About 2011 European Telematics and Infotainment Competitive Strategy Innovation Award by Luxoft Company

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

2011

2011 European Telematics and Infotainment Competitive Strategy Innovation Award

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

Frost & Sullivan’s Global Research Platform Frost & Sullivan is in its 50th year in business with a global research organization of 1,800 analysts and consultants who monitor more than 300 industries and 250,000 companies. The company’s research philosophy originates with the CEO’s 360 Degree Perspective™, which serves as the foundation of its TEAM Research™ methodology. This unique approach enables us to determine how best-in-class companies worldwide manage growth, innovation and leadership. Based on the findings of this Best Practices research, Frost & Sullivan is proud to present the 2011 Europe Competitive Strategy Innovation Award in Telematics and Infotainment to Luxoft.

Significance of the Competitive Strategy Innovation Award Key Industry Challe nges Addressed by Innovative Competitive Strategie s Connectivity has ushered in a new era in the European automotive market with almost all vehicle manufacturers on the verge of releasing of new connected solutions by 2012-2013. Crucial changes from the earlier embedded nonconnected model are the ability to allow dynamic content to integrate seamlessly inside the car through connectivity modules either embedded inside the car or coming from the smartphone. The latter model, which the automotive industry has named hybrid connected model, has been a huge success with offerings such as Ford Sync, the hybrid telematics model offered by Ford registering double digit growth rates year-on-year. Several vehicle manufacturers and tier 1 suppliers in Europe have collaborated to create the next generation infotainment systems where smartphone applications and dynamic content mark new levels of value addition to the driver. However, along with this model comes with several challenges. Most notable of the challenges is the need to differentiate between content suitable for the driver and the passengers. Most of the current connected offering design takes into account content and apps meant to add value to the drivers with hardly any model taking into account the need to keep passengers entertained and connected. Rear-seat entertainment, which was a product meant to keep passengers entertained failed to make a mark in the European market owing to the high cost of the system making it suitable only for high end luxury cars. The other crucial challenge that prevails in such a scenario is to ensure safe integration of smartphone inside the car and designing a clear business model, where roles and responsibilities of vehicle manufacturers and other ecosystem partners such as service providers and content providers are clearly defined. In addition, regulatory pressure is increasing in the U.S. and Europe to prevent the use of portable devices inside the car. This is posing a big challenge in terms of bringing intelligence to the smartphone integration software, which can filter unsafe content, such as games and videos, to not be played while the vehicle is in motion. The last and another major challenge is to ensure that software platforms that support these connected telematics and infotainment offerings are scalable and upgradeable over the vehicle lifecycle and where new features and functions can be added to it without the need to redesign the complete system. Such an open software system with complete tools and support functions allows vehicle manufacturers to keep pace with the rapid advancements in the telecommunications and consumer electronics industries.

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

Impact of Competitive Strategy Innovation Award on Key Stakeholders The Competitive Strategy Innovation Award is a prestigious recognition of Luxoft’s accomplishments in telematics and infotainment. An unbiased, third-party recognition can provide a profound impact in enhancing the brand value and accelerating Luxoft’s growth. As captured in Chart 1 below, by researching, ranking, and recognizing those who deliver excellence and best practices in their respective endeavors, Frost & Sullivan hopes to inspire, influence, and impact three specific constituencies: •

Investors Investors and shareholders always welcome unbiased and impartial third-party recognition. Similarly, prospective investors and shareholders are drawn to companies with a well-established reputation for excellence. Unbiased validation is the best and most credible way to showcase an organization worthy of investment.

•

Customers Third-party industry recognition has been proven to be the most effective way to assure customers that they are partnering with an organization that is leading in its field.

•

Employees This Award represents the creativity and dedication of Luxoft’s executive team and employees. Such public recognition can boost morale and inspire your team to continue its best-in-class pursuit of a strong competitive position for Luxoft. C ha rt 1 : Be st Pr ac t ic es L e ve ra ge f or G r ow t h A c c e l er at i o n

Key Benchmarking Criteria for Competitive Stra tegy Innovation Award For the Competitive Strategy Innovation Award, the following criteria were used to benchmark Luxoft’s performance against key competitors: •

Uniqueness of Strategy

•

Improves Market Position

•

Leverages Competitive Intelligence

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

Decision Support Matrix and Measurement Criteria To support its evaluation of best practices across multiple business performance categories, Frost & Sullivan employs a customized Decision Support Matrix (DSM). The DSM is an analytical tool that compares companies’ performance relative to each other with an integration of quantitative and qualitative metrics. The DSM features criteria unique to each Award category and ranks importance by assigning weights to each criterion. The relative weighting reflects current market conditions and illustrates the associated importance of each criterion according to Frost & Sullivan. Fundamentally, each DSM is distinct for each market and Award category. The DSM allows our research and consulting teams to objectively analyze each company's performance on each criterion relative to its top competitors and assign performance ratings on that basis. The DSM follows a 10-point scale that allows for nuances in performance evaluation; ratings guidelines are shown in Chart 2. C ha rt 2 : P er f orm a nc e - Ba se d Rat i n g s fo r D e c i s i o n S u pp o rt Mat r ix

This exercise encompasses all criteria, leading to a weighted average ranking of each company. Researchers can then easily identify the company with the highest ranking. As a final step, the research team confirms the veracity of the model by ensuring that small changes to the ratings for a specific criterion do not lead to a significant change in the overall relative rankings of the companies. C ha rt 3 : F ro st & S u l l i va n ’ s 10- St e p P r oc e s s f o r I de nt i f y i ng A w a r d R ec i p i e nt s

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

Best Practice Award Analysis for Luxoft The Decision Support Matrix, shown in Chart 4, illustrates the relative importance of each criterion for the Competitive Strategy Innovation Award and the ratings for each company under evaluation. To remain unbiased while also protecting the interests of the other organizations reviewed, we have chosen to refer to the other key players as Competitor 1 and Competitor 2. C ha rt 4 : D ec i si o n S u p p or t M at r ix f or Co m pet it i ve S t r at e g y I nn o v at i o n A w a r d

Relative Weight (%)

33% 33% 33%

Weighted Rating

Leverages Competitive Intelligence

Improves Market Position

Award Criteria

Uniqueness of Strategy

Measurement of 1–10 (1 = lowest; 10 = highest)

100%

Luxoft

8.25

Competitor 1

Criterion 1: Uniqueness of Strategy As a company Luxoft has progressed from being a pure outsourcing software support company to a more wholesome technology solution provider. The automotive unit of the company was formed in 2006 to support Harman International the leading tier 1 infotainment supplier in the global automotive industry in Germany with software maintenance and support functions for Harman’s two major clients - BMW and Mercedes Benz. Luxoft currently works with leading Tier 1 automotive suppliers such as Harman, Elektrobit, and NIS Glonass, developing full suite software solutions catering to the needs of the connected telematics and infotainment systems. The company is currently looking at many areas within the telematics and infotainment domain such as navigation, rear seat entertainment, head units and instrument clusters, telematics services and infotainment platforms based on several architectures such as Controller Area Network (CAN) and Media Oriented Systems Transport (MOST) where software plays a major role. The company is also differentiating itself by looking at different operating systems such as Android and Linux for different features for passengers and drivers. This by far is the first such effort in the automotive industry. Luxoft is also a part of the GENIVI industry alliance which is looking to standardise in-vehicle infotainment systems based architecture, reaffirming the company’s stand in aggressive pursuit of new business in this area. The company is actively pursuing original equipment manufacturer (OEM) business in Europe and North America and from initial talks with the automotive community, has had witnessed great interest from North American vehicle manufacturers and tier 1 suppliers for some of its solutions.

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

The company has three major offerings for the automotive industry. At one level its DashCore , which is a software solution that accelerates growth of head units allows vehicle manufacturers and tier 1 suppliers to create a virtual instrument cluster using a Linux based platform. The basic core of this platform is connectivity, where various types of social networking applications, dynamic points of interest and other dynamic content such as traffic information can be built in an embedded fashion. This platform is upgradeable and Luxoft can support with full implementation and support maintenance of this software platform .This is ideally meant for the driver and front seat passengers. The other solution named DroidBUZZ is an Android 2.2 (Froyo) based rear seat entertainment software which allows rear seat passengers to fully utilise the benefits of the Android platform with all its applications. The implementation is hassle free because factors such as distractions are not applicable for the rear seat passengers. Luxoft is in talks with a big European tier 1 supplier to implement this solution commercially, which might be available before end of 2011. Luxoft partnered with Elektrobit, a device manufacturer and recently announced at the telematics Detroit 2011 show, a new in car media server which delivers computing power, storage and connectivity which includes key technologies such as 3G, WiFi, GPS

and Bluetooth and allows users to stream

media content from their smartphones to the rear seat screens. Combined with the DroidBuzz this is an excellent platform which is unique in its implementation for rear and front seat passengers. DroidBuzz is a customisable software platform developed by Luxoft, which can be used by any vehicle manufacturer or tier 1 supplier and that delivers rich media content supported by robust Android market applications. The third solution which the company is developing is called Access. Access is a smartphone integration 2-way protocols that allows smartphone content and apps to be displayed in the car head unit in a simple and intuitive way. The solution comes with different sets of Application Programming Interface (API), which are co-created with vehicle manufacturers that will not allow non-certified apps to be integrated in the head unit. This way, the security of the solution is much higher compared to competition and also gives greater control to vehicle manufacturers to filter content that is suitable for their cars and drivers. With such a three pronged strategy which effectively covers the needs of the drivers as well as passengers, Luxoft with its software development and support expertise is definitely differentiating itself in a clear way compared to its competition, which is not offering such a wholesome suite of products and solutions catering to the connected car Criterion 2: Improves Market Position With a revenue growth of almost 40 per cent in 2010 compared to 2009, automotive segment at Luxoft accounted for roughly 10 per cent of the overall revenues of close to $206.1 million in 2010. The company has several active partnerships such as the ones with Harman, which have been lasting since 2006, where it has progressed from a support function to a more active software development and project managing function. Luxoft is also working with Elektrobit on a very innovative media server solution providing connectivity and media streaming features. The Russian automotive market is facing an impending legislation on every car sold in Russia both domestically produced and imported by 2013 to feature an Emergency Road Assistance system based on Global Navigation Satellite System (ERA GLONASS) similar to the European eCall initiative. This legislation will enable every vehicle to have an automatic emergency and breakdown assistance system. Luxoft has already partnered with the ERA GLONASS federal operator which is NIS GLONASS to help roll out this system taking care of the entire service at

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

both front- and back-end levels. This partnership will allow Luxoft to make steady progress into the Russian market and also allow it to create OEM compatible GLONASS based products. Combined with the company’s focus in European and North American market in the area of connected infotainment solutions, this Russian effort with further help strengthen the company’s market position in these sectors in the different geographic markets. Criterion 3: Leverages Competitive Intelligence Luxoft as a company has its roots in software solutions and support design, development and maintenance with a delivery capability that encompasses more than 10 countries across the world giving it the ability to support its customers at a global level. With a 54 per cent increase in research and development (R&D) spend in 2010, which includes dedicated effort towards automotive telematics and infotainment product platforms, the company is fast progressing as a strategic supplier for vehicle manufacturers and tier 1 suppliers. With other major suppliers focusing on bringing Android based solutions to the central head unit which has its own challenges in terms of software updates, security and other elements, Luxoft as a company focused on bringing Android to the rear seats which is a highly competitive move. The other solutions of the company such as DashCore and Access also showcase its ability to understand the current gaps in the infotainment industry and address those gaps with intelligent open and upgradeable solutions where vehicle manufacturers can customise it as per their needs. Luxoft has shown intuitive understanding of the market needs and effectively differentiated itself from the competition using intelligent solutions. Co nc l u s i o n Luxoft is fast becoming a key software supplier in the area of in-vehicle connected infotainment and telematics market in Europe, North America and Russia. The company with its diverse offerings such as DashCore, DroidBuzz and Access is clearly creating products that fill the current gaps in the connected vehicle domain. With strategic clients such as Harman, Elektrobit and NIS GLONASS, to name a few, Luxoft is fast progressing from being an outsourcing support company to a full blown technology solutions provider. By differentiating its offer for front and rear seat passengers, the company has clearly shown competitive differentiation and thus is the worthy recipient of the 2011 Europe competitive strategy innovation award in telematics and infotainment.

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The CEO 360 Degree Perspective™ model provides a clear illustration of the complex business universe in which CEOs and their management teams live today. It represents the foundation of Frost & Sullivan's global research organization and provides the basis on which companies can gain a visionary and strategic understanding of the market. The CEO 360 Degree Perspective™ is also a “must-have” requirement for the identification and analysis of best-practice performance by industry leaders. The CEO 360 Degree Perspective™ model enables our clients to gain a comprehensive, action-oriented understanding of market evolution and its implications for their companies’ growth strategies. As illustrated in Chart 5 below, the following six-step process outlines how our researchers and consultants embed the CEO 360 Degree Perspective™ into their analyses and recommendations.

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

C ha rt 5 : H ow t he CE O ' s 3 60 D e gr ee P er s p ec t i v e™ M o de l D i rec t s O ur Re se arc h

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

Critical Importance of TEAM Research Frost & Sullivan’s TEAM Research methodology represents the analytical rigor of our research process. It offers a 360 degree view of industry challenges, trends, and issues by integrating all seven of Frost & Sullivan's research methodologies. Our experience has shown over the years that companies too often make important growth decisions based on a narrow understanding of their environment, leading to errors of both omission and commission. Frost & Sullivan contends that successful growth strategies are founded on a thorough understanding of market, technical, economic, financial, customer, best practices, and demographic analyses. In that vein, the letters T, E, A and M reflect our core technical, economic, applied (financial and best practices) and market analyses. The integration of these research disciplines into the TEAM Research methodology provides an evaluation platform for benchmarking industry players and for creating high-potential growth strategies for our clients. C ha rt 6 : Be nc hm ar k i ng Pe rf o rm a nc e w it h T E A M R e sea rc h

About Luxoft Luxoft established in the year 2000 headquartered in Moscow is a leading global company in high-end software development for multiple industries such as aerospace, automotive, banking and finance, energy and utilities, manufacturing and telecommunications. It is witnessing fast growing presence in the automotive market covering key clients in Europe, North America and Russia. With double digit growth rates recorded for the past several years consecutively, the company has development and delivery centers in more than 18 locations around the globe.

“We Accelerate Growth”

2011 European Telematics and Infotainment Competitive Strategy Innovation Award Luxoft

About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-inclass positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

Emily Bailey Frost & Sullivan DDI: +44 (0)20 7915 7869 Email: emily.bailey@frost.com www.frost.com

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