vCustomer: Christian Bonneau Daniel Byrne Stefanie Jones Lindsay

vCustomer: Christian Bonneau Daniel Byrne Stefanie Jones Lindsay Rosenthal Optimizing a Global Footprint

Objective Objectives Key Issues Decision Overview Establish the most attractive market for: Offshore operations Potential clients Off-Shoring End Market Design the implementation plan for the international expansion Implementation Additional Recommendations Q&A Recommend additional services

Key Issues Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Changing customer demands Near-shoring Single sourcing Higher value-added BPO Changing cost structures Rising wages in traditional low cost regions vCustomer’s goals & competencies Commitment to quality Best-in-class technology Low cost structure

Recommendation Objectives Offshore Country Key Issues Thailand Decision Overview End market United States Malaysia Off-Shoring China Japan End Market Implementation Additional Recommendations Q&A India Bulgaria Western Europe

Offshore Criteria Objectives Financial Attractiveness -Compensation -Infrastructure -Tax & Regulatory 36% Thailand Key Issues Decision Overview Off-Shoring People skills & availability -Labour force -Education -Attrition Risk Malaysia 36% China End Market Implementation Additional Recommendations Business Environment -Infrastructure -Cultural exposure -Initiatives in intellectual property -Ease of doing business India 28% Q&A AT Kearney “Building the Optimal Global Footprint” World Bank “Doing Business Economy Rankings” Bulgaria

Drivers of Offshore Demand Objectives Key Issues Decision Overview -High wage costs Off-Shoring High Potential Economic Gains From Outsourcing End Market Implementation Additional Recommendations Q&A High Outsourcing Demand -Inefficient labour

End-market Analysis Objectives Wages Key Issues (high wages) EU 127 B Decision Overview Off-Shoring Efficiency End Market (high output) (low output) Implementation Additional Recommendations Japan 42 B US 277 B Q&A US department of Labor (low wages) Market size: 50 B USD 100 B USD 200 B USD

Most Attractive End Market: Western Europe Objectives Europe is the fastest growing consumer of BPO services Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Europe Grabbing Market Share BPO ITO Market 80% 60% 40% 2002 20% 2006 0% United States Europe Asia-Pacific

Top 5 Offshore Countries Objectives Bulgaria Key Issues Decision Overview Western Off-Shoring End Market Implementation Additional Recommendations Q&A China Japan Europe United States Thailand India Malaysia

Fit with vCustomer’s Competencies Objectives Key Issues Commitment to Quality Educated in Sofia, speak many languages Excellent transportation time to market Decision Overview IT Infrastructure risk is moderate but improving Off-Shoring Best in Class Technology End Market Privatization of BTC should lead to improved telecom network Implementation Internet connection per capita has more than tripled over the past two years Additional Recommendations Q&A Low Cost Structure Wages similar to India Inflation is moderate ( 10%)

Recommendation Objectives Offshore Country Key Issues Thailand Decision Overview End market United States Malaysia Off-Shoring China Japan End Market Implementation Additional Recommendations Q&A India Bulgaria Western Europe

Critical Implementation Issues Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Issues related to maintaining vCustomer’s core competencies Maintaining low-cost structure as Bulgaria’s labour market becomes more mobile Best in class technology – guarantee reliable access to broadband Dedication to quality

Low Cost Structure Implementation Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Very limited short-term wage pressures Labour force mobility effecting longterm wage pressure EU labour mobility agreements (2011) Offer programs to retain employees

Best in Class Technology Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Bulgaria Telecom being privatized Long-term increase in quality of infrastructure Meet with Mayor of Sofia and Telecom head to reach access agreement Potential for 1000 job creation powerful bargaining tool

Commitment to Quality Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Critical to client relationships Competence of employees key to consistent service Large # unemployed university grads Continual training and quality monitoring

Implementation Timeline – Functional Analysis Objectives Key Issues Logistics Decision Overview Off-Shoring End Market Human Resources Implementation Additional Recommendations Q&A Marketing

Logistics Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Timeframe: 0-6 Months Analyze and execute entry method Continued partnership, acquisition, go it alone Site identification and secure leasing Starting with 11,500 sq. ft, Expandable to 23,000 sq. ft. Regulatory Approval (32 days) Establishment and testing of telecom services Install first 200 workstations

Logistics Objectives Key Issues Decision Overview Timeframe: 6-12 Months Install 450 workstations Evaluate operations Off-Shoring End Market Implementation Additional Recommendations Q&A Timeframe: 18-24 months Install 450 workstations (total 1100) Increase proportion of BPO trained CSRs

Human Resources Strategy Objectives Key Issues Decision Overview Off-Shoring Sales consultants (20 initial, 5 annually subsequent) On-campus recruitment of European MBAgraduates Headhunting of established professionals End Market Implementation Additional Recommendations Q&A CSRs, BPO clerks, admin staff (1100 by year 3) Recruit through universities Screen for language, personality and aptitude

HR Strategy Continued Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Hands-on training for sales consultants in India Work in service centres and on site with clients CSRs and BPO clerks will receive language and technical training Career evolution CSR BPO Clerk Sales Consultant

Marketing Plan Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Pitch Euro divisions of current clients Target market for sales staff: Medium sized international companies European based multinationals France, Germany and Spain Concentrate on established verticals Upsell CRM customers to BPO

Timeline Logistics HR Marketing

Financial Projections Objectives Key Issues Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Product Mix Call Centre BPO Sales (in millions of ) India Growth rate Bulgaria Growth rate Total sales EBITDA Margins Call Centres BPO Forecasted EBITDA Growth rate 2006 2007E 2008E 2009E 85% 15% 80% 20% 75% 25% 70% 30% 50 0 60 20% 0 72 20% 12 50 60 84 86 20% 24 100% 110 8.75% 15.24% 8.75% 15.24% 8.75% 15.24% 6.0 8.7 45% 11.8 36%

Product Differentiation Strategies Process Specialization Objectives Key Issues Decision Overview Present situation Payment services Billing CRM Off-Shoring Vertical Specialization End Market Implementation CRM Retail Tele Travel Health IT Additional Recommendations CRM Q&A Capitalizing on customer demand for a single source solution

Vertical Analysis Objectives Key Issues Decision Overview Off-Shoring End Market Present verticals: Telecom Retail/ eCommerce Technology (IT) Travel & Hospitality Health Implementation Additional Recommendations Q&A Recommended to expand one vertical at a time

Vertical market decision criteria Objectives Key Issues Decision Overview Off-Shoring End Market How many process within the vertical does vCustomer currently serve? Ex: 80% of Healthcare processes Employee compatibility In-house expertise Implementation Additional Recommendations Q&A Client evaluation Client characteristics, company size Survey current clients to establish needs

Additional Consulting Services: General Off-shoring Objectives Key Issues Determine optimal entry strategy Require more in-depth information about partner and current agreement Decision Overview Off-Shoring End Market Implementation Additional Recommendations Q&A Contract Design Termination and buy-out clauses Off-shore location monitoring Labour mobility and rapid wage adjustment Bi-Annual tailored reporting indicating trends

Decision Overview Objectives Key Issues Production Country Thailand End market Product Differentiation United States Decision Overview Malaysia Off-Shoring End Market Implementation Additional Recommendations Q&A China Japan India Bulgaria Western Europe Process Specialization Vertical Specialization

Key Issues Revisited Objectives Key Issues Decision Overview Off-Shoring End Market Changing customer demands Near-shoring Single sourcing Higher value-added BPO Changing cost structures Rising wages in traditional low cost regions Implementation vCustomer’s goals & competencies Additional Recommendations Q&A Commitment to quality Best-in-class technology Low cost structure

Question & Answer Lindsay Stefanie Daniel Christian

Appendix slides

Appendix: End Market Analysis

End-Market Analysis – Raw Numbers Labour Unit Cost Output US 90 135 Japan 92 126 EU 104 122 Wages (high wages) 101 EU 127 M 99 97 Efficiency 95 (high output)133 131 129 127 125 123 121 119 93 91 US 277 M 89 (low wages) APAC 42 M (low output) Market size: 50 M USD 100 M USD 200 M USD

BPO Overall Market Size

BPO contracts by region Americas Europe Asia/Pacific % Growth in contracts % Growth in Value of Contracts 2004 2005 2006 2004 2005 2006 36% -4% 4% 68% -21% -28% 59% 0% 56% 63% -26% 15% 100% 30% 38% 250% 21% -41% Based on BPO deals worth greater that 25 million in contract value Source: PwC, Morgan Stanley

Appendix: Financial Analysis

vCustomer’s Financial Projections Product Mix Call Centre BPO Sales (in millions of ) India Growth rate Bulgaria Growth rate Total sales EBITDA Margins Call Centres BPO Forecasted EBITDA Growth rate 2006 2007E 2008E 2009E 85% 15% 80% 20% 75% 25% 70% 30% 50 0 60 20% 0 72 20% 12 50 60 84 86 20% 24 100% 110 8.75% 15.24% 8.75% 15.24% 8.75% 15.24% 6.0 8.7 45% 11.8 36%

EBITDA Margins of Comparable Companies EBITDA Margins of Comparable Companies BPO EXLS WNS Average 2006 17.51% 14.06% 2007 15.76% 13.42% 2008 16.30% 14.40% Average 16.52% 13.96% 15.24% Call Centres Teletech ICT Group Convergys Average 2006 10.24% 4.20% 9.10% 2007 12.37% 3.50% 9.70% 2008 14.02% 5.10% 10.50% Average 12.21% 4.27% 9.77% 8.75%

Sample BPO Contract Lengths & Value Vendor Accenture Capita Group Geosoft Tech Tata Consultancy Client Unilever Havant Bourough Council Medquist Transantiago Source: Merrill Lynch Source: Merrill Lynch Industry Contract length Value Rev/Month Type Manufacturer 84 1000 11.9 BPO Government 84 26.1 0.3 BPO Services 60 24.5 0.4 BPO Travel & Transport 60 20 0.3 BPO

Precedent Transactions in the IT Industry Average Price/Sales: 1.22 Source: Merrill Lynch

vCustomer’s Profile Emphasis on call centres 85% call centres 15% BPO Several locations in India Strategy High quality, great customer retention Best-in-class technology Low cost, but not lowest price Source: VCustomer case

Target Acquisition Profile Emphasis on quality & customer service Excellent technology Good reputation Extension of BPO opportunity Small to Mid sized firm within our price range Source: VCustomer case

WebHelp - Profile Located in Algeria & Eastern Europe Strong client base in Europe Same business model Potential candidate for merger Average price/sales of precedent transactions: 1.22 Source: Merrill Lynch, VCustomer Case

Appendix: Country Analysis

ATKearney Inc. GSL Metrics Category Sub-Categories Financial Attractiveness compensation costs Metrics average wages Median compensation costs for relevant positions (Call-centre representatives. IT prorgrammers and local operations managers), as reported in the Mercer Human Resources Consulting Global Pay Summary Infrastructure costs Tax and regulatory costs rental costs Commercial electricity rates International telecom costs Travel to major customer destinations Relative tax burden costs of corruption Currency appreciation or depreciation

ATKearney Inc. GSL Metrics Category People skills, and availability Sub-Categories Remote service sector experience and quality ratings Metrics Education and Language size of existing IT and BPO services Contact center and IT center quality certifications Total workforce University-educated workforce Workforce flexibility Scores on standardized education and language tests Attrition Risk Relative IT and BPO sector growth and unemployment rates Labour Force Availability

ATKearney Inc. GSL Metrics Category Business Environment Sub-Categories Country Environment Infrastructure Cultural Exposure Security of intellectual property (IP) Metrics Investor and analyst rating of overall business and political enviroment A.T. Kearney Foreign Direct Investment Confidence Index Security Risk Regulatory burden employment rigidty Government support for the information and communication technology (ICT) sector Overall infrastructure quality Quality of telecom, internet, and electrictiy infrastructure Personal interaction score from A.T. Kearney/Foreign Policy Globalization Index Investor ratings of IP protection and ICT laws Software piracy rates Information security certifications

Additional countries to GSL report Albania, Belarus, Bosnia & Herzegovina, Croatia, Lithuania, Macedonia, Moldova, Serbia People: World Bank indexes difficulty of firing, hiring, etc Financial: Tax rate as % of profit, cost as % property value, (world bank) Business Environment: Corruption Index

Augmented weighting to Offshore Country Analysis GSL categories: Financial (40%), People (40%), Business environment (20%) Total weight (90%) World Bank: Ease of doing business rank Total weight (10%) Overall weights: Financial 36% People 36% Environment 18% Ease of business 10%

Top Offshore Country rankings Overall Ranking GSL RANK COUNTRY World Bank Ranking total score (GSL 90%, WB 10%) 1 5 Thailand 18 6.3 2 8 Malaysia 25 9.7 3 2 China 93 11.1 4 1 India 134 14.3 5 10 54 14.4 6 3 135 16.2 7 14 43 16.9 8 6 Brazil 121 17.5 9 12 Serbia 68 17.6 10 17 Chile 28 18.1 11 9 Moldova 103 18.4 12 7 Philippines 126 18.9 13 15 Jordan 78 21.3 14 13 Vietnam 104 22.1 15 16 Ghana 94 23.8 16 23 Slovakia 36 24.3 17 20 Uruguay 64 24.4 18 19 Sri Lanka 89 26 19 18 Argentina 101 26.3 20 21 Pakistan 74 26.3 Bulgaria Indonesia Mexico

Offshore Country - Malaysia Category Offshore salaries are more than double those found in India and China Financial Attractiveness Possibility of encountering corruption costs Limited size/quality workforce impedes People skills & availability Business Environment country to gain large share of global IT business Well-developed infrastructure Attractive business environment Stable political environment Source: http://news.com.com/Outsourcings next big thing--Malaysia/2100-1011 3-5344618.html

Offshore Country - Thailand Category Slightly higher offshore salaries than Financial India and China Attractiveness Higher level of corruption higher costs Low literacy rate (92%) People skills & Growing services labour force (37%) availability Business Environment Strong growth rates in 03-04 ( 6%) Separatist movements causes unstable government https://www.cia.gov/cia/publications/factbook/geos/th.html

Offshore Country - China Category Cost effective solution, similar to India Financial Attractiveness Huge labour force People skills & Difficulty with English language availability Business Environment Difficulty in establishing the necessary connections Early stages of call centre development

Offshore Country - Philippines Category 1/3 Higher offshore salaries in Financial comparison to India and China Attractiveness Wage Inflation & attrition is a concern Excels in high quality call centres People skills & Strong labour force availability High corruption rate Higher costs Business Environment

Offshore Country - Poland Category Financial Attractiveness People skills & availability Business Environment Higher wage costs Skilled Labour force Stable

Offshore Country - Mexico Category Financial Attractiveness Higher wage costs Large labour force People skills & Rigid labour laws availability Poor education Business Environment Reasonably stable Proximity to the US Poor infrastructure

Offshore Country - Brazil Category Financial Attractiveness Wage costs almost double India Large population People skills & Strong technical skills availability Business Environment Reasonably Stable

Appendix: BPO Trends

BPO Industry Mix (by Vertical) BPO Market by Industry (by Vertical) Other 25% BFSI 37% Healthcare 6% Retail 6% Telecom 13% Source: PwC, Morgan Stanley Manufacturing 13%

BPO Segment Mix (by Process) Segment Mix Product engineering 7% Sales & Marketing 34% Human Resources 3% Finance & Accounting 4% Customer service 10% Logistics 42% Source: PwC

BPO Segment Growth Rates Human Resources Finance & Accounting Customer service Logistics Sales & Marketing Product engineering Procurement Training 2005 13,009 14,358 40,619 178,731 146,526 27,313 583 1,333 2006E 15,128 16,405 46,357 198,769 156,836 32,789 708 1,738 2007E 17,651 18,770 52,165 221,494 165,967 38,819 862 2,160 2008E 20,614 21,673 59,321 248,129 175,131 45,424 1,056 2,725 2009E 05-09 CAGR 23,915 12.9% 25,328 12.0% 66,843 10.5% 280,034 9.4% 187,781 5.1% 53,037 14.2% 1,291 17.2% 3,002 17.6% Total 422,472 468,730 517,888 574,073 641,231 Source: Morgan Stanley 8.7%

Top 25 BPO Service Providers Source:

Top 10 BPO Providers & Mkt Share Source: Gartner

Global Players in Offshore Outsourcing Source: Business week

Offshore Salaries by Region Source:

General Regional Trends Philippines – focus on customer service/call centres Eastern Europe – focus on finance & accounting Russia – focus on embedded software/product development South America – Spanish Language skills China – interest slowing rising for outsourcing (0% in 2004 vs. 8% now) Source: Morgan Stanley

BPO Trends in India Current trends: Explosion of growth Entry of big players Declining pricing & margins Trend towards near shoring Conclusion: Indian companies must become more global to survive & thrive Source: PwC, Wachovia

India: BPO Industry Trends Trends What can vCustomer do? Location Changes - Find near shore opportunities for end user markets Structural Changes - Focus more on domain/industry specialized BPO process Product Offering - Create higher-end processes (Value-added) Cost Structure Changes - Offer customers Client Relationships - Partnership-based Cost of Manpower & Infrastructure - Need to diversify geographically Deal Structure - BOT / Joint Venture / Captive Model Migrations Strategies - Offer value-added services throughout all processes Risk & Contracts - Create process that mitigate risk Source: PWC Report: -The Evolution of BPO in India – April 2005 Continue to maintain strong customer relationships to stray from exit-clauses

India – HR Related Issues Trends Increased Attrition What can vCustomer do? Retention Strategies - Continue HR initiatives - More emphasis on career planning and cross-training - Support anti-poaching agreements - Leadership initiatives - Recognition/Remuneration strategies Recruitment Strategies Industry Repositioning - Use competency approach (skill tests) - Use realistic job-previews - Join NASSCOM skill registry - Focus on more stable work environments (value-added) - Locate in Tier II or III - Reinforce company brand image - Continue more process-based not person-based - Support initiatives for “long-term career” projects - Create career track within own company

Appendix: Bulgarian Market

Bulgaria – Key Strengths Stable Part of the EU Currency pegged to the Euro BB rating Innovative Ranked #2 in the EMEA in IT Best time to market According to World bank report on business climate Source: Invest Bulgaria Agency, World Bank

Bulgaria – Key Strengths Set up time: Average of 32 days with 9 processes Prices of goods are declining Recently invested a significant amount in transportation infrastructure Average annual wage in Bulgaria in 2006 was 4,255 leva (2,175.55 euro) http://www.sofiaecho.com/article/expectations-for-bulgarias-economic-growth-in-2007-reach-58-per-cent/id 22042/catid 67 http://www.sofiaecho.com/article/world-bank-grants-bulgaria-409m-euro-for-trade-and-transportation-projects/id 22039/catid 67

Bulgaria - Trends Source: Invest Bulgaria Agency

Bulgaria - Trends Source: Invest Bulgaria Agency

Bulgaria - Critical HR Issue Objectives Specific recruiting considerations: Key Issues Creating brand recognition to attract potential candidates Ensuring “fit” between new hire and company Essential to evaluate employee competencies Decision Overview Industry Analysis Country Analysis Product Analysis Implementation Source: http://www.goaleurope.com/main?p 30&more 1&c 1

Skill Competencies for BPO Employees in Bulgaria 7 distinct skills sets: Keyboard skills Verbal ability Spoken English/French/German/Spanish Comprehension & writing ability Office software usage Numerical analytical skills Concentration & accuracy ability All employees should be tested on these competences prior to being hired Source: http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id 2374

Sofia - Infrastructure Strong infrastructure Centre for international railway & automobile routes Public transit is well-developed 500,000 cars in Sofia Centrally heated Source: Wikipedia

Sofia - Education 16 Universities Largest university enrolls 14,000 students per year Large share of unemployed people with higher education 27% vs. 7% for rest of the country Source: Wikipedia, Sofica investor presentation

Sofia - Language Source: Sofica investor presentation

Sofia - Wages Average annual wage in 2006 was 4,255 leva (3000 USD) BPO wages similar to India: 7,5008,000 Relatively low inflation: approx 10% (versus mid-teens for India) Source: Bulgarian News Net

Sofia - Government Mayor - Boyko Borisov Founder of GERB New political organization Stated goal is to fight crime & corruption Preserving family as cornerstone of society Becoming energy independent 2nd in popular polls Karate expert – coach of national team Source: Wikipedia

Bulgarian Competitors Sofica Approx. 40 agents Serves IT, telecom, transport, utilities and financial sector customers Differentiating on service quality, foreign language fluency, cultural and business compatibility Source: Sofica

Bulgarian Competitors Call Centre Bulgaria Approx. 75 agents Use VOIP technology Provides inbound and outbound services for European, East European and domestic (Bulgaria) clients Multi-language low cost platform Source: Call Centre Bulgaria

Bulgarian Competitors Aii Data Processing Approx. 250 agents Focused on information and editorial services, data processing and business services Provides BPO activities in credit management, billing, telemarketing & telesales Source: Aii data processing

Contingency Plan - Slovakia Capital city – Bratislava Economy based on: Services from high tech firms (e.g. IBM, Dell, Accenture) Engineering Chemical and electrical industries Recent trends: Service and high-tech oriented businesses are thriving Many global companies are building their outsourcing and service centres or have plans to build in the near future here Source: Wikipedia

Appendix: Implementation Plan

Implementation – Facility Size 1 employee per 21K in sales 24M in sales 1150 Employees 20 sq. ft. per employee 1150 Employees 23K sq. ft.

Implementation – Labour Force 1 employee per 21K in sales* 24M in sales 1150 Employees 93% staff billable, 7% support and sales** 1150 Employees 80 support and sales 40 sales and consultants *Benchmarked from Tata and WNS **Benchmarked from WNS

Bulgaria IT Infrastructure Infrastructure risk is moderate The main risk arises from the unreliable quality of the telephone network that can make access to the Internet slow The quality of telecoms infrastructure is likely to improve now that the privatisation of the fixed-line telecoms operator, BTC, has been completed Although historically low, the total international connection per capita has more than tripled for the past two years

Vertical initial analysis: Present verticals: Telecom Small addressable market, high offshore penetration Retail/ eCommerce Largest addressable market Technology (IT) Many large clients Travel & Hospitality Lowest addressable market, do it yourself trend Health High level of trust, two tier systems

Sources Morgan Stanley – IT Services – Outsourcing & Consulting – 2007 Outlook & Trends Report, January 22, 2007 Businessweek feature on outsourcing http://www.businessweek.com/magazine/toc/06 05/B3969 0605outsourcing.htm Merrill Lynch – Mid-Quarter IT outsourcing Review – September 7, 2006 Price Waterhouse Coopers – The Evolution of BPO in India – April 2005 Wachovia – Global Delivery of IT/BPO Outsourcing – November 16, 2006 A.T. Kearney – Building the Optimal Global Footprint – 2005

Sources Company websites (vCustomer, Call Centre Bulgaria, Sofica, Aii Data Processing) Invest Bulgaria Agency World Bank Wikipedia Credit Suisse, EXLService Holdings, March 2, 2007 Credit Suisse, WNS Global Services, March 2, 2007 Bulgarian news net

Bulgaria Reasons for high graduate unemployment rates: A sluggish market causes periodic fluctuations in the labour market Youngest and oldest workers tend to be the most because firms recruit few young graduates and lay off the oldest workers Source: http://www.eurydice.org/portal/page/portal/Eurydice/FigurePage?pub 052EN&fig A7&SizeCode null&SVG TRUE

Bulgaria Reasons for Bulgarian labour force staying in Bulgaria: EU15 states are very reluctant to open labour market to Bulgaria CE-8 is currently under scrutiny, not favouring Bulgaria’s labour force Trends for governments to create incentives to keep skilled labour force within Source: http://transitioneconomies.blogspot.com/2006/10/bulgaria-and-romania-green-light.html