Current economic and political conditions clearly have had an impact on the global services market. The number of outsourcing transactions decreased by 7 percent compared to Q1 2012, and the annualized contract value of these transactions decreased by 25 percent. In contrast, Asia is reporting significant growth in delivery centers across global in-house centers, or GICs (formerly known as captives), and service providers.

1. Key Market Developments in Q2-2012:
Market Vista Briefing
August 22, 2012
Live Tweeting #MarketVista

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

3. Context setting
Focus of this webinar
 Present key global services developments in Q2 2012 and future outlook
 Provide perspectives on next generation location optimization
Sources for today’s webinar
 Summary from a
Location Optimization 200+ page report
+  Fact-based
Service Provider research covering
Intelligence global services
Proprietary & Confidential. © 2012, Everest Global, Inc. 3

4. Terminology | Global In-house Center (GIC)
replacing “captive”
Context What has changed
 Historically, the term “captive” has  Everest Group has adopted “Global In-house
referred to service delivery operations Center” or “GIC” as the preferred term to
in lower cost geographies, which are replace “captive”
owned and operated by the same
company receiving the services (i.e.,  This will appear in all of our reports and
not third-party outsourcing) content beginning in July 2012
 Although the term has become widely
used, it has a perceived negative tone
and is not self-explanatory, causing
confusion for those new to the global Growing industry-wide shift
services space Both NASSCOM (India) and BPAP (Philippines)
are championing the change in terminology
 Furthermore, many organizations, for
which captive is intended to describe,
do not use the term themselves
Proprietary & Confidential. © 2012, Everest Global, Inc. 4

5. Highlights of today’s webinar
Audience poll
Outsourcing and offshoring activity  Current trends and outlook
decreased in first half of 2012  Segment performance
High-value work reversing location  Geographic trends
set-up trends  Offshore GIC activity
 Key drivers and factors for
Large players optimizing locations
assessment
in different ways than before
 Examples
Proprietary & Confidential. © 2012, Everest Global, Inc. 5

6. Presentation topics
Key market Special topic:
developments in Q2 Location Wrap up and Q&A
2012 Optimization 2.0
 Outsourcing transactions
 GICs
 Service providers
 Locations
Proprietary & Confidential. © 2012, Everest Global, Inc. 6

7. As the fog of the 2012 U.S. election
clears, what trend in offshoring
activity do you expect to see in the
overall market?
Significant decrease
0%
Slight decrease
28%
No change 32%
Slight increase 33%
Significant increase 7%
Proprietary & Confidential. © 2012, Everest Global, Inc. 7
Source: Live polling conducted during the “Market Vista: Global Services Developments in Q2 2012” webinar on August 22, 2012

8. Outsourcing transactions have declined, while GIC
activity has remained steady in last four quarters
Index of outsourcing transactions Index of offshore GIC health
Number Number
GIC set-ups and expansions
GIC divestures
33
508 516
472
433 441
411
23
20 19
18
13
0 0 1 0 0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2
2011 2011 2011 2011 2012 2012 2011 2011 2011 2011 2012 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 8

9. Decline in outsourcing activity driven by BFSI,
manufacturing and energy verticals
Outsourcing deals announced Change in average
Number of transactions ACV
(Q1 2011-Q2 2012)
508 516
472
433 441
178 411
Others1 176
163
151 157
125
Healthcare 44 56
52
61 41 43
Public sector 114 108 75
94 102
85
Manufacturing 80 76 82
62 66 68
BFSI 94 98 100 83
74 73
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012
1 Includes energy & utilities, technology, telecom, travel & logistics, and miscellaneous
Proprietary & Confidential. © 2012, Everest Global, Inc. 9

10. Outsourcing transactions have decreased in
traditional geographies, growth in rest of world
Outsourcing deals announced Change in average
Number of transactions ACV
(Q1 2011-Q2 2012)
508 516
472
Rest of World2 96 433 441
119
411
105 66
65
Rest of Europe 90
112
129
127 104 137
107
UK 102
103 91
80 88
82
North America1 198
165 160 173 150 132
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012
1 Excludes Mexico
2 Includes Asia-Pacific, Latin America, and Africa
Proprietary & Confidential. © 2012, Everest Global, Inc. 10

11. Using banking applications outsourcing as an
example, competitive intensity is high
Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix for large banking AO relationships
Leaders
75th percentile
High Major Contenders
Leaders TCS Emerging Players
Cognizant IBM GS Star Performers
75th percentile
Major Contenders
Accenture
Wipro Infosys
(Transaction activity)
HCL Technologies
Market success
bolstered its Major HPES TCS strengthened
Contender positioning its Leadership
HCL Capgemini position
MphasiS Polaris
iGate CGI
Polaris enhanced its
25th percentile
Dell Services CSC major contender position
by expanding scale and
Mahindra Satyam L&T Infotech
achieving higher market
Syntel
EPAM Mindtree success
Softtek
Luxoft 2011 saw L&T Infotech
Hexaware Unisys crossing over from
ITC Infotech Emerging Players to Major
Contenders category
Emerging Players
Low
Low 25th percentile High
Delivery capability
(Scale, scope, domain investments, and delivery footprint)
The banking AO market, represented by 25 service providers, assessed by the Everest Group, scaled up to over US$6.4 billion
in revenue and ~130,000 FTEs spread across ~22 delivery countries
Proprietary & Confidential. © 2012, Everest Global, Inc. 11

12. Leaders’ dominance in the banking AO increased in
2011 – across contracts, ACV, and TCV
Market share of providers in large active banking AO contracts1 Increase from last year
Active ACV and total TCV in US$ billion, number of contracts No/minimal change from last year
Decrease from last year
100% = ~6.4 0.9 ~21.4 1.4 180+ 5
Emerging Players 3% 1% 4% 1% 1%
10%
Major Contenders 23%
5% 28%
28% Major contenders category lost
6% 4% 4-6% share of their revenues,
TCV, and number of contracts in
the banking AO industry
Leaders 74%
68% Leaders expanded their market
62% share by 3-5% in terms of number
of transactions, total TCV, as well
as active ACV (revenue)
4% 5% 3%
Active ACV Total TCV Number of contracts
The large players are getting larger – and with larger deals
1 Contracts for a representative set of 25 providers; contract TCV >US$25 million and status active as of December 2011
Proprietary & Confidential. © 2012, Everest Global, Inc. 12

13. High-value work reversing location set-up trends
Offshore location activity across geographies Offshore location activity across Tier-1 and
Number of service delivery centers set up Tier-2 cities
Number of service delivery centers set up
H1 2011 H2 2011 H1 2012
50 44
43 37 38 38
35
39 33
22 22
13 14
12
10
Asia Europe and Africa Latin America Tier-1 Tier-2
Key reversals in set-up trends (compared to 2009 and 2010)
 Asia gaining share compared to Europe and Africa
 More set-ups in Tier-1 cities compared to Tier-2 cities
Proprietary & Confidential. © 2012, Everest Global, Inc. 13

14. Recent set-ups of Global In-house Centers (GICs) have
primarily been in the technology and manufacturing
verticals
Distribution of new GIC set-ups by industry verticals1
Number
46
43
Others1 10 6 37
Telecom 2 6 5
4
Manufacturing 14
13 9
Technology 20 18 19
Recent activity concentrated in India and
other countries in Asia
H1 2011 H2 2011 H1 2012
1 Includes financial services, healthcare, and other miscellaneous industry verticals
Proprietary & Confidential. © 2012, Everest Global, Inc. 14

15. Latin America | Key trends and developments
across locations
NOT EXHAUSTIVE
Proprietary & Confidential. © 2012, Everest Global, Inc. 15

16. Presentation topics
Key market Special topic:
developments in Q2 Location Wrap up and Q&A
2012 Optimization 2.0
 Context
 Examples
Proprietary & Confidential. © 2012, Everest Global, Inc. 16

17. How is your organization
refining its location
strategy?
Primarily by seeking to use new
locations 6%
Primarily by optimizing existing
locations
29%
Mix of optimizing existing
locations and using new 64%
locations
Proprietary & Confidential. © 2012, Everest Global, Inc. 17
Source: Live polling conducted during the “Market Vista: Global Services Developments in Q2 2012” webinar on August 22, 2012

18. Large organizations with significant internal delivery models
must shift from “selection” to “optimization” approaches for
managing locations
Pressures facing large organizations “Selecting” locations
with significant internal delivery models  New region/country/city
 New skills, especially languages
 Filling gaps
Limited appetite Fragmented/sub-  Diversifying structural risks
for investment scale processes
“Optimizing” locations
Business Increased need  Finding synergy across sites –
demanding more for high-value management, employee value proposition,
value skills delivery models, etc.
 Leveraging existing human capital to
expand services and careers
Maturing Competition in  Managing and balancing capacity across
workforce labor market options (internal and third-party)
 Operationally mitigating risk
 Highly selective about adding new locations
– and only when complementing other
locations
Proprietary & Confidential. © 2012, Everest Global, Inc. 18

19. Amongst many location optimization techniques, we highlight
three for consideration by those with large global services
programs
 Current scale of skill in market
Measure and monitor
 Rate at which new skills are entering (all sources)
sustainability of
 Size and pace of competition vying for the skills
access to key skills
 Multi-function center enriches talent model
Expand within an  Creation of career paths across functions
existing center
 Access to more of the labor pool in the city
 Leverage pre-existing investments (management,
Expand within a city
people engine, etc.)
Proprietary & Confidential. © 2012, Everest Global, Inc. 19

20. Monitoring scalability and sustainability of access
to key skills
Talent pool assessment How to look at
 Assess both gross and net supply
 Contemplate impact of in-bound
and out-bound migration
 Separately assess for
experienced hires
Annual Other Total Lack of Lack of Gross Demand Net
relevant relevant annual propen- employ- annual from available Potential implications
graduate pool pool sity for ability for supply comp- supply
pool the the etition  Target size for skill
function function
 Recruiting models
Runway multiple analysis1
Highly constrained Emerging constraints Comfortable threshold  Training programs
Runway multiple
1  Collaboration in the local market
City 1 City 2 City 3 City 4
’12 ’13 ’14 ’12 ’13 ’14 ’12 ’13 ’14 ’12 ’13 ’14
Entry-level
Experienced
1 Ratio of net supply to hiring requirement
Proprietary & Confidential. © 2012, Everest Global, Inc. 20

21. Expanding scope of delivery center to more
functions
Paths for high-performers in entry-level roles
Feeder roles How to look at
Target roles
 Calculate amount of “surplus”
talent produced from key roles
10% of top 10% of top
performers Testing performers  Proactively use to “shape the
pyramid”
Technical
Analytics
Transaction  Consider implications across
helpdesk processing
delivery locations
5% of top
performers
5% of top
Development
performers
Potential implications
Re-balancing feeder and target roles
 Bridge training for new roles
 Cross-pollination
Current empl.: XX
2013 empl.: XX  Mix of functions in a center
Center 2
Current empl.: XX  Target scope/size of GIC and
2013 empl.: XX
third party roles
Center 1
Inter-center transfer of
feeder roles to rebalance
demand and supply
Proprietary & Confidential. © 2012, Everest Global, Inc. 21

22. Expanding within the same city to tap more talent
Distribution of place of residence of IT offshore Acceptable commute time by current commute time IT workforce’s relative ranking of factors while considering
workforce by seniority (years of experience) 2011; Percentage career opportunities within their current organization
2011; Number of FTEs 2011; Percentage
Rank1-2 Rank 3-5 Rank 6-7
Acceptable commute time (min)
100% = XX XX
30 60 90 >90 Company brand
Current average commute time (min)
Region 1 0-30
Profile, career progression
and growth opportunity
30-60
Region 2 Commute time to
place of work
60-90
Region 3 Relocation
Region 4
90+ Social ecosystem
Region 5 near place of work
Region 6 Total Cost of living near
place of work
Seniority 2-4 years 5-7 years
How to look at
 Understand distribution of talent within the city
 Focus analysis on employee value proposition and commute/transit sensitivities
Potential implications
 Center size and work allocation
 Recruiting strategy
Proprietary & Confidential. © 2012, Everest Global, Inc. 22

23. Highlights of key points
 Existing locations can often be optimized to better utilize the resources
available in the market
– Monitor key skills
– Expand existing center
– Expand in same city
 To do so requires deeper assessment of the location’s talent dynamics
and adjustments to operating models
– Talent migration
– Recruiting
– Training
Proprietary & Confidential. © 2012, Everest Global, Inc. 23

24. Presentation topics
Key market Special topic:
developments in Q2 Location Wrap up and Q&A
2012 Optimization 2.0
 Submit any remaining
questions!
Proprietary & Confidential. © 2012, Everest Global, Inc. 24

25. Key messages in today’s webinar
 No segments growing – all holding
Outsourcing and offshoring activity
steady or declining
decreased in first half of 2012
 Competitive intensity is high
 Renewed focus on Asia and tier-1
High-value work reversing location
cities
set-up trends
 GIC activity holding steady
 More focus on “optimizing” than
Large players optimizing locations “selecting”
in different ways than before  Sustainability and talent
optimization are key
Proprietary & Confidential. © 2012, Everest Global, Inc. 25

26. 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:
– Katrina Menzigian, katrina.menzigian@everestgrp.com
– Eric Simonson, eric.simonson@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
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27. 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. 27

28. Related Content
 Market Vista: Q2 2012
 Global Location Insights: July 2012 - Offshore Locations - Plans and Perceptions of Buyers
and Service Providers (2012-14)
 Global Sourcing Viewpoint: "De-mythifying" Location Selection - Realities Behind 5 Common
Myths of Location Selection
 Global Sourcing Viewpoint: Achieving Next Generation Excellence in the Captive (GIC)
Model
 Blog: General Motors’ Drive to Insource most of its Outsourced IT Scope by 2015: Prospects
of an “against the tide” success story? A recipe for disaster? A populist political play?
 Blog: What the Supreme Court Ruling Means for Global Sourcing in Healthcare
Proprietary & Confidential. © 2012, Everest Global, Inc. 28

29. Everest Group
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Everest Group locations
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+1-214-451-3000
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