STRATEGIC ROADMAP

Brian Economaki
Gabriel Gaspar
Harald Tolleshaug
Tran Thi Thu Huong
1
 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

2
[ perspectives ]

The competitive Landscape

3
 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]
2,200 550
110

8,200
25
70 Russia
Ireland Poland
700
5,500
Canada
12.2
200
300
China

100
Mexico 5.2
800 India

200 330
ITeS Exports 120 Philippines
30
Brazil 220
BPO Exports 50 40
25 Malaysa
Romania
25 S. Africa
Hungary
Source: 1) neoIT 4
 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 &
Value Added

Installation Support Full Process Outsourcing

Rules-based Processing Problem Solving

Out-tasking
Maintenance
Application
Support Technical Support

Data Entry

Strategic Impact
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 Situation Analysis: Quality Differentiation

Although it is the cost-benefit perspective which attracts new

clients – Differentiation and Value must be created

vCustomer Solutions Objectives of Value Creation

Client Retention
• MOVING FROM COSTS TO
SPEED AND INNOVATION

Custom Solutions
SERVICES MIX • ADDING VALUE THROUGH
CUSTOM PRODUCTS TRANSFORMATIONAL BPO
QUALITY AND EXPERTISE

Client Acquisition
• ENTERING NEW MARKETS
AND BUSINESS AREAS

6
 [ growth ]
Geographical Expansion

7
 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 “Vendors who do not

MIDDLE-SIZED COMPANIES
WHO WERE LEFT BEHIND ON
THE OUTSOURCING PROCESS
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 8
 Growth Strategy: Benefits of CRM, BPO

Competition is forcing players to expand internationally in order to

further explore cost savings synergies

Phase 1: National Phase 2: Internationalization Phase 3: Multinational

consolidation 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 National markets Consolidation activities
• Risk is less dependent on Regional markets Products
a single geographical area
• Additional funds for further
growth – size drives further size

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 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

10
 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

Moscow 2• CAPEX + OPEX

Riga expenditures
• Language
8 proficiency

Warsaw • Industry
3
Kiev size
Prague
Low
Budapest • Process
Bucharest Medium 4 maturity
• Educatio
7 n System
Sofia High

• Location + Culture
• Infra- 5 (nearshore)
6 structure

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 Growth Strategy: Entering Bulgaria, Monitoring Hungary

Expansion Location: Plovdiv & Varna (Bulgaria)

As the market grows, further expansion can happen in Hungary

Bulgaria India USA Cities with Students [# of graduates]

Procedures [#] 11 11 5 Evaluation before 1700 12400
Cost expading into Hungary
[% of income per capita] 9.6 61.7 0.5 7900
Min. Capital
[% of income per capita] 104.2 0 0
Dealing with Licences
[% of income per capita] 325 678 16.9
Difficulty of Hiring
(0-100) 61 56 0
700
Difficulty of Firing 2100
(0-100) 10 90 10
Cost of Firing
(0-100) 30 79 0 Varna Plovdiv Budapest Szeged
Strength of Investor Bulgaria (1-2 years) Hungary (3rd year) TOTAL
Protection (0-100) 5.3 6.0 8.3

Source: “Doing Business in 2006 – World Bank and the International Finance Group, McKinsey Quarterly” 12
 Growth Strategy: Entering Mexico

Expansion Location: Monterrey, Mexico

•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

Source: World Bank and IFC, 2006

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[ plan ]
Implementation Roadmap

14
 3-Year Implementation: Overview

Implementation Roadmap – Projects take place in a three year

period according to milestones and checkpoints
Bulgarian call Mexican call center
center goes live goes live
Year 1 Year 2 Year 3
• RPO Recruitment • RPO Recruitment & • Evaluate Mexico
Internal
& training - training – Mexico • Further development on,
Bulgaria • Evaluate Bulgaria or exit from, European
• Consider expansion healthcare market
Romania/Hungary
Evaluate and
Bulgaria Mexico
develop
• Pursue healthcare
clients in European
Markets
External
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 3-Year Growth: Financial Outlook

Financial Status
Revenues 2003-2006

• Positive CF since Q4.2001 $60,000,000

• 25 mio. $ accumulated money

$40,000,000
reserve
• Stable CF from established $20,000,000
CRM business
$0
2003 2004 2005 2006

Your financial flexibility is able to support the

recommended expansion without raising further capital

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 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.

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 Thank You. Questions?

Ease of Doing Business – a Comparison EU Map

World Ranking – Ease of Doing Business
Ranking Criterias SWOT
vCustomer – the Company
Bulgaria
Bulgaria – Ease of Doing Business Competitive Landscape
Motivations to Offshore
Why Bulgaria?
Porter’s Five Forces
Cities to operate in – Eastern Europe Offshore Market Potential 1
Offshore Market Potential 2
Mexico Multiple Engagement Models
Mexico – Ease of Doing Business Indian Business Models
Vendor Selection Criteria
China – Ease of Doing Business
Why not China 1? Country Attractiveness Index
Why not China 2? ITO Landscape
BPO Landscape
Why not China 3?
Country SWOT 1
Country SWOT 2
India – Ease of Doing Business Why Europe? – Offshore penetration by geography

BPO in Europe – Q1 2007

A Viable Investment

A Financial Example 18
 Porter’s Five Forces Index

Porter’s Five Forces

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 Ease of Doing Business Index

Doing Business – a Comparison

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 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

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 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.

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 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

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 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.

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 Overview: China Index

China – Ease of Doing Business

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

25
 Overview: India Index

India – Ease of Doing Business

Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.

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 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.
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Ease of Doing Business Criteria Index

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Map of EU Index

29
 Eastern Europe Suitabl Graduates Index

Where to go – Eastern Europe

Plovdiv & Varna

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 vCustomer SWOT: April 2007 Index

SWOT

Strengths
Quality services
Customized solutions
Call centers in India
ISO & Six Sigma certified
Weaknesses
High costs - no economies of scale
Small product umbrella
Limited financial ability
Only located in India

Opportunities Threats
Nearshoring Increasing competition
Increasing demand from Europe Market saturation
Increasing nr. of BPO companies
Industry M & A
Losing quality during expansion

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 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

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BPO Competitive Landscape Index

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 Potential Client Offshore Motivation Index

Motivations to Offshore

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 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

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Country Attractiveness Index 1 Index

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 ITO Landscape: 2006 (McKinsey) Index

Country Attractiveness Index 2 - ITO

37
BPO Landscape: 2006 (McKinsey) Index

38
 Country Analysis (neoIT) Index

Country SWOT 1

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 Country Analysis (neoIT) Cont. Index

Country SWOT 2

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 Why Europe? Index

Why Europe?

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 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

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.

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 Why Bulgaria? Index

Primary Criteria Secondary Criteria

•Strategic Partnership •Gaining experience for

potential EU operations
•Nearshoring: EU
•Improving infrastructure
•Future potential
•EU Membership: Prioritized
region
•Qualified workforce

Ease of transition to essential market to

optimize first mover advantage

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 Why not China? Index

Why not China?

Red Ocean

•Economies of
scale of larger
(over $1b
revenue)
companies
•Pre-Olympic
‘boom’ vs. post-
Olympic
economy
•Strength in India

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 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

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 Why not China? Cont. Index

Why not China?: Nearshoring

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Offshore Market Potential Index

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 ITO/BPO Industry Outlooks: 2005 Index

Offshore Market Potential 2

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 Multiple Engagement Models Index

From primarily captive… …to a hybrid model

Indian best-of- Indian best-of-

breed vendor breed vendor
Outsource to
Outsource to
Global brand
Global brand

Feasibility of JV/ Alliance JV/ Alliance

outsourcing the
process

Delay Delay
Captive Captive

Cross-border operation sophistication

Source: McKinsey Analysis

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 Indian Business Models
Captive Models
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
Index
India Business Models
Strategic Alliance/Joint
Outsource Model
Venture Models
Joint Venture (JV) Pure Outsource
• Joint Venture with equity participation • Use of a India-based provider to offshore
from customer and vendor. Customer business processes or IT services
retains control due to investments in
entity.
• British Telecom - Mahindra Managed Outsource
• Full-/part-time resources on the ground
in India to facilitate transition, relationship
BOT and Inverted BOT mgmt and transfer of organization and
• Where the Indian Provider sets up facility domain knowledge to third party
and provides implementation support to providers
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
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Criteria for Vendor Selection Index

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 Startup Costs Index

Start Up Cost per Teleworker One-Time

Furniture, Equipment and Telecommunications $5900

One time charges, Set-up & Installation $1200

Total per Teleworker $7100†

Ongoing Monthly Costs Recurring

Telecommunications $110/month

Network & home office/teleworker support $110/month

Total Average Cost per Year $2640

Year One Average Cost $9740

Year Two Average Cost $2640

Recurring One-Time

Savings from unneeded office build out $1,500,000

One-Time start-up Costs (710,000)

Annual Real Estate Cost Avoidance $ 500,000

Productivity ($50K salary x .15 x 100) 750,000

Retention ($50K salary x .20 x 100) 1,000,000

On-Going annual costs (264,000)

Net Annual Savings (1st Year) 276,000 790,000

Net Annual Savings (2nd - 5th years) 1,986,000 Source: UCN, Inc.
Total Five Year Savings 10,010,0008

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 BPO in Europe: April 17th, 2007 Index

BPO in Europe - 2007

•BPO activity in last 12 months higher in EU than in US

•Benelux and Central Europe up 13%
-Trend for growth throughout all of Europe, not just
UK
•Industry specific outsourcing responsible for increase
in Europe
Source: Nelson Hall
April 17, 2007

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 A Viable Investment Index

“Czech Republic, Hungary, Poland, and Slovakia—can offer average labor

cost savings of 40 to 60 percent over costs in Western Europe, while
cities in EU-candidate and non-EU countries can offer cost advantages of
60 to 80 percent.”

- The McKinsey Quarterly - “The Overlooked Potential for Outsourcing in Eastern Europe”, Dec. 06

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