Infosys Consulting Competition_ Karol Gornowicz

Karol Górnowicz,Director of

Sales Department

How to go global -expanding our business.

Warsaw, 06.06.2012

What are the aims and logic of this presentation ?

Goals

Find solutions to meet Copernicus’ fundamental aims:

Maintain the double-digit annual growth Retain the highest-quality workforce

Go and grow international

Diversify revenue sources

Road Analysis of company’s financial data, market analysis and presentation of the current trends that deeply affect the demand for Business Transformation services.

Result The idea of the new long-term selling strategy to overcome the challenges, avoid future market failure and meet all the Goals in the most efficient way.

SUCCESS!

Warsaw, 06.06.2012

Agenda

Executive Summary

Closing remarks

Company overview

Most important challenge to overcome

Proposed solutions to the problem

Expected results

“Success for a company often comes from the ability to drive the proper transformation at critical points.

‘Business as usual’ is an expression that can mean certain death over the long run.

Being able to grow and reinvent offerings is critical to addressing economic volatility, staying on top of the market, and remaining competitive.” Source:(Journal of Management Excellence: Business Transformation. March 2011)

Warsaw, 06.06.2012

Executive summary

We achieved satisfying financial results,: € 5,3 M of profit and over € 14,1 M of revenue in 2011. and managed to accumulate considerable cash reserves in the amount of € 7,6 M.Our profit margin, however, lies below the market benchmark.

4

6 For large corporations we provide well corporate-suited range of services thus expanding our potential client base. So far they were our marginal clientele.

1

2

3

5

So as to maintain the double-digit growth and expand our activity, we need to get more big contracts, which means establishing long-term relationships with customers and providing them with a wide range of services.

We depend on the revenues from F&A services to too great extent. On average 60 % of revenues in 2009-2011 came from F&A services. That poses risk to maintaining sustainable growth.

Both small&medium and large companies inceasingly depend on more sophisticated business transformation operations such as Customer or Knowledge Services.

To diversify the sources of revenue we need to grow organically and form periodical joint ventures to aggressively expand sales of non-F&A services.

7 For our currently fundamental customer base, small and medium sized organizations , we implement cross-selling of our wide range of services thus retaining our current clients.

Warsaw, 06.06.2012


Sales Department

Company Overview

… where we WILL BE

Where we ARE …

Warsaw, 06.06.2012

We have best-qualified workforce satisfied with the job workforce. Our products portfolio is wide, but we focus on F&A services thus not exploiting the full capacity.

How does our finances present themselves ?

Can we actually do better in the coming years ?

F&A S&F

Our portfolio of servicesOur portfolio of services

F&A S&F S&P CS KSFinance &

AdministrationSales &

FulfillmentCustomerServices

Sourcing & Procurement

SMEIntern. corp.Other

Our clients (revenues as % of total sales)

Our people

5 managers

30 consultants

5 part-time consultants

10 back-office employees

High satsifaction rate

KnowledgeServices

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Our satysfying financial results, on average 22 % annual growth of revenue and 25 % annual growth of profit, contributed to over € 5,3 M of profit and over € 14,1 M of revenue in 2011. We managed to accumulate considerable cash reserves - € 7,6 M Our profit margin, however, lies below the market benchmark.

What is the structure of our services ?

Is it optimal from the financial point of view ?

14134115909500

2009 2010 2011

531342503400

2009 2010 2011

TOTAL REVENUES (€ k)

TOTAL PROFITS (€ k)

CAGR= 22%

CAGR= 25%

AVERAGE COPERNICUS’ PROFIT MARGIN: 37%

AVERAGE MARKET MARGIN: 42 %

Cash (as of 2011): € 7,6 M

Warsaw, 06.06.2012

The non-F&A services constitute roughly for 10% of the total sales per annum. This number does not match with the profit structure since non-F&A services yield approx. 40 percentage points higher profit margin

How does the market for our services look like ?

2009 2010 2011

5700 69548484

4 x 9504 x 1159

4 x 1414

F&AS&FS&PCSKS

2009 2010 2011

1190 1488 1859680

8501063

340425

531

510

638

797

680

850

1063

2210

2763

3453

F&A services yield on average 21% profit

margin.

Non-F&A services yield on average 60%

profit margin.

TOTAL REVENUES (€ k)

PROFITS (€ k)

Warsaw, 06.06.2012

We are the third biggest player in Poland in the SM sector with 17% market share. As for the international companies, Copernicus has about 4 %. Our position in Europe is marginal. The market for non-F&A will continue to grow much more rapidly than demand for F&A services.

MARKET SHARE OF BUSINESS TRANSFORMATION SERVICES POLAND

18

12

13

17

40

22

SME sector (%)

AkcenturaIn-FosysBT Con.CopernicusOtherSIP

22

20

24

34

International corporations (%)

Copernicus – 4%

In European scale our position is marginal. Altogether we have approx. 2 % of the market share

in SME sector and 0,5 % in

F&A S&F S&P CS KS

5

10

5

10

15

Source: IDG Research (2010)

Forecasted annual growth of the European market (%)

Warsaw, 06.06.2012

10

The dynamics of the revenue growth in the F&A services should support the thesis of the best achievable profitability. The true is – it does not. The non-F&A services yield more attracitve profit margines.

2009-2011

60%

F&A S&F S&P CS KS

4 x 10 %

SOURCES OF REVENUE

Considerable dependance on the F&A services poses risk to sustainable growth.

Diversification of the sources of income has not really been implemented

The growth of revenue of the F&A services is considerable and reached about 37% per annum and can be considered as impressive.

But the growth of the non-F&A services , considering their profitability, is not satysfying.

CONCLUSIONS

To sum up our financial situation: we are too strongly dependent on the Finance&Accounting services. 25% annual growth in profit was mostly contributed to the non-F&A services which yet are not in our focus.

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Sales Department

Most important challenge to overcome

What are we missing ?

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Welcome to the End of „Business as usual” !

Percentage of non-technology literate at work and as consumers

Percentage of technology-literateat work and as consumers

Business as usual

New business models

The demographics change in consumers and the workforce alone mean businesses have to change. Therefore there will be a rapidly growing market for a wide range of innovative business transformation services.

The changing business environment will imply more focus on business transformation services for the companies. They always follow their clients.

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want lower tariffs, more range of products, efficient and reliable service

want job enablement, efficient tools and processes to perform their job

want increased revenue and controlled costs, for higher ROI

Consumers

Employees

Shareholders

necessity

„Business as usual” leads to . . .

influence marketing/cross-selling and rollout of new products/servicesCompetitors

What do we have to be particularly aware of ?

Arguments for new business focus

What do these changes mean to our business ?

New market conditions are challenging our company portfolio of services.

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Understanding end users’ needs becomes crucial.This is achievable by expanding knowledge services, customer services.

Business needs support in implementing new business solutions. This is why they will look for complicated business transformation solutions.

To sum up…

What do the experts say about it ?

Source: Strategic Review report by Nasscom (2010)

Small or medium sized organizations have the challenge to come out with products that give the look and feel of that of big brands. This is a big challenge. That's when alternate, outsouricng models like customer services and knowledge management are needed.

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”Large corporate giants have the resources and power to maintain their hold in uncertain situations. They will aim at maintaing their dominant position and try to keep customers attached to them. They must optimize their core operations to drive best-in-class efficiency and help fund the transformation and innovation.

What about our long-term targets ? Are we likely to meet them with certainty ?

There are increased incentives for our clients to increase demand for more sophisticated services, such as CS or KS. Companies must at the same time increase their efficiency – our Fulfillment and Sourcing Services are well suited here.

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What will help us meet customers’ demand and our long-term targets at the same time ?

Copernicus’

Targets

• Maintain double-digit growthCompanies increasingly use number of outsourcing providers , often based on targeting providers with specific capabilities and/or reputations to specific processes and activities.

• Go and grow international

If we want to scale-up the market our services cannot be based on headcount. It would have to go beyond head-count, on solutions that use domain expertise. We have to aim at creating business impact.

• Retain the highest-quality workforceAt the end of the day, the concept of continuous improvement and business-challenging projects puts the employee first as well. She or he has the chance to implement her or his own ideas every day.

• Diversify sources of incomeAs companies differentiate their outsorcing providers, it is more complicated to maintain dynamic sales growth without going international and keeping the best-quality employees who constitute our competetive advantage.

F&A focus does not support this target F&A focus does not support this

target

F&A focus does not support this target

F&A focus does not support this target

The realization of our long-term targets is threatened with continuation of current sales strategy. We need to act quickly and move towards services other than F&A.

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Sales Department

Proposed solutions to the problem

What shall we do to break a potential growth barrier ?

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Organic growth + We have relevant knowledge, top-notch employees and enough cash + We have total control over the company. Managing is not complicated We do not need extra cash for risky ventures and change management

Joint venture + We have sufficient resources to meet necessary requirements + We brace ourselves for further market expansions - We risk culture clash, pressure from external partners

Merger+ Possible synergy effects

- No experience with mergers

- Costly, long-lasting process

- Our employees do not like this idea and may leave us

Acquisition+ New portfolio of valuable clients

- We do not have enough cash resources

- High investment costs with no certain success

Summary from the internal research of the possible ways of change.The advantages (+) and disadvantages (-) of the four analyzed scenarios.

What shall we do to expand revenues from each non-F&A service?

Recommended scenario:

Organic growth with joint ventures

Increasing revenues from the non-F&A services is our solution. It can be achieved in 4 scenarios. The organic growth is defnitely most adequate one.

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Hire top manager in the Sales&Fulfillment field, implement efficiency wagesHire top manager in the Sales&Fulfillment field, implement efficiency wages

Marketing & Promotion actions Marketing & Promotion actions

H2 2012

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

Hire top manager

Joint venture

Competetive rates

Cross-selling

Form periodical joint ventures to get big contractsForm periodical joint ventures to get big contracts

Offer our clients competetive service rates, even below bottom lineOffer our clients competetive service rates, even below bottom line

Implement cross-selling within current and new F&A projectsImplement cross-selling within current and new F&A projects

Sales & Fulfillment

Warsaw, 06.06.2012

GANTT

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H2 2012

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

Hire top manager

Long-term projects

Competetive rates

Cross-selling

GANTT

Compete for the long-term government projects Compete for the long-term government projects

Offer our clients competetive service rates, even below bottom lineOffer our clients competetive service rates, even below bottom line

Implement cross-sellingImplement cross-selling

Hire top manager in the Sourcing&Procurement field, implement efficiency wagesHire top manager in the Sourcing&Procurement field, implement efficiency wages


Warsaw, 06.06.2012

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Customer ServicesThemeGallery is a Design Digital Content & Contents mall developed by Guild Design Inc.

H2 2012

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

Hire top manager

Fresh workforce

Joint ventures

Free services

GANTT

Advertise job positions to fresh graduates and hire the bestAdvertise job positions to fresh graduates and hire the best

Form periodical joint ventures with small businesses and start-ups Form periodical joint ventures with small businesses and start-ups

Advertise our services by off-charge cross-sold serviceAdvertise our services by off-charge cross-sold service

Hire top manager in the Customer Services field, implement efficiency wagesHire top manager in the Customer Services field, implement efficiency wages


Warsaw, 06.06.2012


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H2 2012

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

Hire top manager

Business events

Target students

Cross-selling

What are the benefits and costs of those actions ?

GANTT

Organize or take part in cyclical business events (conferences, meetings)Organize or take part in cyclical business events (conferences, meetings)

Organize topic-related workshops and competitions for studentsOrganize topic-related workshops and competitions for students

Cross-sell the services to our current and new clientsCross-sell the services to our current and new clients

Hire top manager in the Knowledge Services field, implement efficiency wagesHire top manager in the Knowledge Services field, implement efficiency wages

Knowledge Services

Warsaw, 06.06.2012


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BenefitsBenefits

+ Focus on high-margin projects+ More big, long-term contracts+ Increased brand recognition+ Promotion in the European market+ Increased information flow and exchange of experience+ New contracts and clients coming with hired managers + Increased dependence of our clients on wider range of services + Increased operational efficiency (wages)+ New experience in business cooperation – helpful in future global expansion

- Extra hiring costs for the top-managers - Extra operational risk in joint venture projects- Short-term lossess due to discount rates

CostsCosts

We have enough resources (workforce, cash and knowledge) to implement all actions. The benefits of the recommended actions outweight the costs incurred.

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Sales Department

Expected results

d

What can we expect to happen in consequence ?

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Revenues

Costs

Revenues from F&A Revenues

from F&A

Preperation of new contracts

Efficiency wages

Cross-selling

Big, long-term contracts

Stable costs

New RevenueSources

Current Business Model

New Business Model

Economics of scale

Fixed HR expenses

PR actions

More contracts

More clients

Stable source of income

Efficiency

Advertising

Diversification & Sustainability of growth

New selling strategy will provide more sources of revenue, attract big prestigeous contracts and create incentives to increase operating efficiency.

Warsaw, 06.06.2012

2012 2015

Number of full-time

consultants

+200%+200%More projects in real terms

Going global & Retention of employees

More long-term services

More demanding clients

More high-margin projects

More ambitious tasks

More information flow

At the same time, the organic financial growth must be supported by the substantial growth in the workforce.

35

105

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Sales Department

Closing remarks

d

Our new strategy realizes all company’s targets

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All four goals have received total attentionand were provided with appropriate solutions

Maintain the double-digit

growth

Retain the highest-quality workforce

Diversify revenues

sourcesGo and grow international

Focus on high-margin

projects More big projects Cross-selling strategy

Increased distribution

of revenue sources

Clients’ dependence

on new services

More orders from large

corporations Increased brand recognition

Aggressive growth of the

workforce and portfolio of projects

New trade experts More experience from

joint ventures Extra ideas from young employees

There were four goals of this presentation concerning the performance of the Copernicus Consulting Inc.

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Sales Department

We are competing for the moment

We are competing for the future

We are competing for the relevance

Warsaw, 06.06.2012

Thank You!