MMICC 2009 - 2nd Place - NUS

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MMICC 2009 - 2nd Place - NUS

  1. 1. At Exeter, it is our business to improve yours.
  2. 2. Key Issues 1. Choosing The Right Clients & The Right Project Profits/ Diversify Revenue Streams Large Large Management Tulane Tl University Private Consulting Client University Firm 2. Growth and Staying Ahead Key Issues
  3. 3. Situational Analysis Exclusively Exeter Inc Exeter. Quality Service Service Oriented 1. Blended Teams - Multidisciplinary Offshoring Services Service Oriented - Strong Technical Expertise 2. Capable Consultants p 4 Business Segments 3. Credible Reputation Business Focus Exclusively Key Issues Exeter
  4. 4. Situational Analysis Exclusively Exeter Inc Exeter. Service Oriented India I di Benefits: Offshoring Services A. Technical Expertise A T h i lE i Service Oriented B. Substantial Savings 4 Business Segments Business Focus Exclusively Key Issues Exeter
  5. 5. Situational Analysis Exclusively Exeter Inc Exeter. Service Oriented Exeter’s Segments • Government Offshoring Services Service Oriented • Healthcare • Finance 4 Business Segments • Higher Education Business Focus Exclusively Key Issues Exeter
  6. 6. Situational Analysis Exclusively Exeter Inc Exeter. Service Oriented Exeter’s F E t ’ Focus • Large-Client Approach Offshoring Services Service Oriented • Blended Teams • Developing Individuals 4 Business Segments Business Focus Exclusively Key Issues Exeter
  7. 7. Strategy: E² Focus Quality Service India Segments Benefits: • Large-Client •Blended Teams • Government Approach -Multidisciplinary A. Technical • Healthcare -Strong Technical Strong • Blended Expertise Expertise • Finance Teams •Capable B. Substantial Consultants • Higher • Developing Savings •Credible Education Individuals Reputation Overall Exclusively Key Issues Strategy: E² Exeter
  8. 8. Strategy: E² Enabling Education Focus India Quality Service Segments Benefits: • Large-Client •Blended Teams • Government Approach -Multidisciplinary A. Technical • Healthcare -Strong Technical Strong • Blended Expertise Expertise •Tulane • Finance Teams •Capable B. Substantial Consultants • Higher • Developing Savings •Large University Large •Credible Education E Individuals Reputation Expanding I t I di E di Into India E •Public Universities •Private Universities Exclusively Key Issues Exeter
  9. 9. Enabling Education – Tulane & The Large University Option Under O Sh U d One Shared Roof dR f Tulane & Large University 1. 1 Similar Product Product, Implementation Project 2. Vendor Unable to deliver 3. Larger scale projects 4. Significant Risks involved g 5. Significant Opportunities For Long Term Growth Overall Strategy: E Exclusively Key Issues Enabling Education Exeter
  10. 10. Syne rgies 2. Knowledge Sharing across working teams 3. Higher cost g 1. Same Product, savings Same Issues, across with Same twin projects Problems Overall Strategy: E Exclusively Key Issues Enabling Education Exeter
  11. 11. Human Talent Management & Training Tulane Project Benefits a. 1 Senior Consultant Human Talent Management 1. Cross Project b. 10 Consultants learning 1. 7-8 Senior Consultants c. 10 Developers 2. 2 Interchangeable 2. 80 consultants Large University Project team 3. 80 Developers in India a. 2 Senior Consultant 3. Accelerated Training and Development of b. 20 Consultants Staff c. 10 Developers Tulane/Time Frame 2 Months 6 Months 4 Months 6 Months Completion 1. Pre-Development 2. Project Development 3. 3 Testing 18 Months 4. Systems Roll-Out Large University/Time 3 Months 10 Months 6 Months 6 Months Completion 1. Pre-Development 2. Project j Development 3. Testing 25 Months 4. Systems Roll-Out Overall Strategy: E Key Issues Exclusively Enabling Education Exeter
  12. 12. Potential Issues in taking up Tulane Reallocation “Star Human from Managers” Resource from Foregone F Staffing Chicago/Boston Project Opportunity to Gaining Increase Scope Competency in New Product of Revenue New Segment Streams Increasing Opportunity KEY driver to capability in Cost – 6 propelling Long current months ots Term G o t e Growth Strength Area – Education Growing at 6% Overall Strategy: E Key Issues Exclusively Enabling Education Exeter
  13. 13. Convincing the Large University Right tool will Firm’s KEY Project only yield when STRENGTH lie used by the right Management in Proprietary team Methodology Fixed fee ALONE Payment period Value-Added to include stretched out + Performance Key Performance Competition Based Fees Indicators Collaboration Microsoft Vendor & Key Partner Issues Alliance Program, Program SAP Development Certified Key Issues Overall Strategy: E¹ Exclusively Enabling Education Exeter
  14. 14. Solving the Issues 1. Choosing The Right Clients & The  Right Project Right Project Large University Tulane Client Adding g Interesting work Value to Future Potential in new segment Client Strategy: E¹ Exclusively Overall Education Exeter Enabling
  15. 15. Expanding into India Why India? Fastest F t t growing market for IT i k tf • consultancy services estimated CAGR of 6.8%, US$22 billion Demand growth for IT services • 30 - 32% Leverage on current presence in • India’s offshoring operations Trends •Huge growth i headcounts and investments towards high H th in h d t di t tt d hi h valued consulting •IBM Global Services, Tata Consulting Services, Accenture, Fujitsu C F jit Consulting, Wipro Consulting lti Wi C lti Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Enabling Education Expanding India Exeter
  16. 16. Expanding into India - Education Entrance into Education Market Average public spending Segment US$ per student •India lagging in public spending 4000 on higher education per student 3500 3000 •Fiscal spending to counter 2500 India economic recession – 6% of GDP, Russia 2000 USD$1440 million on higher China 1500 Brazil education 1000 500 •Lucrative Private education – 0 growth USD$40bn to US$120bn in 2007 10 years Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Enabling Education Expanding India Exeter
  17. 17. Expanding into India India Headquarters Bangalore •Open new Exeter.Inc Office O E t I Offi •Hire 4 senior consultants and 30 junior consultants Bangalore Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Enabling Education Expanding India Exeter
  18. 18. Expanding into India India Headquarters Bangalore Client Selection Criteria Variables Weighted  Private Higher Education Average 310 Private Universities Annual IT Spending Annual IT Spending 30% •13 Indian Institutes of Technology (IITs) Size of Client 15% •3 IITs to open in 2008 and 3 3 Allows for blended  Allows for blended 15% more slated in the next 5 years teams •Set up cost per IIT: USD$625 Opportunities for  25% million to USD$1 billion $ future endeavors  •High growth market segment Developing  15% Individuals expected to triple in size by 2018 Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Enabling Education Expanding India Exeter
  19. 19. Expanding into India Public Higher Education 200 U i Universities and 8000 iti d colleges •Services in excess of USD$5bn •3 states with top literacy rates: Kerala, Goa, Tamil Nadu Higher Education Information Systems Project (HISP) •Grants Management, Integrated g , g System for Admissions, Central Knowledge Bank, Research Projects Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Enabling Education Expanding India Exeter
  20. 20. Expanding into India US and Bangalore Headquarters Team Blending New hires: 4 Senior Consultants and 30 Junior Consultants from IIT Madras and IIT Bombay over 4 years Job Rotation 80 consultants from US 34 consultants in India Average project(10-12) requires: 10 consultants Target 20% US-based consultants to work in India Target 50% Indian based consultants to work in US Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Enabling Education Expanding India Exeter
  21. 21. Financials Beta of Exeter – .981 Obtained from 3 competitors •Accenture •Oracle •SAP Market Rate of Return – Annual Return of S&P 500 Risk Free rate – 20 Year T-bill Rate Weighted Average Cost of Capital (WACC) of Exeter – 10.6% Overall Strategy: E² Key Issues Exclusively Overall Strategy: E¹ Financials Expanding India Exeter Enabling Education
  22. 22. Financials Key Assumptions Cost: Initial Investments •Education $4 1 million Ed ti $4.1 illi •Opportunity Cost $4 million •Factory Investment $10000 Other Assumptions •Office Supplies $10000 •Tax rate 35 05% 35.05% •Recruitment $0 5 million Recr itment $0.5 •Depreciation accounted for •Exchange rate Rupee/USD Revenue Streams 50.65 50 65 •Tulane Tl •Large University Client •New Domestic Market •India Private Education Sector •India P bli Ed I di Public Education S t ti Sector Overall Strategy: E² Key Issues Exclusively Overall Strategy: E¹ Financials Expanding India Exeter Enabling Education
  23. 23. Financials NPV – 2011 2012 2013 2014 $12,262,826 Growth Rate 6% 13% 19% 17% Reached the Goal of Tripling Growth g Sensitivity  Sensitivity Growth Rate Growth Rate Rate Analysis (USD  4.5% 5.5% 6.5% mil) WACC 9.6% 12.1 15.9 22.1 10.6% 10 6% 9.7 97 12.3 12 3 16.1 16 1 11.6% 7.9 9.8 12.4 Overall Strategy: E² Key Issues Exclusively Overall Strategy: E¹ Financials Expanding India Exeter Enabling Education
  24. 24. Implementation 2009 2010 2011 2012 2013 2014 1st Phase of Tulane Enhancing Education Large university Tulane over 1 ½ years New Domestic Market Large university of 2 g y ¼ years New Domestic Market open p Overall Strategy: E² Key Issues Exclusively Overall Strategy: E¹ Implementation Financials Expanding India Exeter Enabling Education
  25. 25. Implementation 2009 2010 2011 2012 2013 2014 2nd Phase: Tulane Expanding into India Hiring and Job Large university Rotation 4 Private University New Domestic Market Seize P bli S i Public University Market Hiring and Rotation Private University Public University y Key Issues Exclusively Overall Strategy: E¹ Overall Strategy: E² Implementation Financials Exeter Enabling Education Expanding India
  26. 26. Enabling Education •Tulane •Large University Large E Expanding I t I di E di Into India E •Public Universities •Private Universities Exclusively Key Issues Exeter
  27. 27. Implementation Question & Answer Exclusively Overall Strategy: E¹ Overall Strategy: E² Key Issues Implementation Financials Exeter Enabling Education Expanding India
  28. 28. Complimentary Slides 1. Comparison between 4 options 2. Why not Large private university? 3. Why not the management consultancy? 4. Key Assumptions for cost savings to Large University 5. 5 Issues Pertaining to Synergy (TU + LU) 6. Cooperation with Competing with Vendor 7. Customer Relationship Management for Rejected Projects 8. Economic Downturn affecting Consulting 9. Off shoring is not a main strategy in The Short Run 10. Country Comparison for Offshore options 11. Offshoring Options: China in the Long Run 12. Jonathan & Mark do not interact with each other’s clients 13. Decentralized nature of Healthcare & Education Group 14. Financials 15. Why not the financial industry?
  29. 29. Complimentary Slides 1. Comparison between options Variables/Options Tulane  Large University  Private University  Management Consulting Project Type Systems Integration +  Systems Integration of  Strategy +  Customized System  Implementation of New  New Product  Implementation  Development Product Ease of  Relatively Harder  Relatively Harder  Medium – Hard  Relatively Easier  Implementation/Succ ess rate  Concurrence with true  No – attachment of staff to  No – attachment of staff to  No – attachment of staff  Yes, blended team  Business Model  organization  organization  to organization  development project Revenue  $5M over two years  $7M over 4 years  NA NA Significant  Preferred manager’s transfer  NA NA NA Opportunity Costs issues  1. Need to manage 3rd Other Issues  1. Losing capability for 6 mths gp y g 1. Constantly acceding  y g 1. Communication issues party staff  to requests on projects 2. New product  2. Differing cultural issues 2. New product  2. Small project &  3. No new development, old  margins  3. Client’s preferred  capability  engagement method 1. Synergy with 2nd option  Positives 1. Previous working  Maintaining Client  New segment, new set of  relationship relationship  customers  2. Higher margin, bigger  2. Synergy with 2nd option  project 3. New Revenue Stream 3. New Revenue Stream Longer Term potential Potential Future projects with  Potential Future projects  Can remain positive  Basic exploration stage, non‐ Org and other org in new  with Org and other org in  despite not picking up  committal  Product Pd new Product Pd project j
  30. 30. Complimentary Slides 2. Why not large private university? a. Always been taken advantage off, need to bend over backwards b. b Resulting in significant opportunity costs of tied up senior staff c. Senior staff assigned on projects with low margins d. No adherence to core business model e. No new development, traditional business segment f. Hinders long term growth – opportunity costs, no new development
  31. 31. Complimentary Slides 3. Why not Management Consultancy? a. No new development, same traditional business b. Culturally and subsequently working relationship issues in two high performance organizations c. Potential for poaching of current staff and lost of proprietary intellectual property d. Does not support long term growth, no diversification of f f income streams
  32. 32. Complimentary Slides 4. Key assumptions for Cost Savings for Large University
  33. 33. Complimentary Slides 5. Issues Pertaining to Synergy (TU+LU) a. Proprietary information, methodologies and solutions to be kept private and confidential b. Only generic common information, solutions, problems encountered, learning points that are cross platforms will be shared
  34. 34. Complimentary Slides 6. Cooperation with Competing Vendor Collaboration Plan 1. Select and pick key industry software vendors 2. Enter into exclusive strategic alliances as sole preferred technical partners (For. E.g. SAP) 3. Alliance will see Exeter being certified technical p g partners for key y software products (SAP certified gold partner) 4. Exeter will serve as marketing agent for their products in relevant and appropriate projects 5. Giving vendors more reach
  35. 35. Complimentary Slides 7. CRM for Rejected Projects a. Convey the company’s concern of why they elected not to undertake the engagement b. Convey b Con e possible alternati e firms that can undertake the job alternative ndertake c. Actively engage these firms on the longer term basis and convey latest developments, capabilities and to not lose future engagement opportunities
  36. 36. Complimentary Slides 8. Economic Recession affecting Exeter’s Segments a. Education, government & Healthcare sectors are core public services that require high reliability and delivery rates b. b IT is a long term capital expenditure and in estment that is e pendit re investment beyond economic cycles c. Government’s fiscal policies spend on these 3 sectors to stimulate economy, in a slowdown, it would in fact drive even economy slowdown more engagements to be made available
  37. 37. Complimentary Slides 9. Offshoring is not a main strategy in S.R. Variables India Others Approximately 55.4 Approximately 58.5 Wages g USD/day USD/day Set to Increase by 15%: 63.71 USD •Existing Physical New Market Initial Capital Infrastructure a) New Facilities Investments •Require only 3-4 b) New consultants Additional Consultants Additi lC lt t Consequences •Strengthen Core •Disruption to Competencies Business Operations •Fertile Ground for Talents (Existing Projects) •Disadvantages Price Differentials: 8.9% 8 9% Offshoring is not a option in the short run as the SMALL cost savings cannot mitigate the BIG costs involved.
  38. 38. Complimentary Slides 9. Country Comparison for Offshoring Variables India China Asia Eastern Europe Industry Wages Low Wages Low Wages Low Wages Trend T d Ease of Experienced •No Prior •No Prior •No Prior Experience Experience Experience Entrance Existing Physical Infrastructure •Open Economy •Some Countries: •Politically Politically Unstable: •Government Unstable Changing Market Encourages Reforms Investments Education High •Increasing Low •Increasing Standards of Standards of Education Education •Government •Government initiatives to initiatives to Promote English Promote English Proximity to Nil Close Far Far India Capital Increasing costs Very Low Low Low Outlay y A)Proximity to India ) y B)Favorable factors
  39. 39. Complimentary Slides 9. Offshoring Options: China in the Long Run Variables India China Asia Eastern Europe Low Wages Industry Wages Low Wages Low Wages Trend T d •No Prior Ease of Experienced •No Prior •No Prior Experience Experience Experience Entrance Existing Physical •Open Economy Infrastructure •Some Countries: •Politically Politically Unstable: •Government Unstable Changing Market Encourages Reforms Investments Education High •Increasing Low •Increasing Standards of Standards of Education Education •Government •Government initiatives to initiatives to Promote English Promote English Close Proximity to Nil Far Far India Very Low Capital Increasing costs Low Low Outlay y A)Proximity to ) y India B)Favorable factors
  40. 40. Complimentary Slides 10. Country Comparison for Offshoring (NOTE: HYPER LINK) Assuming 8 Work Hours India: 2,800 Rupees ≈ 55.4 USD China: 400 RMB ≈ 58.5 USD Set to Increase by 15%: 63.71 USD Source: Pay scale, http://www.payscale.com/research/CN/Country=China/Hourly_Rate/by_Job
  41. 41. Complimentary Slides 11. Jonathan and Mark do not interact with each other s clients other’s 1. Need to for both managing partners to critically client relationship management system 2. Best to involve both or even more staff in interaction 3. Aids Business Continuity System in times of emergencies 4. Double perspective from 2 or more partners would improve decision making 1. Decentralized nature of Healthcare & Education Group
  42. 42. Complimentary Slides 12. Decentralized nature of Healthcare & Ed Education Group ti G • Hinders disciplined client portfolio management • To circumvent, beyond the traditional weekly meetings and follow up circumvent up, Exeter should actively involve Group managers and senior consultants to not just weigh in but be part of the decision process • Ensure entire organization understands and is committed to Exeter’s Exeter s
  43. 43. 13. Complimentary Slides – Beta All numbers in thousands Levered Beta Tax Rate Value of Debt Value of Equity Unlevered Beta Accenture 0.77 29.30% 1087952 16880000 0.736 Oracle 1.09 29.53% 1 09 29 53% 10235000 89750000 1.009 1 009 SAP 1.05 32.23% 24000 42060000 1.050 Accenture Oracle SAP Income Before Tax 3107762 7834000 4173000 Income Tax Expense 910574 2313000 1345000 Tax rate 29.30% 29.53% 32.23% Average Unlevered Beta 0.932 Average value of Debt 3782317 Average value of Equity 49563333 Debt/Equity Ratio 0.0763 Average Tax rate 30.35% Implied Beta for Exeter 0.981 Values obtained from Yahoo! Finance
  44. 44. Complimentary Slides – WACC S&P500 Average Annual Return Exeter 1988 16.61% Equity/Value 0.9237 1989 31.69% Debt/Value 0.0763 1990 -3.10% Beta 0.9812 1991 30.47% 30 47% 1992 7.62% Average Market Return 11.34% 1993 10.08% Risk Free rate 5.77% 1994 1.32% - Cost of Debt 4.17% 1995 37.58% Tax Rate 30.35% 1996 22.96% 22 96% Wacc 0.106 1997 33.36% 1998 28.58% 1999 21.04% 2000 -9.10% 2001 -11.89% -11 89% 2002 -22.10% 2003 28.69% 2004 10.88% 2005 11.07% 2006 15.79% 15 79% 2007 5.49% Average Annual Return 11.34% Obtained from Yahoo! Finance
  45. 45. Complimentary Slides – WACC 20 Year T-Bill Rate Year Return SAP 1993 6.29% Long Term Debt 24000000 1994 7.49% Net Borrowings 1000000 1995 6.95% Cost of Debt 4.17% 1996 6.83% 1997 Obtained from SAP 2007 Financial 6.69% 1998 Statements 5.72% 1999 6.20% 2000 6.23% 2001 5.63% 5 63% 2002 5.43% 2003 4.96% 2004 5.04% 2005 4.64% 2006 5.00% 2007 4.91% 2008 4.36% Average 5.77% Obtained from http://www.federalrese
  46. 46. Complimentary Slides – Projected I/S Projected Cashflow in USD Lifetime Index 0 1 2 3 4 5 Year 2009 2010 2011 2012 2013 2014 Revenue: Tulane 1000000 1000000 3000000 Large University Client 1000000 1000000 2000000 6000000 New Domestic Market 10000000 India Private 157961 236941.56 355412.34 India Public 5663349 8495023.5 Other Revenue Stream 39394642 41718926 44180342 46786982 49547414 Total Revenue 41394641.71 43718926 49338303 58687273 68397850 - Expenses 39676764.08 41904590 47290764 56251751 65559339 Education -4164175.578 Factory Investment -10000 Office Supplies -10000 Opportunity Cost -4000000 Recruitment 500000 EBITDA -7684175.578 1717877.631 1814335 2047540 2435521.8 2838510.8 - Depreciation 1000 1000 1000 1000 1000 EBIT 1716877.631 1813335 2046540 2434521.8 2837510.8 -Tax 521072.361 550347.3 621124.8 738877.37 861184.52 EBIT(1-t) 1195805.27 1262988 1425415 1695644.5 1976326.3 + Depreciation 1000 1000 1000 1000 1000 NATCF 1196805.27 1263988 1426415 1696644.5 1977326.3 Discount Factor 1 1.105857346 1.22292 1.352376 1.4955345 1.6538478
  47. 47. Complimentary Slides – Projected I/S Calculation of Terminal Value Terminal Growth Rate 5.5% Terminal WACC 10.6% Terminal Value 21901276 Discount Factor at year 5 1.654 PV of Terminal Value 13242619 2011 2012 2013 2014 Growth Rate 6% 13% 19% 3% NPV 12262826.59 12262826 59 Achieve Positive NPV of 12.262 million and Tripled Growth rate by 3 X
  48. 48. Complimentary Slides – Projected I/S Depreciation Figures Depreciation Book Value (Beg) 11000 10000 9000 8000 7000 6000 Depreciation 1000 1000 1000 1000 1000 1000 Book Value (End) 10000 9000 8000 7000 6000 5000 Initial Book Value 11000 Depreciate over 10 years Salvage Value 1000
  49. 49. Complimentary Slides – Cost Education Cost for new software Adminstration Cost 40914.326 Faculty Cost 40914.326 Student Cost/Opp. Cost 4091432.6 Materials Cost 40914.326 Total Cost 4214175.578 4214175 578 No. Of Employee Senior Consultant 3 Consultants 30 Developers 10 Total N T t l No. of Employees fE l 43 Student Cost Revenue per Consultant 113023 50% of Senior Revenue per Senior 226046 Revenue per Developer 2260.46 1% of Senior Obtained from http://www.reuters.com/finance/industries/benchmarks?industryCode=57211 Total Student Cost 30 Consultant 3390690 3 Senior 678138 10 Developer 22604.6 Total Student Cost 4091432.6 No. of People in Office Indian Consultants 4 American Consultant 2 Developers p 10 Total 16
  50. 50. Complimentary Slides – Revenue No. of Staff Accenture 160000 Accenture Revenue 25313826000 No. of Staff Exeter US 80 India 80 Puerto Rico 9 EGS 80 Total No. of Staff Exeter 249 Revenue Exeter Re en e of E eter 39394642 Gross Margin of Industry 4.15% Obtained from reuters.com
  51. 51. Complimentary Slides – Revenue %Government %Go ernment Spending on Ed cation Education 3.80% 3 80% GDP of India 2008 USD 3311900000 Government Spending Education USD 125852200 Obtained from www.everonn.com. Report by Credit Suisse % on Tertiary Institutes 0.09 Govt Spending on Tert Education Tert. 11326698 Year 1 Year 2 Assuming Exeter obtains 50% 75% Revenue 5663349 8495023.5 No. Of Private Schools 50000 % that are tertiary Institutes 9% No. Of Private tertiary Institutes 4500 No. Of Private tertiary Institutes in Region 310 Amt Private School in US Spend on IT USD 2000000 Amt Private School in India Spend on IT Rupees p 2000000 Exchange Rate ruppe/USD 50.6454 Amt Private School in India Spend on IT USD 39490.25973 Assume Private School Contract Growth rate of 50% 2012 2013 2014
  52. 52. Complimentary Slides – Why not the financial sector? 1. Recognize the opportunity during this current economic crisis 2. 2 Increased number of consolidation of banks through mergers and acquisitions (M&A) 3. Not Exeter’s expertise 4. Exeter specialises in investment management and hedge funds 5. Strong competitions among incumbent firms e.g. Tata Consultancy 6. These M&A are a current trend, not sustainable 7. Not in line with our long term goal

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