Perspectives on Delivery Center Locations for BPO – Latin America

Location Optimization February 2008 – Preview Deck

Topic: Perspectives on Delivery Center Locations for BPO – Latin America

Everest and Location Optimization overview

Research report overview

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Combination of quantitative and qualitative, proprietary sourcing Sourcing research data industry Facts on market maturity research Size/type of opportunities Understanding of economic and non-economic factors

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Transaction Intelligence Tracking of key transaction-based analyses: process, industry, geography, supplier, buyer

Supplier Intelligence Functional and vertical capability assessment, geographic locations, profiling, function specific

Location Optimization Develop function-specific location strategies (cost, benchmark different locations, sustainability/maturity of different offerings)

Risk Assessment Multi-dimension risk profiling by city to allow for optimal decision- making; risk-reward trade-off analyses

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Experience includes serving global majors across industry verticals – energy, pharmaceuticals, banking and financial services, technology, and outsourcing suppliers

Captive location database Parent industry vertical Time since IT (ADM Engineering Comments on FTE estimates No. Company name (primary) inception and Infra) BPO KPO CC , R&D services offered (date variable) Software 1 3Com Telecom and hi-tech <3 yrs 9 100 development Software 2 ABB Manufacturing 3-5 yrs 9 500 development & 3 ABN Amro BFSI 3-5 yrs 9 9 9 Banking 2000 transaction 4 Adobe Telecom and hi-tech >5 yrs 9 R&D 600 Application and 5 Agilent technologies Telecom and hi-tech <3 yrs 9 9 1000 SOC Chip design, 6 Airwide solutions Telecom and hi-tech <3 yrs 9 100 Akzo Nobel Car Develop products 7 Others 3-5 yrs 9 NA Finishes and color 8 Allianz Cornhill BFSI 3-5 yrs 9 9 9 IT application 500 development and Engineering and 9 Alsthom Manufacturing <3 yrs 9 1,000 design services, Software 10 Amazon Telecom and hi-tech <3 yrs 9 9 NA Development, Team of eight 11 AMD Telecom and hi-tech <3 yrs 9 Design 120

12 American Express BFSI >5 yrs 9 9 9 F&A back-office 3,000 analysts HR processing, Contact center , 13 AOL Telecom and hi-tech 3-5 yrs 9 9 1,650 focused on software Location City database Supplier location database Optimization

125+ cities currently host offshore delivery centers City profile: Bangalore - Call centre

>5 suppliers Salary costs (US$ p.a.) 2-5 suppliers 1 supplier

Base salary-call center agent 3,043 Gross salary-call center agent 3,408 Base salary-call center supervisor 5,180 Gross salary-call center supervisor 5,802 Base salary-call center manager 21,725 Gross salary-call center manager 24,332 Base salary-call center COO 73,021 Gross salary-call center COO 81,783 Number of cities with supplier presence1 27

16 Education 12 8 998 10 10 335 2 1 221 0

North America Latin America W. Europe E. Europe Middle East & Africa Asia 1 Based on analysis of delivery center locations for 42 suppliers Number of university graduates pa 71,335 Note: Map not to scale Source: Everest Research Institute 1 Number of high-school graduates pa - Proprietary & Confidential. © 2006 Everest Partners, L.P.

Russia Sweden Finland

Denmark

Scotland Estonia

Northern Ireland Poland Slovakia Czech Republic India China Mexico Jamaica Romania Turkey Philippines EL Salvador Thailand Costa Rica Malaysia

Brazil Singapore Chile

Argentina South Africa Uruguay

Increasing specificity/sophistication

City profiles Location prioritization Location strategy

Objective Objective Objective City overview for specific Relative attractiveness and Development/review of functions prioritization of cities across company-specific delivery functions center strategy and/or location selection

Illustrative deliverables Illustrative deliverables Illustrative deliverables Demographics Comparison of cities on Evaluate best-fit location Functional skills costs, labor pool, based upon alignment with Costs language/functional skills, company strategy and Market landscape market activity, and risks business plans Labor Short-list most attractive Evaluate alternate delivery options and highlight cost- models risk trade-offs in making Due diligence location choices

This report is a standard location prioritization analysis that has not been customized to a specific organization’s objectives or needs

Everest and Location Optimization overview

Research report overview

Topic Page no. Section I: Executive summary 7

Section II: Latin America market overview 12 Size and growth of the Latin American market 13 Examples of supplier and captive presence 14 Location/city options for delivery centers 15 Key factors driving complexity in decision-making 16 Report contains Section III: Drivers and approach to location selection over 90 pages of 17 detailed analysis Everest risk-reward framework 18 and information Approach/methodology used for location prioritization 22

Section IV: Relative attractiveness of Latin American cities for BPO 24 How to read this document 25 Assessment on environment- and infrastructure-related factors 28 z Environment-related factors: stability, security, risk of natural hazards 29 z Infrastructure-related factors: connectivity, infrastructure support 34 Labor pool analysis 40 z Tertiary educated labor pool 43 z Level of language skills 45

Topic Page no. Section IV: Relative attractiveness of Latin American cities for BPO (continued) Cost-risk analysis 51 z Total operating costs per FTE 53 z Risk analysis: environment risk, time-to-market risk, labor-availability risk 54 z Trade-off analysis: cost-risk trade-offs in selection of cities for BPO 57 Summary of assessment and prioritization of cities 58

Section V: Additional considerations for location selection Report contains 59 over 90 pages of detailed analysis Section VI: City snapshots of prioritized cities 64 and information Appendix 79 Overview of Everest Location Optimization capabilities 80 Details of assessment of cities across environment-and infrastructure-related factors 86 Details of availability of language skills by country/city 97 Other reports in this series 103

The economic growth of Latin America has attracted a number of outsourcing suppliers Background to the region to serve the growing domestic demand In addition to this, suppliers are also using the region to serve U.S. customers, especially in light of the growing Hispanic population in the United States Lower costs, physical proximity, and cultural affinity are other factors driving the growth of outsourcing market in the region As a result, the location landscape in Latin America is rapidly expanding to new countries/cities. Leading global suppliers/captives have set up delivery centers in numerous cities in the region However, these locations have different leverage points across multiple factors relevant for location selection (e.g., costs, labor pool, functional, language skills). The presence of multiple city options with significantly different characteristics drives complexity in location-selection decisions in Latin America This research provides perspectives on the relative attractiveness of Latin American locations for Business Process Outsourcing (BPO)

Provide perspectives on the relative attractiveness of Latin American locations for a Objective BPO center Prioritize 8-15 locations from multiple city options based on their relative attractiveness The focus of this report is on prioritizing a set of potential location options. However, the report is not aimed at selecting the best-fit location for a company-specific situation. In order to further make location choices, additional company-specific requirements and factors need to be evaluated

Tijuana Mexicali Juárez Chihuahua Mexico Culiacán Monterrey Saltillo Aguascalientes Leon Querétaro Guadalajara Mexico City Toluca Puebla Panama

San José Panama City Costa Rica

Brazil Recife

Salvador Brasilia

Uberlândia Belo Horizonte Vitória Campinas Rio de Janeiro San Miguel de Tucumán Curitiba Sao Paulo Santa Fe Cordoba Porto Alegre Mendoza Parana Santiago Rosario Buenos Aires

Chile Argentina

Countries considered are Mexico, Costa Rica, Panama, Brazil, Chile, and Argentina; 35 cities across these countries are covered in this research 13 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Summary of key analyses and data presented in the research

Analysis Data presented/analyzed Analysis Data presented/analyzed

Latin American BPO overview Risks Labor availability market overview Supplier and captive landscape z Size of labor pool Location options for delivery z Language skills center z Competition for talent Stability z Political, economic stability Labor pool Tertiary educated labor pool z Security Assessment of language skills Connectivity z Includes Spanish, Portuguese, Infrastructure support and English Evolution of ancillary services Regulatory environment

Costs Total operating costs per FTE based on Everest’s proprietary cost model capturing 40+ data Trade-offs Assessment of cost-risk elements. Examples: trade-offs z Salaries & benefits Classification of city clusters z Management z Administration z Overhead City facts (e.g., population) z Real estate City snapshots Business environment z Training Outsourcing activity z Attrition Supplier and captive presence z Telecom z Equipment z Utilities 14 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Everest’s location selection methodology/approach

1 Overall objectives and requirements

2 Filtering 3 Labor pool 4 Cost-risk 5 Customized 6 Due analysis analysis analysis diligence Cost

Risk

Activities De-prioritize cities De-prioritize cities Cost analysis Evaluate alternate Due diligence that do not meet that do not have Risk analysis delivery models on prioritized basic minimum minimum labor Cost-risk trade- z Fit with cities to requirements pool to meet offs business plans validate a) Environment- requirements and existing findings and related factors using a two-step delivery identify – stability, process footprint potential security, risk of a) Overall tertiary company- natural hazard educated labor specific b) Infrastructure- pool incentives related factors b) Language skills – connectivity, infrastructure support

15 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 The report has more than 80 pages of data, insights on relative attractiveness of Latin American locations for BPO Supplier/captive centers across Language skills across First-principle filtering – stability,

Latin America countries in Latin America security risk ratings Low risk Monterrey (IBM, CSC, etc.) Medium risk Mexico City (EDS, Share of total population Low availability City Stability1 Security2 Capgemini, etc.) High risk High availability Mexico Curitiba Guatemala (ACS, Capgemini, etc.) English Spanish Portuguese El Salvador Panama Salvador (Dell, Atento, etc,) Panama City Costa Rica (Sitel, Dell etc.) Argentina San José (IMB, Uberlândia P& etc.) Brasilia Peru Brazil Brazil (Atento, Siemens) Rio de Janeiro Porto Alegre Sao Paulo (Teleperformance, Chile (IBM, KPMG) Belo Horizonte Accenture,etc.)

Chile Curitiba (Accenture, Campinas HSBC, etc.) Costa Rica Santiago Buenos Aires (EDS, Rio de Janeiro (Shell, IBM, TCS etc.) IBM, TCS, etc.) Argentina Mexico Sao Paulo Recife Panama Vitória Annual tertiary education pool Total annual operating cost per Cost-risk comparison for prioritized 2006; ‘000s FTE for BPO delivery center cities for BPO delivery center Buenos Aires 2006; US$ ‘000s per FTE Sao Paulo Mexico City Low Santiago

Rio de Janeiro Emerging locationsCordoba

Belo Horizonte Porto Alegre Curitiba Campinas Brasilia Buenos Aires Brasilia Belo Horizonte Cost Sao Paulo Curitiba Puebla San Jose Santiago Rio de Janeiro Puebla Mexico City Monterrey Salvador Mature locations Cordoba Monterrey PueblaPuebla Brasilia Brasilia CuritibaCuritiba CordobaCordoba

SantiagoSantiago High

Recife Jose Jose San San MonterreyMonterrey CampinasCampinas SaoSao Paulo Paulo Mexico City City Mexico Mexico

Rosario PortoPorto Alegre Alegre High Risk Low BuenosBuenos Aires Aires Rio de JanerioRio de Janerio Porto Alegre BeloBelo Horizonte Horizonte 16 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Everest Research Institute reports in this series

Type of report Number of cities Geography covered BPO ITO covered Central & Eastern Europe 9 9 25

Asia (China, India, Philippines, Singapore, 40 Malaysia, etc.) 9 9 India 9 9 23

Latin America (Argentina, Brazil, Mexico, 35 Costa Rica, etc.) 9 9

Eight different reports covering BPO or ITO for four geographies are available

17 Copyright © 2008, Everest Global, Inc. ERI-2008-2-PD-0177 Get the answers today that lead to tomorrow’s success Everest Research Institute has the resources, experience, and capabilities to provide companies with the strategic intelligence, analysis, and insight that are crucial to making the right decisions in today’s outsourcing marketplace.

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