National ITT sector to anchor in the international markets: outsourcing trends

1. National ITT sector to anchor in the international markets: outsourcing trends Tomas Milaknis CEO, Alna AB Vice President, ITC Association INFOBALT

2. LITHUANIAN ITC SECTOR IS BOOMING… • Total ITC sector valued at ~1,237 mill EUR • 7.5% of the Lithuanian GDP • Growth by 27-30% in 2002-2003 • GDP grew in 2003 by 9% • Export of ITC services grew by 28.6% to 45 mill EUR • Total country exports grew by 9.1% • 12 out of 20 top Baltic IT companies are in Lithuania • 44% of 20 major government services are available on Internet in Lithuania (EU – 67%) • Top 10 companies experienced the growth of their exports from 40% to 80% in 2003

3. …. BUT COMPETITION IS INCREASING • 600 ITC companies already operate in Lithuania • Globalization process • New players come – World famous IT Giants HP, IBM, TIETO, MICROSOFT, ORACLE etc. • Influence of integration with EU – new IT players in the region from EU countries • Estonian and Latvian companies expand to Lithuania

4. LITHUANIAN IT INDUSTRY TOMORROW. WHERE WE SHOULD GO? Scenarios of Lithuanian ITC industry development • Expand: • Enter new markets • Start projects in neighboring countries • Start outsourcing activities • Specialize: • Niche solutions and competence • Specialized products

5. GLOBAL TRENDS THE RISE OF BUSINESS PROCESS OUTSOURCING IN EUROPE • Eastern Europe will be the primary offshore delivery platform for BPO in Europe by 2007 • Spending on BPO in Europe will reach 4,3 USD billion by 2007 • A Consortia of service providers will be necessary for 70 percent of strategic BPO in 2007 • One-third of outsourcing deals will include business-benefit-based pricing by 2007 instead of 11 % now. (Now – 50 % fixed price, 39% – per transaction, 4% - time and materials)

6. GLOBAL TRENDS OUTSOURCING PLAYERS SHOICE. NEARSHORE vs OFFSHORE • These inhibitors provide excellent opportunities for the nearshore providers: • Geopolitical risk • Global economic slowdown • Unknown countries • Unknown vendors • Lack of infrastructure • Language & culture • Lose control • So, Lithuania is on the pipe, but we still look poor comparing Romania, Bulgaria, even Latvia achievements

7. GLOBAL TRENDS IT FUTURE…by 2007 • End-User Consider… • Outsourcing anything non-value-added • Standardizing everything you can at base level • Rigorously managing your portfolio • Massive Vendor consolidation • Computing Infrastructure goes virtual • Networks goes wireless broadband • Massive shift in Software Architecture – applications will be built by assembling services • Major wave of Innovation and demand for IT will start at 2006 • Real-time analytics, massive data and process management will emerge as the most important business applications

8. …. AND CONCLUSIONS COULD BE • Design Architectures and company strategies should be based on fundamental and inevitable confluence of: • Real-time infrastructure • Wireless broadband • Low-cost, low-power-consumption mobile devices • Service oriented architecture • Trigger year is 2006 – future will be terrific for those that upgrade their skills now.

9. ACTION POINTS • We must ensure that we have a vision of what we want to achieve as offshore / nearshore providers • We also need to have a carefully developed strategy to achieve this. • We also need to drive our companies to get international qualifications to support positioning and marketing (CMM) • Many countries are now putting offshore outsourcing high on their agenda for economic growth. The window of opportunity is thus narrow. We need to move fast. • We should take a critical look at our strengths and weaknesses and define our starting point immediately • We need innovations and infrastructure at 2 levels: Government and private sector organizations.

10. ACTION POINTS • We should reload our service portfolio - From body shopping to product development, project management • We should go to Alliances • We should start specialize in order to have leading positions in on the global substantial niches: • Enterprise content management (process, documents, collaboration, data, real-time analysis management) • Wireless solutions • Applications for mobile devices

11. ROLE OF GOVERNMENT • Innovation Support: - Active promotion of cluster policies – e.g. participation in “Sunrise Valley” and “Technopolis” projects • Knowledge society: • Government already is active in “Window to the future” project • Government supports school computerization • Export marketing: • Government should market Lithuania as a No1 choice for nearshore • Government should join Outsourcing2Lithuania project • IT services outsourcing: • Government should lead the way starting to outsource IT • Government should increase operational effectiveness by outsourcing

12. OUTSOURCE2LITHUANIA • Goal: to become No1 outsourcing destination in Europe • Stages: • Information presentation • Training • Marketing • Challenges: it is very expensive to market Lithuania abroad and compete with a substantial government support for marketing of India and other countries

13. BRINGING INNOVATIONS TO THE COUNTRY. ROLE OF ALNA • Gartner says, Alna is one of the leading near-shore site for outsourcing in Europe • Starting in 1995 from “body-shopping”..... … 2004: complete project delivery in 30 countries on five continents • Passionate in quality – already CMM Level 2 • Hundreds of specialists through partner networks and Alliances with global players (India, Europe) • Product Development • Document management system DOCLOGIX – sold in Germany, Denmark, Lithuania, Latvia, Estonia • Investments into new products development - 1 m Euro

14. The condition of IT industry is self-inflicted. Let’s join the forces and act. tmilaknis@alna.lt www.alna.com