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IT Services Industries in Developing Nations

IT Services Industries in Developing Nations . Jessica Cassano. Andrea Nelson. Developing Countries. Countries that are generally characterized by low levels of industrialization, personal incomes, educational attainments and health standards . Source: home.ica.net/~drw/glossc-d.htm.

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IT Services Industries in Developing Nations

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  1. IT Services Industries in Developing Nations Jessica Cassano Andrea Nelson

  2. Developing Countries Countries that are generally characterized by low levels of industrialization, personal incomes, educational attainments and health standards Source: home.ica.net/~drw/glossc-d.htm

  3. IT Service Industries Although India and China are leaders in Offshoring for developing countries, other countries are setting up the systems and infrastructure to compete in this global marketplace.

  4. Global Outsourcing Report: Opportunity, Costs and Risks • Costs (30%) • Risks (54%) • Geopolitical risk (10%) • Human capital risk (10%) • IT competency risk (10%) • Economic risk (6%) • Legal risk (6%) • Cultural risk (6%) • IT infrastructure (6%) • Market Opportunity Rating (16%)

  5. HofstedeStudies • Power Distance Index (PDI) • Individualism (IDV) • Masculinity (MAS) • Uncertainty Avoidance Index (UAI) • Long-Term Orientation (LTO) Source: Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

  6. Countries • Philippines • Thailand

  7. Philippines • Culture • Inequalities of power and wealth • Collective society, extended families, group responsibilities • Male dominance in power structure • Risk taking society, accepts change • Traditions are not impediments to change • Westernized • English Speaking, neutral accent • Business laws and accounting practices are similar to U.S. Source: www.outsourcing.ph Source: Philippines Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

  8. Hofstede Studies ( Philippines) Source: Philippines Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

  9. Thailand • Culture • High levels of inequality of power and wealth • Not forced, cultural heritage • Strict rules, laws, polices, and regulations • Try to avoid uncertainty • Low individualism • Loyalty to family is key, over-rides rules, laws • Less Assertiveness • Less competitiveness • 95% Buddhist values (LTO) • Being mindful & aware of thoughts and actions, developing wisdom and understanding Source: Thailand Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

  10. Hofstede Studies (Thailand) Source: Thailand Geert Hofsted Cultural Dimensions; www.geert-hofstede.com

  11. Philippines • Location: • Southeastern Asia, between Philippine Sea and the south China Sea , east of Vietnam • Population: • 81,159,644 • Educational System: • Similar to USA • Good system - more students enrolled in University than Europe • Major Cities: • Manila Source: www.computerworld.com (9/15/03); www.offshoreitoutsourcing.com

  12. Thailand • Location: • Southeastern Asia, southeast of Burma • Population: • 66,444,371 • Educational System: • SchoolNet • Only 5,000 IT specialist a year • Major Cities: • Bangkok Source: www.odci.gov ; CIA – The World Factbook; Digitizing a nation; Far Eastern Economic Review; Mar 8, 2001; 164; 9

  13. Philippines • Religion: • 83% Roman Catholic • 9% Protestant • 5% Muslim • 3% Buddhist and other • Language: • Pilipino (official based on Tagalog) • English (official) Source: www.odci.gov ; CIA – The World Factbook

  14. Thailand • Religion • 94.6% Buddhist • 4.6% Muslim • 0.7% Christian • .1% other • Language • Thai • Ethnic and regional dialects • English (secondary language of elite) Source: www.odci.gov ; CIA – The World Factbook

  15. Philippines Literacy Rate: • 94.6% • Age 15 and over can read and write • Life Expectancy: • 64.65 males • 70.46 females Source: www.odci.gov ; CIA – The World Factbook

  16. Thailand • Literacy Rate: • 92.9% • age 15 and over can read and write • Life Expectancy • 69.65 males • 74.37 females Source: www.odci.gov ; CIA – The World Factbook

  17. Philippines • GDP per Capita: • $390.7 billion • GDP growth: 4.5% • Government: • 3 branches(Republic) • President • Congress/Senate • Judicial • Availability of Skilled Labor: • 380,000 college graduates • 15,000 IT graduates Source: www.computerworld.com (9/15/03); Global Ventures, Inc. – Global outsourcing report pg 36

  18. Thailand • GDP: • $524.8 billion • GDP per Capita: • Purchasing power parity - $8,100 • Government: • Constitutional monarchy • Availability of Skilled Labor: • Nearly ¼ of firms are not operating at full capacity due to skill shortage Source: www.odci.gov ; CIA – The World Factbook

  19. Philippines • Government Support for IT Services • Tax holiday • Business park • Deregulation Source: Global outsourcing report

  20. Thailand • Government Support for IT Services • Business Park • Deregulation • SchoolNet Source: www.odci.gov ; CIA – The World Factbook

  21. Piracy Rates • Philippines: • 71% software piracy • $69 Million in losses • Thailand: • 79% software piracy • $183 Million in losses Source: www.bsa.org/globalstudy

  22. Philippines Technology Infrastructure • 3.3 Million land-line telephones • 3.5 Million cellular telephones • 93 Internet services providers Source: Global Outsourcing Report

  23. Thailand Technology Infrastructure • 6.6 Million land-line telephones • 26.5 Million cellular telephones • 15 Internet services providers • 6.9 Million Internet users Source: Going Global Ventures Inc., Global Outsourcing Report. pg 36

  24. Size of IT services market (Philippines) • 2005 market growth 29% • 2.2% of GDP in 2005 • $1 Billion • 30 Companies • 10,000 software programmers Source: Going Global Ventures Inc., Global Outsourcing Report. pg 36

  25. Size of IT services market (Thailand) • Increased from $817 million in 1999 to $1.5 billion in 2002 • 5.6% of population are Internet users (2001) • 16% in Bangkok Source: EIU ViewsWire; Thailand industry: Internet use is held back by rural poverty; Apr 28, 2003

  26. 3 Major Software/Service Providers (Philippines) • SVI • SPI • AJK Consulting

  27. Software Venture International • Largest outsourcing company in RP • 2500 Employees • $40 Million in Annual revenues • Low cost • High quality • IFC investment Source: IFC Invest in largest Software Outsourcing House in the Philippines; Jul 2003

  28. Outsourcing in Philippines • Overview: Strong educational system, low risk, language compatibility • Ondeo Nalco Company • Naperville, IL • Reasons for choosing the Philippines • English-speaking • Low cost • Joint development • Disaster recovery plans Source: www.computerworld.com 9/03

  29. Assessing Risks to Ondeo Nalco • Time difference • System security • Militant groups Source: www.computerworld.com

  30. Internet penetration • Philippines • 4% • Thailand • 2% • Global average • 5% Source: EIU ViewsWire. New York Aug 1,2003; Digitizing a Nation; Far Eastern Economic Review; Mar 2001; 164, 9.

  31. Information and Technology and E-commerce Council (Philippines) • Failure of Congress to ratify budget for e-commerce initiatives • P1 Billion for ICT initiatives – rejected • Current President Arroyo orders E-government fund Source: Computerworld Philippines. Metro Manila, Feb 16,2004 pg 1

  32. E-commerce • Philippines ~$2 to $3 Million (2000) • Thailand ~$31 Million (1999) Source: EIU ViewsWire. New York Aug 1,2003.

  33. Government Regulation • CAT (Communication Authority of Thailand) • Government regulation of Internet and telephone connections • Monopolistic – high cost, poor quality, and generally unresponsive to consumers. • TOT (Telephone Organization of Thailand) • 2002 – register as private companies • 50% of each sold to the public Source: E-commerce emasculated; Far Eastern Economic Review; Sept. 21, 2000 pg26; www.business-in-asia.com/telecom_software_electronic.html

  34. E-commerce Resources (Thailand) • National Electronic and Computer Technology Center( NECTC) • Government agency responsible for development of IT in Thailand • Initiated SchoolNet (Internet services) • Electronic Commerce Resource Center • Set up by Ministry of Science, Technology and Environment • Helps with awareness, training programs • www.thaiecommerce.net • Government website to allow companies to sell online at no cost Source: Journal of Global Information Technology Management; 2003; 6,3, pg 72; Slow Progress; Asian Business. Nov 2000 pg 19

  35. National Electronic and Computer Technology Center (NECTC)

  36. www.thaiecommerce.net

  37. Software Park Thailand • Est. 1997 • In 2003: • 50 Companies • 17 Companies with International Links • $10 Million/yr in income Source: www.swpark.com

  38. Major Software/Service Providers • Companies include: • IBM (Thailand) • Oracle (Thailand) • Intel (Thailand) • Sun (Thailand) • Microsoft (Thailand) Source: www.swpark.com

  39. Philippines Complex Disputes Terrorism Illicit Drugs Typhoon Belt Tsunamis Rebellions Declining Markets ERAP Factor Thailand Complex Disputes Terrorism Illicit Drugs Typhoon Belt Tsunamis Rebellions Inflation Legal System Risks of Doing Business Source: Research Technology Management; Jul/Aug 1994; 37, 4; Forbes.com, DiCarlo, 5/22/03; Knight Ridder Tribune Business New. Wash.: Apr 26, 2005, pg 1

  40. Philippines Low cost English-speaking Tax Breaks Requires very little capital for start-up Niche Specialties Backup Site Western Influenced Thailand Low cost Requires very little capital for start-up Niche Specialties Backup Site Security risk is historically low Western Influenced Benefits of Doing Business Source: Research Technology Management; Jul/Aug 1994; 37, 4; Forbes.com, DiCarlo, 5/22/03;

  41. Conclusions for IT Manager • Evaluate Technology Infrastructure • Research Local IT Service Providers • Government Initiatives/Tax Breaks • Assess Benefits vs. Risks • Partner with Firm for Niche Products • Consider Backup Options

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