1. National ITT sector to anchor in the international markets: outsourcing trends Tomas Milaknis CEO, Alna AB Vice President, ITC Association INFOBALT

2.  Total ITC sector valued at ~1,237 mill EUR ▪ 7.5% of the Lithuanian GDP  Growth by 27-30% in 2002-2003 ▪ GDP grew in 2003 by 9%  Export of ITC services grew by 28.6% to 45 mill EUR ▪ Total country exports grew by 9.1%  12 out of 20 top Baltic IT companies are in Lithuania  44% of 20 major government services are available on Internet in Lithuania (EU – 67%)  Top 10 companies experienced the growth of their exports from 40% to 80% in 2003 LITHUANIAN ITC SECTOR IS BOOMING…

3. …. BUT COMPETITION IS INCREASING ▪ ▪ 600 ITC companies already operate in Lithuania ▪ ▪ Globalization process ▪ ▪ New players come – World famous IT Giants HP, IBM, TIETO, MICROSOFT, ORACLE etc. ▪ ▪ Influence of integration with EU – new IT players in the region from EU countries ▪ ▪ Estonian and Latvian companies expand to Lithuania

4. LITHUANIAN IT INDUSTRY TOMORROW. WHERE WE SHOULD GO? Scenarios of Lithuanian ITC industry development ▪ ▪ Expand: - -Enter new markets - -Start projects in neighboring countries - -Start outsourcing activities ▪ ▪ Specialize: - -Niche solutions and competence - -Specialized products

5. GLOBAL TRENDS THE RISE OF BUSINESS PROCESS OUTSOURCING IN EUROPE ▪ ▪ Eastern Europe will be the primary offshore delivery platform for BPO in Europe by 2007 ▪ ▪ Spending on BPO in Europe will reach 4,3 USD billion by 2007 ▪ ▪ A Consortia of service providers will be necessary for 70 percent of strategic BPO in 2007 ▪ ▪ One-third of outsourcing deals will include business-benefit-based pricing by 2007 instead of 11 % now. (Now – 50 % fixed price, 39% – per transaction, 4% - time and materials)

6. GLOBAL TRENDS ▪ ▪ These inhibitors provide excellent opportunities for the nearshore providers: ▪ ▪ Geopolitical risk ▪ ▪ Global economic slowdown ▪ ▪ Unknown countries ▪ ▪ Unknown vendors ▪ ▪ Lack of infrastructure ▪ ▪ Language & culture ▪ ▪ Lose control ▪ ▪ So, Lithuania is on the pipe, but we still look poor comparing Romania, Bulgaria, even Latvia achievements OUTSOURCING PLAYERS SHOICE. NEARSHORE vs OFFSHORE

7. GLOBAL TRENDS ▪ ▪ End-User Consider… ▪ ▪ Outsourcing anything non-value-added ▪ ▪ Standardizing everything you can at base level ▪ ▪ Rigorously managing your portfolio ▪ ▪ Massive Vendor consolidation ▪ ▪ Computing Infrastructure goes virtual ▪ ▪ Networks goes wireless broadband ▪ ▪ Massive shift in Software Architecture – applications will be built by assembling services ▪ ▪ Major wave of Innovation and demand for IT will start at 2006 ▪ ▪ Real-time analytics, massive data and process management will emerge as the most important business applications IT FUTURE…by 2007

8. …. AND CONCLUSIONS COULD BE ▪ ▪ Design Architectures and company strategies should be based on fundamental and inevitable confluence of: ▪ ▪ Real-time infrastructure ▪ ▪ Wireless broadband ▪ ▪ Low-cost, low-power-consumption mobile devices ▪ ▪ Service oriented architecture ▪ ▪ Trigger year is 2006 – future will be terrific for those that upgrade their skills now.

9. ACTION POINTS ▪ ▪ We must ensure that we have a vision of what we want to achieve as offshore / nearshore providers ▪ ▪ We also need to have a carefully developed strategy to achieve this. ▪ ▪ We also need to drive our companies to get international qualifications to support positioning and marketing (CMM) ▪ ▪ Many countries are now putting offshore outsourcing high on their agenda for economic growth. The window of opportunity is thus narrow. We need to move fast. ▪ ▪ We should take a critical look at our strengths and weaknesses and define our starting point immediately ▪ ▪ We need innovations and infrastructure at 2 levels: Government and private sector organizations.

10. ACTION POINTS ▪ ▪ We should reload our service portfolio - From body shopping to product development, project management ▪ ▪ We should go to Alliances ▪ ▪ We should start specialize in order to have leading positions in on the global substantial niches: ▪ ▪ Enterprise content management (process, documents, collaboration, data, real- time analysis management) ▪ ▪ Wireless solutions ▪ ▪ Applications for mobile devices

11. ROLE OF GOVERNMENT ▪ ▪ Innovation Support: - Active promotion of cluster policies – e.g. participation in “Sunrise Valley” and “Technopolis” projects ▪ ▪ Knowledge society: - -Government already is active in “Window to the future” project - -Government supports school computerization ▪ ▪ Export marketing: - -Government should market Lithuania as a No1 choice for nearshore - -Government should join Outsourcing2Lithuania project ▪ ▪ IT services outsourcing: - -Government should lead the way starting to outsource IT - -Government should increase operational effectiveness by outsourcing

12. OUTSOURCE2LITHUANIA ▪ ▪ Goal: to become No1 outsourcing destination in Europe ▪ ▪ Stages: ▪ ▪ Information presentation ▪ ▪ Training ▪ ▪ Marketing ▪ ▪ Challenges: it is very expensive to market Lithuania abroad and compete with a substantial government support for marketing of India and other countries

13. BRINGING INNOVATIONS TO THE COUNTRY. ROLE OF ALNA   Gartner says, Alna is one of the leading near-shore site for outsourcing in Europe   Starting in 1995 from “body-shopping”..... … 2004: complete project delivery in 30 countries on five continents   Passionate in quality – already CMM Level 2   Hundreds of specialists through partner networks and Alliances with global players (India, Europe)   Product Development   Document management system DOCLOGIX – sold in Germany, Denmark, Lithuania, Latvia, Estonia   Investments into new products development - 1 m Euro

14. ALNA AB GLOBAL PROJECTS

15. The condition of IT industry is self-inflicted. Let’s join the forces and act. tmilaknis@alna.ltwww.alna.com