© 2012 Duke CGGC

OFFSHORE SERVICES GLOBAL VALUE CHAIN

Conferencia Deslocalización de servicios y cadenas globales de valor: ¿Nuevos factores de cambios estructurales en América Latina y el Caribe?

Santiago, Chile18-19 de Octubre de 2012 1

Karina Fernandez-Stark Center on Globalization, Governance & Competitiveness (CGGC)

Duke University

© 2012 Duke CGGC

Duke University Center on Globalization Governance &

Competitiveness

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.

2

Global Value Chain analysis understand the dynamic of global industries and how countries can capture higher value (Upgrading)

Global Value Chain analysis understand the dynamic of global industries and how countries can capture higher value (Upgrading)

© 2012 Duke CGGC

Infrastructure

Software

Network ManagementNetwork Management

Applications ManagementApplications Management

Applications DevelopmentApplications Development

Applications IntegrationApplications Integration

Desktop managementDesktop management

CRM (Customer

Relationship Management

)

HRM(Human

Resource Management

)

ERM (Enterprise Resource

Management)

Marketing & Sales

Marketing & Sales

Finance & AccountingFinance & Accounting

Procurement, Logistics

and Supply Chain

Management

Procurement, Logistics

and Supply Chain

Management

TrainingTraining

PayrollPayroll

RecruitingRecruiting Contact Centers/Call

Centers

Contact Centers/Call

Centers

Talent Management

Talent Management

Content/Document

Management

Content/Document

Management

ITO Information Technology

Outsourcing

BPOBusiness Process Outsourcing

KPOKnowledge Process Outsourcing

Horizontal ActivitiesVertical Activities a

Industry specific bBanking, Financial

Services and Insurance (BFSI)

Ex. Investment research, private

equity research, and risk management

analysis

Banking, Financial

Services and Insurance (BFSI)

Ex. Investment research, private

equity research, and risk management

analysis

Telecommunications

Ex. IP transformation, Interoperability

testing and DSP and multimedia

Telecommunications

Ex. IP transformation, Interoperability

testing and DSP and multimedia

ManufacturingEx. Industrial

Engineering and sourcing and vendor

management

ManufacturingEx. Industrial

Engineering and sourcing and vendor

management

Retail eComerce and

Planning, merchandising and demand intelligence

Retail eComerce and

Planning, merchandising and demand intelligence

Health/Pharma

Ex. R&D, clinical trials, medical

transcript

Health/Pharma

Ex. R&D, clinical trials, medical

transcript

Others Others

Travel & Transportation

Revenue management

systems, customer loyalty solutions

Travel & Transportation

Revenue management

systems, customer loyalty solutions

Business Consulting

Business AnalyticsMarket Intelligence

Business Consulting

Business AnalyticsMarket Intelligence

Legal Services Legal Services

EnergyEx. Energy Trading

and Risk Management , and Digital oil field

solutions

EnergyEx. Energy Trading

and Risk Management , and Digital oil field

solutions

ERP (Enterprise Resource Planning): manufacturing/operations, supply chain management, financials &

project management

ERP (Enterprise Resource Planning): manufacturing/operations, supply chain management, financials &

project management

Infrastructure ManagementInfrastructure Management

IT Consulting

Software R&D

Valu

e A

dd

ed

LOW

HIGH

Offshore Services Global Value Chain

3

© 2012 Duke CGGC

Offshore Services: Global Supply and Demand

4

Demand for Offshore Services (%)

51.1%US &

Canada30.6%EU-15

16.2%

Asia-Pacif

ic

50

3015

2

2.1% Rest of the World

Source: CGGC based on Everest & Datamonitor

45% of the industry market

Same number of call centers

employees than India

© 2012 Duke CGGC

The Size of the Offshore Services Industry (estimates)

Estimates of the Offshore Services Market Size

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010

Year

Billion (

US$)

• 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

OECDUS$ 252.4 bill

BCGUS$ 281,3 bill

NASSCOMUS$ 117.5 bill

Source: CGGC based on OECD 2008, NASSCOM 2009, Boston Consulting Group 2007.

© 2012 Duke CGGC

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

© 2012 Duke CGGC

Examples of Upgrading Trajectories

7

Entry into the value chain

Upgrading within the BPO segment

Broad Spectrum Services

Upgrading to KPO Activities

Industry Specialization

© 2012 Duke CGGC

Offshore Services Upgrading: India, Philippines and Chile

8

India

1990s – 2010 Early 2000s Mid to late 2000s

Philippines Early 2000 Mid 2000s Late 2000

Chile 2000-2008 2007-2010 2010

© 2012 Duke CGGC

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.

9

© 2012 Duke CGGC

10

Upgrading and Workforce Development

BPO KPO

IT

TECH

NIC

IAN

SOFT

WARE

PRO

GRAM

MER

IT

CO

NSU

LTAN

T

SOFT

WARE

R&

D

ENG

INEE

RCALL

CEN

TER

OPE

RATO

R F&A

AN

ALY

ST

MARKE

TIN

G &

SALE

S

AN

ALY

STQ

UALI

TY A

SSURAN

CE

MAN

AG

ER

LEG

AL

AN

ALY

ST

BUSI

NES

S

AN

ALY

ST

FIN

AN

CE

AN

ALY

ST

ITO

Skill Level

Value Chain Segments

Job Profiles

Job Profiles and Upgrading

© 2012 Duke CGGC

Upgrading Trajectory: Entry into the Value Chain

11

En

try

into

th

e V

alu

e C

hai

n

Call centers hire people with high school diplomas or Bachelor’s degrees. Further skills training is provided by the company or private training institutions.

Skills Preparation

Short technical training

Institutions Private sector Government

© 2012 Duke CGGC

• 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

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GVC Upgrading & Workforce Development: Select Findings

© 2012 Duke CGGC

Center on Globalization, Governance & Competitiveness- Duke University

http://www.cggc.duke.edu

Karina Fernandez-StarkSenior Research Analystkarina.stark@duke.edu

THANK YOU FOR YOUR ATTENTION!