This is a preliminary analysis of the business opportunity identified by our project group. The basic idea is to create a company that offshore software development company for business-to-business (B2B) electronic commerce . A recent IDC Research report projects a labor shortage of close to 2 million IT professionals in the US and Europe by 2002. In the United States alone there is expected to be a shortage of close to 850,000 that year. Currently, IDC estimates that there is a worldwide shortage of over one million, and this number is expected to exceed 25 percent of the total 1998 IT workforce.

   India is the country specifically identified at this point for the offshore programming, because of the abundance of cheap but well-trained programmers. In addition, special incentives are given for investors to set up operations there with a focus on the export market. Conversely, duty free import of all inputs is permitted, including capital goods such as servers and other hardware.

   Over the next weeks we will investigate the other critical issues in developing this business.  For the moment it appears that this is a high potential opportunity with ideal timing.
 
 

Criterion                                                                                                                                        Potential
                                                                                                                                             Low                      High

Need /want/ problem – identified                                                                                           

Customers – reachable & receptive                                                                                        
 

Payback to users – less than one year                                                                                     
 

Market Size                                                                                                                           
1998 - $187 million
2003 - $ 8.5 billion

Market Growth Rate - 30-50%                                                                                              
 

Overall Potential                                                                                                                     

Criterion                                                                                                                                        Potential
                                                                                                                                             Low                      High
Fixed and Variable Costs

Fixed costs - low                                                                                                        

Relatively high operating leverage                                                                                

Degree of Control

Prices and costs – moderate                                                                                       
Distribution – moderate                                                                                              

Proprietary protection – difficult to tell
Response/lead time – competition quite slow

Contacts and networks – moderately developed

Overall Potential
Costs
 Channel
Barriers to Entry
Timing
 
 

Criterion                                                                                                                                         Potential
                                                                                                                                              Low                      High

Profit after tax - over 30%   (see Appendix)

Time to break-even  - less than 2 years

Time to positive cash flow – less than 2 years

Value – high strategic value

Capitalization requirements – moderate

Exit mechanism – IPO, acquisition
 

Overall Value Creation Potential
 
 

 GO NO GO

Margins and Markets ?

Competitive Advantages ?

Value Creation and Realization Issues ?