Talent availability and quality
• CRM in Georgia is the most developed among the BPO
segments with a number of relatively large call centers (between 200 and 500 FTEs) servicing both local and international markets
• Fresh talent in CRM is expected to come mostly from Humanities/Arts faculty which is in top 5 faculties in Georgia showing 77% growth in last 2 years
• Ability to tap fresh talent from the young pool of unemployed with 100% literacy rate, 92% of at least secondary education and average English and Russian skills of 38% and 63% respectively
• CRM experienced specialists are available in the BPO industry as well as in industries employing large call centers, such as banks, telecoms and insurance companies which are in the top 3 industries in Georgia by number of FTEs
Cost attractiveness
• Lower wage cost compared to other locations in CEE region
• Lower utility and internet costs compared to other locations in CEE region
• Comparable office rental prices to CEE countries and high availability of A-, B+ class office stock
• Opportunity to move to Tier II cities in the long-term, with even lower costs per FTE
Source:: KPMG Research and Analysis, , Everest Group, news articles, BPO company websites
Nearshoring opportuinities
• Close proximity and similar time zone with both European and CIS markets
• Presence of cultural affinity with both Europeans and Russians
• Scalable English speaking talent but also a large pool of Russian speaking talent
Business environment
• Presence of attractive business environment, ease of setting up a business
• Relatively stable macroeconomic environment compared to the region
• Association Agreement with EU
• Flexible labour laws, no minimum wage, no fixed overtime premium
• Low taxation (corporate tax – 15%, no social security tax)
• Ability to fully depreciate capital investment in the first year of operation generating a significant amount of tax loss-carry forward to be used during the first years of operation
• CRM is a long developed IT&BPO segment with established market players all across the world and most companies having locations in CEE/CIS
• Contact center outsourcing market is heavily fragmented with top 20 players accounting for less than 40% of the market share, but the market has seen consolidation over the last 18 to 24 months
Competitive forces
© 2015 KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 91
CRM Segment
Target operational and financial model
• Considering availability of experienced talent in CRM, Georgia can offer direct offshoring/ nearshoring to demand companies
• Georgia might also target BPO companies with no current locations in CIS (for example Teletech which is expanding geography) to set up a location in Tbilisi
• Full range of low-end processes throughout Marketing, Sales and Customer care may be provided in short-term
• Due to low availability of IT talent, digital CRM should be tapped in the longer term perspective
• Georgia should leverage talent in economics/ mathematics to couple voice/non voice customer care with data analytics for improved offering
Operational
o Campaign execution (loyalty program management, coupon and gift card
management) o Content management o Lead generation o Cross-sell/Up-sell o Omni-channel
customer care (SMS/web chat/email/
social media/voice)
o Search engine and social media marketing
o Data cleansing and consolidation o Marketing and
campaign analytics o Call center analytics o Customer analytics o Web development,
e-commerce support
Processes – full range of low-end processes
• Revenue per FTE for low-end work is estimated at USD 11,000 per year
• Cost per FTE excluding management overheads is estimated at USD 7,700 per year
• Management overheads are estimated at 20% of Cost per FTE
• Currently around 7,700 fresh and experienced staff are readily available for the industry from which 1,000 to 1,500 can be allocated to CRM segment
• Average EBIT margin on similar companies in the industry in Europe ranges from 4% to 9%
• EBIT margin in Georgia is estimated at 16%
Financial
Source: KPMG analysis, SPI Research, CapIQ
© 2015 KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 92
All rights reserved.
47 50 53 57 60 64
2015E 2016E 2017E 2018E 2019E 2020E
HR Market 2015-2020 Forecast (in BnUSD)
31.6 0.0 10.0
1.1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
HR Market demand 2014
Americas Central Europe
Rest of EMEA APAC
HR Segment
HR Market
• Current demand for HR outsourcing is USD 42.8 billion
• Most of the demand comes from Americas, however the demand from the EMEA region represents 24% of the total demand and stands at USD 10.1 billion
• HR sector is expected to grow 37% in the next 5 years
Demand factors
Source:: KPMG Research and Analysis, HFS Global IT and BPO Services Market Report 2013
CAGR 6.5%
© 2015 KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 93
HR Segment
Georgia’s competitive advantage
Talent availability and quality
• HR BPO in Georgia is relatively developed with a number of small companies servicing both local and international markets
• Fresh talent in HR is expected to come from Social and political sciences faculty as well as Economics and Business which are in top 5 faculties in Georgia. Social and political sciences faculty showed 90% growth in he last 2 years
• HR experienced specialists are available in the BPO and other industries
• Ability to tap fresh talent from the young pool of unemployed with 100% literacy rate and 92% of at least secondary
education, as well as average English and Russian skills of 38%
and 63% respectively Cost attractiveness
• Lower wage cost compared to other locations in CEE region
• Lower utility and internet costs compared to other locations in CEE region
• Comparable office rental prices to CEE countries and high availability of A-, B+ class office stock
• Opportunity to move to Tier II cities in the long-term, with even lower costs per FTE
Source:: KPMG Research and Analysis, Everest Group, news articles, BPO company websites
Nearshoring opportuinities
• Close proximity and similar time zone with both European and CIS markets
• Presence of cultural affinity with both Europeans and Russians
• Scalable English speaking talent but also a large pool of advanced Russian speakers with ability to understand Russian Labour legislation
Business environment
• Presence of attractive business environment, ease of setting up a business
• Relatively stable macroeconomic environment compared to the region
• Association Agreement with EU
• Flexible labour laws, no minimum wage, no fixed overtime premium
• Low taxation (corporate tax – 15%, no social security tax)
• Ability to fully depreciate capital investment in the first year of operation generating a significant amount of tax loss-carry forward to be used during the first years of operation
• The top 5 providers continue to dominate the market, both in terms of revenue and number of active deals, holding 55% share of the market
• Indian heritage service providers have been steadily increasing their share of new deals signed in the market reaching 37% share in 2014
• The top providers engaged in HRO all have locations in CEE and CIS including Kazakhstan, Ukraine, Azerbaijan and Russia
• While new deals, renewals and scope expansions contributed to market growth, terminations, de-scopes, and non-renewals hampered growth, indicating a scope for new entrants
Competitive forces
© 2015 KPMG Georgia LLC, a company incorporated under the Laws of Georgia, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. 94
All rights reserved.
HR Segment
Target operational and financial model
• Considering availability of some experienced talent in HRO, Georgia can offer direct offshoring/ nearshoring of low end processes to demand companies
• Georgia might also target growing BPO companies with no current locations in CIS (for example Genpact) to set up a location in Tbilisi
• In the longer term, given the increase in the number of available talent and increase in their experience level, as well as the increase in the demand from the CIS region, Georgia might target top BPO companies (for example NGA HR) to set up locations in Tbilisi as a better alternative to CEE and other CIS countries
Operational
o Payroll
administration:
Produce cheques, handle taxes, deal with sick/vacation time o Employee benefits:
Health, Medical, Life o HR management:
Recruiting, hiring, and firing. Also
background interviews, exit interviews, and wage reviews
o HR analytics solutions:
performance management,
employee satisfaction, retention