Outlook2012: Understanding the State of the Industry in the Coming Year by Cybermedia

Outlook 2012: Understanding the State of the Industry in the Coming Year

15th December 2011

Atul Vashistha Chairman

Atul Vashistha

Neo Group

Chairman Neo Group www.GlobalSupplyRiskMonitor.com

Since 1999

www.NeoGroup.com

Neo Group Trends 2012 Demand Outlook Operating Models

M&A Pricing Wages/ Hiring

Risk Management Rising Geographies

NEO GROUP

SERVICES ADVISORY

GOVERNANCE / PROGRAM MANAGEMEN T SERVICES

Exclusively focused on superior outcomes through global services, outsourcing and related issues

RISK MONITORING

RESEARCH

TRENDS 2012

MY VIEWS

• Demand outlook expected to improve in 2nd half • Insourcing, managed services models dominate

• Professionalization of Outsourcing • M&A continue but yield little benefits • Pricing expected to be flat • Hiring & Utilization will strengthen • Wages will rise creating margin pressure • New Geographies will take market share away from traditional locations • New opportunities: Cloud and Mobile © 2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

BUYERS

MATURING

 Optimal Demand Management  Innovation - key to transformation – beyond SLAs  Greater emphasis on collaboration  New and improved vendor partnering  Increasing focus on Risk & Governance  New destinations: moving beyond India  Professionalization of talent

 Models evolve – insourcing, managed services, utility  Rise of the mid-sized buyer © 2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

BUYER TRENDS TO WATCH

IN 2012

 Operating Models going retro:  Frustrated with supplier rising costs, governance challenges and uneven performance, insourcing is being explored by more clients  Continued hiring and attrition challenges and overall governance requirements will accelerate buyers to move to managed services models

 Professionalization of Outsourcing:  Supplier management and governance challenges will help clients recognize the need to have professionally trained managers.  Programs such as COP from IAOP, and workshops from companies like Neo Group will be leveraged more.  Recognition of clear differences in sourcing and managing the services category vs. product categories will lead to higher importance of sourcing leads and vendor managers.

SUPPLIER TRENDS TO WATCH

IN 2012

 M&A continue but yield little benefits  Wages will rise creating increased pressure on supplier margins  Pricing expected to be flat in spite of many upward pressures

 Utilization will strengthen next year, increasing staffing challenges on fast ramp initiatives  Managed services move beneficial

 Geographic expansion to serve diversified needs ↯ Local ↯ Global © 2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

TRAP

UNCLEAR SUPPLIER DISTINCTION  No clear methodology adopted to distinguish suppliers; especially in a multi-sourcing environment  Perception that existing supplier/vendor best suited for all outsourcing functions, can be dangerous  In-depth analysis of supplier domain expertise and exposure critical to successful outsourcing  Establish effective framework to demarcate functions and processes a supplier is most suited for © 2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

TRAP

NOT FOCUSED ON COLLABORATION  Maintaining a ‘Client-Vendor’ relationship instead of a ‘Partnership’ – not sustainable for long in a managed/shared services model

 Joint involvement and participation of client in key operational activities of supplier is critical to business transformation  Sustained innovation becomes reality in collaborative relationships  Effective knowledge management between all stakeholders essential to gain competitive advantage

NEED FOR PROACTIVE

RISK MANAGEMENT  Proactive Risk Management is critical to continued growth of industry:  Greater attention to the diversity of one’s geographic portfolio  Increased attention to monitoring of risk and compliance related to disruption at supply locations and the supplier base  Real-time alerts and monitoring of events, and their disruptive impacts  Sorry for the plug but Neo’s Global Supply Risk Monitor web-service (globalsupplyriskmonitor.com) 16-12-2011

10 10

RISE OF NEW AND EMERGING

LOCATIONS

Rising Geographies take market share away from traditional locations but the pie is growing:  New destinations continue to take a share of an expanding pie  Eastern Europe & Central and South America are surging  Buyers will increasingly utilize existing supplier's Global Delivery Models to provide time zone coverage and realize true 24x7x365 support  Offshore players will continue to expand and/or setup operations in new geographies, such as Brazil, Poland, China, Mexico, and Colombia etc

CURRENT HOT SPOT:

WORKFORCE PROFILE Canada • Excellent education system • Productive IT workforce • Capable for complex project • Shortage of IT labor supply

Poland • Highest Universities in EE • Large IT Workforce • Largest Labor Pool in EE • Excellent Education System • Multi-lingual Skills Set • Promising ITO & BPO labor market

United States • World class IT workforce • Capable to manage most complex project • Excellent education system • Shortage of IT labor supply Mexico • Good education system • Large IT graduate pool • World class IT skills set • Excellent bi-lingual skills • Capable for large operation

Czech Republic • World class IT skills • Very small IT graduate • Very limited labor force • Shortage of IT labor pool Colombia • Large graduate pool • Huge labor force • Bi-lingual skills • Promising Labor supply

Guatemala , Panama, Honduras, Costa Rica, Peru, Chile • Highly qualified graduate pool • Good for higher end services • Excellent bi-lingual • Small workforce • Limited labor supply Argentina • Large labor pool • Bi-lingual capacity (English & Spanish) • Good for large contact center operation • Stable workforce in the long-run

Belarus • Excellent Software Skills • Small Labor Force • Suitable for Niche Operation • Smart & hard worker Ukraine • World class programmers • Smart & hard worker • Creative workforce Romania • Multi-Language Skills • Highly Skill Worker • Promising IT O & BPO labor market

Russia • Excellent programming Skills • Large universities graduate pool • Large IT workforce • Capable for large operation • Promising IT labor market China • Large IT workforce • Improving Project Manager Level Skills • Good number of colleges & Universities • Capable for large operation • Promising labor market

Philippines • Large workforce • Huge graduate pool • Fluent in English • Promising labor market Israel Vietnam • Highly qualified IT Egypt • Large workforce graduate • Large labor force • Large # of universities • Excellent IT Skills • Good education graduate turnout • Suitable for small system • Good IT Skills operation • Multi-lingual skills • Promising IT labor market • Limited IT labor supply • Potential labor market Malaysia • Excellent IT skills Brazil • Good education system • High turnout of IT graduates • Limited labor supply • Huge Labor pool India • Good people skills and • Large IT workforce Uruguay availability • World class IT skills • Limited IT workforce • Quality human capital • Excellent IT education system • Small Population • Capable for large operation • Capable for large operation • Higher end IT Skills • Promising IT labor market • KPO, BPO, Call Center skills labor pool • Suitable for small operation • Amazing IT labor market • Small IT graduate turnout • Shortage of IT labor supply Promising labor Pool

Shortage of labor pool

CURRENT HOT SPOT:

SPECIALIZED FUNCTIONS Canada • IT Services • R&D, ADM • Medical Transcription • KPO, BPO Voice and Non-Voice

Belarus • Embedded Software • Engineering Services • IT Services • Product Development • R&D, Systems Integration

Poland • Multi-Language Call Center • Shared Services BPO • F&A BPO • IT Application Services

Czech Republic • Infrastructure Management • Multi-Language Call Center • IT Services, R&D

United States • R&D • Product Development • Embedded Software • Engineering Services • ADM, IT Services etc Mexico • Back Office Operations, • Call Center (English, Spanish), • Embedded Services, • Engineering Services, • IT Services, R&D, • Software Testing

Argentina • Bi-lingual call center services • F&A BPO • IT Services

Ukraine • Engineering Services, • IT Services • Product Development • Systems Integration Romania • Business Analytics, • F&A BPO, HRO, • Financial Analytics, • IT Services, R&D • Multilingual Contact Center, Procurement BPO,

Colombia • Back Office Operation • IT Application • Bi-Language Contact Center Israel • Hi-Tech Services • R&D • IT Services • Clinical Trials

Guatemala , Panama, Honduras, Costa Rica, Peru, Chile • Call center (English & Spanish) • Back Office Operation • F&A BPO • Financial Analytics

Uruguay • Call Center (Spanish) • Infrastructure Management • IT Services • Product Development

Russia • Embedded Software • Engineering Services • Product Development • R&D, Systems Integration • Web Development

Egypt • Embedded Software • IT Services • Medical Transcription Multilingual Call Center • Product development • Software Testing

Brazil • IT Services • R&D, ADM • Software Development • Engineering Services • Call Center • Back Office Operation

China • Engineering Services • F&A BPO • IT Services, • Product Development, • R&D, Software Testing • Clinical Trial Philippines • Call Center (English and some Spanish), • Contact Center, F&A BPO, • IT Services, LPO, • Medical Transcription Vietnam • Embedded Software • IT Services, R&D • Software Testing Malaysia • Call Center (English, Mandarin), • F&A BPO, IT Services, • Technical Helpdesk

India • Software Development • Product Development • IT Services • Engineering Services • Embedded Software & Services • Clinical Trial • Medical Transcriptions

Atul Vashistha Chairman, Neo Group atul@neogroup.com

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2011 Neo document Group All rightsor reserved Reproduction© of this any portion thereof without prior written consent is prohibited 14© 2011 Neo Group Inc. All rights reserved. www.NeoGroup.com Reproduction of this document or any portion thereof without prior written consent is prohibited