software, it and bpo - industrial real estate perspective

CBRE | Market View | Sept 2012

Software, IT and BPOIndustrial Real Estate Perspective

Presented by: Hieu Le, Senior Manager, Industrial & Logistics ServicesSeptember 20th, 2012


AGENDA

OPPORTUNITIES

WHO / WHERE / WHY

TRENDS

DRIVING FACTORS

Q&A


CONCENTRATION MAPIndustrial Park – Export Processing Zone - Hi Tech Park – Economic Zone


Migration of business functions occur for numerous reasons; increased confidence in pairing high value operations with domestic labor is high among numerous industry sectors

Sample Business Functions

• Accounting• Human Resources• Administration (e.g.

Payroll)• Information

Technology• Customer Support

(e.g. Call Centers)• Product Development• Research and

Development• Production• Marketing

• Better utilization of labor• Lower labor costs and

labor availability• Favorable tax rates and

tax incentives• Cultural affinity to base

company• Quality of training and

education• Strong government

support• Stable business /

political environment

Right-Shoring Rationale

BPO – IT OUTSOURCINGOpportunity


BPO – IT OUTSOURCINGOpportunity

Onshore Nearshore Offshore


BPO – IT OUTSOURCINGMarket Share

CBRE | Market View | Sept 2012Growing Growing fast Origin of the biz

BPO – IT OutsourcingVelocity and Volume


A.T.Kearney Top 20 countries in 2011

BPO – IT OUTSOURCINGRanking

• Government support / financial incentives / grants play important factor in creating a conducive environment.

• Labor market and language skill drive location decision

• Salary costs once the primary driving factor behind offshore location decisions; increasingly this is balanced with skill set and language availability

• Asia dominates the top 10 positions on the GSLI. The different strengths of these countries vary from India, with a deep and broad skill base, to Vietnam, which ranks as the most financially competitive country in the Index.


BPO – IT OUTSOURCINGRankingHochiminh City ranks 17 and Hanoi ranks 21 in Tholons ‘s report on top 100 global outsourcing cities

Source: Vietnam ICT Outlook 2012


BPO – IT OUTSOURCINGRanking – Financial attractiveness

Source: A.T. Kearney Global Services Location Index, 2011


BPO – IT OUTSOURCINGRanking – People skill & availability

Source: A.T. Kearney Global Services Location Index, 2011


Key Functions being outsourcedData Management

Financial Modeling & Analysis

Human Resources

Risk

Legal

Key DriversCost minimization to remain competitive

Cheaper cost of capital

Efficient management of data

The need to increase productivity (e.g. work can be performed across time-zones)

Closer integration with targeted markets

ResultsCost effectiveness

Centralization of function

Right labor pool and availability

Lower attrition rate

Diminished portfolio exposure

BPO – IT OUTSOURCINGSectors – Financial and Insurance


Key Functions being outsourcedHuman Resources

Research & Development

Support Centers

Training Facilities

Key DriversCutting costs to remain competitive

Risk management

Management of talent

Hyper-competition

ResultsImproved focus on core operations

Support business growth

Economies of scale

Right labor pool and availability

Improved financial flexibility

BPO – IT OUTSOURCINGSectors – IT and High Tech


Software

BPOOutsourcing

Telecom

DataServices

Digital Content

BPO – IT OUTSOURCINGSectors – IT and High Tech – Vietnam

Spill over effects: BPO and IT Outsourcing projects, especially from financial and insurance sectors, create demand for data

center owners and builders and other related industries.


BPO – IT OUTSOURCINGImplications – FDI Inflow

Makati

Taguig City(Bonifacio Global City &

McKinley Hill)

Quezon City Eastwood City


Forecasts

BPO – IT OUTSOURCINGImplications – Jobs Creation


•Now moving to Vietnam to:- Gain from low cost labor supply- Gain from attractive offers from government

• (2009) India – 19,000 people as of June 2009

• (2011) Hochiminh – Phase 1: 150 staff, IT & BPO outsourcing

WHO / WHY / WHERECapgemini, from Europe to Vietnam


•Now moving to Quang Trung Software City in Hochiminh City, Vietnam to- Gain from low cost labor supply- Gain from attractive offers from government

• Two R&D centers in China and India

• (2010) Hochiminh – investment cap: $US18 million, 1,000 people, testing & global services

WHO / WHY / WHEREHewlett Packard, from US to Vietnam


•Now moving to Saigon Hi-Tech Park in Hochiminh City, Vietnam to

• - Capture opportunities for automation software- Gain from attractive offers from government

• 15 centers in Asia. Strong in China & Singapore

• (2012) Hochiminh – 50 people, software & global services

WHO / WHY / WHERERockwell Automation, from US to Vietnam


•Now moving to Tan Thuan EPZ in HochiminhCity, Vietnam to- Tap on skilled labor with language competency - High growth on telecoms & network software

• 7 centers in Asia (India, China, Japan, Korea, Sing, Taiwan)

• (2011) Hochiminh – 300 people, software development

WHO / WHY / WHEREAricent, from US to Vietnam


•Now moving to E-Town in Hochiminh City, Vietnam:

• - Synergy with manufacturing plant in Dong Naito service customers in Japan & Asia

• - Young labor force• - Attractive government incentives

• 4 R&D centers in Asia. India, China, Japan, Singapore

• (2011) Hochiminh – investment cap: $US4.5 million, 1,000 people, software & embedded system services

WHO / WHY / WHEREBosch, from Europe to Vietnam


TRENDSHCMC still captures the lion share


TRENDSBinh Duong & Dong Nai rises

Breathtaking and Stunning Façade

• Perfect Office Solution in Binh Duong• High specs• Competitive rental


TRENDSDecentralized & business parks

MapletreeOffice Building

Sacom @ SHTP E‐town @ Tan Binh

TMA @ QTSC

Incubation @ TT EPZ

Centerpoint @ Phu Nhuan


DRIVING FACTORSSpecs

39 x office units~ 190 to 250 sqm each

Column-Free Space~ 2,000 sqm per floor

Highly Efficient Layout

Tall Ceiling Height: 4.5m

Ample Natural Light

Floor Loading: 500kg

15.6 m

39 m

62.3 m

Well-Planned Building Design & Specifications

Mapletree Floor Layout Typical office floor Layout


DRIVING FACTORSRents

• Possible short-term bottom in office rents

• Average business parks office rent below $20/m2/month.

• In par with office rent in HCMC’s peripheral area and Da Nang (~$12/m2/month)

• 60% saving on rental vs. downtown buildings

Business parks office rent

Source: CBRE Market View Q2/2012


DRIVING FACTORSStrong supports / Fast track services

Lice

nse

s &

Perm

its

One Stop Service

Availability of tax incentives

Approval & issuance of investmentCertificates

HR support


Steps in the right direction• Information technologies and telecom are consider the primary infrastructure to enable

Vietnam’s development. e.g. High Tech Law, Information Technologies Law.• PM Decision 50/2009/QD-TTg on 4/29/2009, "Regulation on Management &

Development Program of the software industry and the development program of the digital content industry in Vietnam" in order to remove obstacles and promote the implementation of development programs and software industry.

• IT-related industries are entitled to high tech incentives.• MOF Circular 96/2011 extending Tax Incentives for supporting industries in (1)

Electronics and (2) IT• Personal income tax reduction for IT workers is in serious consideration

DRIVING FACTORSStrong supports / One stop services

SOFTWARE UP 10% ($US1.17 bil.)

79,000 people

DIGITALCONTENT

UP 25% ($US1.16 bil.)

60,000 people

ELECTRIC & ELECTRONIC PRODUCTS

UP 101% ($US11.3 bil.)

167,000 people

Source: Vietnam ICT Outlook 2012

CBRE | Market View | June 2012

187 U.S. and Canada Offices

14 Latin America Offices

109 Europe Offices

25 Middle East and Africa

Offices

55 Asia Offices

30 Australia & New Zealand Offices

Thank you for your attention.

www.cbrevietnam.com

software, it and bpo - industrial real estate perspective

Business

hochiminh

key functions

development

hochiminh

global services

attractive

software industry

labor pool