BCGCI中国callcener外包投资项目推荐

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TRANS-COSMOSINC.CHINAENTRYSTRATEGYPRESENTATIONFebruary8,2001AGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicsCompetitionRecommendationsSuccessbusinessmodelPartneringstrategyE-CommerceMarketOverviewTCITianjinCurrentSituationAnalysisRecommendationsAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicsCompetitionRecommendationsSuccessbusinessmodelPartneringstrategyE-CommerceMarketOverviewTCITianjinCurrentSituationAnalysisRecommendationsCHINAISBECOMINGAHIGHLYDYNAMICCCMARKETChina’scallcentermarkettookoffsince1998withanannualgrowthrateover100%Non-pagingmarketsizereached54,000seatsin2000HoweverpastgrowthwaslargelydrivenbydemandsfromadministrativedrivensectorOver60%ofthenewCCdemandcomesfromfourpillarindustries:Banking,PostServices,Fixed-lineTelecom,andInsuranceDistinctivepurchasingbehavioridentifiedforthesepurchasesFuturegrowthwillbepropelledbyserviceorientedandoutsourcingsegmentsServiceorientedsegmentexpectedtobe50%oftotalCCmarketOutsourcingmarketwillgrowatleast50%ayearforthenextfewyearsHoweverlargevarianceexistsforoutsourcingsegmentgrowthOverall,ChinaCCmarketisexpectedtoreachover130,000seatsin2004and340,000seatsin2010CCOURSOURCERSAREEMERGINGBUTSTILLEXPLORING(I)Currently,CCoutsourcingbusinessisbrandnewinChinaNomorethan30companiesprovidingmerelyabout3,200seatsinserviceOver70-80%supplyconcentratedin4majorcitiesFutureoutsourcingdevelopmentishighlydependentoncurrentplayer’sperformanceandstrategiesPotentialcustomersconcernedaboutquality,confidentiality,informationprocessingability,HR,andpriceGrowthwillfluctuatewidelyaccordingtotheindustry’sabilitytosatisfycustomerconcernsandrequirementsnowInshortterm,competitionwillbeminimumduetohighlydifferentiatedpositionsandlargenumberofunexploitedpotentialoutsourcingcustomersInmediumterm,pagingcompaniescanbepowerfulanddesperatecompetitorsinthelow-endoutsourcingmarketThatmightdistorttheindustryprofitabilityandtriggerviciouscompetitionHoweverhigh-endoutsourcingmarketmightbeintactCurrently,onlylow-price/standardservicevendorsareprofitableUtilization,andtherefore,long-termcustomers,isthekeyforprofitabilityHowever,high-pricedoutsourcingsolutionsnotwidelyacceptedbythemarketButinthelong-run,webelievehigh-endserviceswillbevaluedbycustomersWeareencouragedbyrecentpositivenewsonclients’long-termcommitmentstohigh-endoutsourcersWithChina’spendingWTOEntryandcontinuedeconomicgrowth,webelieveit’sthedirectionHigh-endoutsourcerscanwinthegamebyaggressivelyestablishinglong-termclientbase,andtargetingvariousoutsourcingopportunitiesalongthevaluechainFivesuccessfulstrategiesidentifiedfornewcustomerdevelopmentTelemarketingandvalue-addedinformationservicemostlikelytobeoutsourcedCCOURSOURCERSAREEMERGINGBUTSTILLEXPLORING(II)TCISHOULDPARTNERWITHRIGHTLOCALCCOUTSOURCERSApartneringstrategyisessentialforTCItocapturethegreatopportunitiesinChinaTCIlacksabunchoflocalcapabilities,whiletimeiscontingentTCIshouldtargetbothmoneymaking,andmoneylosingtechadvancedoutsourcersduringnegotiationprocess,basedontwoplausiblepartnershipstrategiesMoneymakingones:shareprofitsandleveragelocalstrengthMoneylosingones:controlandnegotiateforabargaindealConsideringthelimitednumberofcandidatesinChinaandTCI’stightschedule,abroadersearchcanstrengthenTCI’snegotiationpositionFivepromisingoutsourcersidentifiedduringtheinterviewprocessMoneymakingones:ChinaMotion,800Teleservices,andCompaq-StarMoneylosingones:TCY,ITSShanghaiEC:ONLYSOFTWAREFIRMSANDSIsWORTHPURSUINGAlthoughunderbooming,ChinaE-CommercemarketareexperiencingbottlenecksOnlinepopulationandrevenuesgrew10timesinthepast3yearsHowever,macro-environmentandinfrastructureareproblematic……andonlyfewICP/ISPsaremakingmoneyICP,ISPandtechnologycompanies,asasector,arenotworthTCI’spursuitICP:MarketisdownwhilemostChinaICPsarestillattheirearlystagedevelopmentISP:Highlyfragmentedandregulated,whichsuffocatebothforeignparticipationandprofitabilityTechcompanies:SuperioronescanhardlysurviveinChinaHowever,severaltopventuresintheabovesectorsarequiteinteresting,whichareidentifiedandillustratedindetailforTCI’sfurtherinterestICP:51;S;A;DISP:263Net;EastnetTCI-TJ:RSTRUCTURINGANDBUILDINGSTRATEGICALLIANCESTCI-TJexperienceddifficultiesduetobothpromotionandmanagementissuesThoughimproving,thefirmisintrinsicallyuncompetitiveinChinamarketItshouldrestructureforbetterperformance…RedefinecorporatemissionsandstrategiesRestructureprojectarrangement,reporting,measurementandincentivesystemsRefocusitssalesonJapanesecompaniesinChinaandinJapan…andfindstrategicallianceforTCI’sChinaexpansionTCIshouldonlypartnerwithprestigiouslocalsoftwarecompanyorsystemintegratorsWisewayscreenedallthepotentialcandidateslistsandfunneleddown5mostpromisingcompaniesforTCI’sfurthercontactLongshine;GlobaleForce;eBIS;ModernComputer;HuatengSoftwareAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicsCompetitionRecommendationsSuccessbusinessmodelPartneringstrategyE-CommerceMarketOverviewTCITianjinCurrentSituationAnalysisRecommendationsCCMERELYABUSINESSPRACTICEBEFORE1997HightelecomchargeLowphonepenetrationWeakserviceattitudeWidespreadindustrymonopolyCommercialCClessthan10,000seatsin1997(2)Phonecallcharge(centsperminute)ChinaUSPhonepenetration(%)#ofphones(1)(million)1997825399229AutomotiveExample:ExpertSurvey1997PriceCompetitionfocus(%)(1)Fixedline+mobile(2)Excludingabout50,000seatsinpagingcompanySource:WorldDevelopmentReport1999/2000;ChinaAutoMarket1997;JardingFlemingResearch;interviewsQualityServiceStyleNationalmonopolyBankingTelecomInsuranceUtilitityRegionalprotectedSteelAutoPetrochemicalTobacco...Monopolizedindustryestimated55%ofindustrialoutputHighertelecompenetrationCOMMERCIALCCTOOKOFFSINCE1998EspeciallyinNon-PagingServiceSectorPenetration(%)YearCAGRFixedlineMobile37%83%Non-pagingCCseats(’000)YearCAGR=129%IntensifiedcompetitionMostindustriescapacityoverproductionDecliningretailpricesYearGDPindexRetailpriceindexIndexGrowingawarenessoftechnologyInternetusers(mio)E-Commercerevenue(US$M)GraduallyreducedtelecomfeeSource:JardingFlemingResearch;ChinaStatisticsYearbook;interviews;OECD;ChinaTelecomLongdistance(RMB/min)(1.2)(0.8)(1.0)(0.7)>800km<800kmCCINDUSTRYWILLREACH330-370KSEATSIN2010IllustrationIdentifymajordrivingfactorstoCCadoption- marketcompetitionandserviceawareness- telecomchargesandphonepenetrationQuantifyrelationshipsbetweendriversandCCadoptionhereweusedUSbenchmarkProjectCCdevelopmentbyforecastingdevelopmentofdriversProjectCCpenetrationinmajoruser’sindustries- banking,telecom,insurance……AddupnumbersofeachindustrytogiveaCCmarketoverviewInterviewindustryexpertsorknowledgeableindustrypractitionersfortheiropinionofCCmarketgrowth- systemintegratorsandexperts2004projection(1)(’000seats)1581321452010projection(1)(’000seats)368337N.A.DrivingfactoranalysisBottom-upanalysisExpertsopinions(1)WithoutpagingcompanyTOP-DOWNAPPROACHREVEALSAPROMISINGENDGAMEPhonelineper1000peopleCCagentsper1000peopleUSbenchmarkY=0.00146X+4.79DeflatedtelecomfeeindexPhonelineper1000peopleChinaphonelineYearNon-pagingCCseats(‘000)Source:USTelephoneStatistics;Datamonitor;MIIdata;ChinaStatisticsYearbook1998992000010410REDUCINGTELECOMCHARGESWILLBOOSTFIXED-LINEADOPTIONBackupCompetitionpushesfurthertelecomreductionMostalternativesatleast50%cheaperIP,internetphonecall,““callback””services……Ministrydeterminedtofurtherreducetelecomcharges“Currenttelecomchargestilldoesnotreachitsoptimumstageyet”- MinisterofMIITelecomreductionprojectionPhonepenetrationper1000Deflatedpriceindex(1)Phonelineper1000peopleYear(1)PricedeflatedbyGDPindexSource:ChinaTelecomChargesPolicyBook;BCGanalysisTELECOMISTHEMOSTSIGNIFICANTCCUSERNOWBottom-upAnalysisIndustryTelecomMobileBankingInsurancePostserviceManufacturingComputerAirlineSecurityCourierHomeapplianceTVsellingOthersOverallProjectedseatsCAGR200025,0007,6674,5452,0001,6001,5018005942572402403006,67551,419200435,71422,85711,1003,7606,0007,5195,2504,1004,1581,0002,4601,00026,669131,588201041,66750,00047,0009,85020,83325,18414,0009,60032,6003,3338,8002,00071,965336,8322000-049%31%25%17%39%50%60%62%101%43%79%35%41%26%2004-103%14%27%17%23%22%18%15%41%22%24%12%18%17%Source:interviews;onlineresearch;expertsopinions;BCGanalysisEXPERTOPINIONSREVEALAMARKETOF145,000IN2004“Fastdevelopmentisexpectedtocontinueinthenextfiveyears.Ibelievethatcallcentersseatswillgrowat30%ayearforthenextfiveyears(whichmeans145,000in2004)”Director,CTIForum“Comparedto1999,in2000callcenterseatsincreasedby142%,or16,000seats”ChinaComputerNews“Inthenextthreeyears,weprojectthatcallcenterseatswilldouble.It’’sourconservativeestimate.”ManagerofBusinessDevelopmentDept,HuaweiSource:BCGinterviewsAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicsCompetitionRecommendationsSuccessbusinessmodelPartneringstrategyE-CommerceMarketOverviewTCITianjinCurrentSituationAnalysisRecommendationsCHINACCUSERBASEVERYDIFFERENTFROMU.S.SelectedindustryexplanationTelecomChinatelecomcallcenterinvestmentisstillquitegovernmentdriven.Topromote““189”serviceline,MIIdemandcallcenterateachcity/countylevelManufacturingManufacturingCCusagestillnotwidelyadoptedyet.Moststate-ownedcompaniesareunwillingandunabletoinvestinserviceRemoteshoppingAlthoughremoteshoppingisthebiggestCCuserintheUS,it’smerelythecaseherebecauseofinconvenientpayment,creditanddeliverysystem.Also,shoppingconvenienceinmetropolitanareaandgeneralpoorconsumptionpowermakeremoteshoppingeconomicallyunsoundOthersOutsourcingSecurityTVsellingNews&mediaAirlineComputer/TechManufacturingPostserviceInsuranceBankingMobileFixed-lineTelecomChinaUSOthersOutsourcingTransportHealthcareUtilitiesRemoteshoppingSecuritiesAirlineTechnologyManufacturingInsuranceBankingTelecomOur1.5monthsinterviewshavewellcoveredtheaboveindustriesSource:Datamonitor;Interviews;onlineresearch;expertopinions;BCGanalysisCCMARKETROUGHLYSEGMENTEDINTOFOURCATEGORIESAccordingtoAreaofCCUsage,andWillingnesstoOutsourceSelectedindustryexamplesWillingnesstooutsourceHighLowService-orientedOutsourcingGenericserviceAdmin-drivenSecuritiesHomeapplianceComputer/technologyCourierservicePublicationTVsellingMessagingTravelSimpleordertakingPagingTelecomInsuranceBankPostserviceCommunityserviceUtilityCoreareaNon-coreareaAreaofCCusageTHREECRITERIATODISTINGUISHCOREANDNON-COREAREAIndustryCoreAreaSecuritiesCourierserviceComputer/technology“GreyArea”HomeapplianceBankingInsurancePublicationTelecomTravelingNon-coreArea(generic)PagingserviceMessagingTVsellingUtilitiesFunctionalityTechnicalassistanceAftersalesserviceCustomercomplaintsettlementSourcing/suppliercoordinationCustomerinquirysettlementTelemarketingMessagedeliveringSimpleordertakingCallCenter’simpacttooverallbusiness- Core:WhenCCfunctioniscriticaltotheperformanceoftheindustryConfidentialityrequirement- Core:Iftheindustry/functionalitycommandsstrictconfidentialityCallCenteroperationalcomplexity- Core:IfoperatingCCinthisindustryrequiresgreatsophisticationCriteriaManyindustrieshavebothcoreandnon-coreareasBackupMANAGEMENTANDOWNERSHIPSTRUCTUREAFFECTWILLINGNESSTOOUTSOURCEConsiderationsOwnershipstructureCompanysizeCompetitionManagementsophisticationReasonsSOEsconsidereconomicslessand““managementauthority”more- Prefertobuildin-houseinordertoincreasemanagementpowerandassetsCallCenterinvestmentislesssignificanttolargecompanies.Also,theiragents’needscanjustifyasizablein-houseoperationMonopolizedindustrytendstobeadmin-driven,ortodisregardCCsolutiontotallyPoorlymanagedcompanies/industriesseemuchlessvalueofcallcenterstotheirbusinessimprovementSOE(1)LargeMonopolizedindustryPoorlymanagedPrivatelyownedforeigninvestedSmall-to-mediumMarket-driven,competingindustryWellmanagedLesswillingMorewilling(1)SOE=State-ownedenterpriseBackupAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicsCompetitionRecommendationsSuccessbusinessmodelPartneringstrategyE-CommerceMarketOverviewTCITianjinCurrentSituationAnalysisRecommendationsADMIN-DRIVENSEGMENT:MOSTIMPORTANTFORNOWHigh%intotalnewCCdemandDrivenby“Pillarindustries””DemandsurgedinagroupofChina’simportantindustriessince1999,aimingtoimproveservicelevelBankPostserviceFixed-linetelecomInsuranceRequiredmostlymid-to-highendcallcentersolutions(Nortel,Lucent,IBM,Huawei…)Big,monopolized,profitablecorporationsHighcostoffailureBudgetapprovalfromaboveOfteninconjunctionwithstructuralreform4.9#ofnewCCseats(’000)YearAdmin-driven11.229.5TotalnewdemandAdmin-driven66%76%62%Source:BCGmodelingHOWEVERDEMANDEXPECTEDTOFLUCTUATEINTHEFUTUREUnderlyingReasonsAdmin-drivensegmentorderscomeinbatchesCallcenterconstructionproposalofteninitiatedbygovernment-controlledcorporateheadquarters,orevenministriesBranchcompaniesrequiredtocompletecallcenterconstructionwithinsimilarperiodoftimeAdmin-drivencorporationstendtoover-investBranchofficesincentivizedtouseupthebudgetadvisedbyheadquarterHoweverfewadmin-drivenindustriesareexpectedtoinvestincallcentersforthefollowingyearsOnlytwoindustriesexpected:utilityandrailtransportation#ofnewcallcenterseats(’000)YearBankingexampleSource:BCGmodeling;interviews,literatureresearchAdmin-drivenUNIQUETHREE-TIERDECISIONMAKINGPROCESSSystemIntegratorsShouldPutEffortstoAllTop-downinitiativesAdvocateimprovingservicestandardMake““servicefacilities””anevaluationcriteriaMaysuggestcallcenterasanoptionDeterminerollingoutcallcentersinthecorporationRaisealistofrecommendedsystemintegratorsPresentthelisttobranchcompaniesSetabudgetfordifferentbranchcompaniesDecidecallcentersizeandsophisticationbasedoncorporatebudgetNegotiateandselectasystemintegratormostlysuitabletothebranch’srequirementsSIshouldpayattentiontoMinistry’srecentserviceimprovementincentiveMinistrySIshouldapproachpromisingcorporateheadquartersinadvancetogetthenameonthelistCorporateheadquarterSIshouldputmosteffortstoinfluencebranchcompany’’sselectionProvincial/regionalbranchesAdmin-drivenOUTSOURCINGALMOSTNEVERANOPTIONFORADMIN-DRIVENCOMPANIESOutsourcingisnotconsideredanoptionforCCadoptionatcorporatelevelWorriedaboutunforeseeableconsequencesMoneysavingisnotapriorityforthesebig,monopolizedSOEsUnabletodistinguishdifferentconditionsindifferentgeographysomeareasdon’thavesatisfactoryoutsourcersPoliticallyriskyforbranchmanagerstobe“creative”Ifusingoutsourcers,branchmanagershavetobearallresponsibilitiespotentialforfailureisconsiderableCCconstructionbudgetwouldbeinvainifnotusedupwhileoutsourcingbudgetneedstobereportedforupperapprovalAnd……themoneyisnotmineOnlyexceptionisGuangzhouMobileCompany’’soutsourcingofits““MobileSecretary””serviceBynatureapagingservice:Idealtobedonebyapagingcompany“MobileSecretary”serviceisnotplannedandbudgetedfromthecorporation(ChinaMobile)Guangzhou’’sbusinesspracticeismoreliberalthanrestofChinaAdmin-drivenSERVICE-ORIENTEDSEGMENT:ADRIVERFORLONG-TERMCCPENETRATIONRapidgrowthinthelong-termWidespreadadoptionexpectedinmarket-drivenindustriesHeatedcompetitionwillstimulateCCusageinmass-marketindustriesWTOwillnotonlyliftvariouslocalprotectionism,butalsointroduceglobalcompetitionCurrentover-capacitysituationwon’talleviateforthenextseveralyearsTherefore,servicewillbemoreandmoreimportanttocreatedifferentiationWithbettermarketenvironment,consumersareeducatedtoappreciateserviceWTOwillintroduceworld-levelserviceconcepts,includingcallcenter,toChinaTotalnon-pagingCCseats(’’000)Service-oriented10Year50337TotalCCseatsService-oriented26%24%50%13242%Source:Interviews;onlineresearch;expertopinions;BCGanalysisMOREINDUSTRIESARELIKELYTOADOPTCCOVERTIMECCAdoptionAreaHomeapplianceAutomotiveComputerMobileSecuritiesRetailingPetrochemicalDistributionFMCG(1)TaxiTextileMachineryChemicalPublicationHealthcareGovernmentEntertainmentBroadcasting/TVAviationGeneralTechnologyHighModerateLowCompetitionintensityHighHorizontalwillextendovertimeImportanceofservice(1)Fast-movingconsumergoodsSource:Interviews;literatureresearchsummaries;BCGanalysisHorizontalwillextendovertimeService-orientedCOMPANIESQUITESELECTIVEONCCUSAGENotblindlychasingafterhigh-endsolutionsIntegratingcallcenterswithitscorebusinesspracticeInterviewssummarySource:Interviews%Investmentperseat(’’000RMB)Interviewssummary%AftersalesserviceOrdertakingInformationserviceTelemarketing10-70Service-orientedVERYCAUTIONSONCCOUTSOURCINGPrice“Thepriceforoutsourcingistoohighnow,forexample,95Infocharges15,000RMB/month(180,000RMB/year)perseat,mostcompaniescannotundertakeit.”SalesManager,SIEMENSQuality“Chinesecallcenteroutsourcershaveinadequateservicementality,wemostlyworriedabouttheirservicequality.”HotLineSupervisor,EPSONChinaHumanresources“Ordinaryoutsourcer’sagentscanonlyhandlesimplequestions.Itrequiresexperiencedengineerstodealwithcomplexproblems.”HotLineSupervisor,EPSONChinaConfidentiality“Weoncewantedtooutsourcemanagementto95Info,butsalesdataaresecrettothecompany,sowegaveuptheoutsourcingoption.””CallCenterVice-Manager,FounderComputerInformationprocessing“Ourcallcenterismainlyusedtoprovidecross-departmentinformationformanagement,outsourcingcallcentermightmaketheinformationprocessinglosingcontrol.”ExecutiveOfficerBeijing,GuangdongMacroMajorconcernsaboutoutsourcingTheiroutsourcingpossibilityhighlydependsonoutsourcers’abilitytosatisfytheirconcernsSource:InterviewsService-orientedGENERICSERVICE:AGENERALLYDECLININGSEGMENTConsistsMainlyofPagingServicesGenericserviceDecliningpagingservicesegment...…Becauseofstrongsubstitution#ofpagingseats(’000)YearPagingservicemarkethasbeengraduallyerodedbywidespreadmobileandinternetcommunicationservicesfulfilledpager’’smessagefunction,butbeingeithermoreeconomical(internetcommunication),ormoreversatile(mobilephone)pagingcustomerswilldeclinefrom50millionin1998to20millionin2010Small-to-medium,non-scaleablepagingcompaniesarebeingsqueezedoutofbusiness#ofcompanies199820002000173620045002010200Source:InterviewsGENERICSERVICEDEFINEDASACROSSOF

INDUSTRIESANDFUNCTIONSGenericserviceFunctionalityMessagetakinganddeliveringSimpleordertakingStandardtelemarketingStandardcustomerquestionansweringStandardvalue-addedinformationserviceIndustryPagingindustryTV/cataloguesellingUtilitiescollection“Secretary”servicesBackupGENERICCCUSERSHAVESTRONGINCENTIVESTOOUTSOURCEGenericserviceCost-effectiveforsmallCCusersResolvedconcernsSatisfactoryqualityStandardpracticeandtrainedagentsTrustedhumanresourcesProfessionalagents,centralrecruitedandtrained,familiarwiththeirjobsNoneedforinformationprocessingLittlerequirementonconfidentiality(1)Assume10seats,andutilization100%Source:CTIforum;BCGmodelingTVsellingexampleCost(’000RMB)permonthperagent10-12Self-build(1)OutsourcedAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicsCompetitionRecommendationsSuccessbusinessmodelPartneringstrategyE-CommerceMarketOverviewTCITianjinCurrentSituationAnalysisRecommendationsFOURDISTINCTIVETRAITSFORCHINA’SCCOUTSOURCERSTraitsforAnEmergingSegmentOverviewOutsourcerJustemergingHighGeographicconcentrationFocusongenericservicesInterviewsSummaryManyarelosingmoneyInterviewsSummary#ofoutsourcers%(%)Source:Interviews;CTIforum;ChinaStatisticsYearbook#ofseats(’’000)(%ofoutsourcers)DEMANDPROJECTIONDEPENDENTONACYCLEOFFACTORSWidevarianceinprojection...…dependentonagroupoffactors#ofoutsourcingseats(’000)Virtuousorviciouscycle?Outsourcer’’sPriceOutsourcer’’sprofessionalismCustomersatisfactionOutsourcer’’sservicesophistication#ofnewcustomertrialEducationeffecttopotentialcustomersOutsourcingindustryreputationIt’shardtotellwhethertheindustrycanestablishitsreputationorgounderdeveloped,attheverybeginningofitsemergenceDemandOutsourcer51.26.6CAGR=100%CAGR=20%CAGR=20%POSITIVECUSTOMEREVOLUTIONOBSERVEDINCHINA’’SOUTSOURCINGBUSINESSPositiveprojectionsforfutureHistoricaltrendsshowedincreasingpenetrationintohigh-endbusinessChina’’smassivesmall-to-mediumbusinessconstitutesgoodpotentialcustomerbaseMassiveun-exploitedgeography:outsidetop3citiesGoodoutsourcerwillemergewithincreasedbusiness,whichwillgeneratemorebusinessfortheoutsourcingindustryOutsourcingservicesophisticationTimeLowHighBeforeRecent2yearsWebelieveinthepositiveargumentandprojectdemandtogrowatleast50%ayearforthenext4yearsPagingserviceoutsourcingforHongKong“Secretary”serviceSimpletelemarketingOrdertakingAfter-salesserviceNegativeprojectionsforfutureCustomer’snegativethoughtsaboutoutsourcer’’squalityhaven’tchangedProfessionalismwillcontinuetobeaheadacheforChinaserviceindustry,includingoutsourcingLow-endentry(pagingcompanies)willruinoutsourcingindustry’spricingstructureandmakegoodoutsourcer’sunprofitableDemandOutsourcerBALANCEBETWEENLONG-TERMCLIENTSANDPERIODICASSIGNMENTSISCRITICALCustomersOutsourcerLong-termclientsLong-termclientsaremostimportanttotheprofitabilityofanoutsourcerJobnatureCustomerrequirementCompensation“Secretary”serviceOrder-takingAfter-salesserviceValue-addedinformationOthersTrustbetweencompanyandcustomerTrainingtoagentsGoodunderstandingofclients’businessSmoothcommunicationandfeedbackofimportantinformationAmonthlypaymentperagentseatTelemarketingCampaign/activityphonereceptionBrandnameinoutsourcingindustryTrainedagentsandeffectivemanagementInformationfeedbackReasonablepricePaymentpercallPeriodicassignmentsINTERVIEWEDOUTSOURCER’SLONG-TERMCUSTOMERLISTOutsourcerLong-termclientOutsourcedbusinesstypeLocationProfitable?TCYPfizerPharmacyChinaAftersalesBeijing,ShanghaiDeficitCCIDCallCenterChinaInfoWorld(Newspaper)InboundserviceBeijingDeficitGuangzhouMobileHighway&BridgeFeecollectioncalloutGuangzhouCOMPAQAftersalesShanghaiNECMobileChinaAftersalesShanghaiChinaMotionChinaMobileManagementoutsourcingN.A.ProfitableBeijingHongfanSunMicroSystemsSimplequestionhandlingN.A.ChannelBeyondProfitableCompaqStarProfitableBackupAftersales“Secretary”serviceFeecollectioncalloutGuangzhouVankeCommunityserviceGuangzhouBeijingTelecomMessagingserviceBeijingDeficit95infoNokiaAftersales(mobile)BeijingDeficit800teleserviceMotorolaAftersales(mobile)ShanghaiN.A.ITSPharmacycompaniesN.A.ShanghaiDeficitMULTINATIONALSNOTFULLYREADYFOROUTSOURCINGCustomersOutsourcerMultinationalsneedcustomerinformationtoassistdecisionmakingEspeciallyimportantininfo-scarceChinaConfidentialityisalsoabigconcernTherearelittleestablishedoutsourcersinthemarkettouseManymultinationalsdon’tresorttooutsourcersatparentcompanyHardforChinasubsidiarytooutsourceAnumberofmultinationalsoutsourcetheirsalesandservicefunctionstofocusoncorecapabilityNoneedforcallcenterOnlyafewmultinationalsoutsourcedtheircallcenteroperationsOUTSOURCINGSALESANDSERVICEHELPSMULTINATIONALSTOFOCUSONCORECAPABILITIESAdvancedproductdesignTechnologyFinancialmuscleOperationalmanagementManufacturingDistributionnetworkCustomerrelationshipsLocalmarketingFacilities(land,house……)RegulatoryknowhowServiceSourcingManufacturingSalesXXXMultinational’’sstrengthsLocalcompany’’sstrengthsXXXXXXXXXXXXXXXXExampleofmultinationalsoutsourcingsalesandservicePanasonicShanghaiVolkswagenCustomersOutsourcerBackupHIGH-ENDOUTSOURCERSAREGENERALLYLOSINGMONEYThekeydeterminant:UtilizationProfitabilityEconomicsOutsourcerHiprofitsLowprofitsBreakevenLowdeficitsHideficitsPrice/seat(RMB/month)ChinaMotionShenghuaChengBoCompaq-StarCCIDHongFanTCYITS95InfoSource:Interviews;BCGanalysisHigh-endoutsourcersMid-endoutsourcersLow-endoutsourcersUTILIZATIONISCRITICALTOCCOUTSOURCER’’SPROFITABILITYSimplifiedModelEconomicsOutsourcerFora100-seatcallcenterMoney(‘‘000RMB)55%Source:Interviews;literatureresearch;expertinputs;BCGanalysis(0%,1414)(100%,3120)(100%,1954)100%Utilization(%)RMB80/hourMoney(‘‘000RMB)50%(0%,884)(100%,2340)(100%,1424)100%RMB60/hourMoney(‘‘000RMB)48%(0%,573)(100%,1560)(100%,933)100%RMB40/hourUtilization(%)Utilization(%)PriceASUBTLEBALANCEAROUNDUTILIZATIONRevenuePriceperseatCostEquipmentinvestmentServicelevelHumanresourcesTrainingEconomicsOutsourcerRMB25,000/monthorhigherRMB200,000/seatCustomizedserviceCustomizedsoftwareSpeciallytrainedstaffIndividualservicelineAdditionalequipmentHighcaliberagentsMulti-languageHigheducationRMB3000abovemonthlysalaryIntensivetrainingOftentakemonthsbeforeactualworkRMB10,000/monthRMB10,000~70,000/seatStandardserviceUsingexistingfacilitiesNoadditionalagenttrainingNormalagentsNocollegeeducationRMB2,000monthlysalaryQuicktrainingAtmostweeksP&LCategoriesHigh-endLow-endHowmucharecustomerswillingtopay?Howmuchshouldoutsourcersinvesttoobtaincustomersatisfaction?GamearoundutilizationBackupLITTLECOMPETITIONAMONGCURRENTCCOUTSOURCERSOurinterviewsrevealedthatcompetitio