OFFSHORE SERVICES GLOBAL VALUE CHAIN

1. OFFSHORE SERVICES GLOBAL VALUE CHAIN Karina Fernandez-Stark Center on Globalization, Governance & Competitiveness (CGGC) Duke University Conferencia Deslocalización de servicios y cadenas globales de valor: ¿Nuevos factores de cambios estructurales en América Latina y el Caribe? Santiago, Chile 18-19 de Octubre de 2012

2. Duke University Center on Globalization Governance & Competitiveness Global Value Chain analysis  understand the dynamic of global industries and how countries can capture higher value (Upgrading) OFFSHORE SERVICES • Offshore Services Global Value Chain: Costa Rica Upgrading • Regional Competitiveness in the Latin America Offshore Services Value Chain. In The Oxford Handbook of Offshoring and Global Employment. Oxford: Oxford University Press.  • "The Offshore Services Value Chain: Upgrading Trajectories in Developing Countries." International Journal of Technological Learning, Innovation and Development. • The Offshore Services Value Chain: Developing Countries and the Crisis. In Global Value Chains in a Postcrisis World. Washington DC: World Bank.              • Engineering Services in the Americas. • The Offshore Services Industry: A Global Value Chain Approach. • The Offshore Services Industry: Upgrading Through Workforce Development. • Workforce Development in Chile's Offshore Services Industry. • The Offshore Services Industry: A New Opportunity for Latin America. Durham: Center on Globalization, Governance & Competitiveness. Report for the Inter-American Development Bank.

3. Offshore Services Global Value Chain Vertical Activities a Industry specific b Horizontal Activities ITO Information Technology Outsourcing HIGH Banking, Financial Services and Insurance (BFSI) Ex. Investment research, private equity research, and risk management analysis KPO Knowledge Process Outsourcing Software R&D Business Consulting Business Analytics Market Intelligence Legal Services Manufacturing Ex. Industrial Engineering and sourcing and vendor management IT Consulting BPO Business Process Outsourcing Telecommunications Ex. IP transformation, Interoperability testing and DSP and multimedia Value Added Software ERM (Enterprise Resource Management) HRM (Human Resource Management) CRM (Customer Relationship Management) ERP (Enterprise Resource Planning): manufacturing/operations, supply chain management, financials & project management Energy Ex. Energy Trading and Risk Management , and Digital oil field solutions Applications Development Finance & Accounting Training Marketing & Sales Travel & Transportation Revenue management systems, customer loyalty solutions Applications Integration Procurement, Logistics and Supply Chain Management Desktop management Talent Management Health/Pharma Ex. R&D, clinical trials, medical transcript Infrastructure Payroll Applications Management Content/ Document Management Recruiting Retail eComerce and Planning, merchandising and demand intelligence Contact Centers/Call Centers Network Management Infrastructure Management Others LOW

4. Offshore Services: Global Supply and Demand 45% of the industry market 2.1% Rest of the World 51.1% US & Canada 30.6% EU-15 16.2% Asia-Pacific Same number of call centers employees than India Demand for Offshore Services (%) 50 30 15 Source: CGGC based on Everest & Datamonitor 2

5. The Size of the Offshore Services Industry (estimates) BCG US$ 281,3 bill US$ billions OECD US$ 252.4 bill NASSCOM US$ 117.5 bill Source: CGGC based on OECD 2008, NASSCOM 2009, Boston Consulting Group 2007. • 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

6. 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

7. Examples of Upgrading Trajectories Upgrading within the BPO segment Entry into the value chain Upgrading to KPO Activities Industry Specialization Broad Spectrum Services

8. Offshore Services Upgrading: India, Philippines and Chile

9. 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.

10. Upgrading and Workforce Development Value Chain Segments Job Profiles and Upgrading ITO BPO KPO Skill Level Job Profiles F&A ANALYST IT TECHNICIAN LEGAL ANALYST FINANCE ANALYST IT CONSULTANT BUSINESS ANALYST CALL CENTER OPERATOR SOFTWARE PROGRAMMER SOFTWARE R&D ENGINEER MARKETING & SALES ANALYST QUALITY ASSURANCE MANAGER

11. Upgrading Trajectory: Entry into the Value Chain

12. GVC Upgrading & Workforce Development: Select Findings 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

13. Thank you for your attention! Center on Globalization, Governance & Competitiveness- Duke Universityhttp://www.cggc.duke.edu Karina Fernandez-Stark Senior Research Analyst karina.stark@duke.edu