Perspective 2020 Transform Business, Transform India - PowerPoint by eqt50313

VIEWS: 16 PAGES: 22

									Perspective 2020:
Transform Business,
Transform India

February 11, 2009

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distributi on
outside the client organization without prior written approval from McKinsey & Company. This material was used by
McKinsey & Company during an oral presentation; it is not a complete record of the discussion.
PERSPECTIVE 2020: KEY MESSAGES



 The decade in review




 Transforming business,
 transforming India



 Shifting customer needs
 and delivery




 An agenda for action



                                 1
PERSPECTIVE 2020: KEY MESSAGES



 The decade in review      An unparalleled impact on
                           Indian economy in the last
                           ten years

 Transforming business,    Significant returns to all
 transforming India
                           stakeholders


 Shifting customer needs
                           A large unfinished agenda
 and delivery              remains


                           Global economic crisis will
                           have a far-reaching and as
 An agenda for action      yet uncertain impact


                                                         2
          THE TECHNOLOGY AND BUSINESS SERVICES                                                                                         Actual
                                                                                                                                       Aspiration
          INDUSTRY HAS HAD AN UNPARALLELED
          IMPACT ON THE INDIAN ECONOMY
      Growth of Indian technology and business services exports
      US$ billion
                                                                                                                                47    50


                                                                                                                        18
                                                                                             8
                                                               2
                                                          1998                          2002                         2005      Mar Dec
                                                                                                                               2009 2008
      Share of GDP*
                                                                    <1                                                          4
      Per cent
      Share of exports***
                                                                     4                                                         16**
      Per cent

      *   Total export revenues as a percentage of nominal GDP
     **   Based on FY08 performance
    ***   Technology and business service exports as a percentage of total exports (merchandise exports and service exports)
Source:   RBI Annual reports 1998 to 2008; WMM (Global Insight)                                                                                     3
       THE INDUSTRY HAS HAD A RESONATING IMPACT
       IN THE BROADER SOCIETY
      Incremental jobs created                                                                                  Other areas of impact
      Million; FY 1994-2005
                                                                             Share of total                     • Contribution to education:
                                                                             urban jobs*                           6-7x fold increase in tertiary
                                                                                                                   education capacity in states
                  8.7
                                                                                      45%                          that account for 90% of
                                                                                                                   exports

                                                                                                                • Diversity and global exposure:
                                                                                                                   proportion of women in the
                                             4.0                                                                   workforce estimated to be 30%
                                                                                                                   in 2008 and increasing; around
                                           2.9**             Indirect                 33%                          30% of delivery outside India

                                                                                                                • Offset oil imports: Industry
                                             1.1             Direct                   12%                          exports offset close to 65 per
                                                                                                                   cent of India‟s cumulative net
           Total                      Technology/
                                                                                                                   oil imports over past decade,
           organized                  business
                                                                                                                   strengthening foreign reserves
           urban jobs                 services

      * Total urban jobs in FY 1994 amounted to 81.8 million and 90.5 million in FY 2005
     ** High multiplier effect; for every direct job created 2.6 additional jobs created in indirect employment
Source: Institute of Applied Manpower Research; “The Rising Tide – Employment and Output Linkages of IT-ITES; February 2007”; “Indian IT/ITES Industry: Impacting
        Economy and Society 2007-08”                                                                                                                                4
       THE GLOBAL ECONOMIC CRISIS WILL HAVE                                       US EXAMPLE

       A FAR-REACHING AND AS YET UNCERTAIN
       IMPACT ON THE INDUSTRY
      Historic data indicates a moderate impact                            But…

      IT spend as per cent of GDP
                                                                           • Customer
                                                                            feedback is
                                                                            polarised
      4.2
                                        IT intensity
      3.6                               peaked in 2000                     • Severity of
                                                                            the downturn
      3.0                                                                   is far greater

      2.4
                                                            Current IT
                                                                           • Political and
      1.8                                                                   regulatory
                                                 Trend at   intensity is
                                                                            pressures
      1.2                                      2.9% YoY     much less
                                                                            are
                                             increase in    than at
      0.6                                                                   escalating
                                             IT intensity   peak levels
         0
             1970                1980           1990        2000    2007
Source: BEA; McKinsey analysis                                                               5
PERSPECTIVE 2020: KEY MESSAGES


                           Demographic shifts will fuel the
 The decade in review      growth of new sectors, markets
                           and service lines

                           The promise of technology to
 Transforming business,    create new opportunities needs
 transforming India        to be balanced by the risk of
                           erosion in core markets
                           India can become a global
                           innovation hub and own
 Shifting customer needs
                           business systems in at least
 and delivery
                           three areas

                           ICT-enabled solutions can drive
                           socio-economic inclusion of 30
 An agenda for action
                           million citizens each year


                                                              6
      ASIA (INCLUDING JAPAN) WILL BYPASS EUROPE
      IN THE GLOBAL ECONOMY BY 2020
    Regional share of global GDP
    Per cent                                                                              Share of global GDP*
                                                                                          1990       2020

     100                                                           Middle East & Africa     5%          7%
                                                                   Latin America            5%          5%
       80
                                                                   Asia (except Japan)      8%          20%

       60                                                          Japan                    18%         10%

                                                                   Europe                   31%         25%
       40


       20                                                          North America            33%         33%

         0
         1990 „95             „00         „05   „10   „15   „20 2025
      * Estimates
     ** Brazil, Russia, India, China
Source: McKinsey Global Forces research                                                                          7
       WORK FORCES WILL DECLINE AND AGEING
       POPULATIONS INCREASE IN SELECT DEVELOPED
       COUNTRIES
     Increase in retiree (60+ years)                                     Decrease in working age (15-60
     population: United States                                           years) population: Japan
     Millions of people                                                  Millions of people
                                                                                 83
                                                                                               75     8
                                                 54
                      38                                           16




                    2008                       2020                             2008          2020


                                                                                  Current offshore
                                                                                   base in India –
                                                                                     1.6 million

Source: UN population prospects, 2004; McKinsey Global Forces research                                    8
       TODAY‟S CORE SERVICE LINES ARE AT RISK                                                     Highest
       OF SHRINKAGE                                                                               risk of
                                                                                                  erosion
                     Service line                            Industry revenue
                                                             US$ billion, 2008
                     Traditional IT                              3
                                                                                         • Automation of
                     AD                                               14                  basic services
                                                                                          (e.g., testing,
Tech-                AM                                                         4         level 1 AM)
nology
services             SI                                                             1    • Productivity gains
                     IT Consulting                                                  1    • Increasing
                                                                                          standardisation
                     Total                                                          23

                     Rule based decision making                  3                       • Interactive voice
                                                                                          recognition
                     Basic voice                                  5                       techniques
Business
                     Basic data                                        2                 • New technologies
services                                                                                  such as optical
                     High-end offshoring*                                  1              character reading
                                                                                          to automate data
                     Total                                                                entry
                                                                               11
      * Includes specialised voice
Source: NASSCOM data; McKinsey analysis; expert interviews                                                      9
       THE INDUSTRY CAN TRANSFORM INDIA BY HARNESSING
       TECHNOLOGY TO ENABLE INCLUSIVE GROWTH

        Areas                           Potential of ICT solutions

                                        50% of Indians do not have access to primary
        Healthcare                      healthcare – technology can provide it at half the
                                        cost

                                        80% of Indian households are unbanked –
        Financial
                                        technology can enable access for 200 million
        services
                                        families

                                        India faces a 3-fold shortage in teachers –
        Education                       technology can address this through remote
                                        solutions

                                        India suffers from a leakage of 40-50% in public
        Public
                                        food distribution - technology can ensure
        services
                                        transparency
Source: Expert interviews; McKinsey analysis                                                 10
PERSPECTIVE 2020: KEY MESSAGES



 The decade in review
                          The industry landscape will be
                          fundamentally altered

 Transforming business,
 transforming India
                          There are several new business
                          models for providers to consider
 Shifting customer
 needs and delivery
                          A majority of incremental growth
                          will be driven by opportunities
                          that are untapped today
 An agenda for action



                                                             11
2020 WILL PRESENT A DRAMATICALLY ALTERED
LANDSCAPE (1/2)
                Past decade                  2020
Demand
                • Concentrated footprint     • Significant opportunity outside
                 – 75% with Fortune 500       today’s core markets
                 – 80% from US/UK             – SMB
1   Market
                 – 75% from BFSI, Telco,      – BRIC, GCC, Japan, ROW
                   Manufacturing              – Public sector and Healthcare
                 – 60% from IT services

                • Predominantly private      • Public sector, Government
                 sector                       owned or influenced companies
                • Managing for cost,         • Innovation, end-to-end
2   Customers    productivity and quality     transformation, risk & compliance
                • Labour arbitrage           • Access to talent and expertise
                 dominant value driver
                • Onshore/offshore mindset   • Global delivery
                                                                                  12
2020 WILL PRESENT A DRAMATICALLY ALTERED
LANDSCAPE (2/2)
             Past decade                    2020
Supply

             • India accounting for more    • Global people supply chain with
              than 50% of the low cost       globalised recruiting and talent
              workforce                      practices

             • Delivery centric management • Multiple management tracks,
3   Talent                                   globalised expertise

             • Recruiting and training as   • Emphasis on learning, knowledge
              key differentiators            management, research spending

             • Trainable talent pool        • Deployable talent pools




                                                                                13
                                         THERE ARE MULTIPLE “STEP-OUT” BUSINESS                                    Players today
                                                                                                                   “Step-out” plays
                                         MODELS FOR PROVIDERS TO CONSIDER                                       NOT EXHAUSTIVE
How to compete (competitive advantage)




                                         Multi-client   4 Solution approach
                                         services/                                            Low cost
                                                                              Saas enabled
                                         products                                             product

                                                        3 Domain approach
                                         Domain
                                                          Vertical
                                         expertise
                                                          specialist

                                                        2 Customer-centric approach
                                         Customer
                                                          Full-service
                                         intimacy
                                                          provider

                                                        1 Delivery approach
                                         Delivery
                                                          Low-cost                            BRIC
                                         excellence
                                                                                              specialist

                                                        Large enterprises   SMBs             Large           SMBs
                                                        (Fortune 1000)                       enterprises
                                                                 Developed markets                New geographies (BRIC)
                                                                       Where to compete (customer segments)
          * Independent verification and validation
    Source: McKinsey analysis                                                                                                      14
PERSPECTIVE 2020: KEY MESSAGES


                           Success will rely on concerted
 The decade in review      action by industry stakeholders
                           (companies, NASSCOM,
                           government) anchored on a five-
                           fold vision
 Transforming business,    • Catalysing growth beyond
 transforming India          today‟s core markets
                           • Establishing India as a trusted
                             global hub for professional
                             services
 Shifting customer needs
 and delivery              • Harnessing ICT for inclusive
                             growth
                           • Developing a high caliber talent
                             pool of over 4 million people
 An agenda for action      • Building India as a preeminent
                             innovation hub


                                                                15
       COMPANIES CAN EMERGE AS WINNERS THROUGH
       4 ACTIONS
      Target transformative acquisitions           Deepen end to end capabilities in
                                                                       select areas
      Ring fence talent and
      knowledge investments
                                                                     Target recession
      Consider strategic                                             resilient sectors
      alliances for scale          Make                            (Healthcare, BRIC,
                                 strategic                            climate change)
      Develop                     invest-        Rebalance
      isolutions for               ments          customer/
                                                    services
      domestic end-                                  portfolio
      customers


      Fundamentally           Streng-                              Segment customer
      transform existing       then
                            operations/                            base for resiliency
      cost structure – 20
      to 30% lower           delivery              Adapt         Create a portfolio of
                                             offering/sales      “downturn” services
                                               approach
      Balance delivery
      foot-print to hedge
      against                                                 Invest in transformative
      concentration and                                                        big bets
      forex risk
Source: McKinsey analysis                                                                 16
   AN AGENDA FOR ACTION ANCHORED ON A
   5-FOLD VISION
• Intellectual property framework                                        • Winning through the downturn
  (especially enforcement)                                               • Reinvented business models
• Centers of Excellence                                                  • New verticals, geographies
• Entrepreneurship               Building                  Catalysing
                                                                           and customer segments
                                India as a              growth beyond
                               preeminent                today‟s core
                               innovation                   markets
                                   hub     5             1

• Primary and        Developing a                Five
                                                                 Establishing       • Improved
  tertiary            high caliber    4        themes      2                          infrastructure
                                                               India as a trusted
  education          talent pool of                              global hub for       (e.g., satellite
  quality and        over 4 million              3               professional         townships)
  scale up               people                                     services        • Corporate
• Curriculum                             Harnessing                                   governance
  and faculty                          ICT for inclusive                            • National security
  development                               growth
                                                                                    • Robust domestic
                                                                                      demand
                          • ICT solutions for healthcare, education,
                                                                                    • Global branding
                            financial services, public services
                          • Connectivity and access (e.g., broad-
                            band rollout)
                          • Soft infrastructure (e.g., IT literacy)
                                                                                                          17
PERSPECTIVE 2020 PAINTS THE WAY TO “TRANSFORM
BUSINESS, TRANSFORM INDIA”

  What has lead to the success of the industry thus far?


  What will be the altered landscape of 2020, including growth engines and
  industry revenue potential?


  How can the Indian industry lead the way in innovation-led transformation
  of global business and technology-led inclusive growth of the nation?


  What are internal and external threats to India‟s leadership and how can it
  sustain and improve its competitiveness in 2020?


  What is the industry vision for 2020, and resulting imperatives and actions
  for industry stakeholders (companies, NASSCOM, the government)?


                         Report release in March

                                                                                18
BACKUPS




          19
     Social and environmental trends
                                                                                       BACKUP
     THERE IS AN INCREASING NEED TO ADDRESS
                                                                                       ESTIMATES
     CLIMATE CHANGE AND ICT IS EMERGING AS                                                Select ICT-
     A KEY ENABLER                                                                        enabled
                                                                                          abatements

ICT can play a role in abatement of a potentially dramatic rise in global greenhouse
emissions by 2020
Greenhouse gas emissions
GtCO2e


                                             52          30           ICT enables
                                                                      at least 35%
                                                                      of global
                               12
                                                                      abatement
                   40                                    22           potential




                                                         8
                                                                     22




              Emissions     Incremental   Emissions   Potential   Emissions in
              in 2002       emissions     in 2020E    abatement   2020 with
                                                                  abatement

Source: McKinsey analysis                                                                               20
     Energy efficiency/climate change

    OPPORTUNITIES EXIST ACROSS A BROAD SET                                                  NOT EXHAUSTIVE
                                                                                                      BACKUP
    OF APPLICATIONS AND ARE NOT LIMITED TO
    THOSE TRADITIONALLY ASSIGNED TO ICT
     Abatement potential, GtCO2e

  Industrial motor                                                                   Efficient logistics
                                     0.68                               1.52
  optimisation                                                                       and supply chain
  Industrial process                                                                 Private transport
                                  0.29        Industrial                 0.50
  automation                                                                         optimisation
                                              processes
                                              efficiency                  0.25       Dematerialization*

                                                                          0.16 Efficient vehicles
                                                                                     Traffic flow monitoring,
                                                                          0.10
                                                                                     planning simulation
                                                  ICT      Efficient
                                  Efficient
                                              efficiency   transport
                                  buildings



Smart
                                  1.68                                 2.03            Smart grid
buildings
Tele-                                          Efficient                               Combined heat
                   0.26                         power                         0.40
commuting                                                                              and power (CHP)
                                              generation

      * Excluding telecommuting
Source: McKinsey analysis                                                                                   21

								
To top