1 Brian Economaki Gabriel Gaspar Harald Tolleshaug Tran Thi Thu Huong S TRATEGIC R OADMAP.

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Brian EconomakiGabriel Gaspar

Harald TolleshaugTran Thi Thu Huong

STRATEGIC ROADMAP

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A. Perspectives

1. ITO and BPO Industry size across the globe

2. The Evolution of BPO solutions

B. Growth

1. vCustomer

2. Shaping the new Strategy

3. Going International

C. Plan

1. Implementation Roadmap

2. Financial Status

Presentation Agenda

3

[ perspectives ]

The competitive Landscape

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Cost competitive destinations attracted most of ITO and BPO companies

ITO and BPO Industry size in Outsourcing Destination Countries 2004 [USD m]

Canada

8,200

5,500

200

Ireland

2,200

S. Africa

220

Hungary

50

25

Brazil

Poland

110

70

Romania

30

25 Malaysa

120

40

Philippines330

800 India

12.2

5.2

China

700

300

Russia

550

25

ITeS Exports

BPO Exports

Source: 1) neoIT

Mexico100

200

Situation Analysis: ITeS and BPO Outsourcing Destination

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As competitiveness increases, companies must offer value based solutions which improve their clients way of doing business

Services offered by major companies:

AMOUNT OF VALUE CREATED

Strategic Impact

1980 1985 1995 2000 2005 20101990

Out-tasking

BPO

Transformational BPO

Data Entry

Application Support Technical

Support

Maintenance

Rules-based Processing

Customer Contact/ Hardware & Installation Support Problem Solving

Full Process Outsourcing

Product Development & Testing

Design & Integration

Remote Infrastructure Management

Valu

e A

dd

ed

Situation Analysis: Value Creation through BPO

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Although it is the cost-benefit perspective which attracts new clients – Differentiation and Value must be created

vCustomer Solutions Objectives of Value Creation

Client Retention• MOVING FROM COSTS TO

SPEED AND INNOVATION

Custom Solutions• ADDING VALUE THROUGH

TRANSFORMATIONAL BPO

Client Acquisition• ENTERING NEW MARKETS

AND BUSINESS AREAS

SERVICES MIXCUSTOM PRODUCTSQUALITY AND EXPERTISE

Situation Analysis: Quality Differentiation

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Geographical Expansion

[ growth ]

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While major players (>1 bn USD) fight for large accounts, vCustomers specializes in middle-sized companies

Accenture, CSC, EDS, Fijutsu,  HP and IBM combined have only 21% of market-share 1)

“Vendors who do not narrowly dominate niches in the broad market will continue to try and find the shrinking number of buyers who still buy on a relationpship basis.”

21 %

Vinnie MirchandaniFounder of Deal ArchitectAnd Jetstream Group

UNTAPPED DEMAND LIES ON MIDDLE-SIZED COMPANIES

WHO WERE LEFT BEHIND ON THE OUTSOURCING PROCESS

GROWTH POTENTIAL

Source: 1) Gartner

Growth Strategy: Potential of Middle-Sized Companies

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Competition is forcing players to expand internationally in order to further explore cost savings synergies

Products

Benefits National markets Consolidation activities

Regional markets

Phase 1: National consolidation Phase 2: Internationalization Phase 3: Multinational consolidation

Time

Country A Country B

Country C Country D

Country A Country B

Country C Country D

Country A Country B

Country C Country D

• Economies of scale• Risk is less dependent on

a single geographical area• Additional funds for further

growth – size drives further size

Growth Strategy: Benefits of CRM, BPO

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•Departmentalization of government Health Care Providers

•Demand for ITES in HR, Training, Revenue Cycle Management

•Looking to cut costs wherever customer care isn’t sacrificed

Trends Changing Demand: 2007-2010

•National Health Systems Gaining Interest in BPO

•Global Service Delivery in all Health Care Business Processes

•Positive impact of nearshoring

Solution: End-to-End Business Process Solutions in long term contracts, maintaining quality and evaluating performance

Current State of Demand: Health Care (Europe)

Growth Strategy: Health Care Upcoming in Europe

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Entering Europe through the back door – Cost-competitive countries on Eastern Europe will provide language and IT skills

MoscowRiga

Kiev

Warsaw

Prague

BudapestBucharest

• Language proficiency8

• Education System7

• Infra-structure6

• Location + Culture (nearshore)5

• Process maturity4

• Industry size3

• CAPEX + OPEX expenditures

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• Labor cost1• Labor skill Level9

Medium

Low

High

Country Analysis Framework

Sofia

Growth Strategy: Competitive Entrance In Eastern Europe

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Expansion Location: Plovdiv & Varna (Bulgaria)As the market grows, further expansion can happen in Hungary

Bulgaria India USA

Cost[% of income per capita]

Min. Capital[% of income per capita]

Dealing with Licences[% of income per capita]

9.6

104.2

325

Procedures [#] 11

Difficulty of Hiring (0-100)

Difficulty of Firing(0-100)

Cost of Firing(0-100)

Strength of Investor Protection (0-100)

10

30

5.3

61

61.7

0

678

11

90

79

6.0

56

0.5

0

16.9

5

10

0

8.3

0

124001700

7900

2100700

Bulgaria (1-2 years) Hungary (3rd year) TOTAL

Cities with Students [# of graduates]

Source: “Doing Business in 2006 – World Bank and the International Finance Group, McKinsey Quarterly”

Need

for g

row

th

expa

nsio

n

Varna Plovdiv Budapest Szeged

Evaluation beforeexpading into Hungary

Growth Strategy: Entering Bulgaria, Monitoring Hungary

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Expansion Location: Monterrey, Mexico

•Primary Service: U.S. Market 81% ITES, 2006

•Serve Spanish speaking population in U.S.: est. 100m

•Proximity to U.S. border Nearshoring

•Infrastructure Strength:

•Two International Airports

•5 renowned Mexican Universities: Monterrey Institute of Technology and Higher Studies

Source: World Bank and IFC, 2006

Growth Strategy: Entering Mexico

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[ plan ]Implementation Roadmap

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Year 1

Bulgaria

• RPO Recruitment & training - Bulgaria

Year 2

Mexico Evaluate and develop

• RPO Recruitment & training – Mexico

• Evaluate Bulgaria

• Consider expansion Romania/Hungary

• Evaluate Mexico

• Further development on, or exit from, European healthcare market

Bulgarian call center goes live

Mexican call center goes live

Year 3

Internal

External

• Pursue healthcare clients in European Markets

Implementation Roadmap – Projects take place in a three year period according to milestones and checkpoints

3-Year Implementation: Overview

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Financial Status

Revenues 2003-2006

$0

$20,000,000

$40,000,000

$60,000,000

2003 2004 2005 2006

• Positive CF since Q4.2001

• 25 mio. $ accumulated money reserve

• Stable CF from established CRM business

Your financial flexibility is able to support the

recommended expansion without raising further capital

3-Year Growth: Financial Outlook

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3-Year Growth: Necessary Info. For Further Consulting

• Full disclosure of financials/accounts• Budget preparation, evaluative criteria

• Potential and existing partnerships• Offices/call centers operations• Historical process of expansion• Cash flows Risk evaluation• Client List• Contacts• R & D programs and projects• Strategic road map

Consulting for further opportunities through monitoring and evaluation of all emerging markets. Risk analysis

and trend identification, as well as strategic positioning for partnerships and/or acquisitions.

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Ease of Doing Business – a ComparisonWorld Ranking – Ease of Doing BusinessRanking Criterias

BulgariaBulgaria – Ease of Doing BusinessWhy Bulgaria?Cities to operate in – Eastern Europe

MexicoMexico – Ease of Doing Business

China – Ease of Doing BusinessWhy not China 1?Why not China 2?Why not China 3?

India – Ease of Doing Business

EU Map

SWOTvCustomer – the Company

Competitive LandscapeMotivations to OffshorePorter’s Five ForcesOffshore Market Potential 1Offshore Market Potential 2Multiple Engagement ModelsIndian Business ModelsVendor Selection Criteria

Country Attractiveness IndexITO LandscapeBPO LandscapeCountry SWOT 1Country SWOT 2Why Europe? – Offshore penetration by geography

BPO in Europe – Q1 2007

A Viable Investment

A Financial Example

Thank You. Questions?

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Porter’s Five Forces

IndexPorter’s Five Forces

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Doing Business – a Comparison

IndexEase of Doing Business

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Bulgaria

•member of the EU since 1.1.2007

•inflation rate of 6,5% in 2006

•flat corporate income tax 15% (no other European country beats this)

•established time limits on issuing licenses

•ranks 62 on the World Bank’s ‘Ease of Doing Business Ranking’, China ranks 91, India ranks 116 and US ranks 3

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp., and “The World Factbook” - CIA

IndexOverview: Bulgaria

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Bulgaria – Ease of Doing Business

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

IndexOverview: Bulgaria Cont.

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Mexico

•corporate income tax 30%

•Inflation rate of 3.4% in 2006

•ranks 73 on the World Bank’s ‘Ease of Doing Business Ranking’, China ranks 91, India ranks 116 and US ranks 3.

•nearshore to the US

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp., and “The World Factbook” - CIA

IndexOverview: Mexico

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Mexico – Ease of Doing Business

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

IndexOverview: Mexico Cont.

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China – Ease of Doing Business

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

IndexOverview: China

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India – Ease of Doing Business

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

IndexOverview: India

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Ease of Doing Business Ranking

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

IndexEase of Doing Business By Country

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IndexEase of Doing Business Criteria

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IndexMap of EU

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Where to go – Eastern Europe

Plovdiv & Varna

IndexEastern Europe Suitabl Graduates

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SWOT

StrengthsQuality servicesCustomized solutionsCall centers in IndiaISO & Six Sigma certified

WeaknessesHigh costs - no economies of scaleSmall product umbrellaLimited financial abilityOnly located in India

OpportunitiesNearshoringIncreasing demand from Europe

ThreatsIncreasing competition Market saturationIncreasing nr. of BPO companiesIndustry M & ALosing quality during expansion

IndexvCustomer SWOT: April 2007

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vCustomer – the Company

•Close to 100% customer retention

•Ranked as fastest growing private company in the ITES industry in 2004

•Ranked among the top 5 pure play call-centers in 2006

•Ranked 12th among the top 20 BPO companies in India

•20 marquee clients

•4500 employees

IndexvCustomer: Company Profile

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IndexBPO Competitive Landscape

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Motivations to Offshore

IndexPotential Client Offshore Motivation

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•Inability to compete immediately with larger companies

•Lack of specialization/training of staff

•Economies of scale

•Trend toward megacontracts

IndexWhy not banking, financial services & insurance?

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IndexCountry Attractiveness Index 1

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Country Attractiveness Index 2 - ITO

IndexITO Landscape: 2006 (McKinsey)

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IndexBPO Landscape: 2006 (McKinsey)

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Country SWOT 1

IndexCountry Analysis (neoIT)

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Country SWOT 2

IndexCountry Analysis (neoIT) Cont.

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Why Europe?

IndexWhy Europe?

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•Current competitive strength•Foundation of company, developed infrastructure of operations•Despite rising labor costs, relatively low with other viable options•Potential for growth still high•Competitive advantage expertise of all business practices in country

vCustomer needs to continually monitor India during all future evaluation periods. Competitive advantage with familiarity can lead to positioning in

numerous circumstances, including partnerships, mergers, or any offerings of strategic buyouts.

IndexWhy India?

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Why Bulgaria?

Primary Criteria Secondary Criteria

•Strategic Partnership

•Nearshoring: EU

•Improving infrastructure

•Future potential

•EU Membership: Prioritized region

•Qualified workforce

•Gaining experience for potential EU operations

Ease of transition to essential market to optimize first mover

advantage

Index

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Why not China?

Red Ocean

•Economies of scale of larger (over $1b revenue) companies

•Pre-Olympic ‘boom’ vs. post-Olympic economy

•Strength in India

IndexWhy not China?

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Why not China?

• Lack of English speaking employees, high cost of internet connectivity, workforce immaturity.

• Unfamiliarity with culture• Economic advantages of EU and NAFTA• Not looking solely for cost advantages

China needs to be continually monitored as an expansion option to 2010 and beyond

IndexWhy not China? Cont.

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Why not China?: Nearshoring

IndexWhy not China? Cont.

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IndexOffshore Market Potential

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Offshore Market Potential 2

IndexITO/BPO Industry Outlooks: 2005

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JV/ Alliance

Indian best-of-breed vendor

Delay

Outsource to Global brand

Captive

JV/ Alliance

Indian best-of-breed vendor

Delay Captive

From primarily captive… …to a hybrid model

Feasibility of outsourcing the process

Cross-border operation sophistication

Outsource to Global brand

Source: McKinsey Analysis

IndexMultiple Engagement Models

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Pure Captive Model• An internal cost center or a 100%

subsidiary company set-up to execute offshore business processes and/or IT services

• Amex, Dell, Standard Chartered, HSBC, Ford, Sun

Captive Models

Joint Venture (JV)• Joint Venture with equity participation

from customer and vendor. Customer retains control due to investments in entity.

• British Telecom - Mahindra

Strategic Alliance/Joint Venture Models

BOT and Inverted BOT • Where the Indian Provider sets up facility

and provides implementation support to start with

• Customer can buy out at a predetermined stage

• Reverse scenario has also been seen in the market

• Aviva-WNS/EXL,24/7, AIG- Polaris

Pure Outsource• Use of a India-based provider to offshore

business processes or IT services

Outsource Model

Managed Outsource• Full-/part-time resources on the ground

in India to facilitate transition, relationship mgmt and transfer of organization and domain knowledge to third party providers

India Business Models

IndexIndian Business Models

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IndexCriteria for Vendor Selection

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Start Up Cost per Teleworker One-Time  

Furniture, Equipment and Telecommunications $5900  

One time charges, Set-up & Installation $1200  

Total per Teleworker $7100†  

Ongoing Monthly Costs Recurring  

Telecommunications $110/month  

Network & home office/teleworker support $110/month  

Total Average Cost per Year $2640  

Year One Average Cost $9740  

Year Two Average Cost $2640  

  Recurring One-Time

Savings from unneeded office build out   $1,500,000

One-Time start-up Costs   (710,000)

Annual Real Estate Cost Avoidance $ 500,000  

Productivity ($50K salary x .15 x 100) 750,000  

Retention ($50K salary x .20 x 100) 1,000,000  

On-Going annual costs (264,000)  

Net Annual Savings (1st Year) 276,000 790,000

Net Annual Savings (2nd - 5th years) 1,986,000  

Total Five Year Savings 10,010,0008  

Startup Costs

Source: UCN, Inc.

Index

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BPO in Europe - 2007

Index

•BPO activity in last 12 months higher in EU than in US

•Benelux and Central Europe up 13%

-Trend for growth throughout all of Europe, not just UK

•Industry specific outsourcing responsible for increase in Europe

Source: Nelson Hall April 17, 2007

BPO in Europe: April 17th, 2007

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“Czech Republic, Hungary, Poland, and Slovakia—can offer average labor cost savings of 40 to 60 percent over costs in Western Europe, while cities in EU-candidate and non-EU countries can offer cost advantages of60 to 80 percent.”

- The McKinsey Quarterly - “The Overlooked Potential for Outsourcing in Eastern Europe”, Dec. 06

IndexA Viable Investment