Strategic Roadmap for ITO and BPO Growth and Expansion - Perspectives, Plan, and Implementation

1. STRATEGIC ROADMAP Brian Economaki Gabriel Gaspar Harald Tolleshaug Tran Thi Thu Huong

2. Presentation Agenda • A. Perspectives 1. ITO and BPO Industry size across the globe 2. The Evolution of BPO solutions • B. Growth 1. vCustomer 2. Shaping the new Strategy 3. Going International • C. Plan 1. Implementation Roadmap 2. Financial Status

3. The competitive Landscape • [ perspectives ]

4. Situation Analysis: ITeS and BPO Outsourcing Destination Cost competitive destinations attracted most of ITO and BPO companies • ITO and BPO Industry size in Outsourcing Destination Countries 2004 [USD m] 550 2,200 110 8,200 25 Russia 70 Ireland Poland 700 5,500 Canada 12.2 200 300 China 100 Mexico 5.2 India 800 330 200 ITeS Exports Philippines 120 30 Brazil BPO Exports 220 50 40 Malaysa 25 Romania S. Africa 25 Hungary Source: 1) neoIT

5. Situation Analysis: Value Creation through BPO As competitiveness increases, companies must offer value based solutions which improve their clients way of doing business • Services offered by major companies: • AMOUNT OF VALUE CREATED 1980 1985 1990 1995 2000 2005 2010 Transformational BPO Remote Infrastructure Management Product Development & Testing Design & Integration BPO Customer Contact/ Hardware & Installation Support Full Process Outsourcing Value Added Problem Solving Rules-based Processing Out-tasking Maintenance Application Support Technical Support Data Entry Strategic Impact

6. Situation Analysis: Quality Differentiation Although it is the cost-benefit perspective which attracts new clients – Differentiation and Value must be created Objectives of Value Creation • vCustomer Solutions • Client Retention • MOVING FROM COSTS TO SPEED AND INNOVATION • Custom Solutions • ADDING VALUE THROUGH TRANSFORMATIONAL BPO SERVICES MIX CUSTOM PRODUCTS QUALITY AND EXPERTISE • Client Acquisition • ENTERING NEW MARKETS AND BUSINESS AREAS

7. [ growth ] • Geographical Expansion

8. Growth Strategy: Potential of Middle-Sized Companies While major players (>1 bn USD) fight for large accounts, vCustomers specializes in middle-sized companies • UNTAPPED DEMAND LIES ON MIDDLE-SIZED COMPANIES WHO WERE LEFT BEHIND ON THE OUTSOURCING PROCESS • “Vendors who do not narrowly dominate niches in the broad market will continue to try and find the shrinking number of buyers who still buy on a relationpship basis.” • Vinnie Mirchandani • Founder of Deal Architect • And Jetstream Group • 21 % • GROWTH POTENTIAL Accenture, CSC, EDS, Fijutsu,  HP and IBM combined have only 21% of market-share 1) Source: 1) Gartner

9. Growth Strategy: Benefits of CRM, BPO Competition is forcing players to expand internationally in order to further explore cost savings synergies Phase 1: National consolidation Phase 2: Internationalization Phase 3: Multinational consolidation • Country A • Country B • Country A • Country B • Country A • Country B • Country C • Country D • Country C • Country D • Country C • Country D Time • Benefits • Economies of scale • Risk is less dependent on a single geographical area • Additional funds for further growth – size drives further size Consolidation activities National markets Products Regional markets

10. Growth Strategy: Health Care Upcoming in Europe • Current State of Demand: Health Care (Europe) • Departmentalization of government Health Care Providers • Demand for ITES in HR, Training, Revenue Cycle Management • Looking to cut costs wherever customer care isn’t sacrificed Trends Changing Demand: 2007-2010 • National Health Systems Gaining Interest in BPO • Global Service Delivery in all Health Care Business Processes • Positive impact of nearshoring Solution: End-to-End Business Process Solutions in long term contracts, maintaining quality and evaluating performance

11. Growth Strategy: Competitive Entrance In Eastern Europe Entering Europe through the back door – Cost-competitive countries on Eastern Europe will provide language and IT skills Country Analysis Framework 1 • Labor cost 9 • Labor skill Level • CAPEX + OPEX expenditures 2 Moscow Riga • Language proficiency 8 Warsaw • Industry size 3 Kiev Prague Low Budapest • Process maturity 4 Bucharest Medium • Education System 7 Sofia High • Location + Culture (nearshore) 5 • Infra-structure 6

12. Growth Strategy: Entering Bulgaria, Monitoring Hungary Expansion Location: Plovdiv & Varna (Bulgaria)As the market grows, further expansion can happen in Hungary Cities with Students [# of graduates] • Bulgaria • India • USA • Procedures [#] • 11 • 11 • 5 • Evaluation before • expading into Hungary • Cost • [% of income per capita] • 9.6 • 61.7 • 0.5 • Min. Capital • [% of income per capita] • 104.2 • 0 • 0 • Need for growth • expansion • Dealing with Licences • [% of income per capita] • 325 • 678 • 16.9 • Difficulty of Hiring • (0-100) • 61 • 56 • 0 • Difficulty of Firing • (0-100) • 10 • 90 • 10 • Cost of Firing • (0-100) • Varna Plovdiv • 30 • 79 • 0 • Budapest Szeged • Strength of Investor Protection (0-100) • Bulgaria (1-2 years) • Hungary (3rd year) • TOTAL • 5.3 • 6.0 • 8.3 • Source: “Doing Business in 2006 – World Bank and the International Finance Group, McKinsey Quarterly”

13. Primary Service: U.S. Market  81% ITES, 2006 • Serve Spanish speaking population in U.S.: est. 100m • Proximity to U.S. border  Nearshoring • Infrastructure Strength: • Two International Airports • 5 renowned Mexican Universities: Monterrey Institute of Technology and Higher Studies • Growth Strategy: Entering Mexico Expansion Location: Monterrey, Mexico • Source: World Bank and IFC, 2006

14. Implementation Roadmap • [ plan ]

15. 3-Year Implementation: Overview • Implementation Roadmap – Projects take place in a three year period according to milestones and checkpoints Bulgarian call center goes live Mexican call center goes live Year 1 Year 2 Year 3 • RPO Recruitment & training – Mexico • Evaluate Bulgaria • Consider expansion Romania/Hungary • Evaluate Mexico • Further development on, or exit from, European healthcare market • RPO Recruitment & training - Bulgaria Internal Evaluate and develop Bulgaria Mexico • Pursue healthcare clients in European Markets External

16. 3-Year Growth: Financial Outlook Financial Status • Positive CF since Q4.2001 • 25 mio. $ accumulated money reserve • Stable CF from established CRM business • Your financial flexibility is able to support the • recommended expansion without raising further capital

17. 3-Year Growth: Necessary Info. For Further Consulting • Full disclosure of financials/accounts • Budget preparation, evaluative criteria • Potential and existing partnerships • Offices/call centers operations • Historical process of expansion • Cash flows Risk evaluation • Client List • Contacts • R & D programs and projects • Strategic road map • Consulting for further opportunities through monitoring and evaluation of all emerging markets. Risk analysis and trend identification, as well as strategic positioning for partnerships and/or acquisitions.

18. Thank You. Questions? • EU Map • SWOT • vCustomer – the Company • Competitive Landscape • Motivations to Offshore • Porter’s Five Forces • Offshore Market Potential 1 • Offshore Market Potential 2 • Multiple Engagement Models • Indian Business Models • Vendor Selection Criteria • Country Attractiveness Index • ITO Landscape • BPO Landscape • Country SWOT 1 • Country SWOT 2 • Why Europe? – Offshore penetration by geography • BPO in Europe – Q1 2007 • A Viable Investment • A Financial Example • Ease of Doing Business – a Comparison • World Ranking – Ease of Doing Business • Ranking Criterias • Bulgaria • Bulgaria – Ease of Doing Business • Why Bulgaria? • Cities to operate in – Eastern Europe • Mexico • Mexico – Ease of Doing Business • China – Ease of Doing Business • Why not China 1? • Why not China 2? • Why not China 3? • India – Ease of Doing Business

19. Porter’s Five Forces • Index Porter’s Five Forces

20. Ease of Doing Business • Index Doing Business – a Comparison

21. Overview: Bulgaria • Index Bulgaria • member of the EU since 1.1.2007 • inflation rate of 6,5% in 2006 • flat corporate income tax 15% (no other European country beats this) • established time limits on issuing licenses • ranks 62 on the World Bank’s ‘Ease of Doing Business Ranking’, China ranks 91, India ranks 116 and US ranks 3 Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp., and “The World Factbook” - CIA

22. Overview: Bulgaria Cont. • Index Bulgaria – Ease of Doing Business Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

23. Overview: Mexico • Index Mexico • corporate income tax 30% • Inflation rate of 3.4% in 2006 • ranks 73 on the World Bank’s ‘Ease of Doing Business Ranking’, China ranks 91, India ranks 116 and US ranks 3. • nearshore to the US Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp., and “The World Factbook” - CIA

24. Overview: Mexico Cont. • Index Mexico – Ease of Doing Business Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

25. Overview: China • Index China – Ease of Doing Business Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

26. Overview: India • Index India – Ease of Doing Business Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

27. Ease of Doing Business By Country • Index Ease of Doing Business Ranking Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

28. Ease of Doing Business Criteria • Index

29. Map of EU • Index

30. Eastern Europe Suitabl Graduates • Index Where to go – Eastern Europe • Plovdiv & Varna

31. vCustomer SWOT: April 2007 • Index SWOT

32. vCustomer: Company Profile • Index vCustomer – the Company • Close to 100% customer retention • Ranked as fastest growing private company in the ITES industry in 2004 • Ranked among the top 5 pure play call-centers in 2006 • Ranked 12th among the top 20 BPO companies in India • 20 marquee clients • 4500 employees

33. BPO Competitive Landscape • Index

34. Potential Client Offshore Motivation • Index Motivations to Offshore

35. Why not banking, financial services & insurance? • Index • Inability to compete immediately with larger companies • Lack of specialization/training of staff • Economies of scale • Trend toward megacontracts

36. Country Attractiveness Index 1 • Index

37. ITO Landscape: 2006 (McKinsey) • Index Country Attractiveness Index 2 - ITO

38. BPO Landscape: 2006 (McKinsey) • Index

39. Country Analysis (neoIT) • Index Country SWOT 1

40. Country Analysis (neoIT) Cont. • Index Country SWOT 2

41. Why Europe? • Index Why Europe?

42. vCustomer needs to continually monitor India during all future evaluation periods. Competitive advantage with familiarity can lead to positioning in numerous circumstances, including partnerships, mergers, or any offerings of strategic buyouts. • Why India? • Index • Current competitive strength • Foundation of company, developed infrastructure of operations • Despite rising labor costs, relatively low with other viable options • Potential for growth still high • Competitive advantage expertise of all business practices in country

43. Primary Criteria Secondary Criteria • Strategic Partnership • Nearshoring: EU • Improving infrastructure • Future potential • EU Membership: Prioritized region • Qualified workforce • Gaining experience for potential EU operations • Index Why Bulgaria? Ease of transition to essential market to optimize first mover advantage

44. Red Ocean • Economies of scale of larger (over $1b revenue) companies • Pre-Olympic ‘boom’ vs. post-Olympic economy • Strength in India • Why not China? • Index Why not China?

45. Why not China? Cont. • Index Why not China? • Lack of English speaking employees, high cost of internet connectivity, workforce immaturity. • Unfamiliarity with culture • Economic advantages of EU and NAFTA • Not looking solely for cost advantages China needs to be continually monitored as an expansion option to 2010 and beyond

46. Why not China? Cont. • Index Why not China?: Nearshoring

47. Offshore Market Potential • Index

48. ITO/BPO Industry Outlooks: 2005 • Index Offshore Market Potential 2

49. Multiple Engagement Models • Index From primarily captive… …to a hybrid model • Indian best-of-breed vendor • Indian best-of-breed vendor • Outsource to Global brand • Outsource to Global brand • Feasibility of outsourcing the process • JV/ Alliance • JV/ Alliance • Delay • Delay • Captive • Captive • Cross-border operation sophistication • Source: McKinsey Analysis

50. Indian Business Models • Index India Business Models Captive Models Strategic Alliance/Joint Venture Models Outsource Model • Pure Captive Model • An internal cost center or a 100% subsidiary company set-up to execute offshore business processes and/or IT services • Amex, Dell, Standard Chartered, HSBC, Ford, Sun • Joint Venture (JV) • Joint Venture with equity participation from customer and vendor. Customer retains control due to investments in entity. • British Telecom - Mahindra • Pure Outsource • Use of a India-based provider to offshore business processes or IT services • Managed Outsource • Full-/part-time resources on the ground in India to facilitate transition, relationship mgmt and transfer of organization and domain knowledge to third party providers • BOT and Inverted BOT • Where the Indian Provider sets up facility and provides implementation support to start with • Customer can buy out at a predetermined stage • Reverse scenario has also been seen in the market • Aviva-WNS/EXL,24/7, AIG- Polaris