Baltic States: Baltic States:

Opportunities in Outsourcing & Business Opportunities in Outsourcing & Business

TransformationTransformation

Eastern European Business ForumStockholm, 25-26th November

Nils MelngailisChief Executive Officer

In today’s economy business models are changing towards In today’s economy business models are changing towards decapitalized New Economydecapitalized New Economy

Old Economy New Economy

BRAND CAPITAL

HUMAN CAPITAL

WORKING CAPITAL

“Push” Focus

“Pull” Focus

Production Focus CustomerFocus

High Low

High Low

PHYSICALCAPITAL

(Outsourced Network)

Lattelekom is aLattelekom is an n example of example of a major a major business business transformationtransformation

Before After

Sales & marketing

Network Operations

Billing Customer care

Procurement

HR mgmt

Transportation

Property mgmt

TrainingIT

Sales & marketing

Call centreservices

Billing

TrainingFleet mgmt, leasing

Propertymgmt

Shared services

(HR, project mgmt)

IT

Network Operations

Network Maintenanc

e

F&A

Lattelekom evolution to become a BPO providerLattelekom evolution to become a BPO provider

InternalBusiness

Transformation

Made significant investments in technology

Focus on efficiency and service quality

Contact Centre establishment

Shared Services establishment

Local BPO

Contact Centre e.g.:– Inquiry services– Hansabanka– Statoil / Neste

(Baltic)– Kraft Foods– Governmental– Insurance

Data Centre for several external companies

Payroll Outsourcing for Statoil

Cross-BorderBPO

Softcom Customer Care partnership

Help desk services for Dell PC users

Contact Centre for German mobile operator

Exigen Transformation partnership

A number of success cases signify the trend of business A number of success cases signify the trend of business process & service outsourcing to Baltics along with exchange process & service outsourcing to Baltics along with exchange of local expertiseof local expertise

- Latvia as the key resource base for global IT solutions and outsourced services

- Customer support service in Latvia for Swedish PC users

- Regional lead in e-banking and remote services competence

- Near shore call centres in Estonia (both set up in 2001, with 170 / 70 staff)

- Accenture IT Technology Center established in Riga end of 2002, with staff of 60 professionals serving IT projects in Nordic region.

- Accounting service centre established in Latvia to serve 23countries where Tele2 operates

- One of the earliest Scandinavian capital investments in Latvia, with “Rosme” acquisition in 1993

Introduction to ExigenIntroduction to Exigen

In Brief– Private company (started in 2000)– San Francisco, California– Investor AB among investors– 1100 employees & 300 customers

Operational Innovation for Services Industries

– Financial Services– Communications & Media– Government

Transformation Software and Services

– Business Processes– Legacy Systems– IT Development

Business based on long-term partnership around financial value creation

Pioneered the Business Process Utility™ model – Decoupling and

outsourcing – Transaction processing

leveraging economies of scale

Exigen in LatviaExigen in Latvia

Exigen has developed significant resources and infrastructure in Latvia

12%

7%

6%

69%

6%

100%= 692 Exigen developers*

* Including a/s DATI, which is now an Exigen Group company

Russia

Lithuania

Latvia

Recognizing Latvian advantageous position …

• One of the lowest labor costs in EU

• Availability of qualified and well-educated IT professionals

• Access to reliable infrastructure

• Geographical and cultural proximity to Europe

• Political stability

• Government incentives for IT companies

USA

Other

Transformation SuccessTransformation SuccessIn

du

str

y

Bu

sin

ess

Pro

cess S

oft

ware

Leg

acy

Syste

m

Ou

tsou

rcin

g

Pro

cess a

nd

Tra

nsacti

on

O

uts

ou

rcin

g Universal/Warner Music•9-year relationship•Royalty transaction processing utility

•Target: USD$100+M savings

Prudential Securities•5-year relationship•Application outsourcing for back-office systems

•Target: 35% cost reduction

EDS & Westpac•10-year relationship•Mortgage origination for 1400 person operating center

•Target: 46% cost reduction

2000 2001 2002 2003 2004

Business Process Utility™ ModelBusiness Process Utility™ Model

Shared Royalties Processing – Exigen, Warner, Universal.

Reduced capital expenditures (short-term and long-term)– Amortize upfront and future development costs across all participants using

Exigen software (1500+ person years of development) and offshore Eastern European resources

Variable cost base to utility customers– Service provider model charging per transaction– Aligned business model: variable to customer’s business, incentives for

Exigen to create more value in order to increase transaction volumes

Operating cost reduction created by sharing infrastructure– Initial large-scale operation ready to process transactions for new customers– Over 30% operational cost savings

Hansabank Group - regional leader in e-banking solutions Hansabank Group - regional leader in e-banking solutions and remote services competenceand remote services competence

The parent, Swedbank, historically emerged from several organizations, therefore faced with parallel IT systems and consolidation challenges

Hansabank, as many other Baltic counterparts, in much more advantageous position:

– Different, decades younger IT solution generation from ‘90ties – no migration challenges and huge IT re-investment required

– Pan-Baltic IT system built on common platform with localized services

– All technological solutions built with integrated remote access for immediate practical application

One of leading commercial bank groups in Baltics with Swedbank (FöreningsSparbanken) holding 59.7% of group's shares from 1998

Today, Hansabank is the market leader in remote banking services (attractiveness, service penetration) with superior business expertise in the region

Hansabank Group - regional leader in e-banking solutions Hansabank Group - regional leader in e-banking solutions and remote services competence (continued)and remote services competence (continued)

- Over 1 000 000 pan-Baltic Hansabank Internet banking customers -

0

500,000

1,000,000

1,500,000

1996 1997 1998 1999 2000 2001 2002 2003

Softcom Customer Care – A pan-Baltic Call Center Softcom Customer Care – A pan-Baltic Call Center CompanyCompany

Through innovative services, Softcom creates and maintains competitive and profitable customer relationships for its

clients

Softcom runs Customer Care Centers to create outstanding customer relationships for its clients offering higher quality, lower costs, increased revenues and better understanding of customer needs and behavior.

Softcom has three main areas of service:

• Inbound Customer Services and Support• Marketing & Sales• Customer Research and Analysis

These three basic services are combined to dramatically improve customer relationships for our clients. This is professional CRM In practice.

”Each interaction between a customer and a company should be considered as a business opportunity and treated accordingly.”Alf Sjöström, Founder & Owner of Softcom

SoftcomsSoftcoms hashas establishedestablished aa pan-Baltic Virtual Contact Centerpan-Baltic Virtual Contact Center

Hämeenllnna

Riga

Vilnius

Katowice

TallinnBollnäsStockholm

Ronneby

Kristianstad

Hämeenllnna

Riga

Vilnius

Katowice

TallinnBollnäsStockholm

Ronneby

Kristianstad

Pan-BalticVirtual

ContactCenter

9 Contact Center sites

In total 700 agents

Seamless flow of contacts between countries and locations

Call routing based upon– Language– Location– Cost to serve– Type of customer– Competence

Advanced IP-based Callcenter platform

Growing Softcom business in Baltic - customer support Growing Softcom business in Baltic - customer support service for Swedish and Finnish PC usersservice for Swedish and Finnish PC users

Front level support to PC users in Swedish/Finnish languages

Inbound/Outbound helpdesk call handling + emails

Service launched October, 2003 with more than 40 Baltic operators by end of 2004

Fast launch: 3-4 month preparation

Bringing customer cost saving to ~30%

Lattelekom & its partners have the breadth and depth of Lattelekom & its partners have the breadth and depth of capability to deliver business transformationcapability to deliver business transformation

Fixed & Mobile Voice

Networking, Data & Internet

Converged Offer

Busine

ss Cu

stomer D

em

ands

BPO

IT Infrastructure

IT Services

Call center services, Finance & support operations

transformation

Infrastructure outsourcing;Network operations

outsourcing

Business process audit & reengineering

Process transformation outsourcing

IT consultingDesktop supportSystem support

Application development & support

Hardware operationsNetwork operations

Thank You!

Nils.Melngailis@lattelekom.lv

www.lattelekom.lv