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Veit Dengler
 Vorsitzender des Vorstandes/CEO, Dell, Slowakei/Slovakia
Off-shoring in Zentral- und Osteuropa im Vergleich ...
Of f-Shoring in Centr al
and Easter n Eur ope




CEE ECONOMIC FORUM –
VEIT V. DENGLER
Velden, September 20th, 2007

DELL ...
Executive summary
  OFFSHORING TO CENTRAL AND EASTERN EUROPE
   IS A KEY BUSINESS IMPROVEMENT LEVER




DELL CONFIDENTIAL...
Off-shoring to Central
and Eastern Europe
countries                      CREDIT SUISSE   UPS           INBEV
             ...
Off-shoring to Central
and Eastern Europe
countries

 2006/07
  ALMOST 80 NEW   ~40,000 ADDITIONAL FTE      SEVERAL MAJ...
Executive summary
  OFFSHORING TO CENTRAL AND EASTERN EUROPE
   IS A KEY BUSINESS IMPROVEMENT LEVER

  DELL IS A GOOD EX...
quot;Came for cost,
stayed for qualityquot;                                                    CORPORATE/REGIONAL
        ...
DELL Evolution in
Bratislava
                                      3    Grew to a European Business Center
              ...
DELL Finance in
Bratislava
            BACK OFFICE                         MID OFFICE                      FRONT OFFICE
 V...
Executive summary
  OFFSHORING TO CENTRAL AND EASTERN EUROPE
   IS A KEY BUSINESS IMPROVEMENT LEVER

  DELL IS A GOOD EX...
Challenges of off-
shoring are largely
exaggerated
                     ONLY TRANSACTIONAL ACTIVITIES CAN BE OFFSHORED
  ...
Productivity gap
closing
                          PRODUCTIVITY IMPROVING
                    Revenue/head/quarter index, ...
Wage differences will
persist




 SOURCE: MCKINSEY
DELL CONFIDENTIAL       13
Executive summary
  OFFSHORING TO CENTRAL AND EASTERN EUROPE
   IS A KEY BUSINESS IMPROVEMENT LEVER

  DELL IS A GOOD EX...
Future expansion
options under
consideration
        SLOVAKIA – WHAT CAN THE LABOR POOL
  1
        SUPPORT, EVEN IN OTHER...
Executive summary
  OFFSHORING TO CENTRAL AND EASTERN EUROPE
   IS A KEY BUSINESS IMPROVEMENT LEVER

  DELL IS A GOOD EX...
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2007. Veit Dengler. Off-shoring in Central and Eastern Europe. CEE-Wirtschaftsforum 2007. Forum Velden.

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2007. Veit Dengler. Off-shoring in Central and Eastern Europe. CEE-Wirtschaftsforum 2007. Forum Velden.

  1. 1. Veit Dengler Vorsitzender des Vorstandes/CEO, Dell, Slowakei/Slovakia Off-shoring in Zentral- und Osteuropa im Vergleich mit Indien Off-shoring in CEE in Comparison with India DELL CONFIDENTIAL 1
  2. 2. Of f-Shoring in Centr al and Easter n Eur ope CEE ECONOMIC FORUM – VEIT V. DENGLER Velden, September 20th, 2007 DELL CONFIDENTIAL 2
  3. 3. Executive summary  OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER DELL CONFIDENTIAL 3
  4. 4. Off-shoring to Central and Eastern Europe countries CREDIT SUISSE UPS INBEV NEW  CENTER OF  F&A CENTER  F&A/CONVERGED EXCELLENCE IN WROCLAW SERVICES CAPTIVE FOR BANKING CENTERS IN SETUPS BACK OFFICE PRAGUE AND IN WROCLAW BUDAPEST WIPRO LOGICACMG CONVERGYS RECENT EXPANSION  NEW SERVICE  NEW CALL  BILLING, ANNOUNCE- OF OUT- CENTER IN CENTER IN CUSTOMER SOURCING BUCHAREST BRNO SUPPORT MENTS SERVICE FROM PROVIDERS BUDAPEST NOVARTIS LARGE  F&A OUT- OUT- SOURCING TO SOURCING GENPACT DEALS BUCHAREST AND KOLKATA DELL CONFIDENTIAL 4
  5. 5. Off-shoring to Central and Eastern Europe countries 2006/07  ALMOST 80 NEW  ~40,000 ADDITIONAL FTE  SEVERAL MAJOR CENTERS IN OFF-SHORED TO GLOBAL OUTSOURCING EASTERN EUROPE EASTERN EUROPE IN CONTRACTS INCLUDE ANNOUNCED IN 2006/07, OF WHICH 10,000 EASTERN EUROPE AS 2006/07 IN NEW CENTERS, 30,000 TARGET LOCATION IN EXISTING CENTERS DELL CONFIDENTIAL 5
  6. 6. Executive summary  OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER  DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS DELL CONFIDENTIAL 6
  7. 7. quot;Came for cost, stayed for qualityquot; CORPORATE/REGIONAL HEADQUARTERS KNOWLEDGE HUB TRANSACTION FACTORY TRANSACTION CENTER EUROPEAN/GLOBAL CENTER EUROPEAN/GLOBAL CENTER FOR WESTERN EUROPE FOR CORE COMPETENCIES FOR CORE COMPETENCIES Examples  Lufthansa (Cracow)  Delphi (Cracow)  Dell (Bratislava)  Zurich/Capgemini  Siemens (Wroclaw)  JCI (Bratislava) (Cracow)  SAP Labs (Sofia)  P&G/HP (Bucharest) FASTER MOVE TO KNOWLEDGE-INTENSIVE SERVICES DRIVEN BY COMBINATION OF FACTORS  Talented workforce with good functional knowledge  Cultural proximity/accessibility/timezone overlap DELL CONFIDENTIAL  Language capabilities 7
  8. 8. DELL Evolution in Bratislava 3  Grew to a European Business Center by 2006, w/ num. headquarter functions  Over 1600 FTE by end 2007 covering a wide range of front and back office functions 2  Expanded by 2004 to include German- language Sales and Customer Care  Center with up to 900 FTE to support full range of customer-facing functions 1  Dell launched operations in Slovakia in November 2002  Technical Support with up to 300 FTE for German language area DELL CONFIDENTIAL 8
  9. 9. DELL Finance in Bratislava BACK OFFICE MID OFFICE FRONT OFFICE Value Channel Controlling Commission Targets Pricing Business Analytics Financial Planning & Business Controls Analysis GL Accounting OPEX Mgmt VAT Reporting Functional Accounting AP Credit Collections Time Back-office Mid-office Front Office FY’05 FY’06 FY’07 FY’08 DELL CONFIDENTIAL 9
  10. 10. Executive summary  OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER  DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS  CHALLENGES OF OFFSHORING ARE LARGELY EXAGGERATED DELL CONFIDENTIAL 10
  11. 11. Challenges of off- shoring are largely exaggerated  ONLY TRANSACTIONAL ACTIVITIES CAN BE OFFSHORED Activity  SAVINGS EXPECTATIONS IN BUSINESS CASES ARE INFLATED spectrum and value  EASTERN EUROPE HAS PLATEAUED, THERE IS NO MORE VALUE TO BE EXTRACTED  TALENT AVAILABILITY IS A MAJOR CONCERN Location  EVOLUTION OF COST LEVELS IS A MAJOR CONCERN ( )  EASTERN EUROPEAN CENTERS END UP HAVING TOO MANY EXPATRIATES  RAMP-UP SPEED IS USUALLY OVERESTIMATED Organization and  TRANSITION IS COMPLEX AND ERROR-PRONE operations  OFFSHORE CENTERS HAVE POOR PERFORMANCE SOURCE: MCKINSEY DELL CONFIDENTIAL 11
  12. 12. Productivity gap closing PRODUCTIVITY IMPROVING Revenue/head/quarter index, Bratislava FY06 = 100 Consumer sales Q4 FY06 Q4 FY07  Low cost 1 147 97  Low cost 2 135 141  Bratislava 100 134  High Cost 3 204 197 Business sales Q4 FY06 Q4 FY07  High Cost 1 53 94  Bratislava 100 114  High Cost 2 130 156  High Cost 3 159 172 DELL CONFIDENTIAL 12
  13. 13. Wage differences will persist SOURCE: MCKINSEY DELL CONFIDENTIAL 13
  14. 14. Executive summary  OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER  DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS  CHALLENGES OF OFFSHORING ARE LARGELY EXAGGERATED  WESTERN EUROPE LIVES OFF THE PAST – NEEDS TO DEVELOP NEW VALUE PROPOSITION FOR ATTRACTING BUSINESS DELL CONFIDENTIAL 14
  15. 15. Future expansion options under consideration SLOVAKIA – WHAT CAN THE LABOR POOL 1 SUPPORT, EVEN IN OTHER CITIES? POLAND – CO-LOCATE WITH NEW FACTORY 2 SITE? NEW GREEN-FIELD SITE? In addition, continued HUNGARY – HOW WILL COSTS AND THE expansion of 3 current sites CURRENT POLITICAL TURMOIL EVOLVE? in Morocco, India ROMANIA – IS THE INFRASTRUCTURE & 4 PUBLIC ADMINISTRATION UP TO STANDARDS? 5 EGYPT – A BRIDGE TOO FAR AT THIS POINT? DELL CONFIDENTIAL 15
  16. 16. Executive summary  OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER  DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS  CHALLENGES OF OFFSHORING ARE LARGELY EXAGGERATED  WESTERN EUROPE LIVES OFF THE PAST – NEEDS TO DEVELOP NEW VALUE PROPOSITION FOR ATTRACTING BUSINESS DELL CONFIDENTIAL 16

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