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DELL CONFIDENTIAL 1
Veit DenglerVorsitzender des Vorstandes/CEO, Dell, Slowakei/Slovakia
Off-shoring in Zentral- und Osteuropa im Vergleich mit IndienOff-shoring in CEE in Comparison with India
DELL CONFIDENTIAL 2
Off-Shoring in Central and Eastern Europe
CEE ECONOMIC FORUM – VEIT V. DENGLERVelden, September 20th, 2007
DELL CONFIDENTIAL 3
Executive summary
OFFSHORING TO CENTRAL AND EASTERN EUROPE IS A KEY BUSINESS IMPROVEMENT LEVER
DELL CONFIDENTIAL 4
Off-shoring to Central and Eastern Europe countries
RECENTANNOUNCE-MENTS
NEW CAPTIVE SETUPS
EXPANSION OF OUT-SOURCING PROVIDERS
LARGE OUT-SOURCING DEALS
CENTER OF EXCELLENCE FOR BANKING BACK OFFICE IN WROCLAW
CREDIT SUISSE UPS INBEV
F&A CENTER IN WROCLAW
F&A/CONVERGED SERVICES CENTERS IN PRAGUE AND BUDAPEST
NEW SERVICE CENTER IN BUCHAREST
WIPRO LOGICACMG CONVERGYS
NEW CALL CENTER IN BRNO
BILLING, CUSTOMER SUPPORT SERVICE FROM BUDAPEST
F&A OUT-SOURCING TO GENPACT BUCHAREST AND KOLKATA
NOVARTIS
DELL CONFIDENTIAL 5
Off-shoring to Central and Eastern Europe countries
ALMOST 80 NEW CENTERS IN EASTERN EUROPE ANNOUNCED IN 2006/07
2006/07 ~40,000 ADDITIONAL FTE
OFF-SHORED TO EASTERN EUROPE IN 2006/07, OF WHICH 10,000 IN NEW CENTERS, 30,000 IN EXISTING CENTERS
SEVERAL MAJOR GLOBAL OUTSOURCING CONTRACTS INCLUDE EASTERN EUROPE AS TARGET LOCATION
DELL CONFIDENTIAL 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
DELL CONFIDENTIAL 7
"Came for cost, stayed for quality"
TRANSACTION FACTORY
KNOWLEDGE HUB
CORPORATE/REGIONAL HEADQUARTERS
TRANSACTION CENTER FOR WESTERN EUROPE
EUROPEAN/GLOBAL CENTER FOR CORE COMPETENCIES
EUROPEAN/GLOBAL CENTER FOR CORE COMPETENCIES
Examples Lufthansa (Cracow) Zurich/Capgemini
(Cracow) P&G/HP (Bucharest)
Delphi (Cracow) Siemens (Wroclaw) SAP Labs (Sofia)
Dell (Bratislava) JCI (Bratislava)
FASTER MOVE TO KNOWLEDGE-INTENSIVESERVICES DRIVEN BY COMBINATION OF FACTORS
Talented workforce with good functional knowledge Cultural proximity/accessibility/timezone
overlap Language capabilities
DELL CONFIDENTIAL 8
DELL Evolution in Bratislava
Technical Support with up to 300 FTE for German language area
Dell launched operations in Slovakia in November 2002
Center with up to 900 FTE to support full range of customer-facing functions
Expanded by 2004 to include German-language Sales and Customer Care
Over 1600 FTE by end 2007 covering a wide range of front and back office functions
Grew to a European Business Center by 2006, w/ num. headquarter functions
1
2
3
DELL CONFIDENTIAL 9
DELL Finance in BratislavaValue
Time
Front Office
BACK OFFICE MID OFFICE FRONT OFFICE
Financial Planning &Analysis
Pricing
CreditCollections
Channel Controlling
FunctionalAccounting
Reporting
OPEX Mgmt
Commission Targets
VAT
GL Accounting
AP
Business Controls
Business Analytics
FY’05 FY’07 FY’08FY’06
Back-office Mid-office
DELL CONFIDENTIAL 10
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 11
( )
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
SOURCE: MCKINSEY
Location
TALENT AVAILABILITY IS A MAJOR CONCERN
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
DELL CONFIDENTIAL 12
Productivity gap closing
PRODUCTIVITY IMPROVING
Revenue/head/quarter index, Bratislava FY06 = 100
Low cost 1 Low cost 2 Bratislava High Cost 3
147
135
100
204
Q4 FY06Consumer sales
97
141
134
197
Q4 FY07
High Cost 1 Bratislava High Cost 2 High Cost 3
53
100
130
159
Q4 FY06Business sales
94
114
156
172
Q4 FY07
DELL CONFIDENTIAL 13
Wage differences will persist
SOURCE: MCKINSEY
DELL CONFIDENTIAL 14
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 15
Future expansion options under consideration
2POLAND – CO-LOCATE WITH NEW FACTORY SITE? NEW GREEN-FIELD SITE?
SLOVAKIA – WHAT CAN THE LABOR POOL SUPPORT, EVEN IN OTHER CITIES?
1
EGYPT – A BRIDGE TOO FAR AT THIS POINT?5
HUNGARY – HOW WILL COSTS AND THE CURRENT POLITICAL TURMOIL EVOLVE?
3
ROMANIA – IS THE INFRASTRUCTURE & PUBLIC ADMINISTRATION UP TO STANDARDS?
4
In addition, continued
expansion of current sites in Morocco,
India
DELL CONFIDENTIAL 16
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