OffShoring in Central and Eastern Europe 4 th

Off-Shoring in Central and Eastern Europe 4 th Vienna Economic Forum – VEIT V. DENGLER Vienna, November 5 th, 2007 DELL CONFIDENTIAL 1

Executive summary OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS DELL CONFIDENTIAL 2

Off-shoring to Central and Eastern Europe countries NEW CAPTIVE SETUPS Recent Announce- UPS INBEV Center of excellence for banking back office in Wroclaw F&A center in Wroclaw F&a/converged services centers in Prague and Budapest WIPRO LOGICACMG CONVERGYS EXPANSION OF New service OUT-SOURCING center in Bucharest PROVIDERS ments LARGE OUTSOURCING DEALS DELL CONFIDENTIAL CREDIT SUISSE New call center in Billing, customer Brno support service from Budapest Almost 80 new centers announced in 2006/07, ~40, 000 additional FTE NOVARTIS off-shored to Eastern Europe, of F&A out-sourcing which 10, 000 in new centers, 30, 000 to Genpact in existing centers Bucharest and Kolkata 3

"Came for cost, stayed for quality" CORPORATE/REGIONAL HEADQUARTERS KNOWLEDGE HUB TRANSACTION FACTORY TRANSACTION CENTER FOR WESTERN EUROPE Examples Lufthansa (Cracow) Zurich/Capgemini (Cracow) P&G/HP (Bucharest) EUROPEAN/GLOBAL CENTER FOR CORE COMPETENCIES Delphi (Cracow) Siemens (Wroclaw) SAP Labs (Sofia) Dell (Bratislava) JCI (Bratislava) FASTER MOVE TO KNOWLEDGE-INTENSIVE SERVICES DRIVEN BY COMBINATION OF FACTORS Talented workforce with good functional knowledge Cultural proximity/accessibility/timezone overlap Language capabilities DELL CONFIDENTIAL 4

DELL Evolution in Bratislava 3 Grew to a European Business Center by 2006, w/ num. headquarter functions Over 1600 FTE by end 2007 covering a wide range of front and back office functions 2 Expanded by 2004 to include Germanlanguage Sales and Customer Care Center with up to 900 FTE to support full range of customer-facing functions 1 Dell launched operations in Slovakia in November 2002 Technical Support with up to 300 FTE for German language area DELL CONFIDENTIAL 5

DELL Finance in Bratislava BACK OFFICE MID OFFICE FRONT OFFICE Value Channel Controlling Commission Targets Pricing Business Analytics Business Controls GL Accounting OPEX Mgmt Functional Accounting VAT Reporting Credit Collections AP Time Back-office FY’ 05 DELL CONFIDENTIAL Financial Planning & Analysis Mid-office FY’ 06 Front Office FY’ 07 FY’ 08 6

Executive summary OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS CHALLENGES OF OFFSHORING ARE LARGELY EXAGGERATED DELL CONFIDENTIAL 7

Challenges of off-shoring are largely exaggerated Activity spectrum and value ONLY TRANSACTIONAL ACTIVITIES CAN BE OFFSHORED SAVINGS EXPECTATIONS IN BUSINESS CASES ARE INFLATED EASTERN EUROPE HAS PLATEAUED, THERE IS NO MORE VALUE TO BE EXTRACTED TALENT AVAILABILITY IS A MAJOR CONCERN Location EVOLUTION OF COST LEVELS IS A MAJOR CONCERN ( ) EASTERN EUROPEAN CENTERS END UP HAVING TOO MANY EXPATRIATES Organization and operations RAMP-UP SPEED IS USUALLY OVERESTIMATED TRANSITION IS COMPLEX AND ERROR-PRONE OFFSHORE CENTERS HAVE POOR PERFORMANCE SOURCE: MCKINSEY DELL CONFIDENTIAL 8

Wage differences will persist SOURCE: MCKINSEY DELL CONFIDENTIAL 9

Executive summary OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER DELL IS A GOOD EXAMPLE OF MOVE OF KNOWLEDGE JOBS TO NEW LOCATIONS CHALLENGES OF OFFSHORING ARE LARGELY EXAGGERATED WESTERN EUROPE LIVES OFF THE PAST – NEEDS TO DEVELOP NEW VALUE PROPOSITION FOR ATTRACTING BUSINESS DELL CONFIDENTIAL 10