First Value Shore Bulletin- reviewing the potential IT services available in Spain and getting an advisor\'s view of the considerations for sourcing IT services in Spain.

1. Issue #1 of the Value Shore Bulletin March 2010
Global IT Delivery Shifts
to Spain
Spain, Your Destination for IT Sourcing

2. Accenture · Altran · Atos Origin · Capgemini · Delaware
Deloitte · Ernst&Young · Everis · Hay Group · IBM · Indra
Informática El Corte Inglés · INSA · IOR · Matchmind
Neoris · Oesía · PricewaterhouseCoopers · Sadiel · Steria
T-Systems · Tea-Cegos · Tecnocom · Unisys · VASS

3. Welcome to this, the inaugural issue of the Value Shore bulletin.
Value Shore represents a collaboration of 25 of Spain’s leading
IT consulting firms aimed at promoting Spain as a nearshore
innovation hub for firms in the UK, Germany, the Nordic and
the Netherlands.
Spain offers the same proximity benefits as other European
nearshore destinations for IT service delivery but suffers from
poor perception. A powerful set of competitive differentiators,
however, include a large, well-qualified IT labour pool, world-
class industry expertise, competitive software development rates
Euan Davis (driven by industrialized software factories), and the potential to
Forrester Research scale through Latin American resources. Value Shore sees more
firms from the Western and Northern Europe harnessing Spain
for low-risk software development, functional process expertise,
or business process transformation. Firms report that the costs
involved from sourcing Spanish IT services correlates to high
levels of service competence.
This bulletin offers a quarterly update into relevant news
and features from Spain as your Value Shore destination. In this
issue we interview one of the leading lights from the Value Shore
Team and we turn the spotlight on Spain’s banking behemoth
Santander to understand how its Spanish factory model has
allowed the bank to thrive where others have badly suffered
during the past 12 months. So sit back and enjoy this inaugural
issue of the Value Shore Bulletin and don’t hesitate to contact
Team Value Shore with any queries or follow-ups.
In this Issue…
2 / Executive Insights: José de Rafael from Value Shore
5 / How Santander Leverages Spain as a Value Shore Destination
8 / IT news roundup Q1 2010
10 / Key contract information
11 / Diary Dates
12 / Further information about Value Shore
All the document has been written by Euan Davis, Principal Analyst at Forrester Research
Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 1

4. INTERVIEW
Executive Insights:
José de Rafael
from Value Shore
With the inaugural issue of the Value Shore Bulletin we welcome
José de Rafael to give us his views. José is the CEO of the AEC—
the Association of Spanish Consultants—and was responsible
for setting up the Value Shore. José has been active in promoting
Spain as an innovation hub for European firms.
So José, the obvious question—why Spain? While other localization
options are based on low labour costs and the training and level of their
resources, Spain offers additional value through business knowledge and
experience, specializing in processes and developed sector-specific solu-
tions. In addition, Spain’s geographical and cultural proximity to nearby
countries with significant technological demand makes it possible to set
up closer collaborative working models based on the nearshore concept.
So do you think Spain can rival India as an offshore destination?
Actually no, I don’t think that Spain can rival India as an offshore des-
tination—I believe Spain should be seen as complementary to India or
other offshore destinations as each destination and its providers can offer
different benefits. The fact is that many companies are now moving to
multisourcing so they source providers most apt for the specific needs
of a project and thus obtain the best results.
Are there specific industries that are tapping Spain for its innova-
tion expertise? Yes, and its Europe’s best-kept secret! Several of the
larger providers have built solution centers to tap Spain’s dominance in
financial services as an example. We believe through Value Shore that
this expertise could provide huge benefits to our European neighbours.
As I mentioned earlier, Spain harbors some of the most innovative busi-
ness practices in the IT sector, and this is one of the principal reasons
2

5. that Spanish companies are beginning to make their mark in industries
such as the retail, energy, and of course, financial services across Europe.
What about the ICT industry in Spain? Tell me about the techni-
cal capability of the Spanish workforce? The IT sector in Spain is
supported by our university system and the thousands of students that
graduate each year. In Spain we have over 40 telecom universities and
65 IT universities, and approximately 13,500 science and technology
students graduate from these universities each year. Almost 20% of 25
to 64 year olds are science and technology graduates in comparison with
around 10% in Poland, which is the next-nearest offshoring destination.
I hear about Spain’s Factory model for software development—
what is it and why is it so successful? Before offshoring was stable
and mature, a significant number of global IT firms chose Spain as the
right location for software factories to serve European firms. Spain had
low labour costs, and providers successfully conducted complex IT pro-
grams (see, for example, Accenture’s Malaga software center created
over 10 years ago). As offshore took off, these factories continued being
competitive because of the quality, reusability, and industry expertise
coupled with the industrialization initiatives taking place. Most of these
centres are still actively paired with offshore factories marrying together
deep domain skills from Spain and lower labour costs offshore.
Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 3

6. What about the language—would this be a problem? Language is
necessary for communication, but my experience shows that technical
language in an IT environment is of an international standard and common
knowledge to technology graduates. Textbooks are written in English and
make use of specific technical jargon. Don’t forget what is essential for
fluid communication is cultural affinity—Spain is a major European coun-
try and its culture syncs to other European nations. This cultural affinity
reduces misunderstandings and simplifies unspoken communication.
What about the Spanish economy—should prospective firms
worry? There is a lot of noise about the Spanish economy, and it’s
been exaggerated. Only a few industries are really heavily hit by the cri-
sis—Spanish real estate and construction. Spain’s financial firms remain
in a stronger position than those from other regions, and Spain’s larger
firms continue to perform reasonably well. For Spain’s IT companies
attrition has dropped, and they feel they can now play a valuable role
in helping European companies to be more successful in IT large soft-
ware implementations and outsourcing deals—industry know-how, IT
expertise, and large program management skills are available at a great
value-cost-risk point.
It looks good on paper but where should firms start—through an
intermediary? There are two ways firms outsource to Spain. Firstly, there
are smaller companies nervous about offshoring in India that choose to
mitigate risk by nearshoring to Spain. Secondly, there are larger, more
mature companies (in outsourcing terms) that include Spanish vendors in
their sourcing portfolio to leverage the benefits that Spain offers. In both
cases the AEC and Value Shore offers support. Value Shore is a platform
to provide outsourcing partner selection service, helping firms identify the
right partner to enable them to take advantage of the innovation and cost-
savings available in Spain. Value Shore was developed by a combination
of both global and local IT consultancies including organizing site visits,
providing legal support and offering independent quality control during
the course of the outsourcing project.
Thank you, José
4

7. ARTICLE
Spotlight on Santander:
Leveraging Spain’s
High-End Skills
This quarter we focus on a giant in the world of Banking—Spain’s
Santander. From a small bank founded in the Northern Spanish city of
Santander to one of the most successful banks to weather the great
financial storm—Spain’s most successful bank now owns a commanding
presence on the UK high street through its acquisition of Abbey National,
among others. The rest of the industry will look at Santander’s IT factory
model with envy as it leverages Spain as its nearshore strategy.
Fact Box
2009 Profits € 8.9 billion
Revenue by geography Continental Europe, 48%; Latin, America 36%; UK, 16%
Branch offices 14.000 worldwide
Shareholders 3.2 million
IT organization Isban—the strategic IT development arm of Group
Santander—employs over 10,000 people worldwide
IT is at the heart of Santander’s success
How important technology is to Santander and how much it relies on
Spain as a technology hub is a given. This quote from Santander’s legend-
ary chairman, Emilo Botin, demonstrates the importance that technology
plays in the bank’s success:
“[Our] modern technological platform allows us to establish a compre-
hensive relationship with our customers, making it possible to combine
a high quality of service with a tightly controlled cost curve.”
The acquisition run in the UK will see the bank’s architectural savvy
and sourcing model design support the strategic integration of Abbey,
among its other UK acquisitions, with Santander’s technology platform.
Santander works to deploy standard banking products that are controlled
by its various business units. Its banking products need minimal configu-
ration for local markets irrespective if they are markets in the UK or Latin
America. Technology and a factory model is the key to the bank’s success.
Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 5

8. IT efficiency is first and foremost
Santander aims to become the most efficient bank in every geographical market
that it serves, and this objective goes right to the heart of its IT strategy. IT efficiency
for Santander is a trinity between keeping IT costs down; increasing quality of IT ser-
vices; and managing the risk from across its IT investments. This three-point focus on
efficiency relies on a manufacturing factory model for software development. Santander
views this as an internal global delivery model and it has been developed by its wholly
owned subsidiary, Isban.
Santander’s manufacturing model delivers consistent service
Isban is responsible for delivering strategic application development services to
business units and the products that each one needs to innovate and build on. Isban
represents one-half of the manufacturing model with another subsidiary, “Produban,”
responsible for infrastructure support services. What’s clear is that Santander’s manu-
facturing model for software development is vital to Santander’s success, and it must
adapt to wide changes in demand—right now it is integrating three banks in the UK,
two in Germany, and one apiece in Brazil and the UK. Capturing local knowledge is
important in addition to running a lean cost structure from its factory model in Spain.
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9. Spain provides Santander with a nearshore hub
Santander’s global delivery model centers on its software labs located in the
Spanish capital Madrid. These labs control the architecture and coding work that
needs to be done or to support key integration programs. Core development for the
banking applications happens in the labs and can be subcontracted to third-party
developers around Spain for added capacity. The final code is tested at the hub and
then sent to the overseas entity and integrated locally. Although the architecture and
development take place in the Madrid hub (which Santander views as a nearshore
entity) the architecture best practice is spread around the world through key personnel
and a governance layer. A network of local delivery centers supports local integration
requirements and can offer the tweaks that local product sets require for compliance.
Governance glues the model together
Santander recognizes that only strong governance underpins its use of Spain as
a destination for high-end service delivery. Santander’s policing of the architecture
is vital and it couples to a proprietary delivery methodology and sourcing model. A
strong management team ensures the right architectural decisions are followed and
connect to a sourcing model that flexes capacity from around the world. Partners are
chosen because they know Santander’s business; they understand the systems; and
they know what to do to comply with Santander’s methodology.
Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 7

10. NEWS
IT News Roundup
Q1 2010
This section of the bulletin reveals:
Spain poSitionS for leaderShip in it
Revealing the government’s desire to develop Spain as a nearshore destination
saw the advisory board for the Telecommunications and Information Society (Catsi)
meet in Q1 to discuss the second phase to the “Avanza” program. The initial Avanza
program set out to strengthen Spain’s ICT credentials for coverage and connectiv-
ity; Avanza 2 plans to maneuver Spain into a leadership position in the development
and use of IT products and services in Europe over the next five years. The Avanza
2 program is organized into five strategic areas of action: infrastructure; trust and
security; technology training; and digital content and services.
Spain hoStS firSt MicroSoft innovation center
for healthcare
Valencia will be the location for the first Microsoft innovation center for healthcare
technologies. Francisco Camps, president of the Generalitat Valenciana, and Mary
Garaña, president of Microsoft Spain, signed an agreement for the formal establish-
ment of joint facilities between the two parties. The new center will be designed as
a world reference for innovation in healthcare according to both parties—the project
sees the government investing over €0.8 million in the first two years, which Microsoft
will match with technology, training, software, hardware, marketing, and support staff.
innovation for new SMart grid technologieS
Acciona and Indra are teaming up to develop new smart grids for recharging elec-
tric cars and generating energy from renewable sources. The project, called Serve
(Smart System Refilling Electric Vehicles) has been designed as an open platform
that can be used by any agent that enters into this sector such as car manufacturers,
electrical, and parking managers, among others.
Spain’S telefonica joinS conSortiuM
to Make telecoM greener
A consortium led by Alcatel-Lucent on Monday outlined a research project aimed
at tackling climate change by making telecom networks more energy efficient. The
8

11. consortium involves leading mobile phone operators such as AT & T, China Mobile,
and Spain’s Telefonica. The “Green touch” initiative has the support of the govern-
ments of the US, UK, France, Korea, and Portugal and was presented in London in
January. The first meeting of the consortium was devoted to establishing the five-
year plan of the organization, which will see the initiative provide a reference network
architecture and best practices.
SpaniSh integrator indra
deMonStrateS aviation expertiSe
Indra sets out to modernize air traffic management for Peru, giving Peruvian airports
the possibility to significantly increase the number of flights they operate while ensuring
the highest level of safety. Indra has been engaged to develop a new control center
for air traffic in Lima and deploy a network of stations of secondary surveillance radar
covering almost all of the entire country’s airspace. The project has been awarded to
Indra by the International Civil Aviation Organization through an international public
tender for €24 million, and the implementation will run until December 2011.
vodafone Spain in itS bid includeS
cloud coMputing froM MicroSoft
As a sign of things to come in 2010, expect to see telcos begin to offer cloud-
based solutions from Spain. Vodafone and Microsoft gave additional details about
their alliance announced over one year ago that offers Microsoft business services
and software with the voice and data operator.
Spain layS itS claiM to be
the beSt place for Mobility
The Mobile World Congress held in Barcelona in Q1 has established itself as
the great fair of the mobile industry with organizers expecting over 55,000 visitors
and 1,300 exhibitors. The event coincides with strong competition between handset
manufacturers (Nokia, RIM, Apple, LG, and Samsung) and Internet ISVs (Microsoft
and Google) and operators (Telefonica, Vodafone, and Orange) for the projected
growth in applications.
Spain’S tech Start-upS learn froM Silicon valley
Twelve Spanish technology start-ups flew into Silicon Valley in California in March
to learn how to innovate like the best of them. Apple, Google, Facebook, Yahoo, HP,
Cisco, eBay, and Twitter began life in Silicon Valley, and the organizers of the trip—
Spain’s Fundación Banesto with the support of ICEX—aim to help the region’s innova-
tive start-ups to think globally and internationalize their business. The trip follows the
assertion of Spain’s prime minister that the country leads the field in new technolo-
gies—the government has tripled the budget of research and innovation since 2004.
Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 9

12. Key Contract Information
This section of the bulletin details key contracts won in Spain in Q1 2010.
Client Provider Details Length Volume
European Agency Everis Framework contract for 3 years € 10 million
(Public Sector) application development
Saudi Arabia Everis Development of 15 months € 3 million
Ministry e-government platform
(Public Sector) to support key business
processes
Pharmaceutical Ernst & Creation and Ongoing € Undisclosed
Firm Young implementation of an
European procure-to-pay
shared service center
Real Estate Firm Ernst & Bookkeeping BPO, tax Ongoing € Undisclosed
Young compliance, and statutory
annual accounts
Cash Fulfillment Ernst & Payroll outsourcing Ongoing € Undisclosed
Company Young
Leader T-Systems Multi-year partnership 25 month € 27 million
manufacturer contract to transform
in Automotive the IT Baseline based on
Sector profound knowledge of
customer legacy systems
and core processes:
Harmonization of baseline
services, application
management and
modernization in order to
ensure service quality and
adapt market standards
and best practices (ITIL).
Danone Tecnocom Application support; Ongoing € Undisclosed
application maintenance
(BI excellence center
servicing >30 countries)
10

13. Further Information about
Value Shore
Value Shore represents:
Founded in 2008 by the AEC (the Spanish association of consulting
firms), Value Shore represents a collaboration of the 25 leading consulting
firms in Spain–active members include VASS, Atos Origin, everis, Ernst &
Young, IBM, Indra, INSA, Oesía, T-Systems, and Tecnocom. Supporting
members include Accenture, Altran, Capgemini, Delaware, Deloitte,
Informática El Corte Ingles, Matchmind, Neoris, PricewaterhouseCoopers,
Sadiel, Steria, and Unisys.
Value Shore members represent over 80% of the total turnover of the
management and technology consultancy market in Spain. Furthermore,
they also employ over 60% of the professionals in the sector, represent in
the interests of a market that moves €9.5 billion a year, and provide work
to over 120,000 employees, 85,000 of whom are university graduates.
Value Shore ensures companies have the information they need to
shortlist prospective partners—this includes advising on the potential tax
breaks offered by specific regions and organizing and funding site visits.
Value Shore also has access to lawyers and contract specialists and can
provide independent quality control during outsourcing projects to ensure
both parties fulfill their contractual obligations.
If you have the opportunity to be in Spain in the near future do not
hesitate to contact Value Shore in advance. In addition to the original
purpose of your trip Value Shore can provide you with the opportunity to
better understand Spanish IT capabilities for your industry.
Value Shore offers free support to firms looking to oursource to Spain. Please contact +44(0) 20 7869 8071 11

14. Contact information:
Value Shore UK
Portland House 16th floor
Bressenden Place
London SW1E 5RS
United Kingdom
Telephone number: +44 (0) 20 7869 8071
Fax number: +44 (0) 20 7869 8001
Value Shore Spain
C/ Monte Esquinza 34, 2 B
28010 Madrid
Spain
Telephone number: +34 91 308 01 61
Fax number: +34 91 391 35 93
valueshore@valueshore.org
www.valueshore.org
12

16. Value Shore
Telephone Number: +44 (0) 20 7869 8071
valueshore@valueshore.org
www.valueshore.org