Caso Globant - MIT G-Lab Case

15.389 MIT G-Lab Case March 21, 2006

Globant: Leading the IT Outsourcing Revolution in

Latin America

Shingo Murakami, MBA Candidate 2006 Roger Premo, MBA Candidate 2006 Ina Trantcheva, MBA Candidate 2006 Erik Yeager, MBA Candidate 2006

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Sitting in his Buenos Aires office, Martin Migoya put down a copy of La Nacion, one of

Argentina’s leading newspapers, after reading a new article on Globant and looked out over the

River Plate. As the CEO of Globant, he had grown the company from a few contract workers into a

modern IT outsourcing company with over 240 employees in just four years. Now he was looking

forward to sales of over $12 million in 2006.

This growth had largely been based on Martin’s and his partners’ network of contacts. He and the

CTO, Guibert Englebienne, had sold business through extensive travel and connections. Although

they now sat in Buenos Aires, that was a rarity. Most weeks were spent in London, Boston, Dallas

or Madrid or on planes between those locations.

Although Martin took great pleasure in Globant’s past accomplishments, his aspirations for the

company were even greater. He wanted to build a company that could pride itself as being the best

offshore IT outsourcing company in the Western world. For this, Martin sought to expand and

modify the current sales system of informal networking to build more business. He needed to create

an independent sales organization in the company that could develop leads in a more systematic

manner.

Another challenge for Globant was the focus of the business. While the early sales were based on

reputation and connections, that also meant that projects spanned multiple industries and functions.

Would the new sales process require focus and expertise in a particular industry or roles (horizontal

versus vertical focus)? Would a focused repeatable process allow Globant to sell more quickly and

at higher margins? Or would it move the company into a small niche that limited company growth?

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The final challenge was competitive. While Globant was the largest independent IT outsourcer in

Argentina, the company faced increasing competition for talented workers as large Indian and

American outsourcing companies sought to build and grow development centers in Argentina. How

would Globant respond to this threat?

The IT Outsourcing Industry

Outsourcing in one form or another has existed for thousands of years. At its root, outsourcing

describes the practice of subcontracting certain functions or tasks to an outside resource. It was the

Industrial Revolution that brought outsourcing into common practice, as specialization allowed the

outsourcing of everything from insurance and accounting services to component manufacturing.

IT outsourcing really began in the early 1990’s with the advent of the internet and the vastly

improved forms of communication that came along with it. Businesses recognized the need to both

build a business presence on the World Wide Web, and prepare for the “Y2K” issues that promised

to affect IT systems at the start of 2000. Very few U.S. companies had the internal capabilities to

address either of these issues, and so began to outsource this IT work to a growing pool of domestic

companies created specifically to address these needs.

IT Offshoring

At the same time as many U.S. firms began outsourcing domestically, the Indian government saw

an opportunity to build its own outsourcing industry. Based on a strong telecom infrastructure, a

growing base of technology professionals, and low-cost labor, India began positioning itself as a

destination for IT offshoring. This offshoring practice included firms that chose to both build

internal resources in India and outsource functions and tasks to Indian companies. By recognizing

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the trend early, India and its companies were able to position themselves as the strongest players in

the IT offshoring market.

Size of the IT Outsourcing Market

While IT spending has experienced its ups and downs over the past decade, the IT outsourcing

market has been steadily increasing (see Exhibit 1). With a total market size of $84 billion in 2005,

the U.S. IT outsourcing industry presents a gigantic opportunity. More importantly for Globant,

however, is the size of the offshoring portion of that market. In 2005, U.S. spending on IT

offshoring was $15.2 billion, with projected growth to nearly $40 billion in five years (see Exhibit

2). Clearly, the value pie is large enough to be spread around, and Globant’s primary task would be

to figure out the best way to procure its slice.

Why Outsource?

There are a number of reasons that firms have for establishing an outsourcing relationship (see

Exhibit 3). The most critical reasons fall into three areas: (1) Cost and time savings, (2) Access to

expertise not available internally, (3) Ability to refocus on core business functions. Developing

countries offered the best opportunity for cost and time savings due to the low cost of labor, and the

abundance of resources available to throw at projects. Meanwhile, specialized skills and expertise

could be found both domestically, nearby in Canada and Mexico, and overseas, depending on the

type and depth of knowledge required. Overall, firms were looking to offload areas of work that

were not central to their business, allowing them to focus their efforts on those areas where they

could differentiate themselves. Other reasons to outsource are more difficult to generalize, but may

be important on a case-by-case basis.

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Selecting an Outsourcing Partner

In order to win new business and expand its operations in the U.S., Globant needed to understand

what criteria were important to IT decision makers when selecting an outsourcing destination.

There are many factors that companies consider when evaluating outsourcing vendors for a

potential partner (see Exhibit 4). However, the most important factors fall into three categories: (1)

Vendors’ capabilities, (2) Total cost, and (3) Communication capability. An outsourcing

company’s capabilities are determined by investigating its specific technical and industry expertise

and by speaking with reference customers. To gain new accounts, Globant would need to make

sure that it compared favorably with the competition on each of these key factors.

Current State of the Industry

In early 2006, the IT outsourcing industry had matured. Most companies have had at least some

experience managing outsourcing relationships, and there is a catalog of knowledge about success

factors and challenges in outsourcing projects (see Exhibit 5). Outsourcing vendors need to prove

that they are equipped to work closely with their clients and have a strong process in place to

manage their projects. Additionally, multitudes of companies have arisen to focus on very specific

technologies. A generalist IT outsourcing company like Globant needed to have even stronger

differentiators to compete in this highly fractured environment.

Company Background

Globant was founded in 2003 by four engineers who had a clear goal in their minds: to create the

best offshore IT outsourcing company (see Exhibit 6 for the founders’ biographies). Their strategy

was simple—recruit the best local talent and deliver high quality solutions while ensuring superb

customer service. Three years later, the results have been impressive. The company has grown to

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more than 240 professionals while its sales have doubled each of the past three years and are

projected to exceed $12 million by the end of 2006. Its client base has also grown tremendously,

spanning across the U.S. and Western Europe and serving four different industries (see Exhibit 7 for

a sample list of customers). With these numbers, Globant has become one of the fastest growing

independent offshore companies in Latin America and the largest in Argentina.

Based in Buenos Aires, Globant has benefited greatly from its location in Latin America for several

reasons. First, the company’s proximity to the U.S. as well as its Western cultural fit allows for

better communication and ongoing project management. Second, the as-yet untapped technology

talent pool in Argentina allows the company immediate access to specific technology and industry

expertise on an as-needed basis. Third, the local low-cost structure allows Globant to offer

competitive pricing and high cost savings. While economically devastating to most Argentine

businesses, the country’s 2001 devaluation of the peso enabled the IT outsourcing industry to

compete on price. The Wall Street Journal summarized Globant’s location in Buenos Aires well:

“Latin America comes out ahead of India and China in the off-shoring equation when factors like

labor quality, labor supply and time-zone differences are taken into account.” (Wall Street Journal,

2004)

The company’s business model encompasses three phases of a product’s life cycle: (1) software

development services which cover every aspect from conception to final quality assurance, (2)

infrastructure management which is offered on a 24x7 basis, and (3) other value-added services

such as globalization (for more detailed description, please refer to Exhibit 8).

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The company’s culture can be defined as very close-knit and informal. Unlike its competitors, the

company prides itself on below industry average employee turnover rate of 5%. Mostly young

professionals, the employees thrive on the global aspect of the company and the possibilities of

international business travel. To ensure that the language barrier is reduced to a minimum, Globant

requires all of its employees to master a business level of English proficiency.

With Globant’s appeal as a fast growing and global company, recruiting for local talent is not a

challenge. Given the large number of quality job applicants, the company has the luxury of

selecting and retaining only the best. The backgrounds of the employees vary in terms of

technological skill-set—complementing each other well for the diverse demands of each project.

Employees’ knowledge domains differ across platforms (Linux, Unix, and Windows), technologies

used (such as Java, .Net, LAMP, and Oracle), system administration experience as well as

application design work. Although Globant places special emphasis on open source technologies,

the company is always ready to provide any skill-set that a client might request.

While the technical skills present ensure a consistent quality of delivery for the final product, it is

the level of service that ultimately influences the clients who choose to outsource with Globant. In

fact, when describing Globant, some of the most common responses among its clients are the ease

of communication, high level of service, and strong management ethic that the company offers.

With this reputation, Globant can rely on word-of-mouth marketing to increase awareness among

potential customers. Globant’s ability to be close to the customer and understand and satisfy their

needs is what ultimately wins new business and retains the old. As one long-time, happy customer

put it, “We first chose Globant through a referral [from another client] and we stayed with them

because we wanted someone that we can depend on.”

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Competition

There are literally thousands of IT outsourcing companies across the globe, from domestic giants

like IBM and EDS, to top Indian firms like Infosys and WiPro, to a myriad of smaller, regional

companies. These companies choose to compete on a range of different attributes, including cost,

speed, size, geographic proximity, cultural fit, industry expertise, and functional expertise.

Differentiation is very difficult given the sheer size of the industry, as there are usually several

similar companies for any particular attribute space.

Within the IT outsourcing market, firms choosing vendors often look to select the region first (see

Exhibit 9 for regional salaries and hourly rates). As one of the most popular outsourcing countries,

India has built up a strong reputation over the years, and has the most experience and largest

number of existing relationships and reference customers. However, the country is beginning to run

into manpower limitations. China and Southeast Asia have the lowest labor costs and large,

growing labor pools, but find it difficult to provide a cultural fit with western companies. Latin

America also provides low costs, as well as both geographic proximity and cultural ties to the

United States. Eastern Europe has low costs, but boasts a better fit with Western Europe than with

the U.S. Finally, U.S. firms sometimes outsource to Canada, or firms in low-cost, Midwestern

states. While the cost benefits in these regions are not as high, the fit with the business culture and

language skills is ideal.

Direct Competitors

While it is impossible to address the laundry list of competitors Globant faces in this industry,

below are a few of the larger players Globant is likely to compete against.

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Tata Consulting Services (TCS) was founded in 1968, and is currently headquartered in Mumbai,

India. TCS provides IT outsourcing services to almost all lines of business. It had revenues of $1.8

billion in FY05, with 60% of that derived from the U.S. business. TCS went public on the Bombay

stock exchange in 2004, and with over 50,000 employees, is the largest of the Indian IT outsourcing

companies. TCS has global development centers in both Uruguay and Brazil, presenting a direct

challenge to Globant’s cultural advantage.

Infosys was founded in 1981 by a group of software professionals in Pune, India. It is currently

located in Bangalore, and is listed on the NASDAQ stock exchange. With just under 50,000

employees, it is of similar size to TCS, but is considered a slightly more upscale firm, often winning

awards as the top Indian IT firm. Revenues in FY05 were $1.6 billion. Like TCS, Infosys has no

specific industry focus, preferring to offer IT solutions across all industries. Infosys currently has

no presence in Latin America.

Luxoft is Russia’s largest IT services firm, with approximately 1,400 employees and revenues of

about $37 million. Luxoft was formed in 2000, and is currently held privately. Without the size of

its Indian counterparts, Luxoft focuses on four industries: IT/Telecom, Discrete Manufacturing,

Financial Services, and Software/Product Development. Luxoft also has no presence in Latin

America.

Accenture (formerly Anderson Consulting) was formed in 1989, and is based in Chicago. With

revenues of $15.5 billion in FY05, and over 126,000 employees, Accenture still dwarfs its

international competitors. In addition to IT outsourcing, Accenture provides management

consulting services, which are far more difficult for companies in developing countries to provide.

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The company’s IT services division delivers solutions across industries, and is often pitched

together with its management consulting solutions. Accenture has offices all across Latin America,

but costs considerably more than most other offshore vendors.

In addition to these large players, Globant faces a number of smaller competitors, many with North

American sales offices right next to Globant’s Massachusetts location (see Exhibit 10). As a result,

Globant needed to both, identify who its real competitors were, and figure out how to position itself

to succeed against them.

Structure of Relationships

Winning deals while competing head-on with a vast number of vendors would be difficult enough

for Globant. However, the company also has to face an environment where many firms already

have existing, long-term relationships with offshore partners. Specifically, large firms which spend

a large portion of their revenues on IT typically already have an outsourcing vendor with whom

they have been working for 5-7 years. These relationships are often extremely tight, as outsourcing

partners are privy to confidential information, work on projects of critical importance, and have

already invested the time and resources to iron out the kinks in their working relationships. “I’ve

been working with my vendor for 8 years. They satisfy our needs. I’m sorry, but I’m not looking

for a new partner” said the CTO of one Northeastern telecom company.

Still, such relationships do present some opportunities for companies like Globant. A former VP of

Sales for an Eastern European outsourcing firm observed “Every company who has ever worked

with an Indian outsourcing firm has had problems—find a way to alleviate those problems and

you’re starting out on common ground.” If Globant could identify companies having problems with

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their current outsourcing relationships, it could be a prime opportunity to present itself as a firm

offering better services. In addition, there are firms who already have partners but are looking to

diversify their geo-political risk by “multi-sourcing” in different geographic regions.

Globant’s other option was to focus on the small to mid-size businesses. While the overall market

was still very large, individual contracts were smaller, and the relationships would probably not be

as valuable in the long-term. Consequently, Globant needed to first determine whether the

outsourcing market in this lower segment was addressable enough to include it in its market entry

strategy.

Selecting a Target Market

As Globant continued to grow rapidly, Martin realized that some focus was needed to prevent the

company from spreading itself too thin. He felt that it was necessary to target both specific vertical

industries and geographic regions. The management team decided to select four industry verticals

based on their past experience and project expertise. With their first and most consistent client

being EMC, the High Tech sector was an obvious industry to target. In addition, they had built up

considerable knowledge in the Travel industry with two of their largest current clients, OAG and

lastminute.com. Guibert, the CTO, also had extensive experience in the Telecom sector, having

worked as an executive for a New York-based telecommunications company. Finally, COO Martin

Umaran had previously managed IT implementation products in the Financial Services industry,

which became their fourth target. Geographically, Martin decided to begin with U.S. markets

where he had existing customers, the East Coast and Texas, hoping to utilize references there to

expand outward.

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While he was satisfied with the logic behind his selections, Martin still wanted confirmation that he

was choosing the right industries and that the geographic markets were large enough. A simple

market size analysis proved that the addressable market was large. Focusing strictly on small to

mid-sized businesses (annual revenues of $100 million to $1 billion), Globant developed a report

that showed their total addressable market to be $2.6 billion (see Exhibit 11). A more difficult task

was understanding the needs of each industry they were targeting.

Industry Review: High Tech

While high tech is a common industry description, there are several distinct industries that fall

under this umbrella, ranging from product- to service-oriented businesses. High Tech

manufacturing and computer peripheral companies are the most product-focused, followed by pre-

packaged software, data-processing and preparation, and lastly, IT services companies themselves.

As each sub-segment has its own needs, Globant would have to understand them in more depth

before deciding which of these sub-segments to target (see Exhibit 12 for a summary of the trends

in each sub-segment). In addition, Globant would need to extend its reach to California if it wished

to compete in any of the high tech industries. California represented about 30% of the high tech

space, and contained many of the big name companies that would provide the most value as

reference customers.

High Tech Manufacturing is focused on squeezing every penny possible out of its operations.

Because this includes IT spending, firms in this sub-segment are very willing to explore low-cost IT

outsourcing relationships. Their largest areas of IT spending occur around data analysis, IT cost

containment, compliance, and manufacturing operations. In addition, due to economies of scale,

there are relatively few small to mid-size manufacturing firms. Most of the larger firms are heavy

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users of packaged software such as SAP or Oracle, and their greatest outsourcing need is for

customization expertise in these packages.

Pre-packaged Software is unique in its IT outsourcing needs, as firms in this sub-segment will

outsource not only their IT functions, but also pieces of their product development. Approximately

80% of the companies in this area outsource some part of their application development. Among all

high tech sub-segments, pre-packaged software is the one with the most interest in large-scale

outsourcing arrangements. Additionally, it can be characterized as having a strong interest in using

open source technologies. Areas of focus include implementing Service Oriented Architecture

(SOA), Software as a Service (SaaS), application development, and specialized IT services.

Data Processing and Preparation firms spend the largest percentage of their revenue on IT,

averaging between 6 – 20%. However, due to sensitive data and proprietary software, these firms

are often hesitant to outsource, and even more so to offshore. On the occasions that they do

outsource, projects are usually discrete with short-term scope. The most common areas of

outsourcing in this sub-segment are quality assurance for applications, IT support, data collection

and analysis, and large mainframe applications.

IT Services companies are found to be the least likely to outsource, spending less than 2% of their

budget on IT. For the most part, the only use that one of these firms would have for another

outsourcing company is to serve as a “body shop” to partner with for low-cost labor. Other IT

functions they would outsource are mostly those associated with making their consultants more

productive, such as Voice over IP (VOIP) and security solutions for mobility.

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Industry Review: Travel

The travel industry has undergone a major shift away from its traditional means of conducting

business towards online commerce. By using the Internet for travel research and booking, users

have come to value the convenience, speed and easy access to competitive pricing and itinerary

choices. By 2005, 78% of all travelers had turned to the Internet when planning their trips, as

opposed to 65% in 2004. This number is projected to grow further and with an 11% annual growth

rate, the online travel market is forecasted to become a $91 billion industry by 2009 from $51

billion in 2004. As a result, the online travel market is now the leading and fastest growing

category of e-commerce, accounting for over 45% of all online sales.

The industry structure consists of several players: suppliers (such as the airlines, hotels, and car

rentals), agents and global distribution system (GDS) operators (such as Amadeus, Sabre,

Expedia.com, and lastminute.com), and web portals (such as Yahoo! and AOL) (see Exhibit 13 for

a graphical representation of this structure). Although traditionally suppliers have relied on their

agents and GDS operators to reach the end users, the popularity of the internet has moved this

relationship towards competition. Airlines are now fighting with agents, GDS operators and web

portals for market share based on website features and user content. As a result, there is an

increasing pressure for online websites to cut costs and differentiate themselves through innovative

technologies, breadth of functionality, and international capabilities. Given these requirements, the

interest to outsource in the travel industry is growing.

Although off-shoring is still a relatively new idea in the travel industry, most lead players have

already had successful experiences with this process. The most common services being outsourced

are business processes, web hosting, and technology solutions which include custom product

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development, internet booking engine, pricing tools, back office automation, and 24/7 operations

and support.

Moreover, given the global aspect of this industry, internet marketing is also becoming an important

part of the business model in the travel industry. Through internet marketing, firms benefit not only

through reduced distribution costs but also through a continued and targeted dialog with their

customers and thus an improved customer loyalty.

Industry Review: Telecom

Global telecoms have been internally focused until recently, as they needed to eat into the debt

mountains that they accrued from acquiring 3G licenses, M&A activities and other infrastructure

investments in the late 1990s. Today, the winning companies are emerging back into profitability

and there is more room to evaluate their IT needs and revamp their existing systems. The

percentage growth of off-shoring in the next five years is expected to reach 32-50%.

Although the telecom industry looks attractive, there is considerable competition. Historically,

Indian outsourcers have been the most popular offshoring destination in the telecom industry.

Large companies such as Wipro and Infosys have accrued the knowledge and expertise in various

fields of telecom outsourcing. Even for the small and mid-sized companies which these big Indian

outsourcers do not normally target, there are still many competitors that have both industry and

technical expertise. As one CIO of a mid-sized telecom company shared, “Given the large number

of outsourcers out there, expertise in both telecom and the specific technology we are using is a

strong prerequisite for selecting an outsourcing vendor. Anyone lacking both pieces would not even

be considered as a potential partner.”

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Industry Review: Financial Services

The Financial Services industry (FS) has been the leading consumer of IT services. With an

expected growth in spending of 4.2% CAGR through 2009 (Gartner, 2004), FS has the makings of

an attractive market to enter. FS is already a heavy consumer of outsourcing with 90% of firms

using IT outsourcing to some degree. The midsize market, however, is characterized by a different

profile of companies than the overall market. Midsized FS firms exist primarily in retail banking,

broker dealers, mortgages and investment advisory services.

Overall, the midsized segment has a few major needs that are common among the different sub-

segments. The first concern is data security. For competitive, regulatory and operations reasons, it

is essential to maintain system and data integrity. This has traditionally been a hindrance to

offshore infrastructure management, but not necessarily to application development. Additionally,

some firms have devised sophisticated ways to handle infrastructure and operations offshore while

maintaining the needed level of security.

Legacy systems are also an issue throughout FS. Some of the core banking and trading applications

for FS customers are as many as 30 years old. The process of transitioning these systems onto a

modern platform is a complex, risky and expensive proposition. Expertise in both the legacy

systems code (normally COBOL) and modern platforms (J2EE and others) is needed in addition to

understanding the business drivers for the new systems.

The build versus buy decision is also more pertinent in the midsize segment. While larger firms

have the scale to build their own applications, many midsize FS firms have chosen to purchase

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third-party software to handle core banking, trading, online presence and other functions. Although

the use of commercial software is known to be widespread, the actual penetration is unknown.

Security Brokers and Dealers

A variety of companies fall into this sub-segment as defined by the Standard Industrial

Classification (SIC) system of the U.S. Department of Labor. Firms range from providers of

outsourced trading technology platforms to other brokers and dealers to money managers that trade

on behalf of their investors. Although highly heterogeneous, all companies examined in this sub-

segment are heavy consumers of IT.

Retail Banking

By far the most numerous sub-segment in FS, retail banking is composed of credit unions, regional

and local banks. Competition in this segment is fierce with new offerings and innovations driving

customer acquisition and retention. Retail banks also seek to offer new products to their customers

to gain a greater share of the banking spend (wallet share). Fortunately for Globant, many of the

new products are technology based such as online banking, mobile banking and electronic billing.

There is wide heterogeneity in the degree to which retail banks use outsourcing now, the types of

technologies they are prioritizing and the types of customer needs they address.

Other Sub-Segments

Within the midsize market, there are also a variety of mortgage, bond and advisory services

companies. The low number of targets in each group within the midsize market makes determining

the trends in this sub-segment difficult.

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Sales Acquisition Process

When companies select their IT outsourcing vendors, they normally either send an RFP (Request

For Proposal) to several potential vendors, or ask a vendor directly for a proposal if they know

someone from previous working relationship, reputation, or referral. After these vetting processes,

they sometimes ask the selected vendor(s) to demonstrate qualifications through references or pilot

engagements with them. Historically, Globant has relied mainly on the management team’s human

network when it pursued a new contract, and had not typically faced competitive bidding situations.

For example, Globant’s client lastminute.com, a major European online travel agency, was

introduced by one of lastminute’s previous clients. Similar to this reference, most of Globant’s

other clients have made positive referrals to Globant’s increasing customer base. Although the

company has benefited greatly from such informal networking, Martin felt that it was time for the

company to adopt a more systematic approach to acquire new customers, especially in the U.S.

where the company had a limited customer base.

While Martin’s focus on the four industries in the East Coast region and Texas was justified as good

starting point to expand the customer base, this focus was not enough to help Globant define its

sales strategy. Globant had to look into additional factors to narrow down and prioritize the

potential pool of clients:

Technology use: There are two types of businesses that differ through their use of technology—

technology creators (companies that use technology as a competitive advantage) and technology

consumers. Given Globant’s software development expertise, companies defined as the technology

creators would benefit more from Globant’s services. Another factor when choosing a potential

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client would be companies that work with open source technologies, an area where Globant had

particularly strong technical expertise.

Argentina/Latin America presence: Companies with offices in Argentina are more familiar with

the area and are more likely to choose to outsource there.

No captive offshore development center: A company is unlikely to outsource with Globant if it

has its own captive center for low-cost development and infrastructure management.

Hiring technologists: Companies that are actively hiring IT engineers (information easily

obtainable via internet job postings) indicate the need for IT expertise, which Globant might be able

to provide.

The second step after prioritizing the potential clients is to create leads to these companies. Given

the competitive nature in this industry, a simple cold call is likely to be futile. As one CIO of a

software company shared, “I receive about ten cold calls a day from various IT outsourcers. If the

vendor can’t give me some differentiating offer—specific technology or industry expertise—and be

able to articulate that within five seconds, I will hang up the phone.” Accordingly, Globant had to

explore other means of accessing a potential customer such as a personal or professional connection

or through expanding the company’s visibility through industry associations, trade shows, and other

networking web sites (i.e. LinkedIn.com).

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Expanding the Sales Organization

Beefing up the sales force was another important hurdle. To make effective sales calls, it was

necessary for Globant to train its sales force to share one standard successful sale pitch as the

background story for everyone. Recently, the company hired Daniel Kuperstein as VP of North

America sales and operations. Before joining Globant, Daniel was working as the Director of

Globalization for EMC, the largest information storage and management firm in the world, where

he had worked in a variety of senior marketing positions for the past ten years. Because EMC was

Globant’s first major client, Martin was sure that Daniel’s internal knowledge of the company as

well as his industry experience and social network would help Globant win great new contracts,

especially in the high tech industry.

While Daniel found Globant to be an extremely capable firm in terms of its technical solutions and

customer care, he needed to understand how Globant’s leadership wanted to position the company.

He also needed to know how far to cast his net, both in terms of industry and geography. With his

local presence in the U.S., Globant could stay close to its customers and maintain an ongoing

relationship, something that not all of its competitors could offer.

Finally, Martin was sure that Argentina and Buenos Aires offered tremendous advantages for

potential clients. The geographic proximity, western culture, and modern city lifestyle were all

attractive features. However, he found that there was a general lack of knowledge about his country

among many U.S. IT executives. In addition, fears of criminal activity and political instability were

holdovers from some public problems the country faced in the past. What was the best way to

present Argentina’s recovery and promise in sales presentations?

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As Martin was looking out through his office window, he realized that a more structured sales

approach was needed if the company were to achieve its ambitious goal of doubling its size by the

end of 2006. It was in Daniel’s hands now to fully develop this new methodology and implement it

in the U.S. Martin grabbed his brief case and left the office for the next sales call.

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Appendix Exhibit 1 U.S. IT and IT Outsourcing Spending

$59 $67 $70 $76 $84

$733 $702 $696 $732 $776

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2001 2002 2003 2004 2005

$B

Outsourcing Total IT Spending

CAGR 9.2%

$59 $67 $70 $76 $84

$733 $702 $696 $732 $776

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2001 2002 2003 2004 2005

$B

Outsourcing Total IT Spending

CAGR 9.2%

Source: Forrester Research Exhibit 2 U.S. Software and IT Services Offshore Spending

12.3

18.4

22.1

26.3

31.6

38.2

9.8

15.2

0

5

10

15

20

25

30

35

40

45

2003 2004 2005 2006 2007 2008 2009 2010

$B

Source: Global Insight Exhibit 3 Reasons Firms Gave for Outsourcing their IT Needs

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MOST IMPORTANTMOST IMPORTANT

IMPORTANTIMPORTANT

SOMEWHAT IMPORTANTSOMEWHAT IMPORTANT

• Cost savings

• Access to outside expertise

• Improve focus on company’s core business

• Improve service

• Access to better technology

• Time savings

• Share risks

• Make capital funds available

• Cash infusion

Exhibit 4 Selection Criteria for Choosing an Outsourcing Vendor

Percent of Survey Responses for Each Factor

Slight Factor

Essential Decision Factor

Important Factor

Not a Factor

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Specif

ic Te

chnic

al Exp

ertise

Price

English

Langu

age S

kills

Indus

try E

xperi

ence

Referen

ce C

ustom

ers

Partne

r Rela

tionsh

ips

CMM Qua

lity C

ertific

ation

Home C

ountry

Person

al Relat

ionsh

ips

Open S

ource

Suppo

rt

Same T

ime Z

one

Oppos

ite Tim

e Zone

Source: Survey of CIOs and CTOs

23

Exhibit 5 Reasons for IT Outsourcing Project Success and Failure Importance Success Factors Challenges High • Ongoing management

• Well-defined processes • Contract with clear goals and

metrics

• Problems managing remote vendor team

• Loss of control • Vendor team performance

Medium • Work closely with vendor • Proper vendor selection • Communication

• Language and cultural barriers

• Poor planning • Unclear contracts

Low • Identify the details • Many releases • Simplicity

• Provider turnover • Accountability • Unforeseen expenses

24

Exhibit 6 Management Team Biographies Martin Migoya, CEO Martin has extensive experience in business management, sales and marketing. As Globant’s CEO, his focus is to drive revenue, objectives and profitability. He oversees the company's long-term objectives, planning and analysis. Prior to co-founding Globant, Martin was Director of Business Development and Latin America's Regional Business Manager at a large consulting and technology services company, developing the IT and ERP markets in Brazil and Argentina. He was instrumental in managing and developing high technology businesses related to SAP and the Internet, with customers like Procter & Gamble, Renault, and Roemmers Laboratories. Previously, Martín worked as Project Manager for REPSOL - YPF, Argentina's largest oil-and-gas company. Martin has lived and worked in Argentina, Brazil, Mexico and the U.K. He holds a degree in Electronic Engineering from La Plata University and a Masters degree in Business Administration from CEMA University. Guibert Englebeienne, CTO Guibert has an extensive experience in the information technology and communication industries. As Globant’s CTO, Guibert is in charge of the software production process, and the creation and management of strategic company technology partnerships. Prior to co-founding Globant, Guibert was a scientific researcher at IBM and later the CTO for CallNow.com Inc., a telecommunications company based in New York providing international callback services through the Internet. He also conceived and developed a U.S. patented technology powering a service named 2Speak, to use the Internet to anonymously connect two parties through phone lines. Guibert was responsible for the phone-chat implementation in Chinadotcom Co., owner of the biggest Asian Internet portals. He has also worked as an IT Development Manager outlining and developing software for tax collection through Internet governmental portals. Guibert has lived and worked in Argentina, US, Venezuela and the U.K. He holds a degree in Computer Science and Software Engineering from UNICEN University. Martin Umaran, COO Martin has extensive experience in executive and business management for technology industries. As Globant’s COO, Martin is responsible for the delivery of products and professional services, and is actively involved in capacity growth and process initiatives. Prior to co-founding Globant, Martin was CEO for Neuwagen, a company focused on selling cars to Caja de Ahorro y Seguro's customers (Argentina's largest insurance company). He also worked at several technology companies as Senior Business Manager. At Santander Bank, he was responsible for their CRM implementation initiative. He also negotiated, implemented and operated a state-of-the-art Tax Collection System in several Venezuelan cities. At YPF Ecuador, Martin worked as a manager of facilities automation and maintenance. He also worked at Roman Logistics, where he managed several projects for the Argentinean offices of Ford, GM and Unilever. Martin has lived and worked in Argentina, Ecuador, Venezuela and the U.K. He holds a degree in Mechanical Engineering from La Plata University and a Masters in Business Administration from IDEA University. Nestor Nocetti, VP of Corporate Services Nestor has a considerable amount of experience in the information technology industry, both in operational and advisory roles. As Globant’s VP of Corporate Services, Nestor is in charge of determining the structure for business consolidation and expansion, aligned with the corporate objectives and vision. Prior to co-founding Globant, Nestor worked as Internet Manager in an Argentinean information technology company, where he specialized in internet marketing and web portals localization with customers like EMC, a world leader in information storage, and Techint, an engineering and procurement services provider. He also worked on several projects related to Geographic Information Systems for Light Rio de Janeiro, electricity providers in Brazil and UTE, and a public electricity provider in Uruguay. He worked as a consultant on issues related to IT development, strategy, and operations in the oil-and-gas market, for ENAP Chile and YPF Argentina. Nestor has lived and worked in Argentina, Chile and Brazil. He holds a degree in Electronic Engineering from La Plata University and a degree in Business Direction from IAE University.

25

Exhibit 7 Sample list of customers

Exhibit 8 Globant’s Service Offerings

26

Exhibit 9 Representative Salaries and Hourly Rates for IT Outsourcers Across the Globe

Source: Meta Group. Exhibit 10 Descriptions of Various IT Outsourcing companies Company Location(s) Est. Staff

(onshore-offshore) Revenue

Services Model Client Types

StarSoft Cambridge, MA St. Petersburg Dnipopetrovsk, UA

400 (NA-NA) $10.5M (2005)

Custom Maintenance R&D Internationalization

Heavy- offshore ODC*

Corp. IT IT Services ISV’s**

SoftServe Waltham, MA Lviv, Ukraine

450 (7-443) $6.5M est. (2005)

R&D QA Maintenance Minimal Corp IT

Heavy- offshore

ISV’s, small to mid-size

Lohika San Mateo, CA Lviv, UA Odessa, UA

120 (15-105) $3.5M est. (2005

ISV R&D Including embedded SW.

Hybrid, US: System Architects.

ISV’s Hardware/device

Virtusa Boston, USA UK Chennai Sri Lanka

1800 (200-1600 est) $50-100m est.

Corp IT ISV’s Maintenance QA

Hybrid, leveraging offshore resources onsite. (50+ H1’s!)

Fortune 1000 Small->mid-size ISV’s Technology Co.’s

Patni 24 Sales off. 8 Offshore locations

11,000 $326M (2004)

IT IT Management BPO*** R&D

Full IT Services, hybrid model

Corporate IT Technology Co.’s

Sonata Software 7 Sales, 4 Offshore Locations in India

1,100 $77M

ISV Enterprise/Corp IT Embedded

Full IT Services, hybrid model

Corp IT ISV’s

E5 Systems

VA, USA China India

NA IT Outsourcing Heavy Offshore Corp IT.

Foliage Boston, USA India (partners)

150 (150-?) $30M est.

Consulting -> Systems Development

Heavy onshore- “offshore ready”

Corp clients, embedded systems.

Array Software Boston, USA Partners: India, Russia, Ukraine

150 (20 – 130) Est. $15M

Software Maintenance

Hybrid, w/offshore partners sub-contracted

Technology Co.’s

*ODC – Offshore Development Center **ISV – Independent Software Vendor ***BPO – Business Process Outsourcing Source: Mark Kapij, MIT Sloan Fellow.

CountryIrelandCanadaSingaporeMexicoRussiaIndiaPhilippinesVietnamChina

$5,000 - $9,000$3,000 - $6,000$3,000 - $7,000

Programmer Annual Salary Hourly Rates

$9,000 - $20,000$7,000 - $12,000$5,000 - $9,000$5,000 - $9,000

$40 - $80$40 - $80

$23,000 - $36,000$20,000 - $40,000

$20 - $40$15 - $25$15 - $25

$30 - $60$20 - $35$20 - $40$20 - $40

27

Exhibit 11 Potential Market Size (East Coast and Texas)

U.S. Market Segmentation by number of subsidiary companies East Coast Texas Rest of U.S. Hi Tech 295 (40%) 48 (6%) 396 (54%) Telecom 195 (55%) 33 (9%) 125 (35%) Financial Services 636 (44%) 111 (8%) 705 (49%) Travel 151 (43%) 23 (7%) 186 (53%) U.S. Market for Outsourcing (in $M) East Coast Texas Hi Tech $372 $56 Telecom $471 $77 Financial Services $1,227 $202 Travel $139 $25

28

Exhibit 12 Outsourcing Trends in the High Tech Industries Sub-Segment IT Focus High Tech Manufacturing • Better Utilization and Analysis of Data

• IT Cost Containment • Compliance • Lean Manufacturing Processes

Pre-packaged Software • Building in SOA to all applications • Specific IT services requiring specialized knowledge (i.e. firewall

maintenance) • Application development • SaaS for non-core activities – HR/Payroll, Recruiting, Professional Services

Automation • Further refine business process IT • Infrastructure Support (including helpdesk) • Business Analytics (how to evaluate implementations of software packages)

Data Processing and Preparation • QA for applications • IT Development and Support • Further refine automation for data collection and analysis • Upgrade and retire legacy applications • 24/7 Data Collection and Analysis • Large mainframe applications

IT Services • Web Development • VOIP and other “distance-killing” applications for mobile workers • Infrastructure Management • Mainly Sales and HR applications • Security for mobile workers • Programming services during projects – low rates, body shop

Exhibit 13 Travel Industry Structure: Major Players