March 2012 iSoftStone – History & Development • Entered Korea & Japan market • Gained scale through acquisition • Founded in Oct 2001 • Substantial R&D investment in solutions • Aggressive expansion into Tier2 cities • US expansion • Launched BPO service • Established Wuxi iCarnegie Institute • Established sales team in Europe • Implemented regional growth strategy • 16 delivery centers • 7,676 employees 2007 • 14 delivery centers • 4,205 employees 2001-06 • 6 delivery centers in 2006 • 40–1,527 employees 2 2010 2011 • 24 delivery centers • 11,750 employees (As of Sept 30, 2011) 2009 2008 • Listed on NYSE (NYSE: ISS) • Increased penetration of high-end BFSI market • Strengthen ERP capabilities in global marketplace • Breakthrough in Smart City and Healthcare • 9 delivery centers • 3,116 employees Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. • 19 delivery centers • 9,285 employees iSoftStone Snapshot – Leadership in China IT Services Employees1 Sales and Delivery Centers Clients2 Over 14,000 24 in total, of which 17 in Greater China Over 80 Fortune 500 companies Net Revenue by Geography3 56% Greater China clients, 44% Global clients Net Revenue by Service Offering3 29% Consulting & Solutions, 67% IT Services, 3% BPO Services 135.2 134.4 90.0 82.5 2008 2009 3Q 2009 3Q 2010 1 As of March, 2012 2 For the 12 months ended Sept 30, 2011 3 For the 9 months ended Sept 30, 2010 4 Total revenues from operations, less business taxes 5 Based on period end numbers 3 7,676 3,116 36.4 2007 Headcount5 Net Revenue4 (US$mm) Track Record of Strong Growth Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. 2007 9,172 4,205 2008 2009 3Q 2010 Global Presence and Resource Distribution Kirkland Beijing Tianjin Dalian Seattle London Hamburg Boston New York Xi’ an Osaka Tokyo Fukuoka Hiroshima Nanjing Yancheng Wuxi Zhenjiang Chengdu Wuhan Shanghai Hangzhou Changsha Taipei Guangzhou Shenzhen Hong Kong Greater China • Beijing • Tianjin • Dalian • Xi’an • Shanghai • Wuxi • Nanjing • Hangzhou • Wuhan • Guangzhou •Hong Kong • Taiwan • Changsha • Shenzhen • Chengdu • Yancheng • Zhenjiang US / Europe •Boston •New York •Seattle • London • Hamburg Japan • Tokyo • Osaka •Fukuoka • Hiroshima On-shore, Near-shore and Off-shore Services to Clients Globally 4 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. End-to-End Suite of Services across Industry Verticals Industry Verticals Consulting Research & Development Services Infrastructure & Software services Communications IT Services Technology Application Development & Maintenance Industry Specific Energy, transportation and public sector (ETP) Solutions Banking, financial services and insurance (BFSI) Consulting and Solutions BPO Functional Common and Consistent Business Processes 5 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Benefits of a Comprehensive Service Offering Multiple growth drivers Large addressable markets Cross-selling opportunities among services Deep penetration of clients Numerous Third-Party Accolades ISO9001:2008, ISO27001:2005 2011/2010/2009 Top 100 Chinese Enterprise for Software Sales Revenue 6 2011/2010 IAOP Global Outsourcing 100 2006-2009 Deloitte Technology Fast 50 China 2009 Red Herring Global 100 2010/2009 China Outstanding Corporate Citizen Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. 2011/2010/2009 China Top 10 Leading Service Provider 2010 China’s Best Employer Enterprise Global and Greater China Marque Clients Industry Verticals Greater China Clients Technology Communications Banking, Financial Services and Insurance (“BFSI”) Energy, Transportation and Public Sector (“ETP”) Other 7 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Global Clients Success Factor #1: Strategically Established U.S. Headquarters Key drivers to select the Pacific Northwest 1 Favorable business climate 2 Highly educated and experienced IT resource pool 3 Marque companies in high-tech, bio-tech, aerospace, telecom, retail…, that spur innovations 4 International environment, nearest port to Asia from Mainland U.S. 5 Strategic engagements with diverse blue-chip clients 6 Revenue & size have grown 8 fold since early 2008 Well positioned to sustain high growth, scale profitably and maintain a leadership position 9 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Success Factor #2: Strong Alliances with Municipalities iSoftStone Wuxi iSS Wuxi Expansion Phase I Completed: Oct. 2010 Square Meters: 38,000 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Cloud Computing Center in Wuxi Collaboration with IBM Overview Wuxi wanted to build a data center as part of their supporting platform for IT Services. In collaboration with Wuxi K-Park and IBM teams, iSoftStone carried out design, implementation, testing and transition Features • Total Area around 1,800 square meters • Across the street from iSoftStone Wuxi Main Campus and iCarnegie • Data hosting, disaster recovery, and other associated value added services • Provides software renting services including IBM Rational, Tivoli, WAS, and DB2 • High Reliability with N+1 redundancy architecture design • 7x24 Service • Technical staff have rich experience, and strong technical backgrounds • Advance resource management system 12 Confidential Limited. Rights Reserved. Confidential©2011 © 2010iSoftStone iSoftStoneHoldings Group. All RightsAll Reserved. World Class Training Through iCarnegie Institute iCarnegie–iSoftStone Institute Training center located in Wuxi Jointly owned by iSoftStone, Wuxi and iCarnegie Utilizes technical curriculum and professional certifications developed and maintained by iCarnegie Inc., an affiliate of Carnegie Mellon University Annual training capacity of up to 10,000 students Tailored training programs Long term curriculum (4+ years) Short term program (1- 6 months) Provide on-the-job training as well as distant learning program Graduation exams and review from on-the- job trainings for hiring and placement Tailored training for clients with client specific materials and client internship All courses taught in English 13 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Success Factor #3: 360° Partnerships with Strategic Clients Go to Market Together iSoftStone as a GTM Partner and System Integrator GTM Process VAR Qualification Marketing Plan Sales and Engineering Training Targeted Outreach Solution Implementation Closeout and Maintenance Feedback GTM Experience • iSoftStone has a 50 person solutions sales team organized by region and industry that participate in go-to-market efforts in Greater China (and about 33% have 10-12 years of experience from organizations like IBM and Oracle) Go to Market Partners In addition to its own proprietary solutions, iSoftStone has implemented over 150 GTM partner products for more than 60 customers. Industry Targets Healthcare Organizations Telco Operators Manufacturing Domestic Consumer Goods • 2009 GTM revenue is $15M (via VAR agreements and Systems Integration) • iSoftStone has been an active GTM partner with Microsoft MCS Industries Served Banking • Insurance • Telecommunications • Energy and Utilities • Manufacturing 15 Confidential Limited. Rights Reserved. Confidential©2011 © 2010iSoftStone iSoftStoneHoldings Group. All RightsAll Reserved. 360° Partnership Partner • • • • Vendor Business Productivity & Collaboration Go-toMarket Partner Business Intelligence (BI) Mobile Application Development & Infrastructure Web Application Design & Development • • • Consulting Dual-shore & Pure Offshore IT Outsourcing Business Process Outsourcing iSoftStone has supported Microsoft as a strategic vendor for almost ten years. We are currently on the approved vendor list (Global AVLS) for Project Management/Consulting, Web Development, Application Development and Testing Services. iSoftStone offers Microsoft consulting and IT outsourcing services in addition to go-tomarket opportunities for sellthrough of Microsoft technologies. Customer • 100% Genuine Advantage Compliance 16 16 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. iSoftStone maintains its integrity as a customer of genuine Microsoft software. We have signed an Enterprise Agreement including Software Assurance benefits for several Microsoft product suites to support our business. Connected Health Innovation Lab 3-way Partnership between iSoftStone, Microsoft, Wuxi City Government 17 Confidential Limited. Rights Reserved. Confidential©2011 © 2010iSoftStone iSoftStoneHoldings Group. All RightsAll Reserved. Doing Business in China From an IT Services Perspective Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. • Which one is central to future long term global plans and strategies? Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. What to do in China? • “Victorious warriors win before going to war; defeated warriors go to war then try to win” – Sun Tzu China vs. Other? Ancient Wisdom Fortune Favors the Prepared Mind • Which part of business to do in China? • What kind of teams in China? IT Services Growth Rates, Asia/Pacific Region 2010 China India Malaysia Singapore Hong Kong Thailand Korea Taiwan Australia New Zealand 2011 13.0 18.0 8.5 6.2 5.7 -0.4 3.9 -3.5 1.5 1.1 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. 15.2 16.6 8.2 6.1 5.7 4.6 3.6 3.6 2.8 1.9 2012 19.1 16.2 8.7 6.0 5.8 5.4 3.8 3.8 3.1 2.4 2010-2015 17.8 16.4 8.7 5.9 5.8 5.3 4.2 3.8 3.0 2.3 Location Choice involves many Aspects First tier vs. second tier cities Business opportunities Talent pool Expenses Local government support Turnover rate Guan Xi (relationships/connections) Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. IP Protection & Data Security Laws, regulations Contractual commitments Enforcement: civil, criminal and Legal administrative 24x7 guarded building Card access to offices Physical Restricted access to the server rooms Segregated network Other security measures implemented based on each client’s requests Client International standards, security policies, processors, training, Logical Personnel monitoring ISO27001 compliant corporate policies, procedures and enforcement Background checks Regular security training Individual NDA 22 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. It takes patience and flexibility to overcome obstacles Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Team Matters Most Do not expect to simply duplicate or transfer a business from the U.S. to China Things work differently Duplication Doesn’t Work Duplicating U.S. Businesses? Well-balanced mix of eastern and western principles is often the best way to develop a successful business American Brands, Chinese Ingredients Made in for China YUM! Brands’ success in China • Egg custard at KFC • Deep sea eel is the best selling topping at Pizza Hut Wal-Mart vs. Carrefour • Record number of people on Wal-Mart’s opening day because of the brand name; downhill after that • China specific changes were made later • Carrefour has been more tailored to Chinese customs from the beginning Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Talent Pool More honor students than total students in the U.S. About 400,000 new engineers every year. Rapidly improving quality Overseas talent returns to China – over 100k a year Challenge: very experienced software architects are rare 25 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. The Management Gap Challenge in China Expatriate Managers – Lack of Culture and Language skills is becoming an issue “Sea Turtles” - Returnees like Daniel Saw, new Asia head of Campbell Soup Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Local Managers – Lacking in Western Management skills Communication “China will soon become the number one English speaking country in the world.” Computer science students must pass foreign language test before they graduate Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Biggest challenge is spoken English Work and Reward Work Ethic • 70% of Shanghai white collar workers work 12+ hours per day • It’s normal to ask employees to work late and on weekends • (Recent labor law changes heavily favor employees) Pay • It’s normal for people to ask each other’s salaries Rewards and Incentives • Organized trips and events • Bonuses Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Recommendations to U.S. Service Providers in China Provide focused services in a good targeted market Grow or expand through present clients in the U.S. that are expanding into China Start from your core competencies and domain expertise Develop a China BU with a balanced mix of practices 29 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Loci Soft ware , Inc. ww w.lo Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved. Innovation Across Borders Contact us: Weiling Li Weilingl@isoftstone.com 206-353-1570 Confidential ©2011 iSoftStone Holdings Limited. All Rights Reserved.