Location OptimizationSeptember 2007 – Preview Deck

Topic: Perspectives on Delivery Center Locations for BPO – Central & Eastern Europe (CEE)

Copyright © 2007, Everest Global, Inc.ERI-2007-2-PD-0173

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ERI-2007-2-PD-0173

Contents

Everest and Location Optimization overview

Research report overview

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ERI-2007-2-PD-0173

Everest supports Global 2000 organizations through three lines of business

Comprehensive consulting services

Unique portfolio of services across sourcing lifecycleDeep sourcing functional expertise and the advisor of choice forcomplex, sourcing transformational programs

Sourcingindustry research

Combination of quantitative and qualitative, proprietary sourcing research dataFacts on market maturitySize/type of opportunitiesUnderstanding of economic and non-economic factors

Sourcing information repository

Supports overall education of the industry through an informative Web site, which posts white papers, articles, and surveys on currentindustry topics and trends

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Location Optimization is a key service offering of the Everest Research Institute

Syndicated research DescriptionHROFAOPOGS (Global Sourcing)ITO

Annual ReportMarket updatesStrategy dayAnalyst accessWebinar presentations

Service offerings DescriptionTransaction Intelligence Tracking of key transaction-based analyses: process, industry

geography, supplier, buyer

Supplier Intelligence Functional and vertical capability assessment, geographic locations, profiling, function-specific

Location Optimization Develop function-specific location strategies (cost, benchmark different locations, sustainability/maturity of different offerings)

Risk Assessment Multi-dimension risk profiling by city to allow for optimal decision-making; risk-reward trade-off analyses

Custom Research Customer-specific research to obtain specific insight

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ERI-2007-2-PD-0173

We currently track over 125 cities globally across multiple functions

Experience includes serving global majors across industry verticals – energy, pharmaceuticals, banking and financial services, technology, and outsourcing suppliers

Over 40+ projects

completed

Source: Everest Research Institute (2007)

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ERI-2007-2-PD-0173

Our ability to deliver insight on locations is based on extensive and continuing market research…

Team of eight analysts

focused on Location

Optimization

Proprietary & Confidential. © 2006 Everest Partners, L.P.1

125+ cities currently host offshore delivery centers

1 Based on analysis of delivery center locations for 42 suppliersNote: Map not to scale

Source: Everest Research Institute

8

27

8 105

169 9

3 3 1

10

2 1 2 2 0

12

North America Latin America W. Europe E. Europe Middle East & Africa Asia

>5 suppliers2-5 suppliers1 supplier

Number of cities with supplier presence1

Supplier location databaseCity databaseCity profile: Bangalore - Call centre

Salary costs (US$ p.a.)

Base salary-call center agent 3,043Gross salary-call center agent 3,408Base salary-call center supervisor 5,180Gross salary-call center supervisor 5,802Base salary-call center manager 21,725Gross salary-call center manager 24,332Base salary-call center COO 73,021Gross salary-call center COO 81,783

Education

Number of university graduates pa 71,335Number of high-school graduates pa -

Captive location databaseNo. Company name

Parent industry vertical (primary)

Time since inception

IT (ADM and Infra) BPO KPO CC

Engineering, R&D

Comments on services offered

FTE estimates (date variable)

1 3Com Telecom and hi-tech <3 yrs Software development

100

2 ABB Manufacturing 3-5 yrs Software development &

500

3 ABN Amro BFSI 3-5 yrs Banking transaction

2000

4 Adobe Telecom and hi-tech >5 yrs R&D 600

5 Agilent technologies Telecom and hi-tech <3 yrs Application and SOC Chip design,

1000

6 Airwide solutions Telecom and hi-tech <3 yrs 100

7 Akzo Nobel Car Finishes

Others 3-5 yrs Develop products and color NA

8 Allianz Cornhill BFSI 3-5 yrs IT application development and 500

9 Alsthom Manufacturing <3 yrs Engineering and design services, 1,000

10 Amazon Telecom and hi-tech <3 yrs Software Development,

NA

11 AMD Telecom and hi-tech <3 yrs Design 120

12 American Express BFSI >5 yrs F&A back-office HR processing,

3,000

13 AOL Telecom and hi-tech 3-5 yrs Contact center , software

1,650

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ERI-2007-2-PD-0173

…and a wide network of relationships

Brazil

Costa Rica

EL Salvador

Northern Ireland

Malaysia

Jamaica

Philippines

Poland

Romania

South AfricaUruguay

India ChinaCzech Republic

Denmark

FinlandSweden

Scotland Estonia

Slovakia

Thailand

Singapore

Argentina

Mexico

Russia

Turkey

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ERI-2007-2-PD-0173

Everest engages with clients in multiple ways to assist with location-selection decisions

Increasing specificity/sophistication

City profiles

ObjectiveCity overview for specific functions

Illustrative deliverablesDemographics Functional skillsCostsMarket landscapeLabor

Location prioritization

ObjectiveRelative attractiveness and prioritization of cities across functions

Illustrative deliverablesComparison of cities on costs, labor-pool, language/functional skills, market activity, and risks Shortlist most attractive options and highlight cost-risk trade-offs in making location choices

Location strategy

ObjectiveDevelopment/review of company-specific delivery center strategy and/or location selection

Illustrative deliverablesEvaluate best-fit location based upon alignment with company strategy and business plansEvaluate alternate delivery modelsDue diligence

This report is a standard location prioritization analysis that has not been customized to a specific organization’s objectives or needs

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ERI-2007-2-PD-0173

Contents

Everest and Location Optimization overview

Research report overview

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ERI-2007-2-PD-0173

Table of contents

Section I: Executive summary 7

Section II: Central & Eastern Europe (CEE) market overview 12Size and growth of the CEE market 13Examples of supplier and captive presence 14Location/city options for delivery centers 15Key factors driving complexity in decision making 16

Section III: Drivers and approach to location selection 17Everest risk-reward framework 18Approach/methodology used for location prioritization 22

Section IV: Relative attractiveness of CEE cities for BPO 24How to read this document 25Assessment on environment and infrastructure related factors 28

Environment related factors: Stability, security, risk of natural hazards 29Infrastructure related factors: Connectivity, infrastructure support 33

Labor pool analysis 38Tertiary educated labor pool 40Level of language skills 43

Topic Page no.

Report contains over 90 pages of detailed analysis and information

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Table of contents

Section IV: Relative attractiveness of CEE cities for BPO (continued)Cost-risk analysis 48

Total operating costs per FTE 49Risk analysis: Environment risk, time to market risk, labor availability risk 51Trade-off analysis: Cost-risk trade-offs in selection of cities for BPO 53

Summary of assessment and prioritization of cities 54

Section V: Additional considerations for location selection 55

Section VI: City snapshots of prioritized cities 60

Appendix 73Overview of Everest Location Optimization capabilities 73Details of assessment of cities across environment and infrastructure related factors 80Details of availability of language skills by country/city 88Other reports in this series 94

Topic Page no.

Report contains over 90 pages of detailed analysis and information

12Copyright © 2007, Everest Global, Inc.

ERI-2007-2-PD-0173

Background and objective of the research

Central & Eastern Europe (CEE) countries have emerged as attractive near-shore destinations to provide business process and technology services to Continental Europe Lower costs coupled with language skills and cultural, time-zone affinity have been the key drivers of offshore market growth in CEE countriesGiven this market growth, the location landscape in CEE is rapidly expanding to new countries/cities. Leading global suppliers/captives have set up delivery centers in numerous cities (~25) in the region However, these cities have different leverage points across multiple factors relevant for location selection. (e.g., costs, labor-pool, functional, language skills). The presence of multiple city options with significantly different characteristics drives complexity in location-selection decisions in CEEThis research provides perspectives on the relative attractiveness of CEE locations for Business Process Outsourcing (BPO)

Background

ObjectiveProvide perspectives on the relative attractiveness of CEE locations for a BPO centerPrioritize 8-12 locations from multiple city options (~25) based on their relative attractivenessThe focus of this report is on prioritizing a set of potential location options. However, the report is not aimed at selecting the best-fit location for a company-specific situation. In order to further make location choices, additional company-specific requirements and factors need to be evaluated

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ERI-2007-2-PD-0173

Scope of the research – cities covered

Adana

Ankara

Bursa

Istanbul

Izmir

Sofia

Bucharest

IasiTimisoara

Cluj-Napoca

Wroclaw

Warsaw

KrakowKatowice

Poznan

Pécs

Debrecen

PlzenOstrava

Brno Olomouc

Budapest

Prague

Turkey1

Bulgaria

Romania

Hungary

Poland

Czech Republic

Szeged

BratislavaSlovakia

Countries considered are Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia, and Turkey. 25 cities across these countries are covered in this research

1 Turkey is included in Eastern Europe as opposed to Asia. Turkey (especially the western half of Turkey where most of the cities under consideration are located) is closer to Europe than Asia in terms of culture, language, customs, etc.

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Summary of key analyses and data presented in the research

Analysis Data presented/analyzed

CEE market overview

Market size and growthSupplier and captive presenceEvolution of city options for delivery center

Analysis Data presented/analyzed

Tertiary educated labor-pool Assessment of language skills

Includes English and key European languages

Labor-pool

Total operating costs per FTE based on Everest’s proprietary cost model capturing 40+ data elements. Examples:

Salaries & benefitsManagementAdministrationOverheadReal estate TrainingAttritionTelecomEquipmentUtilities

Costs

Labor availabilitySize of labor-poolLanguage skillsCompetition for talent

StabilityPolitical, economic stabilitySecurity

Connectivity Infrastructure supportEvolution of ancillary servicesRegulatory environment

Risks

Assessment of cost-risk trade-offs Classification of city clusters

Trade-offs

City facts. Examples: PopulationGDP

Outsourcing activitySupplier and captive presence

City snapshots

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ERI-2007-2-PD-0173

Everest’s location selection methodology/approach

Overall objectives and requirements1

Activities

Filtering Labor pool analysis

Cost-risk analysis

Customized analysis

2 3 4 5 Due diligence

6

Risk

Cos

t

Deprioritize cities that do not meet basic minimum requirements a) Environment

related factors – stability, security, risk of natural hazard

b) Infrastructure related factors – connectivity, infrastructure support

Deprioritize cities that do not have minimum labor pool to meet requirements using a two-step processa) Overall tertiary

educated labor pool

b) Language skills

Cost analysisRisk analysiscost-risk trade-offs

Due diligence on prioritized cities to validate findings and identify potential company specific incentives

Evaluate alternate delivery models

Fit with business plans and existing delivery footprint

Copyright © 2007, Everest Global, Inc.ERI-2007-2-PD-0173

16

The report has more than 80 pages of data, insights on relative attractiveness of CEE locations for BPO

Language skills across countries in CEEShare of total population

Bulgaria Czech Republic

Slovakia Hungary Poland Romania

English GermanRussianFrench

Supplier/captive centers across Central and Eastern Europe

Bratislava (Accenture, IBM)

Warsaw

Krakow (ACS, IBM, Tesco)

Budapest (IBM, EDS, Genpact)

Prague (Accenture, Exxon)

Katowice (Capgemini)

Bucharest (Genpact, HP, Oracle)

Wroclaw (HP)

Annual tertiary education pool 2006; ‘000s

Cost-risk comparison for prioritized cities for BPO delivery center

First-principle filtering – stability, security risk ratings

Low risk

Medium risk

High risk

Iasi

Pol

and

Rom

ania

Turk

ey

Poznan

Timisoara

WarsawWroclaw

Adana

AnkaraIstanbul

IzmirBursa

Cluj - NapocaBucharest

StabilityCity Security

IstanbulWarsaw

BucharestKrakowAnkaraPoznan

WroclawKatowiceBudapest

SofiaPrague

IasiCluj - Napoca

TimisoaraBrno

OstravaSzeged

PecsDebrecenOlomouc

Plzen

Total annual operating cost per FTE for BPO delivery center2006; US$ ‘000s per FTE

Olo

mou

c

Brn

o

Wro

claw

Sof

ia

Poz

nan

Buc

hare

st

Kra

kow

War

saw

Pra

gue

Bud

apes

t

Ista

nbul

RiskC

ost

High Low

High

Low

BudapestPrague

BucharestSofia

Istanbul

Mature locations

Emerging locations

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ERI-2007-2-PD-0173

Everest Research Institute reports in this series

Type of reportGeography covered

BPO ITONumber of cities

covered

Asia (China, India, Philippines, Singapore, Malaysia, etc.) 40

India 23

Latin America (Argentina, Brazil, Mexico, Costa Rica, etc.) 35

Central and Eastern Europe 25

Eight different reports covering BPO or ITO for four geographies are available

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