Meeting the challenges in off shoring of engineering services, Vikas Sehgal, Principal and Director, India Business, Booz Allen Hamilton

Slide 1: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Booz Allen Hamilton – NASSCOM Presentation Mumbai, India · February 13, 2008 1 This material was used by Booz Allen Hamilton during an oral presentation; it is not a complete record of the discussion. No part of this document may be circulated, quoted, or reproduced for distribution without prior written approval from Booz Allen Hamilton.

Slide 2: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Engineering lies at the very heart of organizations Note: Based on top engineering spenders/key innovators in Automotive, Aerospace, Telecom, Semiconductor, Consumer electronics and Pharmaceuticals verticals 2 Source: Booz Allen IC, Booz Allen Innovation 1000 database, Booz Allen analyses

Slide 3: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question IT is important – but engineering is in a league of its own Percentage of Respondents Considering a Function Core/Strategic 100% 95% (2007) 80% 80% 75% 70% 60% 60% 40% 30% 20% 0% Engineering Finance Sourcing Sales & Marketing Manufacturing IT Source: Booz Allen IC, Booz Allen client engagements 3

Slide 4: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question IT is linked to the entire value chain but engineering sits at the heard of it Working Relationships B/W Different Functions Sales & Finance Marketing Product IT Engineering Strategy Strong linkage Tertiary linkage Manufacturing Sourcing Source: Booz Allen IC, Booz Allen client engagements 4

Slide 5: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Companies such as Toyota are built around engineering Toyota Business Model QRD PRODUCT PROGRAM SOURCING PRODUCTION STRATEGY MANAGEMENT ENGINEERING Strong Long-term Conservative Design CE as Creative Production Bundled Reveal Continuous Investment Re-use Integrator Tension Functional Supplier Outsourcing Problems Improvement Engineering Orientation Relationship Configuration Simplicity Discipline Long-term Supplier Incre- Follower and Supplier Supplier Capability JIT and mentalism Schedule Engineering Competition Development Kanban Maintenance Cost Source: Booz Allen IC, Booz Allen client engagements 5

Slide 6: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Engineering landscape is evolving more rapidly Past: Extent of Engineering (1900s) Dominant region for engineering activity Emerging regions for engineering activity Source: Booz Allen IC 6

Slide 7: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Engineering – Present Present: Extent of Engineering Dominant region for engineering activity Emerging regions for engineering activity Source: Booz Allen IC 7

Slide 8: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question The Future Future: Extent of Engineering (2015) Dominant region for engineering activity Emerging regions for engineering activity Source: Booz Allen IC 8

Slide 9: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Following the shift, companies are increasingly utilizing global model for engineering Share of Foreign R&D Sites Top Reasons for New Site Planning – All Companies – 100% Business 90% Environment Technology (9%) Clusters or 80% 45% Academic 51% 54% Institutes 70% 60% 62% (20%) 68% 70% Percentage of Sites Low-Cost Skill Base 60% (18%) 50% Markets or 40% Qualified Workers Customers (18%) (24%) 30% 55% 49% Proximity to 47% 20% 40% Production 38% 32% 30% Facilities (12%) 10% 0% 1975 1980 1985 1990 1995 2000 2006 Note: Based on survey of companies with home base in Europe 9 Source: Booz Allen Survey of leading companies

Slide 10: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Companies view engineering services through a global lens Sites Under Active Consideration for Engineering Services St. Petersburg Moscow Changchun Beijing Budapest Shanghai Gurgaon Bangkok Guangzhou Pune Manila Hyderabad Mexico City Bangalore Mysore Chennai Sao Paulo Johannesburg Satellite Site Global Service Site Note: Weighted average scores based on client ratings 10 Source: Booz Allen client study; Booz Allen analysis

Slide 11: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Business of engineering offshoring is competitive—many want a piece of this pie Government Support for Engineering Offshoring (Present) Policy Support for Engineering Offshoring Forced Support Active Support Passive Support Source: Booz Allen IC 11

Slide 12: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Countries like China are formulating policies that are aggressively geared towards attracting high value add services Comparison of Incentives Offered by Countries for R&D/Engineering Services (Relative Scale) Czech India China Mexico Russia Republic Poland Hungary Thailand Philippines Tax Reduction (e.g. tax abatement in SEZs) Subsidies & Grants (e.g. Subsidy on percentage of total cost) Infrastructure Improvements (e.g. access to communication, power, water supply, roads, etc.) Training & Education (e.g. grants to train employees for new roles, grants to R&D institutes) Policy Support for Engineering Offshoring Strong Support Moderate Support Passive Support 12

Slide 13: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question So yes, it is a big opportunity Market Potential for India $40 (2004 – 2020) $35 Defense Opportunity $30 Revenue Potential ($ Bn) $25 $20 $15 Commercial $10 Opportunity $5 $0 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Booz Allen NASSCOM study; Booz Allen IC; Industry research, Expert Interviews 13

Slide 14: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Yes, India leads the pack for engineering services, currently Competitive Index of Countries – Engineering Services 6 (Present) 5 4 Competitive Index* 3 2 1 0 India China Mexico Russia Czech Poland Hungary Thailand Philippines Egypt Ukraine Bulgaria Brazil Vietnam Romania Turkey South Republic Africa * Competitive Index based on a range of 0 – 7 (0 – Minimum, 7 – Maximum) 14 Note: Scores for countries are based on scores for components in Country Assessment framework Source: BAH analyses

Slide 15: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question …but others are catching up Competitive Index of Countries – Engineering Services 6 (2015) 5 4 Competitive Index* 3 2 1 0 China India Russia Mexico Thailand Czech Poland Philipp. Hungary Egypt Ukraine Bulgaria Brazil Romania South Vietnam Turkey Republic Africa * Competitive Index based on a range of 0 – 7 (0 – Minimum, 7 – Maximum) 15 Note: Scores for countries are based on scores for components in Country Assessment framework Source: BAH analyses

Slide 16: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Questions for the panel 1 What is the future of off shoring of engineering services to India 2 What are the challenges that you have experienced in off shoring 3 Are there differences in challenges when dealing with vendors vs. captives 4 What are the most attractive attributes of vendor, and captive 5 Which countries are you looking to source the technical services from – apart from India 16

Slide 17: Please contact Vikas Sehgal at sehgal_vikas@bah.com; 001 312 560 2311 if you have any question Q&A 17