How has the global services industry been impacted by the economic slowdown? Why has global services delivery increased in Central & Eastern Europe? And what about Africa? Our Market vista webinar reviews the state of the global services industry in 2011 and outlook for 2012. This webinar will provide facts and insights on the decline in outsourcing transactions, reduction in operating margins across leading service providers, and captive adoption in emerging locations.

1. Key Market Developments in 2011:
Market Vista Briefing
February 16, 2012
Live Tweeting #MarketVista

2. Introductions
Katrina Menzigian
Vice President, Research
katrina.menzigian@everestgrp.com
Eric Simonson
Managing Partner, Research
eric.simonson@everestgrp.com
H. Karthik
Vice President, Research
h.karthik@everestgrp.com
Proprietary & Confidential. © 2012, Everest Global, Inc. 2

3. Context setting
Focus of this webinar
 Present key global services developments in 2011 and outlook for 2012
 Provide perspectives on attractiveness of U.S. Tier-2/3 cities
Sources for today’s webinar
 Summary from a
Location Optimization
Market 175+ page report
Vista + Service Provider
 Fact-based
research covering
Intelligence global services
Proprietary & Confidential. © 2012, Everest Global, Inc. 3

4. Highlights of today’s webinar
Audience poll
Outsourcing and offshoring
 Outlook and extent of decline
activity declined in the second
 Segment performance
half of 2011
New location investments are  Geographic trends
increasingly specialized  Tier-1 and Tier-2 city trends
U.S. Tier-2/3 cities can be
 Factors influencing U.S.
attractive, but have stark
location strategy
implications on the operating
 City/delivery options
model
Proprietary & Confidential. © 2012, Everest Global, Inc. 4

5. Presentation topics
Key market Special topic:
developments Perspective on Wrap up and
in Q4 2011 and U.S. Tier-2/3 Q&A
yearly review cities
 Outsourcing transactions
 Captives
 Service providers
 Locations
Proprietary & Confidential. © 2012, Everest Global, Inc. 5

6. Poll Question: In comparison to 3 years ago, how mature
are your organization's global sourcing efforts?
Somewhat more mature 83%
About the same 9%
We may be slipping... 2%
Mature? We are babes in the
7%
woods
Source: Live polling conducted during the “Key Market Developments in 2011: Market Vista Briefing” webinar on February 16, 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 6

7. Outsourcing transactions decreased in H2 2011
while captive activity remained steady
Index of outsourcing transactions Index of offshore captive health
Number Number
Captive set-ups and expansions
Captive divestures
46
1,036 1,024 43
943
890 905
840 35
29
27
17
6
2 3
1 0 1
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2009 2009 2010 2010 2011 2011 2009 2009 2010 2010 2011 2011
Proprietary & Confidential. © 2012, Everest Global, Inc. 7

8. Decrease in transactions in most sectors, except
healthcare
Outsourcing transactions by vertical
Number of transactions
1,024
905
Others1 226
201
MDR 156
 Growth in healthcare driven by
144
Healthcare 100 changing regulatory environment
E&U 52 113
Defense 35  Significant decrease in public sector
58 (government and defense)
Government 187 25 transactions
Technology 135
28
Telecom 48 23  Financial services largely steady
32
BFSI 192 174
H1 2011 H2 2011
1 Includes logistics and wholesale, services, travel and transport, media and entertainment, education, etc. Also, includes any transactions where buyer identity/industry
was not disclosed
Proprietary & Confidential. © 2012, Everest Global, Inc. 8

9. Market Vista Index service providers facing increasing
competition but continue to dominate large deals
Distribution of Market Vista Index service providers in transactions
Number
100% = 1,979 1,929
Market Vista Index 22%
31%  Share of Market Vista Index
service providers
service providers decreased in
transaction volume but increased
in value
Other service 78%
69%
providers  Competition from specialist
providers
2010 2011
Market Vista Index service providers
Proprietary & Confidential. © 2012, Everest Global, Inc. 9

10. Acquisitions leveraged predominantly to build broader
service portfolios and industry specific skills
Yearly distribution of acquisitions by acquisition themes
2009-2011; Number of acquisitions
100% = 40 73 87
4% 1% Delivery
6%
Industry consolidation 15% 10% footprint expansion
9%
8%
Geography or client
20%
expansion 15% 26%
Industry-specific skills 13%
63% 58%
Service portfolio gaps 52%
2009 2010 2011
Proprietary & Confidential. © 2012, Everest Global, Inc. 10

11. Increasing focus on acquiring next generation
capabilities in service provider acquisitions
EXAMPLES
 ACS-CredenceHealth: Cloud-  IBM-Q1 Labs: Analytics
based applications for solutions in security/
healthcare BPO Business vulnerability domain
platform analytics
 Accenture-CAS AG: CRM  Capgemini-Artesys:
and mobility solutions Cloud Infrastructure services to
Mobility
focused on the retail industry computing augment cloud services in
Europe
30% of M&A deals in 2011 carried some flavor of next generation services
Proprietary & Confidential. © 2012, Everest Global, Inc. 11

12. Europe and Africa gaining share in new set-ups;
Tier-2 city set-ups now larger than Tier-1
Offshore location activity across geographies Offshore location activity across Tier-1 and
Number of service delivery centers set up Tier-2 cities1
Number of service delivery centers set up
2009 2010 2011
93
84 86
76 78
72 70
67
60
32 32
27
24 22
21
12
8 6
Asia Europe Africa Latin America Tier-1 Tier-2
Proprietary & Confidential. © 2012, Everest Global, Inc. 12

13. Overall captive activity increased in 2011 with
significant growth in engineering services/R&D
Distribution of new captive set-ups by functions supported1 Primarily engineering services/R&D
Number Primarily other functions
82 Multiple functions including
5 Engineering/R&D
50
41 42
2 4
15
23
24 27
15
2009 2010 2011
Majority of the engineering services/R&D captive activity in India, Rest of Asia, and CEE
1 Indicates announcements related to actual captives set-ups only; captive expansions not included
Proprietary & Confidential. © 2012, Everest Global, Inc. 13

14. What we expect looking forward into 2012
1 Increased aggressiveness in winning away renewals from incumbents
2 1-2 landmark captive divestitures – but not a trend
Continued widening of gap between Tier 1 and Tier 2/3 service
3
providers, making consolidation by acquisition more attractive
4 Exchange rate concerns outweigh inflation concerns
5 Continued increase in location activity in Central & Eastern Europe
Proprietary & Confidential. © 2012, Everest Global, Inc. 14

15. Presentation topics
Key market Special topic:
developments Perspective on Wrap up and
in Q4 2011 and U.S. Tier-2/3 Q&A
Yearly review cities
 Factors influencing U.S.
location strategy
 City/delivery options
Proprietary & Confidential. © 2012, Everest Global, Inc. 15

16. Poll Question: What best describes your company’s future
plan for onshore delivery centers (e.g., in the US) relative to
offshore centers?
Grow onshore delivery while
4%
decreasing use of offshore delivery
Grow offshore delivery while
0%
decreasing use of onshore delivery
Grow both onshore and offshore
96%
delivery
Decrease both onshore delivery and
0%
offshore delivery
Source: Live polling conducted during the “Key Market Developments in 2011: Market Vista Briefing” webinar on February 16, 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 16

17. Key drivers of interest in U.S. Tier-2/3 cities
Savings relative to U.S. Cultural fit, time zone and
Tier-1 cities proximity to client
Increasing
Sensitivity towards interest in
Skilled talent pool
offshoring U.S. Tier-2/3
cities
Robust physical
Government incentives
infrastructure
Proprietary & Confidential. © 2012, Everest Global, Inc. 17

18. Perspectives on commonly held opinions regarding
U.S. Tier-2/3 cities
Opinions regarding U.S. Tier-2/3 cities Our perspective
Costs are often comparable to Although U.S. Tier-2/3 cities offer savings
offshore locations when relative to Tier-1 cities, operating costs
considering total cost to manage significantly higher than offshore locations
Primarily appropriate to deliver Some Tier-2/3 cities offer a quality pool of
contact center and transactional technical talent for IT, although specific
BPO work from these cities business domain knowledge may not exist
Operating models in Tier-1 cities Scale and associated operating complexities
can be transposed onto Tier-2/3 quickly constrain the potential roles for these
cities cities
Proprietary & Confidential. © 2012, Everest Global, Inc. 18

19. Talent-cost profile for IT skills
 Wide diversity of options
 Niche options, non-  Experienced IT pool
traditional business center 20-80% of Tier-1
Experienced IT pool
Operating cost per FTE

5-20% of Tier-1 Tier-1
5-8%
Savings
Upper Tier-2 range
10-15%
Lower Tier-2
15-20%
Tier-3
20% 40% 60% 80% 100%
Accessible annual graduate pool for IT
 Often single company towns (As a percentage of pool in Tier I cities)
 Costs can be similar to Tier-2
due to small labor market
(1-10% of Tier-1)
Proprietary & Confidential. © 2012, Everest Global, Inc. 19

20. Models for small scale centers (50-250 FTEs) in
Tier-3 cities
1
Isolated and/or  Support unique needs (regulatory, economic
specialized center development, industry skills)
 Commitment to developing distinctive talent position
2
Complementary  Extra capacity to balance across centers
capacity  Well-defined delivery platform to create delivery
efficiency and predictability
3
Satellite staff  Support a large center by providing targeted skills
augmentation center  Requires clear operating and project management
model
Each requires a specific talent and operating model
Proprietary & Confidential. © 2012, Everest Global, Inc. 20

21. Presentation topics
Key market Special topic:
developments Perspective on Wrap up and
in Q4 2011 and U.S. Tier-2/3 Q&A
Yearly review cities
 Submit any remaining
questions!
Proprietary & Confidential. © 2012, Everest Global, Inc. 21

22. Key messages in today’s webinar
 Decrease across most verticals,
Outsourcing and offshoring
except healthcare
activity declined in the
 Captive set-ups increased,
second half of 2011
divestitures remain low
New location investments  Growth in CEE and Africa
are increasingly specialized  Tier-2 city growth
U.S. Tier-2/3 cities can be
attractive, but have stark  Savings versus challenges in
implications on the scalability and breadth of skills
operating model
Proprietary & Confidential. © 2012, Everest Global, Inc. 22

23. Q&A
To ask a question during the Q&A session
 Click the question mark (Q&A) button located on right side of your screen. This opens Q&A
 Be sure to keep the default set to “send to All Panelists”
 Type your question in the box at the bottom of the Q&A box and click the send button
 Attendees will receive an email with instructions for downloading today’s presentation
 For advice or research on Market Vista, please contact:
– Eric Simonson, eric.simonson@everestgrp.com
– Katrina Menzigian, katrina.menzigian@everestgrp.com
– H. Karthik, h.karthik@everestgrp.com
Stay connected
Websites Twitter Blogs
www.everestgrp.com @EverestGroup www.sherpasinblueshirts.com
research.everestgrp.com @Everest_Cloud www.gainingaltitudeinthecloud.com
Proprietary & Confidential. © 2012, Everest Global, Inc. 23

24. MV 2012 Offshore Locations Survey
2012 Offshore Locations Survey: Perceptions and Plans
How do your offshore location plans compare with the industry?
Participate in Everest Group’s 2012 Market Vista Offshore Locations Survey and share
your perspectives. All participants receive a complimentary copy of survey findings.
Take the survey: https://www.surveymonkey.com/s/lo2012-mvw
Survey ends soon!
Proprietary & Confidential. © 2012, Everest Global, Inc. 24

25. Check out our blog for the latest perspectives
on global services
Experts in the global
services terrain
www.sherpasinblueshirts.com
Proprietary & Confidential. © 2012, Everest Global, Inc. 25

26. Related Content
 Market Vista: Q4 2011
 Market Vista: 2011 in Review
 Global Location Insights: December 2011 – Perspectives on Tier-2/3 Cities in the
United States as Locations for IT Services Delivery
 Global Locations Compass – China
 Global Offshore Captive Landscape and Trends: Focus Geography – China
 Blog: What’s your Policy to Serve Policy Providers?
 Blog: Video: Outsourcing and Offshoring Trends in Pharmaceuticals Report –
Key Findings
Proprietary & Confidential. © 2012, Everest Global, Inc. 26

27. Everest Group
Leading clients from insight to action
Everest Group locations
Dallas (Headquarters): info@everestgrp.com
+1-214-451-3000
New York: info@everestgrp.com
+1-646-805-4000
Toronto: canada@everestgrp.com
+1-416-865-2033
London: unitedkingdom@everestgrp.com
+44-207-887-1483
Delhi: india@everestgrp.com
+91-124-496-1000
www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com
Proprietary & Confidential. © 2012, Everest Global, Inc. 27