FAO Growth in 2010: Key Opportunities and Challenges

1. Today’s webinar is brought to you byOutsourcing CenterToday’s webinarFAO Growth in 2010: Key Opportunities and ChallengesSynopsis:Everest experts, Katrina Menzigian and Saurabh Gupta, will discuss the status of the FAO market and whatbuyers and suppliers must do to develop a strategic plan for 2010, including contract, supplier, and marketevaluations.About Outsourcing CenterOutsourcing Center is the world’s most prominent internet portal for authoritative information on outsourcing.The Center’s mission is to build the industry by helping people understand how to create value throughoutsourcing.outsourcing We serve the outsourcing community through: Trusted and objective third-party perspective Database of over 81,000 opt-in subscribers Relevant media including editorials, research, whitepapers, and the annual Outsourcing Excellence AwardsFor more information, contact Peter Bowes at pbowes@everestgrp.com 1 Proprietary & Confidential. © 2010 Outsourcing Center

2. Q&ATo ask a question during the Q&A session Click the question mark ( q (Q&A) button located on the floating tool bar in the bottom right ) g g of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2 Proprietary & Confidential. © 2010 Outsourcing Center

3. Introduction Katrina Menzigian Saurabh Gupta VP-Research Research Director Everest Groupp Everest Group p kmenzigian@everestgrp.com sgupta@everestgrp.com 3 Proprietary & Confidential. © 2010 Outsourcing Center

4. FAO Growth in 2010: KeyOpportunities and ChallengesApril 6, 2010

5. Agenda FAO definition and research methodology Market size, growth, and buyer adoption Evolution of contract characteristics Supplier landscape Outlook for 2010 5 Copyright © 2010, Everest Global, Inc.

6. Our research is guided by a framework thatdistinguishes multi-process FAO from single processfinance and accounting (F&A) transactional services Strategy Judgment-intensive Transaction-intensive F&A strategy Capital budgeting Internal audit Budgeting/forecasting Treasury & risk management FAO (multi-process) Management reporting & analysis Regulatory reporting & compliance Tax T F&A Fixed assets transactional General accounting services Accounts receivable (single process) Payroll Accounts payable and T&E1 Everest’s analyses include multi-process FAO contracts with a minimum of two F&A processes, over US$1 million in Annualized Contract Value1 (ACV), and a minimum contract term of three years Everest analyses include all FAO contracts signed as of November 2009 1 Defined in AppendixSource: Everest Research Institute (2010) 6 Copyright © 2010, Everest Global, Inc.

7. Everest’s FAO research is based on two key sources ofproprietary information1 Proprietary Everest database of ~450 multi-process FAO Suppliers covered in the analysis contracts (updated annually) The database tracks the following elements of each multi-process FAO contract: Buyer details including industry, size, and signing region Contract details including TCV ACV term start date TCV, ACV, term, date, supplier FTEs, and pricing structure Scope including coverage of buyer geography and coverage of functional activities Technology including core F&A technology, supplier- provided tools (if any), ownership, and maintenance Global Gl b l sourcing including delivery l i i l di d li locations and l ti d level of l f offshoring2 Proprietary Everest database of operational capability of 20+ FAO suppliers (updated annually) The database tracks the following capability elements for each supplier: Key leaders Major FAO clients and recent wins Overall revenues, total, and F&A employees Recent F&A related developments FAO revenue split by geography, industry, and client size lit b h i d t d li t i FAO delivery locations FAO service suite Quality certifications and credit rating F&A related technology capability Note: We continuously monitor the market and update the above list to include emerging suppliers such as Arvato Consero HOV Arvato, Consero, HOV, NCO and QuatrroConfidentiality: The Everest Research Institute takes our confidentiality pledge very seriously. Any information we collect that is contract specific will only be presented back to the industry in an aggregated fashion 7 Copyright © 2010, Everest Global, Inc.

9. The annual ACV growth of the FAO market in 2009 sloweddue to the prevailing economic uncertainty New FAO contract signings in 2009 decreased FAO contract extensions in 2009 increased Number of contracts Number of contracts 67% 13% 129 24% 483 418 65 35% 52 82 77 20 Cumulative activity 418 till date 336 77 57 Activity in current year 2008 2009E 2008 2009E xx% Annual growth Active ACV as of December 2009 increased Cumulative TCV in 2009 increased by 11% to US$3.1 billion by 13% to US$23.5 billion Active ACV in US$ billion TCV in US$ billion 13% 20% 23.5 20.8 2.7 3.2 20% 11% 2.8 3.1 20.8 17.6 Dec-08 Dec-09 2008 2009ESample size: 476 multi-process FAO contracts signed as of November 2009 Note: Complete data available up to November 2009. Estimates used for full year Source: Everest Research Institute (2010) 9 Copyright © 2010, Everest Global, Inc.

10. 2010 promises be a stronger year for FAO 2009 reflections 2010 outlook Growth was muted for most suppliers especially in Sales pipelines of major suppliers are stronger the first half of 2009 “Expect one or two new contract signings before end “First half of the year (2009) was slow, picked up in First slow of year (2009) (2009)” last quarter” “Saw pick-up beginning in Oct 09. 2010 looking good “Win rates consistent, but overall volumes down” – resources are fully engaged” “Glad to see 2009 end” “If we compare our FAO/PO pipeline to our other “In 2009 there was a high level of uncertainty and service lines we see a much stronger pipeline” decisions were delayed or not being made” “Robust pipeline for next year – four to five RFP’s in Jan/Feb J /F b 2010” Primarily attributed to the prevailing economic “Largest pipeline across BPO in FAO – around 50- uncertainty 55%. From a demand standpoint, it is looking good” “Sales cycle has become unpredictable due to slow decision making” Backed by the pent-up demand in the market and “Companies have multiple cost cutting initiatives organic growth hence it depends whether outsourcing is a priority or “Pent-up demands is creating traction now” not” “We are seeing relatively faster decisions now” “Initial severance costs is becoming an issue for “Existing clients will be one of the key growth drivers” buyers to enter new contracts” “Existing client base continues to evolve and further “In general, there were significant drops in budgets penetration targeted” and outsourcing volumes g impacted due to g got p “Besides the tough economic situation and cost g business downturn” cutting, companies in need to rationalize SG&A spend” As the global economy revives, most suppliers are reporting stronger sales pipelines. Everest expects growth in excess of 20% for 2010, and the multi-process FAO market is expected to reach nearly US$3.7 billion in ACVSource: Everest Research Institute (2010) 10 Copyright © 2010, Everest Global, Inc.

11. FAO is increasingly pervasive across all buyer segments 1 Buyer Industry Adoption of FAO across industries continues to grow Manufacturing, CPG, retail, and hi-tech continued to be aggressive in 2009. Telecom and pharma are the emerging sectors Significant pent-up demand for 2010 in financial services 2 Contract The U.S. continues to dominate. New contract signings in Europe signing region (both UK and Rest of Europe) were slightly lower than 2008 Asia Pacific started to emerge in 2009 registering YoY TCV growth of ~45% Buyer adoption 3 Geographic FAO continues to be increasingly globalized – both in terms of scope contract signings as well as geographic reach Nearly 70% contracts signed in 2009 had a regional or global scope 4 Buyer size FAO is no longer the prerogative of large enterprises However, the adoption by mid-market has not sustained the momentum gathered in 2006-2007 2010 will be an interesting year for this segment as several solutions like platform based FAO targeting the mid market platform-based mid-market emergeSource: Everest Research Institute (2010) 11 Copyright © 2010, Everest Global, Inc.

13. AP, AR, and GL continue to be the most mature F&Aprocesses. At the same time, the breadth and depth ofother F&A processes has grown considerablyDegree of outsourcing of F&A processes over Transaction-intensive processestime 2006-2007 vs. 2008-2009 2008-2009 2006-2007 High g Pioneer Emerging g g Mature Judgment-intensive Judgment intensive processes cess ownership transferred to Accounts payable 2008-2009 2006-2007 Depth of outsourcing scope Accounts receivable p General ledger FAO supplier) Payroll Analytics F(Degree of proc Regulatory Tax reporting & compliance Low Internal audit Low High Frequency of inclusion (Percentage of transactions)Sample size: 472 multi-process FAO contracts signed as of November 2009 Source: Everest Research Institute (2010) 13 Copyright © 2010, Everest Global, Inc.

14. The nature of FAO contracts is changingDistribution of FAO contracts with end-to-end Type of end-to-end scope in FAO contractsscope over time Frequency of inclusionNumber of contracts P2P in FAO contracts P2P in PO contracts100% = 336 137End-to-end P2P 9% 73% 19% scope 46% P2P has emerged as the most mature end-to-end Traditional O2C 29% process and is outsourced piecemeal 81% either as a part of a FAO scope or a PO contract 54% R2R 20% Up to 2007 2008-2009Sample size: 473 multi-process FAO contracts signed as of November 2009 Source: Everest Research Institute (2010) 14 Copyright © 2010, Everest Global, Inc.

15. The role of technology in FAO has evolved from thebasic “tie-and-run” model to an “augmentation” modelDifferent flavors of technology in FAO and role of supplier Increasing role of technology in FAO Tie-and-run Technology Core F&A technology Platform-based augmentation replacement/ FAO implementation Limited role of Supplier-provided IT infrastructure and/or Pre-integrated technology where tools that serve as core F&A application applications and supplier plugs into “add-ons” around implementation pre-built the buyer’s existing buyer s the periphery of the bundled with FAO processes, processes owned systems to deliver existing systems to services. Technology by supplier, with services address specific ownership resides with pricing built into gaps buyer the FAO contract F&A outsourcing services Enabling tools & technologies Core F&A processing system(s) Traditional Prevalent model modelSource: Everest Research Institute (2010) 15 Copyright © 2010, Everest Global, Inc.

16. The delivery location landscape has maturedsignificantly and FAO has evolved to a truly globaldelivery footprintOffshore and nearshore delivery landscape for FAO Central and Eastern Europe Katowice Wroclaw Lodz China and South East Asia Dublin Lublin Prague Brno Krakow Bratislava Cluj Braga Budapest p Bucharest Lisbon Li b Sofia S fi Dalian Central and South America India Chandigarh Gurgaon Shanghai Guadalajara Juarez New Delhi Hangzhou Jaipur Monterrey St, John Hong Kong Bridgetown Nasik Kolkata Mumbai Hyderabad Guangzhou Guatemala City Montego bay Pune Bangalore ChennaiBangkok Manila Costa Rica Kochi San Jose Colombo Kuala Lumpur Singapore Sao Paolo Hortolandia Santiago Curitiba Buenos AiresMost established suppliers today have coverage across the key delivery regions for FAO – India, Central & EasternEurope, China & South East Asia, and Central & South AmericaSample size: Based on operational details of 18 FAO suppliers including Accenture ACS Capgemini Cognizant Compass BPO HP EX Accenture, ACS, Capgemini, Cognizant, BPO, HP, Service, Genpact, HCL, IBM, iGate, Infosys BPO, OPI, Steria, TCS, VWA, Wipro, and WNS Note: Onshore locations are not included in this analysis Source: Everest Research Institute (2010) 16 Copyright © 2010, Everest Global, Inc.

17. FAO pricing structures are evolving from pureFTE-based models to hybrid modelsBundling of pricing structures in FAO Composition of hybrid pricing structurescontracts over time in FAO contractsNumber of contracts Frequency of inclusion100% = 321 105 123 Hybrid 16% FTE-based 93% 22% 27%Transaction 20% 10% -based The interest in 16% transaction-based pricing Transaction- has increased recently 40% based b d but not a lot of contracts have been signed on it FTE-based 64% 69% 57% It is becoming increasingly important to build an p Gain-sharing 74% incentive structure for the suppliers as buyers try to expand the value that they can extract from FAO Up to 2007 2008 2009Sample size: 427 multi-process FAO contracts signed as of November 2008 Source: Everest Research Institute (2010) 17 Copyright © 2010, Everest Global, Inc.

19. Everest classifies the FAO supplier landscape into leaders,major contenders, and emerging players on the EverestPerformance| Experience| Ability| Knowledge (PEAK) Matrix | p | y| g ( )Everest Performance | Experience | Ability | Knowledge (PEAK) Matrix for FAO 75th percentile High Leaders Top quartile performance across market success Major contenders and capability ercentile 2nd or 3rd quartile performance across market success and capability 75th peMarket success s (Active ACV) rcentileM 25th per Emerging players 4th quartile performance across market success and capability Low Low 25th percentile High FAO capability (Scale, scope, technology, (Scale scope technology and delivery footprint) 1 Suppliers scored using Everest proprietary scoring methodology given in AppendixSource: Everest Research Institute (2010) 19 Copyright © 2010, Everest Global, Inc.

20. Several suppliers noticeably enhanced their marketstanding, effectively intensifying competitive forces inthe FAO marketEverest Performance | Experience | Ability | Knowledge (PEAK) Matrix for FAO 75th percentile High Leaders TCS, Wipro and WNS Genpact IBM further closed the gap Accenture on the PEAK leaders ACS ercentile Capgemini Leader Major contenders Steria Wipro Infosys BPO Major contender WNS Emerging p y g g player 75th peMarket success s VWA HP (Active ACV) TCS EXL Services OPI Intelenet 2009 saw Infosys BPO rcentile Cognizant crossing over from major contenders to Cognizant, Cognizant EXL andM 25th per leaders category on l d t Emerging players Intelenet moved from the PEAK Patni emerging players HCL category to major iGate KPIT Cummins contenders Compass BPO Low Low 25th percentile High FAO capability (Scale, scope, technology, (Scale scope technology and delivery footprint)Source: Everest Research Institute (2010) 20 Copyright © 2010, Everest Global, Inc.

21. The leaders account for 70%+ of the overall FAOmarket in terms of ACVGlobal FAO supplier market share in 2009Number of contracts, TCV and active ACV in US$ billion100% = 2.8 21.6 476 1% Emerging players 2% 4% 4% 4% Established major 5% New major contenders enders contenders (Cognizant, EXL, and ajor 21% 20% Intelenet) te e et) Ma (OPI, Steria, TCS, (OPI Steria TCSconte VWA, Wipro, WNS) 34% 8% 9% 9% New leaders ( osys (Infosys BPO and HP) Oa d )Leaders Established leaders (Accenture, ACS, 68% 64% Capgemini, Genpact, and IBM) 48% Active ACV TCV Number of contractsSample size: 476 multi-process FAO contracts signed as of November 2009 Source: Everest Research Institute (2010) 21 Copyright © 2010, Everest Global, Inc.

22. Successful suppliers from all segments were able tofine tune their capability mix to the 2009 marketrequirementsType of FAO related investments reported in 2008-2009Percentage of events reported Mergers & 11% acquisitions 18%Partnerships & alliances 11% 4% 15% Internal 13% 11% investments 9% 7% Technology-related Process/operational Captive/provider Delivery footprint Internal excellence related acquisition expansion reorganizationSample size: Operational details of FAO suppliers Source: Everest Research Institute (2010) 22 Copyright © 2010, Everest Global, Inc.

23. Everest identified five suppliers as the “2009 FAOMarket Star Performers” based on their relativemovement on Everest PEAK Matrix for FAO2009 FAO Distinguishing Distinguishing features 2009 change inMarket Star features of 2009 of 2009 capability positioning on EverestPerformers market success advancements PEAK Matrix for FAO Highest level of inorganic Smart investments across people, growth in 2009 with 10 new multi-process process, technology, and delivery Strengthened contract signings footprint in 2009. Improved win rates leadership position considerably through greater Top quartile performance for overall credibility and innovative deal spending in 2009 and contract extensions structuring Highest level of organic and inorganic g g g g growth Among the highest level of investment g g in 2009 with 10 new multi-process contract in F&A technology with acquisitions signings and 20+ extensions such as SPSS, Red Pill, and Cognos. Strengthened Continued strong delivery capability leadership position Top quartile performance for overall and new internal initiatives pushed up spending in 2009 and contract extensions the win rate Top quartile performance for ACV growth growth, Posted ~40% FTE growth invested in 40% growth, Transitioned from T iti df overall spending in 2009, and new contract fCOEs, and made significant major contenders to signings investments to build add-on tools and market leaders platforms for the FAO market Top quartile performance for overall market Posted 50% FTE growth, announced spending in 2009 several partnerships to expand process capability established training capability, Closed the gap with academy and competency centers, market leaders expanded capabilities of BASE))), and expanded delivery footprint Top quartile performance for overall market Achieved 25% FTE growth in 2009, Amongst the strongest success including ACV growth, overall invested to enhance process and p performance in major j spending i 2009 and 2009 extensions di in 2009, d t i technology capability, and expanded t h l bilit d d d contenders category delivery footprint beyond IndiaSource: Everest Research Institute (2010) 23 Copyright © 2010, Everest Global, Inc.

25. Outlook for 2010 2010 promises be a stronger year for FAO than 2009 Everest expects growth in excess of 20% for 2010 End-of-term activity in FAO will be a key growth driver There is a significant pent up demand in financial services, which could be a key growth driver in 2010 pent-up Beyond the U.S., we expect contract signings in the domestic Asia-Pacific market as well as rest of Europe to rise 2010 will be an interesting year for the mid market as well as the SMB segment as several targeted solutions like platform-based FAO emerge The captive model will continue to be under the scanner in 2010 Contract characteristics are set to evolve in the near term to support a cost+ value proposition As the current pool of FAO contracts mature and as new, but savvy clients enter the market, more emphasis will be put on achieving business outcomes from FAO Changes in pricing structures to reflect hybrid models will be a key indicator of how suppliers and buyers are shaping these new value propositions Areas of future investment are likely to include technology tools & platforms as well as process maps and methodologies Suppliers will push to differentiate themselves in an increasingly crowded market Everest expects to see ongoing movement between the major contenders and leaders segments Key attributes that will lead to FAO supplier success include — Identification and refinement of target market — A continued focus on meeting client needs in terms of both global delivery capacity and global service support — The ability to bring innovative technology and process solutions that more closely impact business outcomes 25 Copyright © 2010, Everest Global, Inc.

26. Q&A Attendees will receive an email with a link to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Mark Williamson, mark.williamson@everestgrp.com For advice or research on FAO, please contact Everest: Katrina Menzigian, kmenzigian@everestgrp.com Saurabh Gupta, sgupta@everestgrp.com For background information on Everest, please visit: www.everestgrp.com www.everestresearchinstitute.com Thank you for attending todayTo ask a question during the Q&A session Click th Cli k the question mark (Q&A) button located on the floating tool bar in the bottom right of your ti k b tt l t d th fl ti t l b i th b tt i ht f screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 26 Proprietary & Confidential. © 2010 Outsourcing Center