Atul Vohra

President
Majesco Software, Inc.
INDIA: A DYNAMIC MARKETPLACE

Presented at the
Bankers Association for Finance and Trades
13th Annual Conference on International Trade
Prospects for the Future
India: A Dynamic Marketplace
 India: Offshore Advantage
Lower cost Rapid Scalability
$5000 - $8000 annual starting 1 Mn+ Graduates each year
salaries Depth in Legacy & leading edge
technologies
IT & operation costs can be up to
Enables corporations to become
20% of Bank Revenues
more nimble
High Quality Flexibility
50 of worlds 74 CMM5 Companies Vendors more flexible than
are in India (20 in US, 2 in China) employees variable cost models
Cost of Quality ranges from 20-60% Rewarded by the markets
of application budgets
Predictable
92% of Mastek projects on-time v/s
30% industry average
#1 Pressure point for O & T
Managers/Enterprise Users
 A cheaper source of code
Normalized cost structure, percent of costs

Process based entirely

Labor costs 7 50 in the United States

Process based entirely

Statutory costs
Markup or margins
in India
3 13
Based on Morgan Stanley
Dean Witter, Deutsche Banc
Alex Brown;
International Data Corporation;
8 18 McKinsey analysis

Infrastructure costs 12 12

Travel & other

5 7
expenses

Total 35 100
The Value Proposition
40-60% cost reduction
for offshored process
Labor cost arbitrage, the
reason for cost savings,
likely to exist for next 20-
30 years

COST

Its not just about low costs

QUALITY PRODUCTIVITY
Faster turnaround time
Well defined
Time zone difference
quantifiable quality
and process metrics
The 24 x 7 service
Access to highly Value Learning effect/
qualified skill pool specialization
Proposition

Source: Nasscom-McKinsey
 Significant Improvement in Quality and
Productivity
UK based Retail Bank US Financial Services Co
Quality
Number of correct transactions / Number Total satisfaction factor
Established methodologies and of total transactions percent
processes for better performance
Well defined quantifiable quality and
process metrics
Access to highly qualified skill pool UK facility US facility
95 85

Skill level of the

people
India facility 98 India facility 92 employed in
India is
significantly
higher than that
in parent
Number of transactions/hour
Productivity Average speed of answer
location
Seconds
Indexed to UK
Faster turnaround time:
Time zone difference
UK facility 100 US facility 20
24 X 7 service
Learning effect / Specialisation

India facility India facility

120 8
India: Challenges &
Resolution
Challenges Resolution
Strong local presence and
Communication and Partners governance structure
Cultural Issues
Partners strength and
collaborative model maximizes
synergies from its horizontal
Domain Expertise project skills

Partners ePMO Tool enables

greater control.Options to
Loss Of Control dedicate/buy operations.

Low probability/Impact. Robust

Geo-political COB Plan
concerns
Offshore has improved
dramatically in past 3yrs.
50 of 74 CMM5 companies
Poor Prior Experience are now in India. Majesco, for
instance, has 100% reference
w/Off-shore able A/Cs

Allow focus on value-added

work. Spirit of free trade
Socio-political Issues
 Initial Outsourcing of Trade Services to India
Bank Indian Entity Strength Location Countries serviced
Citibank N.A. E-Serve International > 250 FTEs Mumbai, 15+ countries (North
Chennai America, Europe,
Asia)
American Express American Express > 75 FTEs Chennai, 5+ countries (Japan, Asia-
Bank Process Center Gurgaon Pacific, others)
Standard SCOPE International >30 FTEs Bangalore, 5+ countries (UK, Europe,
Chartered Chennai others)
Bank
HSBC HSBC Data Processing >20 FTEs Hyderabad, 5+ countries (UK, Europe,
International (HDPI) Mumbai others)

ABN Amro Bank ACES International >20 FTEs Chennai, 5+ countries (Europe,
Mumbai others)

Large Multinational Banks (mostly US-based) have been the prime-movers in off-shoring of
Trade Services to India
Evolved in a two-stage process: 1) Centralization of local trade operations within India
2) Offshoring of Trade Services operations from
other countries
 Trade Services Offshoring: Key Enablers

Standardized processing norms

Based on Uniform Customs & Practices for Documentary Credits
(UCP-500) which were very well understood in India
Internal standards that Banks themselves adopted
Technology as a key enabler
Imaging technology intensively used (Almost 100% of work off-
shored is image-enabled)
Reducing bandwidth costs during the 90s
Ready availability of Trade processing talent in India
An active trade-finance market has been in existence in India for
over 30 years
Further boost since economic liberalization & WTO
 Trade Services The Operations Ecosystem
5- Confirm LC issuance & collections doc flow (LC)
Corr. Bank

4- Irrevocable SWIFT
commitment correspondence
Confirming
Issuing Bank Bank
2- Issuance &
establishment
Advising Bank
of LC 3- Booking of
credit lines
Neg.
Bank
LC
Receipt
Payment
Paying against bills Bankers Importer
1- Dox
submission
Bank Acceptance Dox
(BA) creation negotiation

Importer *Contract
Exporter
LC
*Collections Retirement
Doc flow (open account)
 Trade Services Being Outsourced to India
Receipt & Scrutiny of Application dox
LC Preparation and maintenance
Booking of credit lines / collateral
maintenance
Credit administration
LC amendments
Scrutiny of Import dox (Verification &
Authorisation)
Release of Payments against Bills
SWIFT Messaging
Processing of Direct Remittances (non
LC based transactions)
Nostro Accounts Recon (for trade
related transactions)
Compliance (UCP, ICC, Central bank
norms, and Banks internal norms)
Dox Negotiation (scrutiny of
Documents)
SWIFT messaging (standard and
non-standard)
LC confirmations and advise to
Exporter
Nostro Account Reconciliation (for
trade related transactions)
Payments to exporters (Tracking &
Recon.)
Treasury transactions processing
Daily tasks of GL entries/recon etc
Periodic tasks of
reporting/monitoring or
testing/documentation
 FX Trading & Settlement: Opportunities
Fx Back-office operations were being off-shored to India on the back of
other Fx related transactions
Funds Transfers / Remittances
SWIFT Messaging (for Custodial transactions, Trade transactions & Fx
remittances)
Some of the processes being off-shored to India were:
Mid-office functions (deal ticket entry & trade tracking, trade confirmation,
collateral valuation and management, etc.)
Back-office functions (Clearing & Settlement)
Accounting functions
Future Challenges
Complex Fx products Derivative products (Swaps, Swaptions, Caps & floors,
etc.) have made settlement & compliance complicated posing a fresh challenge
to off-shoring
OTC market A substantial portion of the Fx trade is non Exchange-traded and
therefore non-standardized making it difficult to off-shore
Reducing settlement periods
 The Opportunity

Treasury outsourcing is increasingly significantly GTN survey

expects >50% of multinationals by 2004
71% is currently to banks but 29% is to others
Best-in-class will move to India and captives will expand their
offerings.
If US Banks dont leverage the offshore opportunity, directly or
through a service provider, they will get disintermediated
CONCLUSION

Just do it!