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Thursday, November 13, 2008

Indian Commodities Trading Market

Turmoil in financial markets, slower growth in high-income countries, and rising inflation have all adversely affected growth prospects for developing countries over the near term. Most countries have shown impressive resilience in this turbulent environment, and growth for developing countries as a group is expected to moderate from 7.8% in 2007 to a still strong 6.5% in 2008. However, vulnerable countries that depend on foreign capital flows are likely to experience a sharper slowdown. Moreover, despite strong production growth at the aggregate level, higher food and energy prices have caused real incomes to decline, significantly increasing the hardships faced by the very poor, particularly in urban centers.

A recent article in the Wall Street Journal noted that if one were to examine the historical performance of the S&P 500, one would find that the stock market is trading at the same level at which it was doing so nine years ago. Commodities markets, on the other hand, have been in a bull trend. Some of the major drivers that have contributed in this stupendous growth of commodity markets globally are
- Increasing influence of Asian demand, particularly from rapidly industrializing China and India
- Increase in commodities prices in international markets as a result of demand growth, reinforced by tight supply capacities, tense geopolitical conditions (especially with respect to the oil market) and intense speculative activity
- With the rise in prices of crude oil, metals and minerals, commodity prices reached record historical levels in nominal terms in 2006, which increased by more than 30% between 2005 and 2006 (and by 80% from 2000 to 2006).
- Numerous developing countries rely on commodities for export revenues, and commodity production and trade provide employment for more than 2.5 billion people worldwide.
- The considerable rise in prices has had an impact on incomes of developing countries. It is estimated that extra revenues resulting from commodity exports were around 6.7 percentage points of GDP for oil-exporting countries and about 3 percentage points for countries exporting mining products.
- Increases in demand from developing countries stimulated by a particularly vigorous commodity consumption per unit of GDP compared to that of developed countries, faster economic growth, and increasing population
- "Globalization" of securities and commodities markets
- Baby boomers are in the middle of their peak savings years and have been one of the major causes of huge inflows of money into the stock market and into mutual funds.
- The increased use of food crops for production of bio-fuels is an important factor that led to large increases in the prices of vegetable oils and grains in 2007, which in turn contributed to an overall 15 percent increase in the index of agricultural prices and a 20 percent rise in food prices.
- The prices of metals have increased more than other commodity prices over the last four years, largely because of an especially strong demand in China.
- Shortages of equipment and skilled workers have significantly increased development costs, and ore grades are deteriorating.

The report on “Indian Commodities Trading Market” offers an in-depth analysis of the Global Commodities Trading Market vis-à-vis the Indian Commodities Trading Market. It discusses the overall structure of the Global Commodities Market as well as Indian Commodities Market from an insider perspective and provides a comprehensive study on macro and micro factors driving the growth of this market.

The report furnishes up-to-date facts and figures following meticulous observation with an aim to provide you with real insights into the commodity trading market as it stands today; the knowledge one needs to stand out and make informed decisions. The expanse of such insights into the past and present scenario percolates down to every known commodity currently traded. A conscious effort has been made to provide an overview of all there is to know and know of in the volatile market whilst a detailed product-wise and segment-wise is used in conjunction to expand. Taking into account that Price and Risk being the key drivers of the market, the report presents an exclusive section which maps price growth trend behaviour, factors triggering such behaviour, tracking relative performance of commodities , effects on the market players directly or indirectly using composite indexes from leading sources, the use of various hedging tools such as forwards and options and the relative performance in comparison, the implication and significance of the various regulatory bodies, commissions and statutory acts to highlight a few.

Table of Contents

Section I: Commodities Trading – An Overview

1. How Commodities Market Evolved – Historical Perspective

2. How Commodities Trading Market Works
2.1 Involved Parties
2.2 Types of Contracts
2.3 Participants in derivative contracts
2.4 Trading Techniques in Commodities Market
2.4.1 Ready Delivery Market
2.4.2 Specific Delivery Market
2.4.3 Futures Market
2.4.4 Auction Market
2.5 Requirement & Benefits of Commodity Derivatives

Section II: Commodities Market – An Analysis

1. Global Commodities Market – An Overview
1.1 Commodities Trading vis-à-vis Role of Investment Banks
1.1.1 Barclays Capital Commodities - Profile
1.1.2 BNP Paribas Commodity Futures – Profile
1.1.3 Citi Global Commodities – Profile
1.1.4 DB Commodity Services LLC - Profile
1.1.5 Goldman Sachs Commodities – Profile
1.1.6 J.P. Morgan’s Global Commodities Group – Profile
1.1.7 Merrill Lynch Global Commodities (MLCI) - Profile
1.1.8 UBS's Commodities Group
1.2 Energy Trading vis-à-vis Energy Trading In-house Divisions
1.2.1 RBS Sempra Commodities
1.2.2 Chevron’s Supply & Trading
1.2.3 LITASCO (LUKOIL International Trading and Supply Company)
1.2.4 Koch Supply & Trading
1.2.5 AEP Energy Services (Subsidiary of American Electric Power Company, Inc.)
1.2.6 Duke Energy Trading and Marketing (DETM)
1.2.7 Shell Trading (US) Company
1.2.8 Reliant Energy Securities & Commodities Trading Center
1.3 Commodity ETFs and ETNs
1.4 Commodity Trading vis-à-vis Sovereign Wealth Funds (SWFs)
1.4.1 History of SWFs
1.4.2 Driving Factors, Issues, Trends & Opportunities
1.4.3 Sources of Capital
1.4.4 How & where the money is invested – Market Size & Projections
1.4.5 Fund Rankings: Largest Funds by Assets under Management

2. Global Commodities Market Analysis
2.1 Global Commodities Market Size & Forecast
2.2 Commodity Market Profiles – Quick Points (Profile, Producers, Consumers, Largest Markets, Price Performance & Top Companies)
2.2.1 Aluminium Market
2.2.2 Cocoa Market
2.2.3 Coffee Market
2.2.4 Copper Market
2.2.5 Cotton Market
2.2.6 Gold Market
2.2.7 Nickel Market
2.3 Global Commodities Indexes – Performance Analysis
2.3.1 Dow Jones - AIG Commodity Indices
2.3.2 Merrill Lynch Commodity index eXtra (MLCX)
2.3.3 S&P GSCI™ Composite Index
2.3.4 Reuters/Jefferies-CRB® Indices

3. Issues, Trends & Opportunities
3.1 Impact of higher commodity prices
3.2 Movement of oil prices
3.3 Performance of agriculture commodities
3.4 Companies turn to top derivatives dealers for help in hedging
3.5 Carbon to be the biggest global commodity market by 2012
3.6 Renewed interest from investors
3.7 More sophisticated tools & platforms
3.8 Investment banks are major players
3.9 ETFs, changing the equation of Commodities Investment
3.10 China – Major Demand Driver of Global Commodities
3.11 Macro-Economic Driving Factors
3.12 Factors affecting pricing of base metals
3.12.1 Lead (75% y-o-y growth)
3.12.2 Tin (66% y-o-y growth)
3.12.3 Zinc (40% y-o-y decline)
3.12.4 Nickel (4% y-o-y decline)

Section III: Indian Commodities Trading Market

1. Indian Commodities Market – An Overview

2. Indian Commodities Market Size – An Analysis
2.1 MCX vs. SENSEX – A Comparative Analysis

3. Indian Commodities Market – Performance Analysis
3.1 Aluminium Market – Future Contract Value (Jan 07 – Jul 08)
3.2 Coffee Market – Robusta Futures Contract Value (Jan 07 – Aug 08)
3.3 Copper Market – Copper Futures Contract Value (Jan 07 – Jul 08)
3.5 Crude Oil Market – Crude Oil Futures Contract Value (Jan 07 - Aug 08)
3.6 Gold Market – Futures Contract Value (Jan 07 – Aug 08)
3.7 Chana (Chickpea) Market – Futures Contract Value (Jan 07 – May 08)
3.8 Nickel Market – Futures Contract Value (Jan 07 – Jul 08)
3.9 Zinc Market – Futures Contract Value (Jan 07 – Jul 08)
3.10 Lead Market – Price Performance (Jan 07 – Aug 08)
3.11 Cardamom Market – Futures Contract Value (Jan 07 – Jul 08)
3.12 Jeera (Cumin Seed) Market – Futures Contract Value (Jan 07 – Jul 08)
3.13 Lead Market – Futures Contract Value (Jan 07 – Jul 08)
3.14 Mentha Oil Market – Futures Contract Value (Jan 07 – Jul 08)
3.15 Natural Gas Market – Futures Contract Value (Jan 07 – Jul 08)

4. Government Regulations, Initiatives and Reforms
4.1 Setting up a Committee on Role of Futures Trading in 1993
4.2 Setting up of Forward Market Commission in 1953
4.3 Forward Contracts (Regulation) Act, 1952
4.4 Forward Contracts (Regulation) Amendment Bill, 2006
4.5 Forward Contracts (Regulation) Amendment Ordinance, 2008
4.6 Commodities Trading Tax
4.7 Import duty cut & export duty hike in Metals industry

5. Issues, Trends & Opportunities
5.1 Commodity Trends: Hurt by economic slowdown
5.2 Multi Commodity Exchange (MCX) launched currency futures trading
5.2 Hedging ban a slow political process to kill futures market
5.3 Commodity investment goes retail
5.4 Unresolved Issues and Future Prospects
5.5 Scrap now being considered a waste commodity
5.6 Commodity and Equity Markets have been moving in tandem
5.7 Indian Bt Cotton to hit market soon
5.8 Warehousing to take giant leap in India

List of Charts

Chart 1: Mode of Financing in Commodities Trading
Chart 2: Business Operations Model of a Trading Process in a Commodity Exchange
Chart 3: SWFs Market Projections (2007-2012)
Chart 4: Comparison of AUM of SWFs and Asset Managers, Private Equity and Hedge Funds ($ billions)
Chart 5: Sovereign Wealth Fund Deal Volume (1997-2007)
Chart 6: Sector-wise growth: Exchange trade of commodity derivatives by volume (03-06)
Chart 7: World’s leading Commodity Exchanges in developing countries – 2006 Contracts ($millions)
Chart 8: Major base metal commodity exchanges & emerging markets
Chart 9: Base Metal Price Trend – 2006 vs. Present Price
Chart 10: Cocoa Monthly Averages of Daily Prices (Oct 07- Oct 08)
Chart 11: ICO Indicator Prices - Annual & Monthly Averages (1998 to 2008)
Chart 12: Global Cotton Average Price Trend ("A" Index (cents/pound)) – 1988 -2008
Chart 13: Merrill Lynch Commodity index eXtra (MLCX) - Commodity Weightings
Chart 14: MLCX Weights as of January 2008
Chart 15: MLCXTR outperformance vs. SPGCCITR & DJAIGTR
Chart 16: Reuters/Jefferies CRB® Total Return Index: Jan 82 – Sep 08 (monthly close)
Chart 17: Forecast of China's Share of the Growth in Demand for Global Commodities- 2009
Chart 18: Types of Commodities Traded in India
Chart 19: MCX vs. SENSEX – Comparative Analysis (Jan 06-Sep 08)
Chart 20: India's Aluminium Futures Contract in Value (Rs. Crore) (Jan 07 – Jul 08)
Chart 21: India's Coffee Robusta Futures Contract in Value (Rs. Lakhs) (Jan 07 – Aug 08)
Chart 22: India's Copper Futures Contract in Value (Rs. Crore)
Chart 23: India's Crude Oil Futures Contract in Value (Rs. Crore)
Chart 24: India's Gold (1Kg) Futures Contract in Value (Rs. Crore)
Chart 25: India's Gold (100g) Futures contract in Value (Rs. Crore)
Chart 26: India's Chana (Chickpea) Futures Contract in Value (Rs. Crore)
Chart 27: India's Nickel Futures Contract in Value (Rs. Crore)
Chart 28: India's Zinc Futures Contract in Value (Rs. Crore)
Chart 29: India's Lead Futures Contract in Value (Rs. Crore)
Chart 30: India's Cardamom Futures Contract in Value (Rs. Crore)
Chart 31: India's Jeera (Cumin Seed) Futures Contract in Value (Rs. Lakhs)
Chart 32: India's Lead Futures Contract in Value (Rs. Crore)
Chart 33: India's Mentha Oil Futures Contract in Value (Rs. Crore)
Chart 34: India's Natural Gas Futures Contract in Value (Rs. Crore)

List of Tables

Table 1: The Global Economic Outlook (2006-2010)
Table 2: Major Global Commodity Exchanges
Table 3: Major Asian Commodity Exchanges
Table 4: Major European Commodity Exchanges
Table 5: Commodity Traders – List of top banks, Financial Institutions & other top companies
Table 6: Fund Rankings: Largest Funds by Assets under Management
Table 7: Global Commodity Prices – Monthly & Yearly Averages (Jan 06 - Sep 08)
Table 8: Commodity Forecast Nominal Prices (2007-2020)
Table 9: World Cocoa Market Estimates (in million metric tons) – 2002-2008
Table 10: ICO Indicator Prices - Annual & Monthly Averages (1998 to 2008)
Table 11: Global Cotton Average Price Trend ("A" Index (cents/pound)) – 1988 -2008
Table 12: Comparison of Commodity Indexes
Table 13: Dow Jones AIG Total Return Performance %
Table 14: Dow Jones AIG Excess Return Performance %
Table 15: Dow Jones AIG Yearly Returns (1990-2008)
Table 16: DJGI AIG Commodity Index - Commodity Weightings
Table 17: Merrill Lynch Commodity index eXtra (MLCX) - Commodity Weightings
Table 18: S&P GSCI™ Components and Dollar Weights (%)
Table 19: S&P GSCI™ Index Values
Table 20: Commodity Exchanges in India
Table 21: Trend of Commodities in National Commodity & Derivatives Exchange (Oct 08)
Table 22: Trend of Commodities in Multi Commodity Exchange of India (Oct 08)
Table 23: Trend of Metals in Multi Commodity Exchange of India (MCX) and National Commodity & Derivatives Exchange (NCDEX) (Oct 08)
Table 24: Trend of Oil Commodities traded in NYMEX (Oct 08)
Table 25: Trend of Metal commodities traded in NYMEX (Oct 08)

Pages: 186

Wednesday, July 2, 2008

Thailand Insurance Sector

Authors: Nishith Srivastava & Akash Rakyan

Thailand is the 2nd largest economy in Southeast Asia, after Indonesia. It ranks midway in the wealth spread in South East Asia and is the 4th richest nation per capita, after Singapore, Brunei, and Malaysia. The Thai economy in 2008 is forecasted to grow at 5.6% (in the forecasted range of 5.0-6.0%). This figure is an improvement on 4.8% growth in the previous year according to Fiscal Policy Office (FPO), Ministry of Finance. In 2008 accelerated public sector spending led to recovery in domestic demand which is expected to be far more balanced economic expansion. Government policy would then be forced to stimulate the domestic economy. This happens when external demand is likely to be softened from possible global economic slowdown. External stability in 2008 will remain strong with current account surplus estimated to be 0.5% of GDP (in the range of 0.3-0.8% of GDP). In contrast, internal stability in 2008 may have some risk with increasing headline inflation at 4.5% (in a range of 4.3-4.8%). This is mainly due to rising energy and food prices in the world markets.

According to ‘The Economist’, real GDP growth will slow down by 1.15% p.a over the next 4 years (2008-12), as compared to 5.3% p.a in past 3 years since 2007. This sluggishness of GDP can be attributed to various negative factors, such as political uncertainty, instability of foreign exchange rates, and continuous high petroleum prices in 2006.

The Thai insurance industry, along with the wider Thai economy, has now however recovered from the depths of the Asian financial crisis and is experiencing noteworthy growth. The trend is expected to continue as public awareness of the need for insurance increases.

Market Performance and Forecast
Within a span of 7 years (2000-2007), Thai Insurance Sector has experienced a growth of 191% currently valuated at $9,434.72 million. The Knowledge Centre predicts, the overall market size will increase by 72.5% further and is expected to touch the highs of $13,012.75 million by 2011.

The life insurance market in Thailand between 2000 and 2007 increased at a CAGR of 16.57%. The Knowledge Centre envisages that this trend would continue and the market will see CAGR of 5.75% in 5 years and reach $8,306.21 million in 2011.

The non-life insurance market in Thailand between 2000 and 2007 increased at a CAGR of 10.73%. The Knowledge Centre also forecasts that the growth will continue and the market will see CAGR of 8.34% in the next 5 years with the premiums reaching $4,706 million by 2011.

Competitive Landscape
Some of the top foreign insurance companies in Thailand are ACE, AIG, Allianz, AXA, Generali, ING, Millea Holdings, Manulife, New York Life and Prudential (UK). The market is dominated by AIA, the local name of AIG that accounted for approx. 29% of all of gross premiums in 2007. Thai Life (TLI) is considered to be the second largest player overall with a market share of approx. 14%. The next largest group is considered to be a joint venture between non-life insurer Ayudhya, local conglomerate Charoen Pokphand and Allianz (AACP) with a market share of approx. 14%. Other major players in this market are Ocean Life, Finansa, local associates of AXA (Krungthai) and ING.

Non-life insurance sector in Thailand is further sub-categorized under Fire, Marine & Transportation, Hull, Cargo, Automobile, Compulsory, Voluntary, Miscellaneous, Industrial All Risks, Public Liability, Engineering Insurance, Aviation Insurance, Personal Accident, Health Insurance, Crop Insurance and Other Insurance. Some of the top companies in this sector are Bangkok Insurance, Dhipaya Insurance, Phatra Insurance, New Hampshire Insurance, Ayudhya Insurance, Mitsui Sumitomo Insurance, MSIG Insurance, Sri Muang Insurance, Siam Commercial Samaggi, South East Insurance, Viriyah Insurance, Synmunkong Insurance, Krungthai Panich etc.

Driving factors
 Balanced economic expansion and supporting role of the government
 Recent reforms and government’s regulatory initiatives
 Re-defined financial practices and strengthening of corporate governance
 Relaxation of restrictions on directors and senior executives of insurance companies
 Amendment of clauses governing the evaluation of assets & debts of a life insurance company
 Merger or consolidation of the large number of local insurers
 Middle income industrial developing nation
 Growing interest in Bancassurance
 Adoption of THBFix and Bibor
 Establishment of Insurance Commission

Major trends, issues and opportunities
 Mergers and acquisitions in Thailand's insurance industry are likely to drop off
 Thailand's economy is slowing as the effects of high oil prices, rising interest rates and long-running political uncertainty take their toll.
 Political uncertainty and instability of foreign exchange rates
 Bullish trend in fixed deposit rates
 Government regulations laying a strong foundation for future growth
 Increase in foreign ownership limits
 Move towards a knowledge economy through skills development
 Issues in Health Insurance Systems

Topics covered in the report
 Thai economy, its performance, future outlook for 2008-09
 Government’s economic policies, macroeconomic factors, trends and analysis
 Economic and Insurance environment in Thailand
 Market performance and forecast for Thai Insurance Sector between 2000, 2007 and 2011
 Market performance and forecast for Thai Life Insurance Sector between 2000, 2007 & 2011
 Market performance and forecast for Thai Non-Life Insurance Sector between 2000, 2007 & 2011
 Recent reorganization of financial institutions and setting up of Insurance Commission
 Corporate Finance Legislation and other major regulatory developments
 Role of Bancassurance
 Specific regulations and norms by the Thai Government for insurance sector.
 Sub-categorization of life and non-life insurance sector
 Competitive landscape & market share of companies in life and non-life insurance sector
 Company profiles of top players in life and non-life insurance sector

Table of Contents

1. THAILAND
1.1. THAI ECONOMY
1.2. GOVERNMENT POLICIES

2. THAI INSURANCE SECTOR

2.1. MARKET OVERVIEW

2.2. MARKET PERFORMANCE & FORECAST
2.2.1. Thailand Insurance Market
2.2.1.1. Thailand – Life Insurance Market
2.2.1.2. Thailand – Non-Life Market

2.3. DRIVING FACTORS
2.3.1. Recent Reforms
2.3.2. M&A or transfer of the business of an Insurance Company
2.3.3. Thai Corporate Finance Legislation
2.3.4. Role of Bancassurance
2.3.5. Recent Regulatory Developments
2.3.6. Insurance Commission replaced Department of Insurance

2.4. TRENDS, ISSUES AND OPPORTUNITIES – AN ANALYSIS
2.4.1. Insurance M&A likely to drop
2.4.2. Pending Legislations
2.4.3. Implications for Foreign Insurers
2.4.4. Skills development remains a key
2.4.5. Issues in Health Insurance Systems in Thailand

2.5. GOVERNMENT REGULATIONS

2.6. COMPETITIVE LANDSCAPE
2.6.1. Life Insurance
2.6.1.1. Life Insurance Renewal Market
2.6.1.2. Single Premium Market
2.6.2. Non-Life Insurance Market
2.6.2.1. Fire Insurance Market
2.6.2.2. Marine and Transportation Market
2.6.2.3. Cargo & Hull Market
2.6.2.4. Automobile Sector
2.6.2.5. Miscellaneous Insurance
2.6.2.6. Industrial All Risks Insurance
2.6.2.7. Public Liability Insurance
2.6.2.8. Engineering Insurance
2.6.2.9. Aviation Insurance
2.6.2.10. Health Insurance
2.6.2.11. Personal Accident Insurance
2.6.2.12. Other Insurance
2.6.3. Company Profiles
2.6.3.1. American International Assurance company (AIA), Thailand
2.6.3.2. ACE INA Overseas Insurance Company Limited
2.6.3.3. Ayudhya Insurance Public Company Limited
2.6.3.4. Ayudhya Allianz C.P. Life Public Company Limited
2.6.3.5. Bangkok Insurance Public Company Limited
2.6.3.6. Bangkok Union Insurance
2.6.3.7. Charan Insurance
2.6.3.8. Deves Insurance
2.6.3.9. ING Life Limited
2.6.3.10. Indara Insurance
2.6.3.11. Manulife Insurance (Thailand) Public Company Limited
2.6.3.12. MSIG Insurance
2.6.3.13. QBE Insurance (Thailand) Company Limited
2.6.3.14. Sri Muang Insurance
2.6.3.15. The Viriyah Insurance Co., Ltd.

List of Tables
Table 1: Macroeconomic Trends: Population (mil.) vs. Nominal GDP ($ bil.) – 2002-2011f
Table 2: Macroeconomic Trends: GDP per capital ($ bil.) vs. Real GDP Growth (%) – 2003-2011f
Table 3: Growth Trends: Inflation (2002-2008f)
Table 4: Key Economic Indicators Forecast – 2007-2012f
Table 5: Growth Trend Comparison: GDP Growth vs. Insurance Growth (%) – 2000-2011
Table 6: Thailand Insurance Market Value ($million): 2000-2007
Table 7: Thailand Insurance Market Value Forecast ($million): 2007-2011f
Table 8 : Insurance Density: Premiums Per Capita in USD
Table 9: Insurance Premium in % of GDP (2001-2011f)
Table 10: Growth Trend of Life Insurance and Non-Life Insurance ($Million): 2000-2011f
Table 11: Thailand Life Insurance Market Value ($million): 2000-2007
Table 12: Thailand Life Insurance Market Value Forecast ($million): 2007-2011f
Table 13: Thailand Non-Life Insurance Market Value ($million): 2000-2007
Table 14: Thailand Non-Life Insurance Market Value Forecast ($million): 2007-2011f
Table 15: Thailand Insurance Sector: Projections of Macroeconomic Drivers (2006-2010f)
Table 16: Market Share of Top Players in Life Insurance Sector: Comparison between 2006 & 2007 (Million Baht) and their Growth (%)
Table 17: Life Insurance Total Premium Growth Year on Year by Company 2006-2007 (%)
Table 18: Life Insurance Market Growth by First Year Premium of Top Companies: Comparison between 2006 & 2007 (mn Baht)
Table 19: Life Insurance Market Growth by First Year Premium of Top Companies: Comparison between 2006 & 2007 (%)
Table 20: Life Insurance Premium Renewal (million Baht) and Growth (%) Year on Year for Top Companies (2006-2007)
Table 21: Life Insurance Renewal Market Share of Top Companies in 2007 (mn Baht)
Table 22: Life Insurance Single Premium Market Share of Top Companies in 2007 (mn Baht & % growth)
Table 23: Loss Ratio of Non - Life Insurance Business (2007)
Table 24: Marine and Transportation Companies: Markey Share by Direct Premium (Unit: 1,000 Baht)
Table 25: Automobile Insurance Top companies by Direct Premium (2007)
Table 26: Top Miscellaneous Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Table 27: Top Industrial All Risk Non-Life Insurance Companies: Market Share by Direct Premium – 2007
Table 28: Top Public Liability Non-Life Insurance Companies: Market Share by Direct Premium – 2007
Table 29: Top Engineering Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Table 30: Top Aviation Non-Life Insurance Companies: Market Share by Direct Premium – 2007
Table 31: Top Health Insurance Companies: Market Share by Direct Premium – 2007
Table 32: Top Personal Accident Insurance Companies: Market Share by Direct Premium – 2007
Table 33: Top Other Non-Life Insurance Companies: Market Share by Direct Premium – 2007

List of Charts
Chart 1: Macroeconomic Trends: Population (mil.) vs. Nominal GDP ($ bil.) – 2002-2011f
Chart 2: Macroeconomic Trends: GDP per capital ($ bil.) vs. Real GDP Growth (%) – 2003-2011f
Chart 3: Growth Trends: Inflation (2002-2008f)
Chart 4: Key Economic Indicators Forecast (2007-2012f)
Chart 5: Growth Trend Comparison: GDP Growth vs. Insurance Growth (%) – 2000-2011f
Chart 6: Thailand Insurance Market Value ($billion): 2000-2007
Chart 7: Thailand Insurance Market Value Forecast ($million): 2007-2011f
Chart 8: Insurance Density: Premiums Per Capita in USD
Chart 9: Insurance Premium in % of GDP (2001-2011f)
Chart 10: Thailand Insurance Market: Segment Share 2007
Chart 11: Growth Trend of Life Insurance and Non-Life Insurance ($Million): 2000-2011f
Chart 12: Thailand Life Insurance Market Value ($million): 2000-2007
Chart 13: Thailand Life Insurance Market Value Forecast ($million): 2007-2011f
Chart 14: Thailand Non-Life Insurance Market Value ($million): 2000-2007
Chart 15: Thailand Non-Life Insurance Market Value Forecast ($million): 2007-2011f
Chart 16: Market Segmentation of Non-Life Insurance (%): 2007
Chart 17: Market Segmentation of Non-Life Companies by Ownership 2007 (%)
Chart 18: Comparison of Direct Premiums of Non - Life Insurance Business (2007 & 2006)
Chart 19: Direct Premium per Insurance Policy for 2007-2006 (Baht)
Chart 20: Comparison of Sum Insured Per Premium of Non - Life Insurance Business Segments (2007 & 2006)
Chart 21: Loss Ratio of Non - Life Insurance Business (2007)
Chart 22: Market Share of Top Life Insurance Companies by Total Premium in 2007 (%)
Chart 23: Life Insurance First Year Premium Market Segment in 2007 by Top Companies (%)
Chart 24: Life Insurance Premium Renewal (million Baht) and Growth (%) Year on Year for Top Companies (2006-2007)
Chart 25: Life Insurance Renewal Market Share of Top Companies in 2007 (%)
Chart 26: Single Insurance Premium Company Segmentation 2007
Chart 27: Fire Insurance Companies – Market Share (%): 2007
Chart 28: Marine & Transport Insurance Segment Share (%): 2007
Chart 29: Cargo and Hull Market: Direct Premium Share (%) in 2006-2007
Chart 30: Marine and Transportation Companies: Markey Share by Direct Premium (Unit: 1,000 Baht)
Chart 31: Market Share of Automobile Insurance Sub Sector 2007
Chart 32: Automobile Insurance Top Companies – Market Share by Direct Premium (%) – 2007
Chart 33: Market Share of Miscellaneous Non-Life Sector (%) – 2007
Chart 34: Top Miscellaneous Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 35: Top Industrial All Risk Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 36: Top Public Liability Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 37: Top Engineering Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 38: Top Aviation Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 39: Top Health Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 40: Top Personal Accident Insurance Companies: Market Share by Direct Premium (%) – 2007
Chart 41: Top Other Non-Life Insurance Companies: Market Share by Direct Premium (%) – 2007

Pages: 163

Tuesday, May 6, 2008

20 Indian firms among world's top 100 in outsourcing

According to Silicon India:

Reflecting strong growth of the Indian industry, 20 Indian firms have successfully made it to the list of top 100 outsourcing companies in the world.

The latest '2008 Global Outsourcing 100', compiled by the International Association of Outsourcing Professionals (IAOP) that features 20 Indian firms has five of them - Infosys (ranked 3), TCS (6), Wipro (7), Genpact (9) and Tech Mahindra (10) among the top 10. All five are leading software service providers.

In the list, Accenture is on the top slot and IBM comes second. Companies on the list averaged $1.7 billion in annual sales and engaged 27,000 employees across the world.

Other Indian companies in the list are HCL Technology (11) Mastek (16), WNS Global Services (19), Hexaware (22), ExlService (26), 24/7 Customer (28), Cambridge (36), ITC Infotech (40), KPIT Cummins (42), Patni (46), Zensar (53), MindTree (54), Mphasis (56), Aditya Birla Minacs (62), FirstSource Solutions (73) and VCustomer (84).

According to IAOP, the key strength of Wipro and TCS is their 'employee management' while 'executive leadership' is cited as the strong point of Infosys and Genpact.

On the other hand, 'outsourcing experience' is attributed as the main strength of Tech Mahindra and HCL Technologies. The power balance in the outsourcing industry is shifting. Global competition in outsourcing is intensifying and that was reflected in this years ranking with companies from 19 countries vying for recognition, IAOP's Managing Director, thought leadership and who head the judges panel, Jagdish Dalal said.

In last year's list, there were five Indian firms in the top 10 - Wipro, Infosys, Genpact, Tech Mahindra and Cambridge.

Sunday, April 20, 2008

Profile of Tata Companies - An analysis

Excerpts sourced from Economic Times and TNN

TATA MOTORS

Competencies & Opportunities: Tata Motors has some new offerings on the block. This includes the 200-500 horse power ‘World Truck’ for the global market. It has also taken a huge stride to grow inorganically by acquiring the business of Ford under the brands, Jaguar and Land Rover. New models such as Sumo Grande and the Rs 1-lakh Nano car are likely to give a fillip to the domestic business.

Challenges: Higher interest rate may dampen the demand for cars. Rising cost of key raw materials such as steel and aluminium will put pressure on margins. Turning around of the Jaguar Land Rover business into a higher profitable business is a major challenge. Positioning of the Tata brand over such a wide variety of vehicles segments starting from the cheapest Tata Nano to the luxury brands like Jaguar will not be easy.

TATA STEEL

Competencies & Opportunities: The Corus acquisition will give Tata Steel the access to global markets and higher volumes. The strong outlook for global as well as domestic steel sector will improve sales realisation. Acquisition of iron ore and coking coal mines in different parts of the globe will improve the operating margin of Corus and contribute more towards the bottomline of the combined entity. The new greenfield and brownfield projects in Orissa, Jharkhand and Chhatisgarh will add significantly to the topline.

Challenges: The higher inflation and pressure from the domestic government might force steel producers to reduce domestic steel prices, resulting in lower profit margins. The higher synergy from Corus will come through only if Tata Steel manages to integrate it successfully.

TCS

Competencies & Opportunities: TCS has been focussing on contracts with larger deal size and time span. This helps in increasing client engagement. Broadening of deliverables will also help in improving competence in the global market for IT services. TCS has opened delivery centres in low-cost destinations of Asia and Latin America. Such a multi-shore delivery strategy comes in handy in times of economic slowdown and lower IT spends by the clients. Presence in the domestic market is worthwhile in the scenario of a stronger home economy and depreciating dollar.

Challenges: Exposure to dollar denominated income increases risk of margin erosion given appreciating rupee. Slowdown in the US may impact the IT budgets of the US clients. This may retard the topline growth. Competition from MNCs in India will intensify. TCS has to come up with firm strategies for its domestic business.

TATA POWER

Competencies & Opportunities: Tata Power is India’s largest private sector power utility with installed capacity in excess of 2,300 mw. Over 600 mw new capacity is likely to be added during FY09, with another 8,000 mw capacity to be added over the next five years including a 4,000-mw UMPP at Mundra. TPL has acquired a 30% stake in two major Indonesian coal producers to assure future fuel requirements. It is emerging as an integrated player in India's power sector with investments in power generation, transmission, distribution and fuel supplies (coal mining and transport).

Challenges: Meeting the time and cost deadlines while executing the long gestation projects is a big challenge as the costs of equipment and project implementation services have gone up substantially. Even after the successful completion of its projects, TPL has to manage the regulatory environment well to ensure sufficient return on its investments.

INDIAN HOTELS

Competencies & Opportunities: Indian Hotels runs the largest domestic hotel chain with 71 hotels and an inventory of 10,487 rooms. It enjoys presence across wide range of hotels right from deluxe properties to budget. This puts the company in a bright spot and helps it take advantage of the growing tourism industry in India. Besides, the company has 14 properties overseas and is expanding its global footprint via acquisitions and greenfield ventures. This is likely to result in greater brand recognition abroad. Its recent entry into lucrative segment of business jets will help the company to take advantage of growing opportunities in this space.

Challenges: Its revenue is greatly dependent on India, where average room rates are expected to see a decline beyond FY09 when supply starts coming in. Rising real estate costs have greatly reduced the return on capital on new properties in major cities.

TATA TEA

Competencies & Opportunities: The company has taken initiatives to introduce different variants of tea. It has also forayed into bottled water and other beverages. This is likely to help it transform itself from a tea company to a beverages company. Acquisitions, geographic expansion and new products are the way to go for Tata Tea, which is already the second largest integrated tea company in the world. Its retail foray through ‘Chai Unchai’ beverage stores is likely to open a new route of growth for the company.

Challenges: Tata Tea operates in a labour-intensive tea industry, which has long gestation periods. This can be an imepdiment in improving operational efficiency. The company will have to grapple with the increase in raw material prices. The appreciation in the rupee is likely to drag profitability of the international businesses.

TATA COMMUNICATIONS

Competencies & Opportunities: Utilisation of existing infrastructure to deliver valueadded services is a sound proposition for Tata Communications. The company recently tied up with Telsima to provide WiMAX services in the country. It has also launched its global telepresence network service to offer virtual meeting solutions. These initiatives will fuel future revenue growth. Tata Comm’s strategy to build global tie-ups for high-end technologies will help it keep pace with the fast-changing technology scenario and improve its global presence.

Challenges: Tata Comm needs to increase focus on deploying managed services, given the stiff competition in domestic as well as global enterprise data space from bigger telecom operators. The company has to improve operational processes in order to increase customer base for its broadband and other services rapidly.

TATA CHEMICALS

Competencies & Opportunities: The recent acquisition of US-based General Chemicals has consolidated position of Tata Chemicals (TCL) in the global soda ash market. Post-acquisition, TCL has become the second largest soda ash manufacturer in the world with majority of the production coming from cheaper natural sources. This goes well with its overall global strategy. TCL is already on an expansion spree for its inorganic chemicals and fertilisers plants in India. This will help it to strengthen its domestic presence. TCL is setting up a 30,000-litres-per-day ethanol plant and has ventured into wholesaling of fresh agricultural produce. This diversification would help in mitigating risk from slowdown in the core business.

Challenges: TCL has to see through an effective integration strategy of its soda ash business with the overseas acquisition. Managing overall growth of the company will be a tough task given the diversification into new business domains.

VOLTAS

Competencies & Opportunities: Voltas is a market leader in central air-conditioning and climate control business in India, besides being a major player in booming West Asia. It is also India's leading distributor and re-seller of textile and mining equipment. Recently it went through a corporate restructuring which has transformed it into a leaner and competitive player. The demand for central A/Cs and climate control systems is booming, thanks to rapid growth in retail, real estate and hospitality sectors. It has also got a boost from strong capex in textile, mining and retail sectors where it supplies forklifts.

Challenges: Being a capital goods supplier, it's highly prone to an economic downturn. It faces strong competitors across its product portfolio. The consumer air-conditioner business continues to be a drag on the company's profitability.

TATA TELE (MAHA)

Competencies & Opportunities: The company is aggressively expanding its base in smaller circles. Increasing presence in high-growth telecom circles B and C will help the company grow its subscriber base rapidly from existing five million.

Challenges: Higher competition is likely to put further pressure on the company’s average revenue per user. This necessitates more focus on value-added services. The company currently provides mobile services on CDMA platform. Establishing a GSM footprint would be a challenging task given competition from bigger GSM players. The company needs to expand its operations in the field of managed services to stay competitive. The company lacks brand recognition. It has to establish its brand presence in the highly competitive
markets.

TITAN IND

Competencies & Opportunities: Titan has diversified into a wide consumer-centric product portfolio comprising time pieces, jewellery, eye wear, and precision equipment among others. A good pedigree, reputed brand standing and strong distribution and service network offer good prospects for the company to ride the boom in consumption. Expansion of retail stores, specially in tier II cities, will help the company increase profitability.

Challenges: Record high gold prices can lead to a drop in jewellery demand, restricting the company's growth in the business. International foray may not be very profitable in view of the global economic slowdown. Branded retail segment is fraught with intense competition. Dominance of unorganised players in the lower end of the watch market poses a challenge. Given rising incomes, Titan may have to face competition from international brands in the premium watch category.

TRENT

Competencies & Opportunities: After establishing its foothold in retail space through Westside stores, Trent is taking new initiatives of foraying into the premium segment. Recently, it joined forces with the Benetton Group for the expansion of the Sisley brand in India. It is tying up with designers to mark its presence in a range different from the private labels. This will help the company face stiff competition in the domestic retail space. Trent has reported good growth in the past few years. Revenues have grown consistently (CAGR of 55% from FY04-07). A sustained revenue model is necessary as it facilitates future expansion plans.

Challenges: The roll out of new stores has not been aggressive. The company has added only 19 stores from ’03 till date. Faces competition from aggressive players such as Pantaloon and new entrants including Reliance Retail.

Tuesday, December 25, 2007

Forecasts for the economy & markets in 2008

Author: Abheek Barua, Chief Economist, HDFC Bank
Source: Rediff

Since this is my last piece this year I thought I would write about the forecasts I have made for the global economy and financial markets for 2008. There is an important caveat, of course. The global macroeconomic and financial environment remains terribly volatile and a number of these predictions could go wrong.
Let me get to the forecasts. The jury appears to be still out on whether the US is headed for a recession next year (going by the textbook, a situation in which GDP growth turns negative for two successive quarters) or whether swift action by the US Federal Reserve is likely to prevent such a situation. US consumption data like retail numbers occasionally surprise positively and US inflation is far from dead. However, despite this bit of fuzziness I remain somewhat sanguine about the following trends.

Whether it qualifies technically as recession or not, the US is likely to see a marked slowdown at least in the first half of 2008, which could last well into the second half of the year. Besides, despite central banks' best efforts, it will take a while for American and European banks to resume lending to each other and to even slightly risky borrowers. Thus, I see the credit squeeze in the US and Europe continuing and perhaps even getting worse in the near term.

The US slowdown is likely to have knock-on effects on the global economy and world GDP growth is likely to moderate. More specifically the result of sharp currency appreciation, harder interest rates and a credit squeeze will begin to take a toll on euro-zone growth. The UK is well into a cyclical downturn.

As I have argued in earlier columns, I think it is impossible for Asian economies to remain immune to a downturn in the developed economies and growth rates will soften in this region as well. I honestly don't know much about Latin America but I think it is sensible to assume that what applies to Asia applies to these economies as well.

Global energy and food prices are likely to remain elevated in the first quarter but are likely to dip subsequently as demand compression on the back of slowing world demand begins to reflect in prices. I am, for example, convinced that concerns about fresh oil supplies and oil peaks notwithstanding, slower global growth is fundamentally incompatible with oil prices at over ninety dollars a barrel.

The same logic might just apply to other assets including stocks. If indeed the signs of global slowdown become more acute, large investors might begin to dump equities and hold on to safer assets like treasury bonds. If there is growing aversion to equities as an asset class, Asian markets (including Indian stock markets) will also take a hit. The slide in stock prices will not be due to risk-aversion alone.

If global growth slows, the slowing down will begin to impact the top line and bottom line growth of companies across economies. That in turn will buttress the negative sentiment towards risky assets. The bottom line: be prepared for a "correction" in the Indian stock market next year.

There is a potential offset. The US Fed is likely to follow a policy of phased quarter percentage point cuts in its target interest rate - I expect the American central bank to cut the Fed funds rate thrice next year. Thus while inflation risks will weigh on the Fed's mind, I expect growth concerns to dominate and spur the Fed to cut rates some more. I expect the European Central Bank to hold interest rates until the second half and then start cutting signal rates.

My bank's research team has forecast two rate cuts next year, possibly in the second half. The Bank of England is likely to be swifter with two quarter percentage point cuts in the first half of 2008. We also expect more direct liquidity both through unilateral cash infusion by central banks and perhaps through more co-ordinated intervention.

The question is: what happens to all this liquidity when central banks turn on their cash spigots? If investors remain terribly risk-averse, a lot of it would go into low-risk government bonds.

US treasury bond prices will continue to move up and yields will decline as this process continues. Besides, if US assets keep getting cheaper and cheaper, investors will sniff a bargain and start buying these assets. In fact, some of the bigger funds have already started picking up chunks of the American financial industry where valuations have hit rock-bottom. Asian sovereign investment funds, for instance, are bailing out cash-strapped American banks, picking up significant equity stakes in the process.

Finally, there is also a chance that some of the money will start finding its way into emerging financial markets where growth rates, at least in relative terms, will remain high in comparison with the rest of the world. What happens then? My prediction is that emerging markets including India are likely to get buffeted by the crosswinds of rising global liquidity and cheaper interest rates, on one side, and concerns about slowing growth, on the other. This means two things.

Our stock markets will remain volatile for a while to come and sharp upswings could be followed by a quick downturn. Ditto for the currency markets. The interplay of these opposing forces also means that these markets will be stuck in a range. Thus I do not see the possibility of prolonged phases of decline, nor do I see the prospect of an untrammelled bull run.

What will take the markets out of the doldrums? Since the problems of the US economy lie at the heart of all the problems, it will take some clarity on the situation there to do this. Any strong signal that the US cycle has bottomed out will lead to a quick re-pricing of risk and realignment of asset prices.

Sunday, September 23, 2007

Car Models in India

BPO Sector Outlook

According to:

Dick Vleesenbeek
- Talent shortages are driving labour markets to become increasingly more global, competitive, and employee-driven
- BPO predicted to be an $80B industry by 2009/10
- RPO (subset of BPO) estimated to grow into a $20B by 2009/10
- Vendor Management Solutions (Managed Service Provider) Market predicted to grow to be $4.2B by 2009/10
- Clients are searching for true global solutions and partners
- Trend toward complex, comprehensive solutions (workforce management models) to blend the expertise of internal/external partners
- The trend toward solutions providing off-shoring and shared service components continues
- Staffing and consulting firms face an environment of evolving legislation, increasing consolidation, and technological advancements impacting the business

Atul Subbiah
Manager - M&A Strategy at Deloitte Consulting
1. The coming of age of the major Indian suppliers
2. The unbundling of contracts where deal size is getting smaller
3. Contracts are getting shorter and work is being spread across multiple providers
4. Large deals are being split, with an increase in number of multi vendor contracts leveraging the near shore and offshore options
5. Large outsourcing contracts signed in the 1990s are coming up for re-bidding

Sunmeet Jolly
A Dropping Dollar may affect the attractiveness and ROI in Outsourcing Industry. The trend needs to be watched carefully over next 2-3 years. Rising wages in Outsourcing Providing Countries also adds to the marging pressures. But Demand for Outsourced Services will definitely increase as projected by Analyst firms. Its likely to become a high volume game and we can see some consolidation on vendor side.

Deverick McIntyre PMP
Industry Leader on China's IT & outsourcing industry
Packaged ITO+BPO+ Infrastructure Management Outsourcing is a significant new trend. We have seen this type of consolidation especially in the Financial Services industry, where, for example, the IT system supporting the outsourced business process is hosted and administered by the same vendor.

It makes sense for many clients to consolidate the BPO and IT contracts with the one vendor to achieve synergies and manage risks. This is not good news for pure BPO players, however for the large Indian outsourcers such as Infosys, TATA and Wipro, as well as international players IBM, Accenture, Cap Gemini etc, it is a perfect fit with their broad solution sets.

Packaged IT/BPO contracts are much larger than pure BPO deals and this trend has led to the increasing use of sourcing consultants such as TPI, Everest Group or smaller players such as TaidaL for thorough due diligence.

The other equally important new trend is contract pricing based on client business revenue/risk. Mainly seen in ITO contracts, the trend to package ITO with BPO will result in more innovative BPO contracts using client business based pricing. It is an interesting trend which has come about as clients force consulting companies pushing solutions to "put their money where their mouth is" and invest in the outcome. "If this solution is good for my business then partner with us in the upside (and downside) risk"

Hossam Elgamal
General Manager of GNSE Group
the Global Business Process Outsourcing sector and just after the launch of the latest ATKearny report, shows a tough competition between different emerging players and existing well established ones like India.
this competition is certainly in the favor of the business, shaping up the processes, increasing the quality and diversifying the options and resources in such global industry.
the result in the coming 1-3 years would certainly be a more rewarding choice to clients with less risk and a more framed quality of delivery, more important an observation that is taking place currently where giant players (indian ones like Satyam, TATA, WIPRO...) are having competency centers outside India to diversify their offering, minimize the risk, better control the cost and benefit more of the other countries benefits... thus becoming truely global... which in turn would lead those countries of choice to learn from the experience, build the expertise and start becoming important players in that market..

but mostly important is the fact that Clients will benefit further and more clearer from the BPO, which will come to a maturity stage.

a) the emerging significant developments/trends would be the diversifications of the countries for large BPO players, and the globalizations in the true meaning of the services.

b) driving this trend are: 1. the clients experience and need for better risk management, further more options and choices, better quality, managed cost. 2. the Giant BPO players need to maintain competitive advantage, and capitalizing on the globalization opportunity 3. the Awarness of the emerging countries in that industry, their government support, and their industry maturity.

c) as i said, the key players are moving more agressively into a globalized diversified offering, not standing still in one country only. example for that WIPRO and SATYAM moved recently to open competency centers with 1000s of resources in Egypt, as the government is agressively supporting the initiative by providing incentives, and building the capacity of the local resources, while cost is very competitive and mastering arabic as well as different european languages help providing a competitive advantage!!

Source: LinkedIn

Thursday, September 20, 2007

Future of IT / ITES / KPOs

We seem to have come a full-circle actually. Outsourcing started with low end menial data entry jobs that were discrete and modularized tasks, not interwoven into the company’s real-time environment. Then we graduated upwards to application maintenance, then onward to application development and then design and system architecture work. Call center and BPO brought about a mission-critical real-time and process driven mode of outsourcing with SLA and metrics based performance measures. With the rise of KPO, the emphasis is now on skills-based and decision-making type of work that is neither “mission-critical” nor “real-time” – yet it is more intimately tied to the top-line performance of companies than ever before in the past. With KPO, there are no metrics, no SLAs, no cultural or accent issues, no time-zone barriers and a productized consulting model that is driving a new breed of companies. With a combination of data aggregation, research, analytical, modeling and consulting skills KPO is redefining the boundaries of outsourcing.

According to me, some of the major drivers were:

• BPO found a niche customer due to a huge demand in back office customer support. BPO was and is mainly successful due to costs effectiveness and the availability of cheap labor – it found a huge pool of workforce as the unemployment rate among English speaking graduates was very high. It created a perfect sector which could find an effective solution to all its workforce requirements among the huge pool of university English speaking graduates.

Slowly countries like India found that although BPO was exploiting the general mass of graduates yet another potential pool of qualified engineering, medical, legal, financial professionals was untapped. There was a clear synergy between the mid-level staff across various companies in US & European regions and this pool in India. Gradually it was realized that the mid-level staff which is mainly involved in offering knowledge based services can be replaced with the pool of talented professionals in countries like India at a much lower cost.

• We can say that BPO has slowly reached to a stagnant point as the factor of realization of using BPO services in new avenues is decreasing. OR we can quote unquote what most industry insiders feel - With the opening of the world economy, many surprises have taken place in the business scenario. This is true for countries across the globe both from outside and within the countries.

The western world has started realizing the potential and the importance of smaller countries of Asia in providing quality services at much lesser rates and are treating this fact as a revolution. Similarly, within the Asian countries revolutionary trends are taking place in terms of expansion and spread of service providers to small cities. BPO is giving place to a new name i.e. Knowledge Process Outsourcing (KPO).

Now coming to what could be the next stage of transformation: - According to NASSCOM, KPO is expected to reach $17 billion by 2010, of which $12 billion would be outsourced to India. In the future, it is envisaged that KPO has a high potential as it is not restricted only to IT or ITES sectors, and includes other sectors like Intellectual Property related services, Business Research & Analytics, LPOutsourcing, Web Dev. Application, CAD/CAM, Finance & Accounting Management, Clinical Research, Publishing, Market Research etc.

Taking into account the huge potential of intellectual property within India, I strongly feel that next stage of KPO could be a more evolved involvement ie Consulting. As of now, we are only creating the groundwork and consultants abroad use our findings to offer advisory services to their clients. In the next 2-3 years, India could become a One Stop Shop for research, analytics as well as Consulting and Advisory services. Hence future IT/ITES SMEs in India would evolve themselves as Consulting Companies.

Tuesday, September 18, 2007

Top 3 concerns when outsourcing to Asia - Uncensored

Excerpts from one of the discussions going on at LinkedIn. Pretty interesting stuff

Here you go

Senior Software Development Engineer, Toshiba America Electronic Components
In my experience culture, distance & communication are big issues when outsourcing.

First of all, we often outsource software dev to realize cost savings. This savings is often eaten up due to logistical and cultural issues which impede the outsourced projects.

1) Communication issues: Especially with China, communication can be difficult because of the lack of qualified English speakers. I interviewed a team that had daily 10 PM phone conferences from the US to China where only 1 guy on the China side could speak English. The Americans would talk for several minutes, then the one English speaker would translate in 15-20 seconds that content to his team members. A lot was 'lost in translation'.
In another example, members of an American software team had great difficulty working with Indian team members over tele-conference because of the accent issue. The company stateside eventually fired several members of their American staff because they would not cooperate fully with the remote Indian team due to language frustration. This damaged morale of the team, and did little to help the ongoing issues.

2) Culture. Sometimes "yes" does not mean "yes". Teams think they are on the same page with their overseas counterparts, when they are not.

3) Distance (physical and metaphorical) - Software development requires a tight interface between the developers and the stakeholders / customers. When separated by distance, time-zones, culture, and language you are adding a significant project risk that the work being done will not mesh with the (often dynamic) requirements for the end product. Not only are problems more likely to occur, but it will take more time to identify them for all of the above-mentioned reasons.

Executive Producer for Video Games
The 3 biggest concerns would be:
- Cultural background: you will experience vast differences in use of color, shapes, facial features, technical detail etc. from country to country. Don't expect Western style unless you guide extremely well.

- Language barrier: definitely an issue in Japan. Not so problematic in India. Mixed in China.

- Reliability. I don't want to say we've been disappointed so far. But we are fully aware that our legal possibilites are very restricted in China and India. This is not really an issue in Japan though.

CEO Bertin Services
1.As you probably know India is the WW Leader in software development, and gatheres probably 80% of CMMI5 companies in the world... but check what is covered by their CMMI certificate to understand the major concern there : It always looks perfect (english culture). Real Life is often not so bright, although they have competencies and want to make it. dig to make a difference between what they say and what they do.
2. I'd rather go in India than in China, because they're under english culture (easier to work with), software oriented, highly educated, and India is the largest democracy in the world. but they're not so cheap...
3. Outsourcing to Asia will require a lot of lawyers' time to make sure you get a fair Deal, and will take very long in India. Let's also be clear about the risks you'll face to have them copy your production and take the business from you, especially in China.

4. Last but not least : I believe that a key of success of operations set up in Asia I was part of is a very strong involvement of Key people of your company, including having a very reliable peron (at least one) staying down there for a year to ensure everything it going to be taken care of.

Software Development Process Reengineering Manager
NINE offshoring advices.
1. Always take care of your local workers.
2. Focus on core competencies.
3. Work with big established companies.
4. Offshore projects that require minimal interfaces.
5. Do not overemphasize process.
6. Focus on communication.
7. Test offshoring team with some pilot project
8. Read some offshoring articles.
9. Conclusion and evaluation using eSCM.

Reference: LinkedIn

Monday, July 23, 2007

Global Auto makers' report card (H1 2007)

Referenced from The Globe and Mail

General Motors Corp.: GM is now being challenged in its long-standing position as the world's top auto maker by surging Toyota. But the company vows to regain the Number One spot by dramatically reducing its costs, slashing low-profit sales to rental companies and other fleets, and revamping its product lineup as sales of trucks and sport utility vehicles slump. It is closing plants and cutting jobs to try to become competitive with Asian-based car makers, and 2007 is expected to show some improvement on 2006, when it lost $2-billion (U.S.).

Ford Motor Co.: Ford continues to lose market share in North America, as the markets for its sport utility vehicles and pickup trucks weaken. The company lost a whopping $12.7-billion (U.S.) in 2006, and it is in the process of eliminating thousands of jobs, while closing plants in Canada, the United States and Mexico. Its goal is to return to profitability by 2009 by shifting its focus to growing segments such as crossover utility vehicles and passenger cars.

DaimlerChrysler AG: The German-American auto giant signed a deal this spring to sell off about 80 per cent of its Chrysler arm to private equity firm Cerberus Capital Management LP. Chrysler has a deep cost-cutting plan and will eliminate 13,000 jobs by the end of 2009, mostly by offering buyouts to employees. While all the North American car firms are losing ground to the Japanese, Chrysler has not been hit as hard as GM and Ford. To boost sales of its key minivans, Chrysler recently dramatically cut prices of the product line in North America.

Toyota Motor Corp.: Toyota has been reporting record sales and profits, driven by dramatic growth in North American and European markets. Earlier this year, it surpassed General Motors for global sales for the first time, taking the lead in the January-to-March quarter. Toyota has a reputation for high quality, but it has also been an innovator. It is the top player in the gas-electric hybrid market with the Prius, and the company has now sold more than a million hybrids. It is also a leader in using fuel cells, which power cars from electricity generated from hydrogen.

Honda Motor Co.: Like Toyota, Honda has made huge inroads in the North American car market with double-digit sales increases. And it is also active in emerging markets such as China and India. While Honda has done well with its gas/electric hybrids, it has also hit some speed bumps; it decided earlier this year to stop production of its slow-selling hybrid Accord, which was designed for extra power rather than fuel efficiency.

Nissan Motor Co.: The Japanese auto maker saw sales decline in 2006 in its two largest markets, Japan and the United States, although the numbers have picked up sharply in North America in the past few months. Nissan has also put in place a series of cost-saving measures to try to boost profitability. It is behind Toyota and Honda in developing the hybrid market, but is putting on a big push to catch up in green technologies.

Volkswagen AG: The German company is the biggest European car maker, posting strong results in Europe and Asia, but has been less successful in North America where it has lost money for the past several years. Volkswagen has been cutting thousands of jobs to improve its competitive position, but it owns a range of strong international brands including Audi, Bentley and Skoda.

BMW AG: The German-based luxury car maker saw a dip in profits in its most recent quarter, after spending bags of money launching new models. But it predicts a turnaround in the balance of the year, and record profits for 2007. BMW is planning to boost production at its plant in the United States – its biggest market – to insulate it from exchange-rate fluctuations. The company has also turned the Mini brand into a big success by targeting aging boomers, and it also owns Rolls-Royce.

Tuesday, June 5, 2007

Top 25 Supply Chain Models

AMR Research released its annual Supply Chain Top 25 report. The report identifies the top 25 manufacturers and retailers that exhibit superior supply chain capabilities and performance. The companies in this report demonstrate excellence across basic metrics related to execution - return on assets, revenue growth, and inventory turns - and are recognized by their peers and AMR Research as supply chain leaders. In this year's list, Nokia, Apple and P&G are at the top three of the list. Others in the list of top 25 include Motorola (12), Johnson & Johnson (14), Nike (18), GSK (20) and HP (21). AMR Research analysis also shows that supply chain leadership translates into stronger market performance. Consistently, the Supply Chain Top 25 as a whole has outperformed the Dow Jones Industrial Average, the S&P 500, and the NASDAQ.

Following is the list of Top 25 Companies with Best Supply Chain Models:

To read the entire article, please visit:
http://www.amrresearch.com/Content/View.asp?pmillid=20450

Thursday, April 26, 2007

Knowledge Management in Pharmaceutical Industry

Knowledge Management – An Introduction

Knowledge Management is simply one of many tactics that organizations can adopt to improve their performance. Knowledge management is not new: the first time that a scientist documented the exact procedure used in an experiment and shared it with colleagues was a form of knowledge management. Knowledge management sounds like a new term for data management or information management, the focus of bioinformatics. It is not. Knowledge management is a systematic, organization-wide effort that: -

=> Recognizes that it is the employees of the organization - scientists, engineers, sales representatives, technicians, and executives - who have profound and deep understanding of the data, information, work processes, competitive environment and societal context that contribute to organizational success
=> Promotes the creation, preservation, transfer and use of that knowledge in order achieve organizational goals and objectives
=> Supports and rewards the creation and dissemination of knowledge in a collaborative, non-individualistic manner
=> Controls and protects knowledge from leakage outside the organization.

Knowledge management involves an intentional effort to stimulate the sharing and use of knowledge, instead of relying on ad-hoc and informal knowledge sharing activities, while at the same time keeping the knowledge secured within the organization and it's selected alliance partners. While knowledge management efforts often entail investments in advanced information technology tools, knowledge management is more than IT projects. Knowledge management is about changing the way that employees create, share and use their knowledge, so that the organization retains and builds upon the knowledge. It is the cultural aspects of transforming individual-held implicit knowledge to organizational-shared explicit knowledge that distinguishes knowledge management from bioinformatics.

Reasons Leading to the Failure of KM
As with other high profile initiatives that have gone before, such as business process reengineering, knowledge management is attracting its critics and various initiatives have stalled or failed. The setbacks can usually be traced to one or more of the following factors:

Knowledge management is seen as a quick win - One of the trickiest aspects is to create a culture where knowledge is freely shared within an organization. Such a culture change is not an overnight job.

Too much emphasis is put on technology - While there are a growing number of excellent knowledge management tools, such as document management, concept mapping and visualization, intranets and intelligent agents, technology is only an enabler. The knowledge it conveys needs organizing, for example through knowledge maps.

Over-ambitious in scope - Some of the most effective corporate-wide initiatives start as selective pilot projects. The pilots are used to develop understanding, build capabilities, and derive lessons for a wider roll-out.

Inappropriate skills - Good information management skills, of the information science / library type provide an essential perquisite. Good networking and facilitation skills are also important. Many knowledge management teams do not have sufficient breadth and depth in the range of skills needed.

Lack of leadership - Like any significant new initiative knowledge management needs business champions and top-level commitment. A senior executive at knowledge initiative had stalled. “We know what to do, but don’t do it”. It was only when the top management team committed their own time, and formalized it as a core activity, that the program moved forward.

Knowledge Management in Pharmaceutical Industry

Pharmaceutical companies need knowledge management solutions that allow users to store, analyze, interpret and share information as part of coordinated processes. They must also provide ways to collect and manage diverse information, and use it effectively to support decision-making. This means not only text documents, but also non-text files such as molecular structures, gene sequence alignments, images, results tables, entry forms and other information. It also includes links to key internal and external resources, discussion items, key e-mails, external search results, and status and summary reports.

The sheer volume of information companies must wrestle with in the course of developing new drugs. Advances in biological and chemical research techniques have caused an explosion in raw data by several orders of magnitude. This compels companies to obtain automated analytic systems to deal with such large portfolios of data. It has also placed a priority on developing and offering timely access to summary information. This requires a range of knowledge, project and portfolio management tools that promote deposition, sharing and coordination, such as: workflows, task lists, intelligent agents, portals at the personal, project and departmental level, advanced query tools, intranet spiders, etc., all of which can be tied together as part of an integrated knowledge management solution.

Life science companies, collaborative software tool vendors, and industry consultants all seem to hold out great hope for this something call knowledge management. The reason is simple: With such massive data overload in the life sciences, companies realize it is to their advantage to find better ways to deal with and use this information. To use knowledge as a strategic advantage, life science companies take one of three broad approaches, which can be generically described as follows:
=> Help scientists know what's already been done and by whom
=> Extract information, relationships, or new insights from existing diverse data sources
=> Capture the expertise and intellectual property of scientists

One approach in using knowledge management is to give researchers a means to better understand what's already been done and who did it. A number of knowledge management projects aim to provide scientists and managers with tools that help them stay informed about what is going on within the company. This helps prevent researchers from duplicating a completed experiment or following a nonproductive path that has already been rejected. The worst-case scenario — one that happens far too frequently — is for a researcher to spend six months eliminating a particular drug candidate, only to find that a colleague had already drawn the same conclusion. Informing researchers that a co-worker is interested in the same topic is one way to avoid such duplication. Such an approach can also reap other benefits — namely, timesavings.

Need for Knowledge Management in Life Sciences Industry

The only sustainable competitive advantage of a pharmaceutical or biotechnology company is the organization's ability to efficiently create, protect and commercialize new intellectual property. Leadership in the pharmaceutical and biotechnology industry is less and less about day-to-day clinical testing, manufacturing or sales. While many pharmaceutical companies have extensive expertise in those functions, similar expertise can obtained by contracted out to specialized organizations as CROs.

The key competitive advantage for firms is the research and development of new intellectual property that forms the basis of successful research, manufacturing and distribution activities. New intellectual property not only includes the development of new chemical entities that can become INDs; it includes manufacturing techniques, regulatory compliance programs, marketing program design, and so forth. The active sharing of the knowledge held within the organization is essential if new intellectual property is to be quickly commercialized and with have a high degree of commercial success. Reducing "time-to-market" depends on knowledge management. At the same time, knowledge management is necessary to avoid repeated explorations of dead-ends - unless knowledge of failures is shared, failures are repeated.

US Food and Drug Administration Regulations
One of the biggest factors is regulation. For just one new drug, a company must maintain enormous volumes of information -- documents, research data, clinical trial records -- over an extended period of time. These millions of files have to be carefully managed in accordance with strict rules governing electronic information, whether they are included in submissions made to the FDA or simply kept for possible inspection by the Agency. The FDA's regulations cover good practices in laboratories, clinics and manufacturing facilities. While these "predicate" rules were written with the assumption that key information would be in paper form, increasingly this material is electronic. Accordingly the FDA developed the 21 CFR Part 11 regulations, to give the industry some ground rules for moving from paper-based to electronic systems, but the rules are complex in interpretation and implementation. In order to comply, companies are being driven toward centralized repositories for managing information to ensure consistent, compliant ways of developing and using information across an enterprise.

Globalization of R&D
Globalization of research and development requires collaboration across time zones and language barriers. The explicit focus of knowledge management on the sharing and use of knowledge can act to bridge diverse research and development teams. Few industries span the world in their research activities, as does the pharmaceutical industry. Lead synthesis, identification, validation, animal testing, formulation, and human testing can occur in a variety of nations. Sharing of knowledge also has applicability to manufacturing and marketing. The need for global uniformity in good manufacturing practices requires that personnel involved in that aspect exchange ideas to assure the highest quality production. While marketing channels differ across markets, knowledge from one market can have applicability in other, if only to avoid costly errors.

High Turnover of Human Capital
The pharmaceutical and biotechnology industry is in a period of rapid change, and employee turnover is increasing due to new opportunities. It is also important that organizational knowledge does not leave with an employee - the control aspects of knowledge management can act as an additional safeguard. High turnover of skilled scientists and other experts requires knowledge management in order to retain the key output of professionals: their own increase in knowledge from working within an organization. Every time a professional leaves an organization, they take with them the increase in their own knowledge that occurred during their tenure. Unless active steps are taken to extract that knowledge, synthesize and share it, so that it can be used, organizations lose the most important aspect of an employee's contribution.

Challenges for Knowledge Management Solutions
While the industry is driving the development of new knowledge management solutions (And finding better solutions to choose from), the industry's biggest challenge is increasingly the user. Many of the human-factor challenges (and costs) of moving to a knowledge management system come from the industry's long dependence on paper and paper processes. Pharmaceutical companies have very detailed, document intensive processes and approval procedures which, when combined with strict FDA rules and the common human-factor challenges, are a bad mix in a very high-stakes game. The biggest issues are proper use of systems to ensure compliance and user acceptance.

Access Rights
Pharmaceutical companies must have to ensure that only authorized and expected people can access records, and that any actions that they take which impact the records in any way are captured in an audit trail. When it comes to electronic signatures, FDA rules are very strict, so companies must carefully manage who can apply an electronic signature through workflows and password authentication to apply a signature. But they must also make sure that management staff understands that an e-signature is equivalent to signing in ink. Password policies should require that staff acknowledge this. In addition, a system that adds an image of a manager's signature to a record, while not required under FDA regulations, reinforces that message. The other major factor is the tendency for employees to write down their passwords, and sometimes share them with colleagues. Rigorous password policies are a necessity to prevent this, but companies must find ways to constantly reinforce the message with employees.

Shift from Paper to Electronic Records
Paper continues to play a significant role, despite the pervasive use of computers. Most people prefer to print out a large document before they read it. This common tendency among office workers has enormous implications for pharmaceutical companies. Companies must make sure they are carefully managing paper copies to avoid unauthorized or inappropriate use. They must also educate employees to make sure they recognize that a printout is not an original record. PDF format is widely employed, since it is possible to overlay watermarks that users cannot remove (e.g. defining document status, effective and expiration dates, etc.), and control whether the document can be changed or printed. Another solution is to consider new encryption techniques, which can prevent screen capture, while continuing to provide access controls on locally saved electronic copies. In this way, all electronic copies of a document, whether in a repository or saved on local computers, can become unreadable at a defined time, for example, when a new version is released.

User Friendliness
Critical information comes from the lab, so pharmaceutical companies must ensure that it's easy for lab workers to use and contribute to a knowledge management system, while working in their unique environment. Systems must offer features that allow workers to add data by simple drag-and-drop, or preferably by automatic agents that capture key information and transfer it to the system without extra effort. Ultimately, these workers have to recognize that depositing information into the system is part of their job, like using a lab notebook. But systems can be designed to offer lab workers added value to encourage use of the system. For example, a comprehensive listing of hyperlinks to all available databases and application tools is helpful, but this can be extended by providing online discussion groups and training manuals. A lab protocol repository covering standard and company lab methods and procedures may also be attractive to lab workers, while also serving corporate goals. This would include being able to find methods used by other workers in the company to accomplish specific experimental tasks, and ways to search for recognized experts across the company.

Finally, the most important challenge is user acceptance of a knowledge management system. If pharmaceutical companies are going to have a uniform, regulatory compliant system for managing information, they must succeed with user acceptance and it starts at the top.

References
KMMag.com
IBM System Journal
Skyrme.com
Wpcarey.asu.edu

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