STRATEGIC ROADMAP
Brian Economaki
Gabriel Gaspar
Harald Tolleshaug
Tran Thi Thu Huong
1
Presentation Agenda
A. Perspectives
1. ITO and BPO Industry size across the globe
2. The Evolution of BPO solutions
B. Growth
1. vCustomer
2. Shaping the new Strategy
3. Going International
C. Plan
1. Implementation Roadmap
2. Financial Status
2
[ perspectives ]
The competitive Landscape
3
Situation Analysis: ITeS and BPO Outsourcing Destination
Cost competitive destinations attracted most of ITO and BPO
companies
ITO and BPO Industry size in Outsourcing Destination Countries 2004 [USD m]
2,200
550
110
8,200
Ireland
25
70
Russia
Poland
700
5,500
Canada
12.2
200
300
China
100
Mexico
800
ITeS Exports
200
BPO Exports
Brazil
5.2
India
330
120 Philippines
30
220
50
25
Romania
25
40
Malaysa
S. Africa
Hungary
Source: 1) neoIT
4
Situation Analysis: Value Creation through BPO
As competitiveness increases, companies must offer value based
solutions which improve their clients way of doing business
Services offered by major companies:
AMOUNT OF VALUE CREATED
1980
1985
1990
1995
2000
2005
2010
Transformational BPO
Remote Infrastructure Management
Value Added
Product Development & Testing
BPO
Customer Contact/ Hardware &
Installation Support
Rules-based Processing
Design &
Integration
Full Process Outsourcing
Problem Solving
Out-tasking
Application
Support
Maintenance
Technical Support
Data Entry
Strategic Impact
5
Situation Analysis: Quality Differentiation
Although it is the cost-benefit perspective which attracts new
clients – Differentiation and Value must be created
vCustomer Solutions
Objectives of Value Creation
Client Retention
• MOVING FROM COSTS TO
SPEED AND INNOVATION
SERVICES MIX
CUSTOM PRODUCTS
QUALITY AND EXPERTISE
Custom Solutions
• ADDING VALUE THROUGH
TRANSFORMATIONAL BPO
Client Acquisition
• ENTERING NEW MARKETS
AND BUSINESS AREAS
6
[ growth ]
Geographical Expansion
7
Growth Strategy: Potential of Middle-Sized Companies
While major players (>1 bn USD) fight for large accounts,
vCustomers specializes in middle-sized companies
UNTAPPED DEMAND LIES ON
MIDDLE-SIZED COMPANIES
WHO WERE LEFT BEHIND ON
THE OUTSOURCING PROCESS
“Vendors who do not
narrowly dominate
niches in the broad
market will continue
to try and find the
shrinking number of
buyers who still buy
on a relationpship
basis.”
Vinnie Mirchandani
Founder of Deal Architect
And Jetstream Group
21 %
GROWTH POTENTIAL
Accenture, CSC, EDS, Fijutsu, HP and IBM combined have only 21% of market-share 1)
Source: 1) Gartner
8
Growth Strategy: Benefits of CRM, BPO
Competition is forcing players to expand internationally in order to
further explore cost savings synergies
Phase 1: National
consolidation
Phase 2: Internationalization Phase 3: Multinational
consolidation
Country A
Country B
Country A
Country B
Country A
Country B
Country C
Country D
Country C
Country D
Country C
Country D
Time
•
Economies
of
scale
National markets
Benefits
• Risk is less dependent on
Regional markets
a single geographical area
• Additional funds for further
growth – size drives further size
Consolidation activities
Products
9
Growth Strategy: Health Care Upcoming in Europe
Current State of Demand: Health Care (Europe)
•Departmentalization of government Health Care Providers
•Demand for ITES in HR, Training, Revenue Cycle Management
•Looking to cut costs wherever customer care isn’t sacrificed
Trends Changing Demand: 2007-2010
•National Health Systems Gaining Interest in BPO
•Global Service Delivery in all Health Care Business Processes
•Positive impact of nearshoring
Solution: End-to-End Business Process Solutions in long term
contracts, maintaining quality and evaluating performance
10
Growth Strategy: Competitive Entrance In Eastern Europe
Entering Europe through the back door – Cost-competitive
countries on Eastern Europe will provide language and IT skills
Country Analysis Framework
9• Labor skill Level
Riga
1 • Labor cost
2• CAPEX + OPEX
Moscow
expenditures
• Language
8 proficiency
Warsaw
3
Kiev
Prague
• Industry
size
Low
Budapest
Bucharest
4
Medium
• Process
maturity
• Educatio
Sofia
7 n System
High
• Infra6 structure
5
• Location + Culture
(nearshore)
11
Growth Strategy: Entering Bulgaria, Monitoring Hungary
Expansion Location: Plovdiv & Varna (Bulgaria)
As the market grows, further expansion can happen in Hungary
Bulgaria India USA
Procedures [#]
11
11
5
9.6
61.7
0.5
104.2
0
0
325
678
16.9
61
56
0
Cost
[% of income per capita]
Cities with Students [# of graduates]
Evaluation before
expading into Hungary
1700
12400
7900
Min. Capital
[% of income per capita]
Dealing with Licences
[% of income per capita]
Difficulty of Hiring
(0-100)
700
Difficulty of Firing
(0-100)
2100
10
90
10
30
79
0
Cost of Firing
(0-100)
Strength of Investor
Protection (0-100)
5.3
6.0
8.3
Varna
Plovdiv
Budapest Szeged
Bulgaria (1-2 years) Hungary (3rd year) TOTAL
Source: “Doing Business in 2006 – World Bank and the International Finance Group, McKinsey Quarterly”
12
Growth Strategy: Entering Mexico
Expansion Location: Monterrey, Mexico
•Primary Service: U.S. Market  81% ITES, 2006
•Serve Spanish speaking population in U.S.: est. 100m
•Proximity to U.S. border  Nearshoring
•Infrastructure Strength:
•Two International Airports
•5 renowned Mexican Universities: Monterrey
Institute of Technology and Higher Studies
Source: World Bank and IFC, 2006
13
[ plan ]
Implementation Roadmap
14
3-Year Implementation: Overview
Implementation Roadmap – Projects take place in a three year
period according to milestones and checkpoints
Bulgarian call
center goes live
Year 1
Internal
• RPO Recruitment
& training Bulgaria
Bulgaria
Year 2
Mexican call center
goes live
• RPO Recruitment &
training – Mexico
Year 3
• Evaluate Mexico
• Further development on,
• Evaluate Bulgaria
or exit from, European
healthcare market
• Consider expansion
Romania/Hungary
Mexico
Evaluate and
develop
• Pursue healthcare
clients in European
Markets
External
15
3-Year Growth: Financial Outlook
Financial Status
Revenues 2003-2006
• Positive CF since Q4.2001
$60,000,000
• 25 mio. $ accumulated money
reserve
$40,000,000
• Stable CF from established
CRM business
$20,000,000
$0
2003
2004
2005
2006
Your financial flexibility is able to support the
recommended expansion without raising further capital
16
3-Year Growth: Necessary Info. For Further Consulting
• Full disclosure of financials/accounts
• Budget preparation, evaluative criteria
• Potential and existing partnerships
• Offices/call centers operations
• Historical process of expansion
• Cash flows Risk evaluation
• Client List
• Contacts
• R & D programs and projects
• Strategic road map
Consulting for further opportunities through monitoring
and evaluation of all emerging markets. Risk analysis
and trend identification, as well as strategic positioning
for partnerships and/or acquisitions.
17
Thank You. Questions?
Ease of Doing Business – a Comparison
World Ranking – Ease of Doing Business
Ranking Criterias
Bulgaria
Bulgaria – Ease of Doing Business
Why Bulgaria?
Cities to operate in – Eastern Europe
Mexico
Mexico – Ease of Doing Business
China – Ease of Doing Business
Why not China 1?
Why not China 2?
Why not China 3?
India – Ease of Doing Business
EU Map
SWOT
vCustomer – the Company
Competitive Landscape
Motivations to Offshore
Porter’s Five Forces
Offshore Market Potential 1
Offshore Market Potential 2
Multiple Engagement Models
Indian Business Models
Vendor Selection Criteria
Country Attractiveness Index
ITO Landscape
BPO Landscape
Country SWOT 1
Country SWOT 2
Why Europe? – Offshore penetration by geography
BPO in Europe – Q1 2007
A Viable Investment
A Financial Example
18
Porter’s Five Forces
Index
Porter’s Five Forces
19
Ease of Doing Business
Index
Doing Business – a Comparison
20
Overview: Bulgaria
Index
Bulgaria
•member of the EU since 1.1.2007
•inflation rate of 6,5% in 2006
•flat corporate income tax 15% (no other European country beats this)
•established time limits on issuing licenses
•ranks 62 on the World Bank’s ‘Ease of Doing Business Ranking’, China
ranks 91, India ranks 116 and US ranks 3
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp., and “The
World Factbook” - CIA
21
Overview: Bulgaria Cont.
Index
Bulgaria – Ease of Doing Business
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.
22
Overview: Mexico
Index
Mexico
•corporate income tax 30%
•Inflation rate of 3.4% in 2006
•ranks 73 on the World Bank’s ‘Ease of Doing Business Ranking’, China
ranks 91, India ranks 116 and US ranks 3.
•nearshore to the US
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp., and “The
World Factbook” - CIA
23
Overview: Mexico Cont.
Index
Mexico – Ease of Doing Business
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.
24
Overview: China
Index
China – Ease of Doing Business
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.
25
Overview: India
Index
India – Ease of Doing Business
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.
26
Ease of Doing Business By Country
Index
Ease of Doing Business Ranking
Source: “Doing business in 2006” – A copublication from the World Bank and the International Finance Corp.
27
Ease of Doing Business Criteria
Index
28
Map of EU
Index
29
Eastern Europe Suitabl Graduates
Index
Where to go – Eastern Europe
Plovdiv & Varna
30
vCustomer SWOT: April 2007
Index
SWOT
Strengths
Quality services
Customized solutions
Call centers in India
ISO & Six Sigma certified
Weaknesses
High costs - no economies of scale
Small product umbrella
Limited financial ability
Only located in India
Opportunities
Nearshoring
Increasing demand from Europe
Threats
Increasing competition
Market saturation
Increasing nr. of BPO companies
Industry M & A
Losing quality during expansion
31
vCustomer: Company Profile
Index
vCustomer – the Company
•Close to 100% customer retention
•Ranked as fastest growing private company in the ITES industry in 2004
•Ranked among the top 5 pure play call-centers in 2006
•Ranked 12th among the top 20 BPO companies in India
•20 marquee clients
•4500 employees
32
BPO Competitive Landscape
Index
33
Potential Client Offshore Motivation
Index
Motivations to Offshore
34
Why not banking, financial services & insurance?
Index
•Inability to compete immediately with larger companies
•Lack of specialization/training of staff
•Economies of scale
•Trend toward megacontracts
35
Country Attractiveness Index 1
Index
36
ITO Landscape: 2006 (McKinsey)
Index
Country Attractiveness Index 2 - ITO
37
BPO Landscape: 2006 (McKinsey)
Index
38
Country Analysis (neoIT)
Index
Country SWOT 1
39
Country Analysis (neoIT) Cont.
Index
Country SWOT 2
40
Why Europe?
Index
Why Europe?
41
Why India?
Index
•Current competitive strength
•Foundation of company, developed infrastructure of operations
•Despite rising labor costs, relatively low with other viable options
•Potential for growth still high
•Competitive advantage expertise of all business practices in country
vCustomer needs to continually monitor India during all future evaluation
periods. Competitive advantage with familiarity can lead to positioning in
numerous circumstances, including partnerships, mergers, or any
offerings of strategic buyouts.
42
Why Bulgaria?
Primary Criteria
•Strategic Partnership
•Nearshoring: EU
Index
Secondary Criteria
•Gaining experience for
potential EU operations
•Improving infrastructure
•Future potential
•EU Membership: Prioritized
region
•Qualified workforce
Ease of transition to essential market to
optimize first mover advantage
43
Why not China?
Index
Why not China?
Red Ocean
•Economies of
scale of larger
(over $1b
revenue)
companies
•Pre-Olympic
‘boom’ vs. postOlympic
economy
•Strength in India
44
Why not China? Cont.
Index
Why not China?
• Lack of English speaking employees, high cost of internet
connectivity, workforce immaturity.
• Unfamiliarity with culture
• Economic advantages of EU and NAFTA
• Not looking solely for cost advantages
China needs to be continually
monitored as an expansion option to
2010 and beyond
45
Why not China? Cont.
Index
Why not China?: Nearshoring
46
Offshore Market Potential
Index
47
ITO/BPO Industry Outlooks: 2005
Index
Offshore Market Potential 2
48
Multiple Engagement Models
From primarily captive…
Index
…to a hybrid model
Indian best-ofbreed vendor
Outsource to
Global brand
Outsource to
Global brand
Feasibility of
outsourcing the
process
Indian best-ofbreed vendor
JV/ Alliance
Delay
JV/ Alliance
Captive
Delay
Captive
Cross-border operation sophistication
Source: McKinsey Analysis
49
Indian Business Models
Index
India Business Models
Captive Models
Pure Captive Model
• An internal cost center or a 100%
subsidiary company set-up to execute
offshore business processes and/or IT
services
• Amex, Dell, Standard Chartered,
HSBC, Ford, Sun
Strategic Alliance/Joint
Venture Models
Joint Venture (JV)
• Joint Venture with equity participation
from customer and vendor. Customer
retains control due to investments in
entity.
• British Telecom - Mahindra
BOT and Inverted BOT
• Where the Indian Provider sets up facility
and provides implementation support to
start with
• Customer can buy out at a
predetermined stage
• Reverse scenario has also been seen
in the market
• Aviva-WNS/EXL,24/7, AIG- Polaris
Outsource Model
Pure Outsource
• Use of a India-based provider to offshore
business processes or IT services
Managed Outsource
• Full-/part-time resources on the ground
in India to facilitate transition, relationship
mgmt and transfer of organization and
domain knowledge to third party
providers
50
Criteria for Vendor Selection
Index
51
Startup Costs
Index
Start Up Cost per Teleworker
One-Time
Furniture, Equipment and Telecommunications
$5900
One time charges, Set-up & Installation
$1200
Total per Teleworker
$7100†
Ongoing Monthly Costs
Recurring
Telecommunications
$110/month
Network & home office/teleworker support
$110/month
Total Average Cost per Year
$2640
Year One Average Cost
$9740
Year Two Average Cost
$2640
Recurring
One-Time
Savings from unneeded office build out
$1,500,000
One-Time start-up Costs
(710,000)
Annual Real Estate Cost Avoidance
$ 500,000
Productivity ($50K salary x .15 x 100)
750,000
Retention ($50K salary x .20 x 100)
1,000,000
On-Going annual costs
(264,000)
Net Annual Savings (1st Year)
276,000
Net Annual Savings (2nd - 5th years)
1,986,000
Total Five Year Savings
10,010,0008
790,000
Source: UCN, Inc.
52
BPO in Europe: April 17th, 2007
Index
BPO in Europe - 2007
•BPO activity in last 12 months higher in EU than in US
•Benelux and Central Europe up 13%
-Trend for growth throughout all of Europe, not just
UK
•Industry specific outsourcing responsible for increase
in Europe
Source: Nelson Hall
April 17, 2007
53
A Viable Investment
Index
“Czech Republic, Hungary, Poland, and Slovakia—can offer average labor
cost savings of 40 to 60 percent over costs in Western Europe, while
cities in EU-candidate and non-EU countries can offer cost advantages of
60 to 80 percent.”
- The McKinsey Quarterly - “The Overlooked Potential for Outsourcing in Eastern Europe”, Dec. 06
54