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Outlook 2012: Understanding the State of the Industry in the Coming Year

15th December 2011

Atul Vashistha

Atul Vashistha
Chairman Neo Group
www.GlobalSupplyRiskMonitor.com

Chairman Neo Group

www.NeoGroup.com

Since 1999

Neo Group Trends 2012 Demand Outlook Operating Models

M&A
Pricing Wages/ Hiring

Risk Management
Rising Geographies

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

SERVICES
ADVISORY

NEO GROUP

GOVERNANCE / PROGRAM MANAGEMEN T SERVICES

RISK MONITORING

Exclusively focused on superior outcomes through global services, outsourcing and related issues

RESEARCH

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

MY VIEWS

TRENDS 2012

Demand outlook expected to improve in 2nd half Insourcing, managed services models dominate

Professionalization of Outsourcing
M&A continue but yield little benefits Pricing expected to be flat Hiring & Utilization will strengthen Wages will rise creating margin pressure New Geographies will take market share away from traditional locations New opportunities: Cloud and Mobile
2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

MATURING

BUYERS

Optimal Demand Management Innovation - key to transformation beyond SLAs Greater emphasis on collaboration New and improved vendor partnering Increasing focus on Risk & Governance New destinations: moving beyond India Professionalization of talent

Models evolve insourcing, managed services, utility


Rise of the mid-sized buyer
2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

IN 2012

BUYER TRENDS TO WATCH


Operating Models going retro:
Frustrated with supplier rising costs, governance challenges and uneven performance, insourcing is being explored by more clients Continued hiring and attrition challenges and overall governance requirements will accelerate buyers to move to managed services models

Professionalization of Outsourcing:
Supplier management and governance challenges will help clients recognize the need to have professionally trained managers. Programs such as COP from IAOP, and workshops from companies like Neo Group will be leveraged more. Recognition of clear differences in sourcing and managing the services category vs. product categories will lead to higher importance of sourcing leads and vendor managers.

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

IN 2012

SUPPLIER TRENDS TO WATCH


M&A continue but yield little benefits Wages will rise creating increased pressure on supplier margins Pricing expected to be flat in spite of many upward pressures

Utilization will strengthen next year, increasing staffing challenges on fast ramp initiatives
Managed services move beneficial

Geographic expansion to serve diversified needs


Local Global
2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

UNCLEAR SUPPLIER DISTINCTION


No clear methodology adopted to distinguish suppliers; especially in a multi-sourcing environment Perception that existing supplier/vendor best suited for all outsourcing functions, can be dangerous In-depth analysis of supplier domain expertise and exposure critical to successful outsourcing Establish effective framework to demarcate functions and processes a supplier is most suited for
2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

TRAP

NOT FOCUSED ON COLLABORATION


Maintaining a Client-Vendor relationship instead of a Partnership not sustainable for long in a managed/shared services model

TRAP

Joint involvement and participation of client in key operational activities of supplier is critical to business transformation
Sustained innovation becomes reality in collaborative relationships Effective knowledge management between all stakeholders essential to gain competitive advantage

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

RISK MANAGEMENT
Proactive Risk Management is critical to continued growth of industry: Greater attention to the diversity of ones geographic portfolio Increased attention to monitoring of risk and compliance related to disruption at supply locations and the supplier base Real-time alerts and monitoring of events, and their disruptive impacts Sorry for the plug but Neos Global Supply Risk Monitor web-service (globalsupplyriskmonitor.com)
16-12-2011
2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

NEED FOR PROACTIVE

10 10

LOCATIONS
pie is growing:

RISE OF NEW AND EMERGING

Rising Geographies take market share away from traditional locations but the

New destinations continue to take a share of an expanding pie Eastern Europe & Central and South America are surging Buyers will increasingly utilize existing supplier's Global Delivery Models to provide time zone coverage and realize true 24x7x365 support Offshore players will continue to expand and/or setup operations in new geographies, such as Brazil, Poland, China, Mexico, and Colombia etc

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

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WORKFORCE PROFILE
Canada Excellent education system Productive IT workforce Capable for complex project Shortage of IT labor supply Poland Highest Universities in EE Large IT Workforce Largest Labor Pool in EE Excellent Education System Multi-lingual Skills Set Promising ITO & BPO labor market Czech Republic World class IT skills Very small IT graduate Very limited labor force Shortage of IT labor pool Colombia Large graduate pool Huge labor force Bi-lingual skills Promising Labor supply

CURRENT HOT SPOT:

Belarus Excellent Software Skills Small Labor Force Suitable for Niche Operation Smart & hard worker Ukraine World class programmers Smart & hard worker Creative workforce Romania Multi-Language Skills Highly Skill Worker Promising IT O & BPO labor market

Russia Excellent programming Skills Large universities graduate pool Large IT workforce Capable for large operation Promising IT labor market China Large IT workforce Improving Project Manager Level Skills Good number of colleges & Universities Capable for large operation Promising labor market

United States World class IT workforce Capable to manage most complex project Excellent education system Shortage of IT labor supply Mexico Good education system Large IT graduate pool World class IT skills set Excellent bi-lingual skills Capable for large operation Guatemala , Panama, Honduras, Costa Rica, Peru, Chile Highly qualified graduate pool Good for higher end services Excellent bi-lingual Small workforce Limited labor supply

Argentina Large labor pool Bi-lingual capacity (English & Spanish) Good for large contact center operation Stable workforce in the long-run

Philippines Large workforce Huge graduate pool Fluent in English Promising labor market Israel Vietnam Highly qualified IT Egypt Large workforce graduate Large labor force Large # of universities Excellent IT Skills Good education graduate turnout Suitable for small system Good IT Skills operation Multi-lingual skills Promising IT labor market Limited IT labor supply Potential labor market Malaysia Excellent IT skills Brazil Good education system High turnout of IT graduates Limited labor supply Huge Labor pool India Good people skills and Large IT workforce Uruguay availability World class IT skills Limited IT workforce Quality human capital Excellent IT education system Small Population Capable for large operation Capable for large operation Higher end IT Skills Promising IT labor market KPO, BPO, Call Center skills labor pool Suitable for small operation Amazing IT labor market Small IT graduate turnout Shortage of IT labor supply Promising labor Pool
Shortage of labor pool

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

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SPECIALIZED FUNCTIONS
Canada IT Services R&D, ADM Medical Transcription KPO, BPO Voice and Non-Voice
Poland Multi-Language Call Center Shared Services BPO F&A BPO IT Application Services Czech Republic Infrastructure Management Multi-Language Call Center IT Services, R&D

CURRENT HOT SPOT:

Belarus Embedded Software Engineering Services IT Services Product Development R&D, Systems Integration Ukraine Engineering Services, IT Services Product Development Systems Integration

Russia Embedded Software Engineering Services Product Development R&D, Systems Integration Web Development China Engineering Services F&A BPO IT Services, Product Development, R&D, Software Testing Clinical Trial Philippines Call Center (English and some Spanish), Contact Center, F&A BPO, IT Services, LPO, Medical Transcription Vietnam Embedded Software IT Services, R&D Software Testing Malaysia Call Center (English, Mandarin), F&A BPO, IT Services, Technical Helpdesk India Software Development Product Development IT Services Engineering Services Embedded Software & Services Clinical Trial Medical Transcriptions

United States R&D Product Development Embedded Software Engineering Services ADM, IT Services etc Mexico Back Office Operations, Call Center (English, Spanish), Embedded Services, Engineering Services, IT Services, R&D, Software Testing

Colombia Back Office Operation IT Application Bi-Language Contact Center


Israel Hi-Tech Services R&D IT Services Clinical Trials

Romania Business Analytics, F&A BPO, HRO, Financial Analytics, IT Services, R&D Multilingual Contact Center, Procurement BPO,

Guatemala , Panama, Honduras, Costa Rica, Peru, Chile Call center (English & Spanish) Back Office Operation F&A BPO Financial Analytics Argentina Bi-lingual call center services F&A BPO IT Services

Egypt Embedded Software IT Services Medical Transcription Multilingual Call Center Product development Software Testing

Uruguay Call Center (Spanish) Infrastructure Management IT Services Product Development

Brazil IT Services R&D, ADM Software Development Engineering Services Call Center Back Office Operation

2011 Neo Group Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited

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Atul Vashistha
Chairman, Neo Group atul@neogroup.com

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