1. Novosibirsk October 2002 Outsourcing to Scandinavia By Jens Brinksten CEO, Technology Outsourcing Systems

2. Agenda  TOS Market Research  Outsourcing today  The Scandinavian market  Outsourcing – advantages / disadvantages  What to outsource  What Scandinavian firms look for when choosing outsourcing partners  Key factors for success in the Scandinavian market

3. TOS Market Research  Our study confirms that many companies experience a lack of IT resources:  lack of people with the necessary expertise in specific areas  difficulties with holding on to the young people who are easily bored with routine jobs (often a turnover of people of 30% per year)  periodical work: peaks and “start up”  time-to-market  Competencies include: Microsoft software (server),.NET, SAP, WAP-programming, C++, Java, XML, database etc.

4. Outsourcing today…  The companies apply different strategies to address the problem of lack of resources:  outsourcing in-house (to other divisions, mostly abroad)  outsourcing to Scandinavian consulting companies  outsourcing offshore  intensive headhunting and job campaigns  using freelancers

5. The Scandinavian Market Norway Sweden Finland Denmark  IBM  CSC  CGE&Y  Accenture  CGE&Y  WM-Data  Adcorre  IBM  CSC  Siemens CG  CGE&Y  WM-Data  Compaq  Accenture  TietoEnator The major system integration firms in Scandinavia are: There are numbers of other players in the market, but these are the one, we meet as competitors in our work

6. The Scandinavian Market Norway Sweden Finland Denmark  India  Ukraine  Russia  Baltic  India  Hungary  Baltic  Russia  Ukraine  India  Czech Rep.  Baltic  Ukraine  Russia  Philippines  Ireland  Baltic  India  Russia From where do we see offshore development firms in the Scandinavian region?

7. Outsourcing - advantages  The attitude to outsourcing is generally positive, although it is recognised that there are some problems involved in this. The main advantages are:  Solving a capacity problem in a quick and low cost manner (compared to hiring people)  Solving a competence/knowledge situation  No hiring of ad hoc staff  Flexibility in production and delivery

8. Outsourcing – disadvantages - I  The main disadvantages are:  Lack of long term internal knowledge  Lack of building up competences  Quality control and documentation  Time-consuming project management  In some companies (SMEs), it is often required to have competencies in- house also – especially when the outsourced projects are of smaller size

9. Outsourcing – disadvantages - II  The main disadvantages of outsourcing abroad are (besides those mentioned):  Different language (communication in general)  Different culture and political system  Lack of trust and security  Lack of control  Not secured by European/local law  Close management of the outsourced project is required

10. What to outsource  IT projects most needed for outsourcing are:  Standard software programming  Database programming  Internet and e-commerce programming (server and networks)  WAP-applications  Projects for which the necessary competences / knowledge is lacking  Routine jobs in developmental projects

11. Outsourcing Partner  What Scandinavian firms look for when choosing outsourcing partners  A local representative in their own country (local contracts)  Managements models and structured project methodology  Security and reliability  Flexible and scalable resources  Fast turn-around times  Local or international references  Price (quality to price)

12. Key factors for success  If a Russian company wants to have success in the Scandinavian market, they need to have some key factors in place:  A local legal entity as representative  Local marketing and success stories  Local project management  Strong project management tools  Strong communications skills  Delivery and quality assurance  Support and service functions  Quality to price

13. Russian firms already have….  Most medium and large size Russian IT outsourcing firms have:  Some of the best trained IT specialists and architects. Because of the emphasis on mathematical and logical thinking, they can solve complex problems, rather than just write code  In addition, Russian programmers have traditionally dealt with limited computing resources by developing more efficient, elegant programs.  Flexible and scalable resources  Many US and European references  Quality to price (attractive price level)

14. Russian firms needs to…. I  To make themselves more attractive, the Russian IT firms have to:  Change their approach from an engineer driven approach/profile, to a more marketing driven approach  Become more active in alliances and partnerships  Use more time on profiling efforts, such as articles in the International Press and media  Use the industry organisations more – because standing together makes you much stronger

15. Russian firms needs to…. II  Furthermore the firms need to:  Emphasize service level, guarantees and data security  Improve communication skills  TRUST…… Improve the approach to foreign firms… we are not ”blood- suckers”, who just want to buy cheap labour and then sell it in the west with high profit!

16. Why are we here…..  We are looking for long-term relations and partnerships with companies in Russia  We want to have close co-operation, and to understand you and your firms! In Denmark we have a phrase saying: ”A sound business practice is a business where both parties feel they gained from the business”

17. SPASIBO Technology Outsourcing Systems H.J. Holst Vej 3-5C DK-2605 Broendby Denmark Phone: +45 7027 1620 Fax: +45 7027 1621 E-mail: office@techoutsys.com