Atos Origin NASSCOM 2008 Hubert Tardieu EVP C&SI

Characteristics and Trends in European Market Source : Gartner IT is taking on a strategic role There is a clear trend towards contracts linked to business outcome (e.g. savings, margin, contract value) The focus is on generating value and not just cost reduction Highly flexible solutions which help reduce response time to market variance Core business process optimization using industry specific IT solutions Reduction in TCO TRENDS CHARACTERISTICS Selective Outsourcing With Multiple Providers Embraced by majority of European companies Objectives: IT excellence and cost optimization Integration and governance challenges Global Sourcing and Global Delivery Models Close-shore & Near-shore proximity key for European market Expanding portfolio of outsourcing services Key area of investment for providers and buyers IT Utility Industrialization is accelerating Convergence of IT utility and global delivery Key drivers: flexibility, efficiency, optimized cost, speed Aggressive ESP Competitive Landscape National, "global" and offshore ESPs converging Mergers, acquisitions and divestitures to continue Providers are implementing new business models New offshore market entrants Application Outsourcing to Grow Drivers: portfolio rationalization, legacy modernization Global delivery will gain acceptance Multitude of providers competing Growing focus on Remote infrastructure management Clients seek 24x7 “follow the sun” coverage and global footprint Variable pricing, SLA provisions, and more flexible contract models are prevalent Small players offering remote services for niche markets

IT is taking on a strategic role

There is a clear trend towards contracts linked to business outcome (e.g. savings, margin, contract value)

The focus is on generating value and not just cost reduction

Highly flexible solutions which help reduce response time to market variance

Core business process optimization using industry specific IT solutions

Reduction in TCO

Embraced by majority of European companies

Objectives: IT excellence and cost optimization

Integration and governance challenges

Close-shore & Near-shore proximity key for European market

Expanding portfolio of outsourcing services

Key area of investment for providers and buyers

Industrialization is accelerating

Convergence of IT utility and global delivery

Key drivers: flexibility, efficiency, optimized cost, speed

National, "global" and offshore ESPs converging

Mergers, acquisitions and divestitures to continue

Providers are implementing new business models

New offshore market entrants

Drivers: portfolio rationalization, legacy modernization

Global delivery will gain acceptance

Multitude of providers competing

Clients seek 24x7 “follow the sun” coverage and global footprint

Variable pricing, SLA provisions, and more flexible contract models are prevalent

Small players offering remote services for niche markets

Clear Trend in European Market Towards Fixed Price End to End Application Management Contracts European IT Market Fixed Price Time and Material Packaged Solutions Custom Solutions End-to- End Application Management Projects Higher customer maturity is resulting in movement towards fixed price There is greater focus on package solution due to Clients willingness to move towards package solutions Evolution of packaged solutions over the years to account for customer specifics Movement towards Fixed price projects Higher share of Package solution Focus On End-to-End Application management High growth potential for End-to-End Application management Using Packaged Solutions

Higher customer maturity is resulting in movement towards fixed price

There is greater focus on package solution due to

Clients willingness to move towards package solutions

Evolution of packaged solutions over the years to account for customer specifics

Outsourcing Potential of European Market Key Highlights Application outsourcing to grow Selective outsourcing with multiple providers Focus on generating value and not cost reduction Movement towards fixed price contracts Focus on package solutions Aggressive ESP competitive landscape Business driven SLAs Outsourcing Market (In Billions of Euros) trend Source : Gartner Country 2005 2010 CAGR UK & Ireland € 17.2 B € 25.7 B 8.3 % Netherlands € 3.4 B € 5 B 8 % France € 6.6 B € 10 B 8.4 % Germany € 10.6 B € 16 B 8.6 % Spain € 2.9 B € 4.2 B 7.8% Italy € 3.6 B € 4.6 B 4.7% TOTAL € 44.3 B € 65.5 B 8.13%

Key Highlights

Application outsourcing to grow

Selective outsourcing with multiple providers

Focus on generating value and not cost reduction

Movement towards fixed price contracts

Focus on package solutions

Aggressive ESP competitive landscape

Business driven SLAs

The European market is not a single market in terms of offshoring and can be divided into 3 parts Nordic countries and UK are comparatively more open to offshoring Central European countries viz. France and Germany , where the potential for global sourcing is high, are opening up gradually to offshoring Southern European countries viz. Spain and Italy are in the nascent stages of offshoring Language and culture issues also results in different preference for offshoring UK & Netherlands based companies prefer India French companies prefer the Mediterranean region German companies like delivery centers based in Poland and The Czech Republic Spanish companies prefer Latin America Italian companies look towards Romania Language constraints reduce the extent of offshoring possible to India along the service axis e.g. requirement gathering and documentation activities. The IT functions that are being sent offshore at the moment are still primarily low-added-value offerings Offshoring Wave Traveling From North to South Europe

The European market is not a single market in terms of offshoring and can be divided into 3 parts

Nordic countries and UK are comparatively more open to offshoring

Central European countries viz. France and Germany , where the potential for global sourcing is high, are opening up gradually to offshoring

Southern European countries viz. Spain and Italy are in the nascent stages of offshoring

Language and culture issues also results in different preference for offshoring

UK & Netherlands based companies prefer India

French companies prefer the Mediterranean region

German companies like delivery centers based in Poland and The Czech Republic

Spanish companies prefer Latin America

Italian companies look towards Romania

Language constraints reduce the extent of offshoring possible to India along the service axis e.g. requirement gathering and documentation activities.

The IT functions that are being sent offshore at the moment are still primarily low-added-value offerings

Differences Between US and Continental Europe Criteria US Europe Remarks In-sourcing Low HIGH Reasons for Europe Volume not high enough to out-task High emphasis on staff transfer Package solutions hence higher skill requirement Out Tasking High Low Out-sourcing Medium maturity & readiness High maturity & readiness Technology Adoption (Custom v/s Package) First movers hence faster adoption of new technologies Lags US and hence leapfrogging from US. This has led to higher focus on packaged solutions in Europe Deal size in terms of Volume of work Large number of big deals Relatively lower number of big deals Difficulty in out – tasking due to lower volume of out-tasking work Type of Contracts More contracts on T&M Higher proportion of Fixed Price contracts Europe is ahead of USA in multi-year Fixed Price contracts for transformational outsourcing Currency $ becoming weaker against major global currencies € and £ have appreciated against $ in the last couple of years Profitability of IT vendors strongly relying on US market is getting impacted. More and more vendors are trying to penetrate the European market.

Reasons for Europe

Volume not high enough to out-task

High emphasis on staff transfer

Package solutions hence higher skill requirement

How Atos Origin Addresses European Market Process & Tools Diversified Global Sourcing Supplier Rationalization & Mutualization Service catalogue & Units of Work ADM/IM sourcing Cost reduction Portfolio Rationalization Demand Management

Atos Origin commitment on ADM operations costs Average Cost Savings Using Atos Origin Solution - 35% Resource optimization, Mutualization Start offshore Demand Management Best efficiency (CMMI) Stabilized Offshore model Continous offshoring Mutualization 100% Scale savings Demand Management efficiency CMMI 3 40% Offshore Year 1 Year 2 Year 3 Year 4 Continuous Improvement Additional savings due to portfolio rationalization 60% Offshore 95% subco’s replaced 20% Offshore 0% 10% 20% 30% Cost reduction

Resource optimization,

Mutualization

Start offshore

Demand Management

Best efficiency (CMMI)

Stabilized Offshore model

Continous offshoring

Mutualization 100%

Scale savings

Demand Management efficiency

Continuous

Improvement

Atos Origin’s Position vis-a-vis Indian IT companies Source : Derived from annual reports Significantly Higher Proportion of Revenues from Fixed Price Contracts

Conclusion The European market is significantly different from the US market Outsourcing of application management is catching up with infrastructure management Best practices learned from i nfrastructure outsourcing are being implemented successfully in outsourcing application management To become successful in European market needs different skills and capabilities With our leadership position in Europe and our track record in infrastructure management we are best positioned to ride the new wave of global sourcing in Europe

The European market is significantly different from the US market

Outsourcing of application management is catching up with infrastructure management

Best practices learned from i nfrastructure outsourcing are being implemented successfully in outsourcing application management

To become successful in European market needs different skills and capabilities

Thank You!

Atos Origin www.atosorigin.com