The State of Service & Support in China

The State of Service & Support in China Presented by Dr. Baumin Lee President, Teleweb Inc. April 27, 2005

Bio – Dr. Baumin Lee • China MII CRM CommitteeDeputy Director • MII Federation of Informationization Promotion Expert Consultant • China Academy of Labor and Social Security Chief Auditor • MII Call Center Professional Jon Standard Commi Expert • Taiwan Call Center Development Association Director • 1998-present Teleweb Inc.CIO • 2002-present Shanghai Teleweb Technology President • 1998-2005 05Info Inc. CTO • 1996,iPlanet Inc.Technical Director • 1997-1998，Tandem Corp. Technical Manager • 1988-1995 Bell LabsMTS • 1983-1987, National Regulatory Research • Institute Research Associate • The Ohio State University, ISE Department P.HD. • The Ohio State University Adjunct Professor

OUTLINE • Technical Support and Help Desk Outsourcing Market • The People’s Republic of China • China Call Center Market Status • China Call Center/Technical Support Challenges • Trend in Call Center Technology • China SCP Experience • Characteristics of China Support Centers • China support Centers SWOT Analysis • Leading China Outsourcing Call Center – 95Teleweb Inc. Introduction

Technical Support and Help Desk Outsourcing Market Dollars in Billion 2002 2007 International Data Corporation (IDC) predicts that the compounded annual growth rate (CAGR) for help desk outsourcing over the next five years will be 11.2%. According to IDC, the market for technical support and help desk business process outsourcing is expected to grow from $14.0 billion in 2002 to $21.5 billion in 2007. Source: Gartner Dataquest

Technical Support and Help Desk Outsourcing Market 2002 2003 2004 2005 2006 2007 Source: IDC 12/2002

Business Process Outsourcing Market 2000 2005 Gartner’s most recent projection for the worldwide BPO market predicted a $234 billion opportunity by 2005, with the market growing at a compound annual growth rate of 14% between 2000 and 2005. Source: Gartner Dataquest

Market for Offshore Outsourcing 3.3 million jobs to go offshore Over the next 13 years, 3.3 million U.S. service industry jobs and $136 billion in wages will move offshore to countries like India, Russia, China, and the Philippines. The IT industry will lead the initial overseas exodus. Source: 2002 Forrester Research, Inc.

THE PEOPLE’S REPUBLIC OF CHINA • Population of 1.3 billion people in 2004, expected to grow to 1.5 billion in 2020 • 3.7 million square miles: 22 provinces, 3 municipalities, and 5 autonomous regions • Socialist Market Economy in 1976 • One Country, Two Systems • Tiananmen Square in 1989 • GDP grew 8% and export grew 12% annually in 1978 – 1992 • WTO in 2002 and Olympics in 2008, World Trade Show 2010 • Open door policy to keep economic development on track

China Political, Economic, and Social Environment • Political Environment • economic system reform and establishment of socialist market economic system • Government Service Department have all established service-type call center, • and this becomes a powerful growth field of China’s call center industry • the political environment of China has been gradually improved • Economic Environment • China has maintained an annual increase rate of 9%, Estimated by experts, • The contribution of China’s economic growth to the world GDP is 14%, only • after U.S. (20.7%) • The financial revenue of the whole country has reached 2.17 trillion Yuan with an • increase of 278.7 billion Yuan than that of last year • The 2008 Beijing Olympics and 2010 Shanghai World Fair will continuously • promote the development of China’s economy • Social Environment • China is a society that values human relations and face-to-face communication. • The concept of conducting business activities by phone hasn’t been broadly • accepted. • The service style of call center strengthens the customer relationship • and is expanding its social foundation in China • The call center for tele-shopping and e-commerce still lacks support from direct users • The social and individual credit system of China hasn’t established at present..

China IT & Software Industry • China’s mobile phone market has overtaken the US and is now the biggest in the world with more than 190 million subscribers at the end of 2003. • China is planning to spend more than $120 billion over the next five years developing its telecom and IT industries. • The number of Internet users in China at the end of 2003 has reached 85 million and will be 150 million by 2005. Now China is the world’s second-largest Internet user base. • China software market is expected to achieve a compound growth rate (CAGR) of 36.9%, reaching US$7.7 billion in 2006. • ERP applications will grow at a CAGR of 32% to reach US$3.6 billion by 2005. The CRM market is expected to grow at a CAGR of 37%, to reach US$2.7 billion by 2005.

China Call Center Industry Snapshot • 125,900+ call center seats • Compound annual growth rate >16% • Industry value estimate US$2.1 billion • 60% have been operating for <4 years • Non services call centers < 20% • Outsourcing call centers < 16% • Average CSR salary US$3500 • Annual loaded salary less than US$4000 >88% • Call Center consulting and training market >US$500M

China Vs. Worldwide Call Center Industry Infrastructure 100% Outsourcing, Consulting & training 14.37% 73% 80% 60% 85.63% 40% System Integration 20% 27% 0% Global China Source：CTIForum

Market Engineering Seats Forecasts for the China Call Center Services Market Source: CTIForum 2004

Market Drivers Source: Frost & Sullivan

Market Restraints China Call Center Market: Market Restraints Ranked in Order of Impact, 2001-2005 Source: Frost & Sullivan

Trends in China Service Center • Market is still relatively immature • China Service Centers tend to be small • China Service Centers not always tightly managed • Customer service most common business functions • Major technology Gaps • Majority are planning to upgrade their Technology • Low uptake of external QA programs • Outsourcing is fastest growing sector • Major issues with accessibility of skilled HR resources

What Are the Challenges • Lack of resources/industry know-how on technology and people management • Price competition on system integrators and outsourcing call centers • The doubtful effects for call center consulting • The traditional concepts from high level management. Call Center managers have difficulties on high quality people hiring, training, applying advanced technology, etc. • Internal Process is too long to kick off projects

Trends in Call Center/Technical Support Technology • Multi-Media Contact Center • IP Call Center • Voice Web Portal (Self-Services) • Knowledge Workers • Integrated Contact Centers Across Companies & Cross Border

Channels of Customer Contact are Expanding

Existing Technology Philippines Singapore Malaysia All Asia Countries Thailand HK India China Source: callcenters.net 2003

Equipment Enhancement Plan

CRM, WFM, and PD Enhancement Plan

VoIP and Speech Recognition Enhancement Plan

Decision Making

Call Center Issues Faced in Next 12 Months

Current China Service Center Operations Issues • Labour shortage • Staff Motivation and Training • Managing Growth and System integration • Need to demonstrate ROI • Sunk Costs restraining purchases • Lack of management skills/experiences • Poor technology/system issues • Standardized operation procedures • CRM implementation • Language Capabilities

95Teleweb SCP KPIs

2004 Audit Results

Benchmark Comparison

Characteristics of China Support Centers • Corporate Culture and Environment • Employee Training, Staffing, and Incentives • Levels of Customer Service • Incorporating Customer Feedback • Interdepartmental Relationship and Consistency Across Channels • Measuring Customer Centricity and Links between Contact center Performance and the bottom line • Tools and Technology

1. Corporate Culture and Environment • Motivation for the organization to become customer centric, including barriers that the organization had to overcome • Customer service philosophy • How culture has aided or worked against the contact center’s focus on customers • How company leaders internally demonstrate their commitment to customer centricity • How companies ensure that each contact with the customer is made with warmth and appropriate intimacy • Individual responsibility in the contact center for resolving customer complaints

2. Employee Training, Staffing and Incentives • Developing necessary qualities in customer-centric technical support agents • Attracting, hiring, retaining, and motivating support talent that have both people skills and technical skills • Optimizing staffing levels in the contact center to provide the level of customer service that customers desire, while balancing the company’s cost and resource requirements • Ensuring the contact center performance management system supports the employee and management behavior necessary to deliver the optimal customer experience

3. Levels of Customer Services • Providing mass customization • Segmenting customers and determining levels of service • Managing growth in the customer base • Exceeding the expectations of customers • Explaining service commitments to customers

4. Incorporating Customer Feedback • Soliciting customer comments • Soliciting perceptions of competitors’ performance as well as of company performance • Determining the attributes that contribute to customer loyalty • Demonstrating a link between a customer-centric approach and increased customer loyalty • Sharing, posting, and updating contact center performance measures • Having a future orientation toward customer needs

5. Interdepartmental Relationships and Consistency Across Contact Channels • Contact center relationship with other areas of the company • Process for resolving conflict between departments • Assurance that customer contacts and service delivery are consistent across all contact channels • The process by which front-line service collaborates with back-office process

6. Measuring Customer Centricity and Links between Contact Center Performance and the Bottom Line • Measuring success in the contact center • Ensuring customer contact representatives and center measures are balanced • Balancing efficiency measures with softer measures of customer centricity • Tracking internal metrics that are predictors of increases or decreases in overall company success or customer satisfaction • Measuring ROI on customer-centric initiatives • Constructing a business case to justify the strategic plan for customer centricity

7. Tools and Technology • Existing technology in place • Assurance that everyone in the organization has a complete picture of the customer at all times • Role of knowledge management systems to enable customer centricity • Self-service technology

Future Directions of China Call Centers • More centralization – to achieve cost savings and increase efficiencies • From cost center to profit center – Inbound to outbound • Incorporation of new technologies/applications • Speech recognition and web collaboration: investigations now, implementation next 12 to 24 months • CTI: often linked to longer term CRM implementations. • CRM: some planning & implementation over next 12 to 24 months • VoIP: limited planning at present, seen as longer term (2-4 years) for implementation. Quality concerns delaying adoption

OUTLINE • Technical Support and Help Desk Outsourcing Market • The People’s Republic of China • China Call Center Market Status • China Call Center/Technical Support Challenges • Trend in Call Center Technology • China SCP Experience • Characteristics of China Support Centers • China support Centers SWOT Analysis • Leading China Outsourcing Call Center - 95Info Inc. Introduction

China Now on The Radar Strengths Weakness (Challenges) • Political stability. • Strong government support • Very large domestic market • Economic environment • Attractive after entry into WTO • Non-Latin language skills • Infrastructure – leapfrogs • Hong Kong — gateway for the more timid • Cost of human resources: 20-40% cheaper than India • Reverse brain drain • Strong Linux skills • Intellectual-property protection and piracy • Education level • Lack of process • Poor levels of English • Poor technical innovators • IT companies small • Weak marketers • Weak R&D budgets and efforts • Lack of international name brands • Lack of innovative software products Opportunities Threats/Risks • Distrust of legal system • U.S. ignorance/perception of China • Weak English skills • Slower development of business relationships • Corruption/piracy /trust • Critical shortage of skilled IT resources • Management of internal opposition to WTO reforms • WTO opening up markets • Very large domestic market • 2008 Olympics • U.S. investment focus • Cooperation with India / Accepting Indian providers • Finding creative ways to take on large projects • Mass producing skilled IT professionals

OUTLINE • Technical Support and Help Desk Outsourcing Market • The People’s Republic of China • China Call Center Market Status • China Call Center/Technical Support Challenges • Trend in Call Center Technology • China SCP Experience • Characteristics of China Support Centers • China support Centers SWOT Analysis • Leading China Outsourcing Call Center - 95Info Inc. Introduction

Company Overview Client Lists: • Founded in 1998, joint venture between Teleweb Inc. and CPTT group. • 700 staff (CSRs, Supervisors, managers, project management, account management, CRM developers, IT technician) and some offshore management • Regional sales (Beijing, Guangzhou, Shanghai, Xian) • High-profile and active board of directors • High-profile brand clients (~200)

Company Profile • A global provider of IT and business process outsourcing solutions to Fortune 1000 corporations, Chinese enterprises, and service organizations. • Ability to integrate customer services into a flexible, total single-point-of-contact solution is a key element of 95Info’s success. • Strong commitment to quality and has been delivering IT service solutions for over 6 years in China. • Partnerships with some of the best-in-class corporations provide 95Info with unparalleled experience in providing IT support solutions: • Help Desk/Call Center Services • Technical/Management Staffing • Professional Services/System Integration • Training Programs

Key Competitive Strengths • Internationally Recognized Client Base affording significant growth potential and highly respected references • Multiple Service Offerings that provide expanded business opportunities with existing clients for new services • Technically Proficient Employee base that enables us to compete more effectively for sophisticated IT support services • Recognition for Delivery of Quality services in the form of ISO9001:2000and SCP certifications, the international standard for quality assurance and operating consistency • Advanced Technology infrastructure featuring state-of-the-art call center enabling the company to maintain a leading provider of the IT support services • Strong financial position and solid balance sheet

The State of Service & Support in China