Opportunities for Brazil in the International Outsourcing Market

Brazil Outsourcing 2008

February 26, 2008

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Insurance companies

Banks and financial services

Travel and transportation

Manufacturing & Retail Energy

Our clients span across a wide variety of industries

PARTIAL LIST

Service Providers and Service Enablers

Service Recipients

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2004 2009

The global offshoring market is growing at 30%+ annually

ITO has becoming increasingly mainstream and continues to grow at ~30% annually

BPO is becoming increasingly mainstream following the success of the offshore delivery model for IT services and is growing faster than the overall offshoring market

Global sourcing market sizeUS$ billion

30-35

70-76

10-12

20-2326-29

44-47

2004 2007

~65%

~35%

~60%

~40%

Information Technology Offshoring (ITO) market

Business Process Offshoring (BPO) market

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Labor arbitrage continues to be a key driver for growth; other factors such as access to talent and business benefits have become increasingly important

2007 ChangeDrivers for offshoring

Importance

Sources: Everest experience; interviews with buyer organizations

Business impact beyond cost savings is increasingly becoming important for buyers of BPO services

Cost reduction due to labor arbitrage continues to be the dominant driver for BPO

The importance of access to qualified talent as a driver for BPO has increased significantly in the last three years

2004

Reduce time to market

Enhance capacity

Improve productivity

Improve service quality

Access to talent

Cost reduction

Increased importanceHigh

Equal importanceLow

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While Brazil has a small share of the market currently, it attracted significant attention in recent years

27%

5%

(3-5%)

4%

37%

15%

(5-7%)

Others2

Canada Philippines

India

Latin America

Business Process Offshoring market 2007; Percentage

C&EE1

Ireland

1Central and Eastern Europe2Primarily includes Southeast Asian locations (e.g., Sri Lanka, Thailand) and African locations (e.g., Egypt, South Africa)Source:Everest Research Institute (2008)

China-2%

NOT EXHAUSTIVE

100% = US$26-29 billion

New entrants in the market

Year Players Countries

2006 TCS Brazil

IBM Brazil

ACS Brazil

Genpact Mexico

Evalueserve Chile

2005 Accenture Brazil

Teleperformance Chile

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Three key factors provide Brazil an advantage as an outsourcing destination

Source:Everest Research Institute (2008)

CST ± 3 hrs

Proximity and time-zone fit with North America provides significant advantage for functions that require real-time interaction

Robust IT market, which provides a large skilled talent pool for IT functions

Strong domestic market, which makes it attractive as a regional shared service hub for global companies

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Further, the labor pool available in key Brazilian cities is comparable to well-established outsourcing destinations

Annual graduate pool estimates1 by city2006; 000’s

1Estimated based on assessment of total enrollments over past three years and the structure of the education system in each countrySources:Everest Research Institute analysis; Ministry of Education by country; Investment Promotion Agency by country

117-118

92-94

59-61

57-58

25-27

21-23

New Delhi

Sao Paulo

Rio de Janeiro

Bangalore

Belo Horizonte

Curitiba

Large labor pools that are comparable to Indian cities

Can support large-scale operations for global players

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However, with rapid currency appreciation providers will need to evolve their offerings to make them less dependent on labor arbitrage by “up-shifting” value proposition

1Center of Excellence

Cha

ngin

g ac

coun

tabi

lity

Process

Business

Simple rules JudgmentComplex rules

COE1

Dominant view of “value add”

Changing capability/ distinctiveness

TaskQuality

Standards

Changing the type of work

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20%

80%

To illustrate the kind of opportunities for Brazil let us consider the rapid-growth area of Remote Infrastructure Management

IMO market2010; Percentage

25 26 28 30 32 35 37

2.33.7

5.98.6

1.40.80.5

2004 2005 2006 2007 2008 2009 2010

26 2729

3236

4146

Infrastructure Management Outsourcing (IMO)US$ billion

100%= ~US$46 billion

Traditional (onshore)

Offshore

61% CAGR

7% CAGR

Source: Everest Research Institute analysis

10% CAGR

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Capitalizing on these opportunities will require a phased approach to attract buyers and investors

Source:Everest Research Institute (2007)

Phase I: Create attractive investment environment to attract global companies

Develop clear positioning Simplify operational set-

up processes Financial Incentives to

attract investors Address potential

weaknesses and road-blocks

Develop robust fact base to engage investors

Increase supply of skilled labor pool

Accelerate infrastructure development

Government support towards ongoing growth

Provide impetus for development of local support ecosystem

Phase III: Address key enablers for future growth; focus on targeted growth areas

Targeted marketing/branding Focused talent development Infrastructure enhancement Refined incentives

Phase II: Build further momentum by de-bottlenecking growth

Potentially most relevant given the current maturity

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To ensure success, government and industry need to focus on key initiatives and learn from the experiences of other countries

Create a one-stop investment agency which provides potential investors with detailed fact-base, due-diligence support, and setup assistance

Create focused “growth zones” which provide a combination of robust infrastructure and fiscal incentives to attract greater inward investment from outsourcing suppliers and captives

Create a robust fact-base that provides a detailed, data-based view of capabilities, skills and potential for the Brazilian outsourcing and offshoring industry

Undertake aggressive marketing to key investor groups through foreign offices and affiliates

Czech Republic

India Malaysia

India

Czech Republic Romania

Example of initiative Example of success

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