Victor GRADINESCU, Bucarest, November, 22 2005

1. S&T - IT Outsourcing Strategy at European Standards Victor GRADINESCU, Bucarest, November, 22 2005

2. Contents • Overview • S&T at a Glance • S&T Focus • S&T SLA Metrics

3. Overview

4. By 2010, IT services delivered via globally sourced resources (nearshore and offshore) will grow sixfold from 2004 levels. • By 2015, 30 percent of all traditional professional IT services jobs will be delivered from emerging markets rather than first world countries. • (Gartner, 2005)

5. Global Sourcing Model • Four tiers of global delivery approach: • 1. On-site services • delivered at client site (project management, business analysis) • 2. Off-site services • delivered remotely from a center located in same country as the client • (center of excellence, development center, shared services center) • 3. Nearshore services • delivered from a country adjacent to the client, typically providing cost • advantages with appropriate language skills/cultural similarities • 4. Offshore services • delivered from countries remote from client location - choice may depend on • geographic preferences, availability of skills and expertise, cultural and language • compatibility, and business continuity factors.

6. What is being outsourced? BPO SCM, CRM ASP E-Business Solutions

7. IT Outsourcing market • Outsourcing drivers • Automation of business processes • IT intensive organizations • Technology access vs. owning • Cost reductions

8. Outsourcing uptake Constant increasing of outsourcing from the top 100 US companies Spending on externally provided services is growing faster than internal IT budgets worldwide.

9. Outsourcing “mega-deals” in 2004 Deals signed until November 2004 Top ESPs • IBM, CSC, EDS: the “old” specialists; IBM has the biggest # of deals=24/1999-2003, more than CSC+EDS • Accenture: 2 deals • HP: 2 deals • Capgemini: the largest mega deal $5.5 Bn (UK IR) and the 2nd largest $3.5 Bn (TXU) • T-Systems, SBS: strong European outsourcers • SAIC • Increasingly short in duration: three to seven years instead of 10

10. Global Sourcing Countries for IT Outsourcing Services Status and perspectives (Source: Gartner, 2005) Leader Emerging countries Early entrants • India • Australia • Belarus • Bulgaria • Costa Rica • Egypt • Estonia • Jamaica • Latvia • Lithuania • Malaysia • Mauritius • New Zeeland • Romania • Singapore • Ukraine • Argentina • Cuba • Fiji • Ghana • Korea(S) • Morocco • Nepal • Nicaragua • Pakistan • Senegal • Slovenia • Sri Lanka • Taiwan • Thailand • Tunisia • Turkey • UAE • Venezuela • Vietnam Challengers • Brazil • Canada • China • Ireland • Israel • Mexico • Northern Ireland • Philippines • South Africa • Spain

11. Offshore country comparison India and Canada continue to lead as top outsourcing destinations, while Eastern Europe was rapidly gaining ground as the preferred outsourcing destination for Western Europe (Neo IT, 2005)

12. Romania As a software outsourcing provider Strengths & Weaknesses Country specifics • Strengths • Good education system for mathematics, engineering and computer science • One of the largest number of graduates of technical universities per capita in the world • Close to Western Europe due to a mix of nationalities and cultural roots • High number of technical certifications, especially for software development • Weaknesses • No real leaders in many areas • Relative immature business culture • Limited venture capital available • Stable market economy: 8.3% GDP growth in 2004, • Fiscal IT facilities in place • 80000 IT specialists, average growth 7000 per year • Software industry hiring : 52% of IT jobs, increase to over 63% in the next 5 years • Software & services market estimated at € 500 M in 2005 (30% of total IT market), among the best ratio in CEE Source: ARIS – Romanian Agency for Foreign Investment (www.arisinvest.ro) Source: INSSE – National Institute of Statistics (March 2005) Source: IDC study for Microsoft, 2004

13. Central and Eastern Europe can be an important contender to India (Diamond Cluster, 2005)

14. S&T at a Glance

15. S&T at a Glance • S&T is the leading provider for IT solutions and services • for Telco, Banking, Manufacturing and Government • in 21 countries in CEE • at more than 50 local offices • with 1800 employees • biggest IT company in Austria

16. S&T Presence in Europe’s Most Dynamic Markets RU PL DE UA CZ SK MD AT* HU CH RO SI HR BA SCG BG MK AL GR TR CY MT CY S&T Countries * Headquarters: Vienna, Austria

17. 60.000 50.000 40.000 30.000 20.000 10.000 0 France Italy Neth. Spain Belgium Austria S&T CEE EU 12 Russia IT Market Size in S&T Countries (US$M) IT Spending Source: IDC WW Black Book February 2005

18. IT Market Growth Rates 20% 15% CEE 10% MEA MENA 5% WE WW 0% S&T 2002 2003 2004 -5% -10% Source: IDC 2004

19. Value CAGR: 14% IT Market Projections in S&T Countries 50000 45000 40000 35000 30000 IT Services (US$M) 25000 Packaged Software Hardware 20000 15000 10000 5000 0 2002 2003 2004 2005 2006 2007 2008 S&T Market will be 80% larger in 2008 Source: IDC 2004

20. Foreign Direct Investments in CEE 2005*in Mio. EUR Total = EUR 22.8 Billion * Forecast Source: BA-CA, 02/2005

21. Government Financial Services Manufacturing Industries Telecom / Utilities Region Adriatic (Slovenia, Bosnia-Herzegovina, Croatia, Macedonia, Serbia & Montenegro, Albania) Medical Systems (MED) Managed Services (MS) Customer Support (CS) Region Central (Austria, Hungary, Poland, Slovakia, Czech Republic, Switzerland) Enterprise Systems (ES) Business Solutions (BS) Region South (Bulgaria, Greece, Romania, Turkey, Malta, Cyprus) Region East (Moldova, Russia, Ukraine) Business Segments Regions Group Architecture

22. Plan / Design Build Maintain Run Managed Services (MS) Business Solutions (BS) Enterprise Systems (ES) Customer Support (CS) Appl. Outsourcing Helpdesk Infrastructure Mgmt Appl. Consulting SW Applications Project MgmtCoop with ISV´s BP Analysis Storage Server NetworksSecurity Maintenance for HW and SWTraining S&T Business Model

23. Factors of Outsourcing Vendors Selection and Their Importance – Transition to Business Factors         (IDC, 2005)

24. CEE Ranks Very Competitive on Major Decision Making Criteria • Resources Skill Factors • Education levels • Resource Availability • Cultural Adaptability • Language Proficiency • Economic and Political Factors • Political Commitment • Infrastructure Commitment • Intellectual Property Protection • IT Infrastructure Factors • ICT infrastructure availability • Business & Regional Factors • Public/private sector coop • Location • Regulatory Issues • Market Experience • Quality Issues • Financial Factors • Compensation • Tax and Country-specific costs • Infrastructure (IDC, 2005)

25. S&T Focus

26. S&T Experience – Few Examples • Application Server Hosting – Industry Sector • Disaster Recovery Services – Banking Sector • Business Continuity Center – Banking Sector • Co-operation with Global Outsourcing Providers in serving the regional and local entities of multinational companies

27. S&T Focus areas Software services Operational outsourcing • Product Development • Migration and Porting • Maintenance and Support • Custom Application Development • Quality Assurance and Testing • Business Process Support • Database Management • Transaction Processing • 24 X 7 Support • Application Management • Shared services centers Software product sales Consulting services • Product & Process • Product-Process Improvement • Requirements Definition, Planning & Product Road Mapping • Global Sourcing Planning • Complex enterprise solution optimization • Own S&T software products • Products developed by S&T for third parties • Exclusive partnerships

28. Content of S&T Software Services focus • BPO and Processing Services • Call centres and customer care • Shared services centers • Document processing • Application Outsourcing Services • Application development, enhancement, and maintenance • Application management • Implementation of packaged enterprise applications and development of additional functionality • Systems consulting • Software testing • Engineering and R&D services: Development of software running on embedded systems for the telecom, automotive, aeronautics, and high-tech industries

29. S&T SLA Metrics

30. IT Outsourcing SLA • SLA – an essential part of any outsourcing project: • Boundaries of the project in terms of the functions and services that the service provider will give to the client • Volume of work that will be accepted and delivered • Acceptance criteria for responsiveness • Quality of deliverables • SLA Performance Metrics: • Measure the right performance characteristics • Can be easily collected • Tie all commitments to reasonable, attainable performance level

31. Selecting SLA Metrics • Five Principles for Selecting SLA Metrics: • Choose measurements that motivate the right behavior • Ensure metrics reflects factors within the service provider’s control • Choose measurements that are easily collected • Less is more • Set a proper baseline

32. Categories of SLA Metrics • Volume of work • Quality of work • Defect rates • Standards compliance • Technical quality • Service availability • Service satisfaction • Responsiveness • Time-to-market or time-to-implement • Time-to-acknowledge • Backlog size • Efficiency • Cost/effort efficiency • Team utilization • Rework levels • Reporting Metrics Information • Simple • Actionable form • Balanced scorecards

33. Conclusion The metrics used to measure and managed performance to SLA commitments are the heart of a successful agreement and are critical long term success factor

34. Thank you

35. EST LV RU LT BY PL UA CZ SK MD AT* HU RO SI HR BA SCG BG MK AL GR TR CY MT CY