Outsourcing transaction activity in Q3 2012 remained lower than third quarters of previous years. In contrast, offshore locations in Asia and Latin America continued to report activity across global in-house centers (GICs) and service providers. Global services managers need to carefully monitor and analyze these market developments that could serve as a critical input toward their plans for 2013.

1. Key Market Developments in Q3-2012:
Market Vista Briefing
November 8, 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 Q3 2012 and future outlook
 Provide perspectives on nearshore locations
Sources for today’s webinar
 Summary from a
Location Optimization 200+ page report
+  Fact-based
IT and Business research covering
Services research 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
Continued decline in new
 Current trends and outlook
outsourcing and offshoring
 Segment performance
activity in Q3 2012
 Share of leading supply
Decline in new center set-ups with
geographies
traditional supply locations
 Trends of tier-1 vs. tier-2/3 cities by
continuing to hold market share
region
 Growth trends and drivers
Nearshoring is Alive and Kicking!  Considerations around evaluating
relevance in location portfolio
Proprietary & Confidential. © 2012, Everest Global, Inc. 5

6. To what extent will onshore
business continuity become a
greater priority for your
organization?
Already comfortable with our plans;
no change
50%
Might become a greater priority 29%
Definitely a greater priority 21%
Proprietary & Confidential. © 2012, Everest Global, Inc. 6

7. Presentation topics
Key market Special topic:
developments in Q3 Nearshoring is Alive Wrap up and Q&A
2012 and Kicking!
 Outsourcing transactions
 GICs
 Service providers
 Locations
Proprietary & Confidential. © 2012, Everest Global, Inc. 7

8. Both outsourcing transaction volume and GIC
market activity decreased in Q3 2012
Index of outsourcing transactions Index of offshore GIC health
Number Number
GIC set-ups and expansions
GIC divestures
33
516
Specific centers
472
433 441 with geographic
411 23 complexities
380
20 19
18
15
3
0 1 0 0 0
Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3
2011 2011 2011 2012 2012 2012 2011 2011 2011 2012 2012 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 8

9. Multiple industry verticals contributed towards the
decrease in outsourcing transactions
Outsourcing deals announced Change in average
Number of transactions ACV
(Q2 2011-Q3 2012)
516
472
433 441
178 411
Others1 380
163
151 157
125
Healthcare 56 155
52
61 41 43
Public sector 108 75 27
94 102
85
83
Manufacturing 76 82
62 66 68
43
BFSI 98 100 83
74 73 72
Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
1 Includes energy & utilities, technology, telecom, travel & hospitality, and miscellaneous
Proprietary & Confidential. © 2012, Everest Global, Inc. 9

10. Both North America and UK witnessed low
momentum during the quarter
Outsourcing deals announced Change in average
Number of transactions ACV
(Q2 2012-Q3 2012)
516
472
Rest of World2 119 433 441
411
105 66 380
65
90
Rest of Europe 129 90
127 104 137
107
97
UK 103 91
80 88
82
68
North America1 165 160 173 150 132 125
Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
1 Excludes Mexico
2 Includes Asia-Pacific, Latin America, and Africa
Proprietary & Confidential. © 2012, Everest Global, Inc. 10

11. The sluggish demand is impacting service provider
revenue growth but has not impacted pricing
IT ADM EXAMPLE
Revenue growth of service providers Pricing trends
Revenue growth rate (Year-on-year) Blended FTE price – IT ADM
Global and Indian IT providers US$/hr/FTE
Indian IT providers Onshore (U.S.)
Global IT providers Offshore (India)
22.9%
18.4% 69.5 69.6 70.0 69.7
15.7%
11.7%
10.2% 20.0 20.0 20.0 19.8
5.6% -0.3%
3.0%
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2011 Q4 2011 Q1 2012 Q2 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 11

12. Contrary to the stated intentions of players diversifying their
portfolios, India and the Philippines continue to be largest
supply geographies for global services…
Distribution of global services market by supply geographies
2008-12; US$ billion
100% = 91 104 120 Growth led by Latin
America (~15% market
share in 2012)
Others1 16.8% 18.5% 18.2%
CEE2 5.9% 5.8% 5.5%
China 2.8% 2.7% 3.6%
Canada 19.7% 16.4% 14.8%
Philippines 6.7% 7.3% 7.8%
India 48.2% 49.3% 50.1%
2008 2010 2012E
1 Include other locations in Asia, Latin America, and Africa
2 Central & Eastern Europe
Proprietary & Confidential. © 2012, Everest Global, Inc. 12

13. …and experience growth in areas that align with
their “sweet spots”
Distribution of global services market across functions by supply geographies
English voice BPO English non-voice BPO IT Services
2008-12; US$ billion 2008-12; US$ billion 2008-12; US$ billion
100% = 14 23 12 19 54 75
23%
RoW1 30% 34% 33%
42% 39%
14%
9% 1%
1%
Philippines 31%
35%
58% 63% 57% 60%
India 39%
31%
2008 2012E 2008 2012E 2008 2012E
 India’s share has reduced,  India and the Philippines’ share  Steady increase in India’s share
particularly for U.S. operations has steadily increased given given advantages of talent
 The Philippines and other locations strengths in F&A and other availability, cost, and domain
(e.g., CEE, Latin America) have non-voice areas expertise
gained share given language skills  Locations in CEE and Latin  Share of the Philippines has
and accent America have large share for remained similar
bi-lingual and multi-lingual support
1 Rest of World includes other locations in Asia, Latin America, Central and Eastern Europe, and Africa
Proprietary & Confidential. © 2012, Everest Global, Inc. 13

14. Increasing trend of leveraging tier-2/3 cities in CEE
and Latin America
Proportion of Tier-2/3 cities in new delivery center set-ups
2011-20121; Percentage
2011
2012
84
53 Service providers have
50
traditionally led the foray into
37 40 37 tier-2/3 cities, but GICs also
making selective
investments in these cities
Asia Pacific Latin America CEE
1 includes analysis from Q1-Q3 (Jan - Sep) 2012
Note 1 Tier-1 cities are mature cities for global services delivery, typically characterized by large talent pool and significant market activity. Examples include Bangalore
(India), Shanghai (China), Metro Manila (Philippines), Sao Paulo (Brazil), Mexico City (Mexico), and Krakow (Poland)
Note 2 Tier-2/3 cities are upcoming cities for global services delivery, typically characterized by relatively smaller talent pool and lesser market activity. Examples include
Jaipur (India), Dalian (China), Cebu (Philippines), Curitiba (Brazil), Guadalajara (Mexico), and Lodz (Poland)
Proprietary & Confidential. © 2012, Everest Global, Inc. 14

15. Are our 2012 predictions for the global services
market holding true?
Same as prediction
Similar but with some variations
Different than prediction
How has the
market fared
What we predicted at the beginning of 20121 to date? Comments
1 Increased aggressiveness in winning away Renewal activity poised to further
renewals from incumbents increase
2 1-2 landmark captive (GIC) divestitures – Selective GIC carve-outs but no
but not a trend landmark divesture
3 Continued separation of Tier 1 and Tier 2/3 M&A activity and service provider
service providers, making consolidation by consolidation likely to continue
acquisition more attractive
4 Exchange rate concerns outweigh inflation Remains a concern in key geographies
concerns (e.g., Brazil, Malaysia, the Philippines)
5 Continued increase in location activity in Growing proportionate to market based
Central & Eastern Europe (CEE) upon skill-cost value proposition
1 Everest Group webinar document: Market Vista Q4-2011 (presented on February 14, 2012)
Proprietary & Confidential. © 2012, Everest Global, Inc. 15

16. Presentation topics
Key market Special topic:
developments in Q3 Nearshoring is Alive Wrap up and Q&A
2012 and Kicking!
 Growth trends and
drivers
 Relevance in location
portfolio
Proprietary & Confidential. © 2012, Everest Global, Inc. 16

17. What is the relevance of nearshore
locations in your service delivery portfolio?
No role at present 0%
Relevant but less important than
offshore locations
64%
Relevant and more important than
offshore locations
36%
Only using nearshore locations 0%
Proprietary & Confidential. © 2012, Everest Global, Inc. 17

18. Definition of “nearshore”
 Located in proximity to source geography in similar time
Near
zone or separated by a few hours
nearshore
 Examples: Canada/Mexico to US, CEE to Western Europe
& UK, Costa Rica to US/Canada, Ireland/Scotland to UK,
Morocco to France
 Similar time zone as source geography, but at a significant
Far
distance
nearshore
 Examples: Argentina/Brazil/Chile to US/Canada, Mauritius
to France, South Africa to UK
Proprietary & Confidential. © 2012, Everest Global, Inc. 18

19. Nearshore locations are an integral component of
the global services strategy of many companies
Size of global Global companies with nearshore Average nearshore locations in
delivery operations portfolio
Percent of respondents Number of countries
>2500 FTE 57 2.6
500-2500 FTE 31 1.9
<500 FTE 14 1.2
Source: Everest Group’s Market Vista Survey on Offshore Locations: Perceptions and Plans 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 19

20. Nearshoring market is large and growing in-line
with the overall global services industry
Share of nearshore locations in Nearshore global services market growth
global services market 2008-12; US$ billion
2012; US$ billion
100% = 120 45
40
37
Nearshore 36-38%
62-64% Offshore
2008 2010 2012 (E)
Proprietary & Confidential. © 2012, Everest Global, Inc. 20

21. However, there are differences across regions
 Predominantly used to  European language Number of delivery centers
capability established since 2011
serve U.S. across IT and
BPO services  Domain and industry-
New delivery center set-ups since 2011
 Stagnant market activity in specific skills
recent years Marginal increase
Significant increase
49
5
CEE
Canada
 Emerging geography
 Value proposition with high growth
9
around bi-lingual potential
Mexico support 17  Differences across
 Also leveraged for locations in functions
F&A and IT services Africa and source markets
43
Rest of Latin
America
Note: Includes global services delivery centers of Forbes 2000 GICs and leading service providers
Proprietary & Confidential. © 2012, Everest Global, Inc. 21

22. How to evaluate relevance of nearshore locations
in portfolio?
 While unit costs are higher compared to offshore locations,
Take a holistic view (total other costs can be lower
cost of ownership) to – Higher productivity
business case – Lower governance costs
 Nearshore model could provide stronger leverage of remote
delivery
– Higher level of remote ownership
– Greater degree of resource based in lower cost locations
 Language skills
Not all nearshore  Scalable (200+ FTEs) high-value/industry-specific skills in
locations may be suitable some locations
for complex work – Examples: Canada, CEE, and Ireland
 Single function vs. multi-function hub
Understand role of  Domain skills vs. scalability
nearshore locations and  Talent model and operating environment
operating model
Proprietary & Confidential. © 2012, Everest Global, Inc. 22

23. Presentation topics
Key market Special topic:
developments in Q3 Nearshoring is Alive Wrap up and Q&A
2012 and Kicking!
 Submit any remaining
questions!
Proprietary & Confidential. © 2012, Everest Global, Inc. 23

24. Highlights of today’s webinar
 Lower incremental demand across
Continued decline in new
major verticals and geographies
outsourcing and offshoring
 Impact on provider top-line growth
activity in Q3 2012
but not on pricing
 Share of leading supply
Decline in new center set-ups with
geographies has increased
traditional supply locations
 Greater use of tier-2/3 cities in CEE
continuing to hold market share
and Latin America than Asia
 Large market with differences
across locations
Nearshoring is Alive and Kicking!
 Likely to play larger role in location
strategies
Proprietary & Confidential. © 2012, Everest Global, Inc. 24

25. 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
Proprietary & Confidential. © 2012, Everest Global, Inc. 25

26. Global In-house Center (GIC) Value Diagnostic
Survey 2012
Are "parent" and "GIC" executives aligned
in how they are looking to drive value
beyond cost savings?
Participate in Everest Group’s GIC Value
Diagnostic Survey 2012 and share your
perspectives. All participants will receive a
complimentary copy of summary findings.
Survey Link:
surveys.everestgrp.com/s3/gic-survey-3
Start the Survey
Are you interested in a custom benchmark of the survey for your organization?
If so, please contact us to request an organization-specific link for your company.
Proprietary & Confidential. © 2012, Everest Global, Inc. 26

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: Q3 2012
 Market Vista Industry Trends and Buyer Geography Trends
 Global Location Compass – Brazil
 Global Sourcing Trends in the U.S. Mortgage Industry
 Global Location Insights: September 2012 – Location Risks – Perceptions and Mitigation
Measures
 Blog: Determining Today’s Value of Global In-house Centers (GICs): GIC Value Diagnostic
Survey – 2012
 Blog: Leverage Points in Global Services for India, China, and Philippines
 Blog: Why Next Gen CEOs are Actively Promoting “Shadow IT”
Proprietary & Confidential. © 2012, Everest Global, Inc. 28

29. About Everest Group
Everest Group is an advisor to business leaders on the next generation of global
services with a worldwide reputation for helping Global 1000 firms dramatically
improve their performance by optimizing their back- and middle-office business
services. With a fact-based approach driving outcomes, Everest Group counsels
organizations with complex challenges related to the use and delivery of global
services in their pursuits to balance short-term needs with long-term goals. Through
its practical consulting, original research, and industry resource services, Everest
Group helps clients maximize value from delivery strategies, talent and sourcing
models, technologies, and management approaches. Established in 1991, Everest
Group serves users of global services, providers of services, country organizations,
and private equity firms in six continents across all industry categories. For more
information, please visit www.everestgrp.com and research.everestgrp.com.
Proprietary & Confidential. © 2012, Everest Global, Inc. 29

30. Everest Group
Leading clients from insight to action
Everest Group locations
Dallas (Headquarters): info@everestgrp.com
+1-214-451-3000
New York: info@everestgrp.com
+1-646-805-4000
Toronto: canada@everestgrp.com
+1-416-865-2033
London: unitedkingdom@everestgrp.com
+44-207-129-1318
Delhi: india@everestgrp.com
+91-124-496-1000
www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com
Proprietary & Confidential. © 2012, Everest Global, Inc. 30