#1T Establishing a strong BPO industry in Albania 13th February 2017 TTHHI FIFE A V ^ SANT © 2016 Avasant LLC. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Avasant LLC. RisìAlbania Partner for Growth#2AVA SANT The global BPO landscape Opportunities for Albania FLST Developing and Promoting Albania as a viable BPO destination#3How large is the Global Outsourcing (IT-BPO) Market Size? 3 Global IT-BPO Spend (USD Bn) 3491 3576 1375 1400 3666 1440 3795 1498 1075 951 979 1008 636 635 652 650 370 395 385 386 159 167 181 186 2012 IT Services ER&D 2013 2014 2015 Packaged Software BPO Hardware -Total IT Spend • • • • Global IT-BPO market recorded steady growth in 2015, with worldwide spend of USD 3.8 trillion and the growth over 2014 was pegged at 4% The largest spend was on Engineering R&D followed by hardware that formed 40% and 26% of the entire global spend Americas remained the largest market 61%, while APAC recorded highest growth of almost 100%, driven by fast growth in bundled IT-BPO services A combination of traditionally high spending verticals such as insurance and government along with emerging verticals such as automotive and retail were key growth drivers for the IT-BPM segment during 2015 AVA SANT#4Global IT-BPO Services Delivery Landscape - Changing Dynamics In just over two decades, IT-BPO sector has been transformed into one of the most widespread industry/services sector globally with a continuing appetite for further geographic expansion. As established locations move up the value chain newer locations enter the fray to fill the gap. 80 2000 Mid 90s 000 ESTABLISHED DESTINATIONS 2010 > Increasing Resource Pool Saturation > Increasing Cost (Resource Pool, Real Estate) > Infrastructure Stress > Increasing Social and Geo Political Risk factors > Increased Attrition > Growth in Other Services Verticals 2015 EMERGING DESTINATIONS > Untapped Resource Pool/ High Retention > Untapped Domestic and Regional market > Low-cost Resources > Improving Infrastructure > Increased Govt. Interest in Sector Development A VA SANT#5Evolution of Delivery Locations - 'Off' to 'Near' and 'Vendors' to 'Partners' Beginning with achieving labor and cost advantages, Outsourcing has now evolved to become a mission critical process that impacts a buyer's core business model, drives market growth and enables its globalization strategy '10 onwards NEARSHORE HYBRID '04-'10 ONSHORE •High Value •Low Volume •Innovation Centric •Low Value OFFSHORE Early '90's •High Volume •Cost Centric Mid '90's '00-'04 Back Office Basic Data Entry - Transaction Processing Document Management Customer Contact - Customer Relations - Call Centers (Voice) Common Corporate Functions Shared Corporate Functions - Knowledge Services & - Decision Analysis Research Services - Customer Analysis - Portfolio Analysis Finance & Accounting - Claims Processing - Procurement IT Functions - Telemarketing - Maintenance - Collections - Development - Testing - Operations - Risk Management - Data Analytics - IP Services - Market Research Digital Artificial Intelligence Robotic Process Automation Business Platforms As-a-service offerings 5 Albania is currently strong in customer contact services and is maturity its capacity towards corporate functions such as HRO and F&A AVA SANT#6a What are the trends in the European nearshore market? Norway-USD (Bn) O 2.2 2.2 • As globally, IT forms a bigger part of outsourcing spend in Europe • Germany & United Kingdom are the Sweden-USD (Bn) UK-USD (BN) O ITO 8 BPO 6.6 O 4.6 Germany-USD (Bn) 5.4 Switzerland-USD (Bn) 6.6 2.6 Location of outsourced services United Kingdom Sweden 77% 10% 14% • 87% 9% 5% Norway Germany 80% 10% 10% 65% 21% 14% Finland 74% 18% 8% 0% 20% 40% 60% 80% 100% Onshore Nearshore Offshore • leading outsourcing spenders in Europe, along with Norway and Sweden Automotive & Aerospace (USD 12.9 Bn), Banking & Financial Services (USD 22.4 Bn), Government (USD 12.9 Bn) & Telecommunications (USD 26.3 Bn) were the largest spenders among the industry verticals European companies prefer nearshoring to offshoring Out of the verticals, Telecommunications, Oil and Gas and Life Sciences had the highest propensity to 'near-shore' their services AVA SANT#7Riding the right wave will exponentially grow the sector in Albania Growth Position Consolidation Bratislava, Slovakia Krakow, Poland Budapest, Hungary • Albania Maturing Tallinn, Estonia Significant Growth Tirana, Albania Vilnius, Lithuania Riga, Latvia Sofia, Bulgaria Bucharest, Romania Prague, Czech Republic Warsaw, Poland can directly jump into higher margin / niche services if it pursues the right market opportunities. • Albania's BPO industry in a nascent stage and this is the right time to identify the right segment positioning & Good Growth Capacity 7 Talent Pool Size Belgrade, Serbia Low Complexity: 1st-3rd Generation (Call Center, Payroll processing, Transactional Processing, ADM) Kiev, Ukraine Mid Complexity: 4th Generation (CRM, ERP, Tax Services, Financial Reporting, Hosting Services) Mid-High Complexity: 5th Generation (HR, Risk Analysis, Digital learning, Product training, Integrated Services) High Complexity: 6th Generation (On-demand services, Cloud solutions, Flexible software platforms) Complexity of Outsourcing Function AVASANT#88 The BPO industry has had a significant positive impact on Emerging and Developing Countries... Increased Pool of Educated Resources Reduced "Brain Drain" - Retention of Talent • . Reduced Unemployment Increased Skilled Labor Women Empower- ment Women constitute 35% of the growing outsourcing industry Reinvestment into Society Progressive Labor Policies Income Redistribution Improved Global Standard of Living Direct: Indirect Job Creation Ratio 1:2.5 Snowball Effect on Other Industries Reduced Unemploy- ment Improved Competitive- ness • Improved Transparency . Higher Accountability AVA SANT#9AVA SANT The global ΒΡΟ landscape Opportunities for Albania FLST Developing and Promoting Albania as a viable BPO destination#10Albania: BPO Industry Profile Banking, Financial Sector and Insurance Healthcare and Pharma Industries served by Albania's Outsourcing Sector Telecom, Media and ⒶEntertainment Travel, Tourism and Logistics 10 Voice Outbound Energy & Utilities Help Desk & Concierge Promotion Campaigns Translation Retail & e- Commerce Service Line - 3 e-Commerce Customer Care Loan & Card Collections Document Processing Service Line - 4 Lead Generation Finance & Accounting Market Research & Surveys Service Line - 1 Service Line - 2 Voice Inbound Technical Support Telesales Data Entry and Analysis Legal Services Agents Transaction Based KPO Services Stock Exchange HR Recruitment The total industry size is estimated to be between $120 Mn and $140 Mn AVA SANT#11Albania: BPO Industry Profile 11 The outsourcing sector in Albania has seen steady growth in recent years. The Albanian BPO industry employs between 25,000 to 32,000 professionals across the sector. 45% 10% 30% 15% More than 1000 seats 250-1000 seats 100-250 seats Less than 100 seats Albanian BPO firms by employee strength Tirana is the outsourcing hub of Albania, followed by Durrës, Vlorë and Shkodër. Elbasan, Fier and Korçë are the other upcoming outsourcing centers in the country. Some of the major BPO companies operating in Albania: Teleprformance ids LOCALEYES alba contact Your product seen through local eyes. Intercom Data Service Group multimedia contact center ALBACALL Λ Tregi Marketing Group AVA SANT#12Albania's strengths lie in its capable young workforce that are challenged by lack of scalability and targeted export promotion Strengths Multilingual capabilities & young population Stable & one of the fastest growing Europe economies 3rd Least expensive across 38 European Countries Investor Friendly-ranked 8th globally in "Minority Investor Protection" One of the most easily accessible countries in the European region as per visa and work permit rules Among the most economical near shore BPO destinations Weaknesses Lack of talent pool scalability BPO sector is largely fragmented and comprises of small enterprises Lack of BPO sector specific support Lack of unified outreach to the buyer and the investor community globally High call tariffs as compared to other destinations Utilities including broadband are comparatively less affordable U 12 Albania can be a "partner" nearshoring. destination for more matured locations Given its multilingual capabilities, it can focus on exporting BPO voice and non-voice services to other countries such as Germany, France and UK To take advantage of the present finance and accounting talent, the service providers can focus on exporting more transactional processes such as F&A The country also has budding export capability in digital processes such as block-chain technologies Opportunities Albanian ΒΡΟ Industry export is largely dependent on telemarketing and contact support for Italy Italy has also introduced a legislation that allows customers to choose the country of call's origin which might deter some of the customers to choose Albanian call centers Since Albania is not yet a member of EU, importing services from Albania may be a concern for some clients Challenges AVASANT#13ALBANIA - THE TRUE NEARSHORE NEXTDOOR Multilingual population € South Eastern Europe Time Zone: CET (UTC+1) Cultural Affinity DEVELOPED SECTOR REAL SAVINGS CLASS-A OFFICE RENTAL (SQM / MONTH) CONTACT CENTER AGENT SALARY € 33 € 31 28 €15 تلتتل 27 19 Albania Poland Romania € 4,200 € 8,700 € 6,300 Bulgaria Ukraine € 6,853 € 6,420 Albania Poland Romania Bulgaria Ukraine Czech Republic Czech Republic € 10,200 Real Estate -40% cheaper PEACE OF MIND Salary -50% lower Serves many verticals A 品 Approx. 32,000 State of the art employees Multi-channel capabilities Telecom SMAC ready EU Mature laws mirrored to EU Stable Republic member NATO Candidate Ranks 8th Globally in Minority Investor Protection UNTAPPED PROFESSIONALS M Service Orientation 32% Surplus talent Supply (15-24 age group) 25% 160,000 Annual ANT University Enrollments 44 13#14Market Analysis- Target Geographic Markets Here are the key target markets for Albania's unique capabilities. Analysis reveals that Albanian BPO Providers can differentiate by positioning itself as a bilingual / trilingual Nearshore location for Contact Centers and Back-office processes. 14 Current Client markets Canada Potential Nearshore markets UK Germany Potential Mid-shore markets Austria Switzerland France USA Spain Italy Albania AVA SANT#15Empty#16Albania should progressively develop its service maturity in the following areas and target markets accordingly Target Markets Buyer Markets Nearshore Locations Nearshore/ Nearshore/ Established Established Locations Locations Nearshore/ Nearshore/ Nearshore/ Established Established Established Locations Locations Locations Buyer/ Nearshore/ Established Locations ΚΡΟ Service Offerings Sales & Collections CIS (Customer Interaction Services) F&A (Finance Resource HRO (Human Healthcare & Medical LPO (Legal Vertical Process specific & Accounts) Outsourcing) Transcription (Knowledge Outsourcing) Services) services Digitization Translation Transactional Process Specific Knowledge Intensive Short Term Focus Medium Term Focus (0-2 years) (2-4 Years) Long Term Focus (4-5 Years and beyond) 16 AVA SANT#17^V^ SANT The global BPO landscape Opportunities for Albania LUL Developing and Promoting Albania as a viable BPO destination#18To mature its offerings, enhancing Albania's inherent capacity is crucial Institutions and Legal Environment 514 Institutions ar Efficiency and Transparency of public administration, independence of judiciary, physical security and Corporate Governance Infrastructure Quality and Availability of transport, electricity and real estate infrastructure Requirements Market Size Domestic market size International Market Size Efficiency Competitiveness Assessment Enhancers Labor Market Efficiency Labor market efficiency and flexibility, Skill Base, Meritocracy and parity at workplace Financial Market Development Efficiency, stability and trustworthiness of the financial and banking system Technology Readiness Adoption and usage of technologies by individuals and businesses Cost of technology $ → Political and economic S Environment Fiscal and Monetary indicators Political Stability Education Primary, Secondary and Tertiary Educations System Innovation & Sophistication Business Sophistication Efficiency of business processes Ease of starting and doing business Innovation o Capacity and commitment towards technology innovations Incumbent Maturity Size and maturity of Incumbents in the sector Industry competitiveness Skill and human capital#19To mature its offerings, enhancing Albania's inherent capability is crucial Strengthen Association Create a vision for the BPO industry - Develop National Skill Registry Create case-studies and testimonials Upgrade Capabilities Deepen vertical capabilities Promote resource up-skilling - Invest in Technology Collaborate for Infrastructure - Leverage Tirana Business Park - - Lobby for favorable SEZ Policy - Work with Telecom and Real Estate Sector for infra development Upgrade skills by Academic Alignment Align university courses - Skill development initiatives at a foundational level 19 - Lobby for Incentives Request Government for targeted incentives Ask for inclusion of IT-BPO as a focus sector SHORT TERM Invest in Human Capital Encourage talent pool to upskill though training and certifications Introduce vocational training Courses - Introduce people friendly HR Policies to check attrition Develop Standards & Legal Framework - Adopt & percolate the BPO standards - Build capacity for new services - Policy advocacy for addressing gaps in laws and regulations MEDIUM TERM AVASANT#20To get the timing of reaching to potential clients right, marketing and brand building should go hand-in-hand with the capacity development Strategic Review, Defining the Value proposition Phase 1 Define Strategy Development of marketing & promotional material Phase 2 Web presence Brochures, Flyers & Handouts Customer Outreach Phase 3 Sales Cycle てです Market Intelligence review Events Strategy Develop Marketing Social Media presence Analyst Outreach & PR Implement Customer Follow - Plan ups Outbound Business promotion 20 20 AVASANT#21A coordinated collaboration between various industry actors helps synchronous development and promotion. Donor Organizations Supporting Entities Educational Institutes Training Institutes Banks and Financial Institutions Telecom & Hardware Companies Infrastructure Companies I Government 21 Talent Pool Clients Local Clients Governments as Clients Regional Clients International Clients International Service Providers as Clients | Enabling Entities BPO Industry Governing Body/Association Investment Promotion Agencies Telecom Associations and Companies Trade Associations Ministry of Finance Ministry of Education & Ministry of Trade Human Resources Ministry of Communication & ICT AVASANT#22Public Private Partnerships are one of the most successfully leveraged mechanisms to promote the BPO industry Infrastructure Joint funding for IT-Park, transport and road development Negotiating telecom provisioning & costs with international service providers J. Private Sector Marketing & Branding Joint funding international & local marketing events Liaising with embassies in international target market to promote the industry Facilitating creation of networks and associations Innovation 22 Skill Incentives and tax deductions for "opex" on training Aligning academic curriculum with industry Collaborating with training service providers for mass skilling Government Developing digital government services in partnership with local service providers Dedicated R&D and innovation hubs, facilitated by the Government AVASANT#23IT-BPO policy environment that have helped the industry grow in CEE Serbia O Corporate Profit tax capped at 10% only ▪ Custom free free import of Machinery, Equipment and Semi finished Goods ■Companies are exempt from Corporate Income Tax for a period of 10 years starting from the first year in which they report taxable profit if they invest in fixed. assets amount exceeding approximately €8 million, and throughout the investment period if they employ at least 100 additional employees an ■A 5-year tax holiday is granted for concession-related investments The tax loss stated in the tax return can be carried forward and offset against future profits over a period up to 5 years ■Income generated commercially in the Free Zones is exempted from VAT Service Maturity: Low Service Portfolio: Call Center, Payroll processing, Transactional Processing, ADM 23 • • . Romania Employers running professional training programs for their employees may apply for a refund of 50% of their expenses for up to 20% of their workforce Monthly grant of 1-1.5 times the national minimum gross salary for each new graduate of a recognized institution, for a period of 12 months. • Employment incentives are also granted to companies which hire unemployed. persons aged over 45, as well as for employment of an individual who is the sole supporter of their family. • • Salary income related to the design and creation of software is exempt from tax IT freelancers may be taxed on a deemed income, established by the local authorities, regardless of actual income Service Maturity: Medium Service Portfolio: Bundled services HRO, F&A, IT-BPO • Poland Exemption from corporate Income Tax Exemption from real estate tax Governmental financial support for creation of new jobs Aid will range from PLN 3 200 to 18 700. 1-10% of aid on costs for new financial investments Companies operating in Poland can obtain training grants within the Human Capital Operating Program (hereafter: HC OP). It is possible to apply for financial support for either General or Specialized training The maximum aid level ranges from 60% to 80% of eligible costs for general trainings and 25% to 45% of eligible costs for specialized training Service Maturity: High Service Portfolio: Digital Services, Product Development, BPO Platforms AVASANT#24Los Angeles (Headquarters) Austin AVA SANT London Trinidad & Tobago Dubai Mumbai Hanoi Dallas New York Tokyo Düsseldorf Houston Washington DC Beijing Delhi Toronto Bangalore Empowering Beyond Chirag Rawat Managing Consultant [email protected] +1 (310) 643 3032 +91 9717296555 GET CONNECTED You Tube & in 9 www.Avasant.com