Shenzhen 1995 Shenzhen 2005 Shenzhen 1985 Kun Chen 2005 Slide 2
*Keynote presentation at the Innovation in Services Conference,
Manchester, UK, June 15-18, 2006. Offshored Services, Innovation,
and Knowledge Intensity* Martin Kenney UC Davis & Berkeley
Roundtable on the International Economy & Rafiq Dossani
Stanford University Slide 3 The Story Is No Longer... about
domestic markets confined to call centers, simple software coding,
or data entry about only large MNCs, small knowledge- intensive
firms are rapidly building capabilities abroad about India alone
(Martha shows) Slide 4 It Is Also About... high value-adding
capabilities being developed in low-wage economies interesting
entrepreneurial initiatives in developing nations interesting
entrepreneurial initiatives in the developed nations to use low
cost think workers MNCs creating global centers of excellence
offshore new business models (virtual receptionist) global
knowledge networks Different mix-and-match (in-house/external)
Slide 5 The Discussion of Whether Knowledge-Intensive Services Will
Be Relocated to Developing Nations Is Over Slide 6 And That Is Why
This Conference Is So Exciting and the Reason We All Came -- We Are
Studying a Major Shift the Organization and Geography of Value
Creation Blinder (2006) claims that it will be a new Industrial
Revolution. Will it be like China in manufacturing, was that an
industrial revolution Slide 7 Consider the Issues With Which Our
Work Intersects The boundaries of the firm The reorganization of
the firm (e.g., Sako 2005) Vertical disintegration Dismantling the
Chandlerian firms staff function Changing location of work Division
of labor Changing organization of work What does information
technology enable Slide 8 The Enabling Conditions -- We All Know
Increasingly accessible workers in developing nations Standardized
platforms & now open source Digitization data and info
fluidized increasing volume plummeting transfer and telecom costs
copying and use costs zero w/t state protection Corporate
reengineering and outsourcing domestically becomes normal practice
Slide 9 Patents as a Measure of Knowledge Creation Slide 10
ChinaIndia Slide 11 USPTO Patents per 10,000 Persons, 2004 Taiwan--
2.5835 (5,938)Taiwan-- 2.5835 (5,938) Korea--.9145
(4,428)Korea--.9145 (4,428) Japan-- 2.7436 (35,350)Japan-- 2.7436
(35,350) U.S.-- 2.850 (84,271)U.S.-- 2.850 (84,271) India--.00336
(363)India--.00336 (363) China--.00457 (597)China--.00457 (597)
Slide 12 India as an Exemplar Slide 13 2005 -- Employment Growth
CAGR 29.8% Employee numbers 000s Source: NASSCOM 2005 37.0% 18.5%
Remember US Work Force is 130 million Slide 14 Employment for
Global Operations in India by Selected Large Non-Indian Software
Firms Slide 15 Sales for IBM GS, TCS and Infosys Source: Various
Annual Reports 31.6% CAGR 23.4% CAGR 6.3% CAGR Slide 16
Profitability of Infosys, TCS, IBM, 2003-2005 27.5% CAGR 15.3% CAGR
6.6% CAGR Source: Various Annual Reports Slide 17 ITES Exports from
India, 2004-05 Call centers are declining as a share EvalueServe
Slide 18 By the year 2010, several new KPO services will become
prominent in the global offshoring space Source: Evalueserve 2005
Slide 19 The Indian IT Services Landscape Future growth Focus
Current Strength IS Outsourcing (110 Bn) System Integration Network
Consulting and Implementation H/w support and Installation (120Bn)
Training & Education ($50Bn) Application development,
maintenance and outsourcing (60Bn) Packaged S/W support &
Integration IS consulting R&D Services Management Processing
Services (80Bn) Leveraging current strengths to grow and move up
the value chain High ValueHigh Volume Technology & Domain IP
Direction of Evolution Network Infrastructure Slide 20 BPO maturing
and moving up the value chain GrowthEmbryonicMatureAging Time
Maturity Insurance Claims IT Outsourcing Accounting HR Admin Call
Centers Engineering High Low Tech Support Knowledge Processes
Specialized players emerging Complexity quickly increasing From
captives to third-party Double Sourcing Source: Alok
Agarwal/Evalueserve 2005 Slide 21 Case Studies Slide 22 MNC A --
Regional and Global Consolidation Decentralized (1990-95) Regional
Consolidation (1996-99) Off-Shore Global Consolidation (2000-03)
India as the global center of excellence Slide 23 Source: Working
Council for Chief Financial Officer MNC A Global BPO Footprint with
Regional Specializations Main Global Hub Low-Cost, Transaction
Processing Center (Bangalore & Chennai) Activities Finance
& Accounting Billing Order & rebates management Customer
fulfillment Employee services & payroll Procurement/SCM
Reporting Workforce 3,800 FTEs, HP employees 2 years to scale
Language fluency in English, French, German, Spanish, Japanese,
Chinese Support Centers Specialized Language Transaction Processing
(Barcelona, Singapore, Guadalajara, Dalian & Costa Rica)
Workforce 250 FTEs Barcelona 92 FTEs Singapore 380 FTEs Guadalajara
60 FTEs Dalian 120 FTEs Costa Rica 1 year to scale Activities
Country-specific regulatory transactions Customer support for
exotic languages (e.g., Serbo- Croatian, Chinese) Back-up and
disaster recovery services Onshore Centers (Colorado Springs &
Houston) Activities Call center support (A/P) Vendor refund &
escalation Tax reporting Mail room & scanning Workforce 65
FTEs, contract labor 1 year to scale Scale of Operations: 4,700+
professionals Presence: 56 local front-offices, 7 regional business
centers, 7 global business centers Language capabilities: Expertise
in 30 languages Slide 24 MNC A -- Business Growth over the Last 5
Years Slide 25 Data Entry (Engineering Services) CAD Support Vendor
Payables Accounts Receivables Product Development EDA, T&M ASIC
Design Center Biz Process Order Mgmt Professional Services Network
Design QA Product Development IT ADMS Web Development Collections
Finance Audit Nov 01Nov 04Nov 03Feb 02Nov 02 ERP Reporting
COMPLEXITY MNC B -- Actual Transition of Projects at a Major US
Firm Bold = unplanned 1,300 employees Global Trade & Logistics
Slide 26 The Educational Levels of Web Posted Job Descriptions for
Intel, HP and Oracle, February 2005 Slide 27 A Job at Intel India
CAD Engineer: Hardware Engineering is all about finding solutions.
As a CAD (Computer Aided Design) Engineer with the Intel Hardware
Engineering team, you'll work on teams designing, developing and
implementing solutions. As part of Hardware Engineering at Intel,
you'll have the opportunity to be involved from start to finish on
the development of world-class innovations. Responsibilities As a
CAD Engineer, you will be involved in developing new very large
scale integration (VLSI) CAD tools and methodology solutions for
design for testability (DFT) and test generation for high volume
manufacturing of next generation microprocessor products. You will
be responsible for development, deployment and maintenance of
in-house fault simulation and test generation tools. This position
will be based in Bangalore, India. Qualifications You must possess
a Ph.D. or Master of Science degree in Electrical Engineering or
Computer Engineering with five to ten years of related work
experience. Additional qualifications include: Extensive knowledge
of Digital Design and Design-for-test principles, digital
circuit/fault simulation and automatic test pattern generation.
Good working knowledge in developing CAD tools using C++ in a
UNIX*/Linux* environment. Excellent experience in a related people
management role would be an added advantage.
http://appzone.intel.com/jobs/uRequisition.asp?Posting=34339Accessed
April 9, 2004 Slide 28 An Example of Offshore KIS EvalueServe
Business Information & Market Research Industry and Value Chain
Analysis In-Depth Analysis of Customer Segments, Products,
Channels, Technologies Competitive Intelligence and Benchmarking
Monitoring and Customized Newsletters Primary Research Surveys of
Industry Participants and Experts Slide 29 Software As a Service
Why own software and pay consultants to maintain it, when you can
buy it as a service Salesforce.com Jotspot.com (uses programmers
globally) Slide 30 Questions How much KIS can be created in LDCs?
What are the limits and can we create theories that will tell us
what they are? How does interpersonal knowledge creation across
national boundaries work? Will a global wage be set for work? How
do networks of intermediaries (these are also KIS) get created to
facilitate globalization (Howells and others here at UM)? How is
the increasingly encompassing open source movement going to affect
KIS? Slide 31 Questions With digitization, value created from the
digital realm itself Music mashups Myspace Web mashups What is the
proper stance toward IP to maximize global value creation? How will
entrepreneurs innovate new value propositions? Slide 32 Thank
You
