Team Analysis • Positive factors driving this segment: • Public healthcare reform in EU (i.e. public healthcare spending consists of >70% of total in EU versus <45% in USA) • De-regulating state-governed healthcare system for outsourcing, and standardizing diverse service delivery model • Key Outsource Service Areas: • Customer Management Processes • Maintaining Electronic Medical Record

  11. Competition The fact that players in Indian ITES industry accounts for over 60% of global healthcare outsource revenue … … and that the following graph shows no close-nature competition from Indian industry players to vCustomer … … are good indicators that vCustomer could be a leading entrant in this segment (small-to-medium-sized European healthcare contract) … … with possibility to improve profitability and growth rate. Source: Case Appendix, Company Websites, Team Analysis

  12. Supply-side Factors

  13. Supply-side Factors

  14. How to get into the low-cost location Set up Acquire WebHelp Partnership with Sofia Implementation

  15. Finance Position $25 million War Chest available + Positive Operating Cash Flow Customer Value Company Vision: High Quality Services People Soft skill + Language Skill Risk Attitude Willing to take risk Criteria

  16. Selection Set up New Plant Partnership with Sofia Acquisition of WebHelp Existing Customer Base Service Quality Control Immediate Cash Inflow Immediate Supply of Multilingual Staff Local Knowledge C B A

  17. Financial Justification for Healthcare Expansion

  18. The Case for Going Global Stay in India Go Global Impact on existing verticals other than healthcare (e.g. retail, telecom) No Impact Impact on Healthcare Positive financial impact

  19. Analyse existing clients’ language needs Relative importance of non-English speaking markets to the clients Build language capability to capture lucrative opportunity Provide more comprehensive service to fulfil clients multi-lingual needs Extension of the Healthcare example to other verticals • Criteria for selecting service centre locations: • Unfulfilled non-English speaking market of clients • Location that can best capture the most lucrative market Decision process for determining where to go:

  20. Most popular language: French and German Clients’ operation languages needs Most lucrative language: French and German Establish European language capability eg. WebHelp Example

  21. Stay in India Go Global ? / Impact on existing verticals other than healthcare (e.g. retail, telecom) Possibly serve existing customers’ need in new languages No Impact X Impact on Healthcare Unable to fully capture opportunities Capture market potentials The Case for Going Global

  22. Question & Answer Healthcare Industry Dynamics of healthcare industry Industry spending on IT services Healthcare outsourcing market financials Company analysis SWOT Internal analysis SWOT External environment 9Cs analysis 1 9Cs analysis 2 9Cs analysis 3 VCustomer core competence Healthcare demand side factors Demand – Market potential bar chart Demand – Market potential waterfall graph Demand - Top private healthcare spending countries Demand - Top public healthcare spending countries Demand - Top 7 Healthcare spending countries (in US$) Demand – Top 7 Healthcare spending countries (in %) Demand - Healthcare spending of English-speaking customers Demand - Healthcare spending of Spanish-speaking customers Demand – Healthcare spending of German-speaking customers Demand – Healthcare spending of French-speaking customers Demand – Healthcare spending of Japanese-speaking customers General outsourcing information Outsourceable and outsourced workforce Outsourcing industry trends Evaluating outsourcers Potential outsourcing industry Why outsourcing? Industry’s customer relations dynamics Outsourcing in Asia China as an outsourcing service centre destination Next Verticals? Healthcare supply side factors Supply factor - Bulgaria risks Supply factor - Bulgaria risk 2 Supply factor - market and outlook Supply factor - China – risk Supply Factor - China – risk Supply Factor - China – cost, market and outlook Implementation of Healthcare expansion Key strategic objectives Financial projections excel Financial projections under 3 scenarios graph Key actions: customer and staff management WebHelp profile

  23. Key Strategic Objectives • Financial Objectives • 3rd Year Revenue above US$ 37 mn • Operating Margin above 12% • Growth Rate above 5% • Customer Value Objectives • Superior Service Quality • Long-term and large-size Contract • Strong brand to facilitate growth • Innovation in Servicing • Internal Processes Objectives • Strong Quality Assurance Processes • Customer Selection and Retention • Business Development • New Service Development • People and Organization Objective • Management Position • Talent Recruitment • Partnership Management • Reward and Incentive Program

  24. Financial Projections

  25. Financial projections under 3 scenarios

  26. Dynamics of Healthcare Industry High • Regulatory changes • No dominant player • High volume transaction processing • Security of information critical ? Market Growth Rate Low Low High Source: Gartner "Industry Market Strategies Worldwide Vertical Forecast Database" November 2006 Market Share

  27. Outsourceable and outsourced workforce

  28. Trends • Standardization • Threats to cut cost • Customer satisfaction • Globalization

  29. Industry Spending on IT Services • Vertical industry spending on IT in Europe, the Middle East and Africa will exceed EUR 625 billion in 2006. From 2006 through 2010, the fastest-growing markets are expected to include utilities, healthcare, and local and regional government. • Source : Gartner

  30. Size :~$36B (1) Growth Rate (’06-’08) : ~8% (1) Operating Margin :~5-11% (2) (1) Source: Gartner "Industry Market Strategies Worldwide Vertical Forecast Database" November 2006; (2) Source: Based on EDS information as of January 2007 Healthcare Outsourcing Market Financials

  31. Next Vertical? • (1) Source: Gartner "Industry Market Strategies Worldwide Vertical Forecast Database" November 2006; • (2) Source: Based on EDS information as of January 2007

  32. Evaluating Outsourcer • Suitability of solution to client business • Provider’s experience and capacity • Financial justification • Providers’ ability to deliver promise • Quality of service • Infrastructure of provider • Service innovation • Strategic alliance • Cultural fit

  33. Why go to Europe when 70% of healthcare market in US • Less competition • Establish market leadership • Healthcare expertise acquired can be readily transferable to serve US customers

  34. Why outsourcing? • Less cost for same amount of work • OR • Same cost for more work Wage Level W W’ L L’ No. of Labor

  35. Potential of Outsourcing Industry By 2008, approximately $300-400 billions worth of services will be moved offshore. Source: Infosys Technologies Analysis

  36. Industry’s Customer Relations Dynamics

  37. Outsourcing in Asia

  38. China as an Outsourcing Service Centre Destination No. of engineers graduates annually 600,000 vs 70,000 in the US Japanese speaking of cities in the Northeast area

  39. Strengths Leadership in technology investment Quality-oriented services Loyal customers (100% retention rate) Reputation (recognition from Inc Magazine, Business Week, Fortune) International recognized standard service delivery approach (ISO and Six-Sigma) Strong management team Focus on customers Familiar with US and Indian business environment Strong financial performance (positive cash flow since 2001) Abundant cash reserve (USD25mil) First mover in emerging technologies (e.g. VoIP) High-qualified employees Ability to charge higher than average Willingness to take justified risks Weaknesses Relatively small size compared to competitors Limited language capabilities Limited BPO offerings No global footprint Small contract size Internal Analysis

  40. Opportunities Outsourcing activity is forecasted to grow at CAGR of 38% (Infosys) Outsourcing becomes the trend in more and more industries (e.g. Health care, Financial services, Insurance) Customers now require broader and more comprehensive services Customers trend to rely more on one outsourcing provider nowadays Industry consolidation in progress New places, such as Eastern Europe, Philippines, Russia, China etc., become suitable destinations for setting up outsourcing operations Continuous decline in communications cost Threats Extremely competitive with large number of small players and large players are entering market Increasing labor costs in India and other potential outsourcing destinations Limited supply of talent High turnover rate High cost to train people External Environment

  41. 9 Cs Analysis

  42. 9 Cs Analysis

  43. 9 Cs Analysis

  44. vCustomer Core Competence Management capabilities Technological leadership Reputation (awards…) Quality-oriented services Service delivery approach (ISO 9001 & Six Sigma) Customer relationship (100% retention)

  45. Demand – Market Potential Source: World Bank (World Development Index)

  46. Demand – Market Potential Source: World Bank (World Development Index), Ethnologue, Team Analysis

  47. Demand – Top Private Healthcare Spending Countries

  48. Demand – Top Public Healthcare Spending Countries

  49. Demand – Top 7 Healthcare Spending Countries (in US$)

  50. Demand – Top 7 Healthcare Spending Countries (in %)

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