ENTRYFORPROFIT

TRANS-COSMOSINC.CHINAENTRYSTRATEGYPRESENTATIONFebruary8,2001AGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicspetitionRmendationsSuccessbusinessmodelPartneringstrategyEmerceMarketOverviewTCITianjinCurrentSituationAnalysisRmendationsAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicspetitionRmendationsSuccessbusinessmodelPartneringstrategyEmerceMarketOverviewTCITianjinCurrentSituationAnalysisRmendationsCHINAISBINGAHIGHLYDYNAMICCCMARKETChina’scallcentermarkettookoffsince1998withanannualgrowthrateover100%Non-pagingmarketsizereached54,000seatsin2000HoweverpastgrowthwaslargelydrivenbydemandsfromadministrativedrivensectorOver60%ofthenewCCdemandesfromfourpillarindustries:Banking,PostServices,Fixed-lineTel,andInsuranceDistinctivepurchasingbehavioridentifiedforthesepurchasesFuturegrowthwillbepropelledbyserviceorientedandoutsourcingsegmentsServiceorientedsegmentexpectedtobe50%oftotalCCmarketOutsourcingmarketwillgrowatleast50%ayearforthenextfewyearsHoweverlargevarianceexistsforoutsourcingsegmentgrowthOverall,ChinaCCmarketisexpectedtoreachover130,000seatsin2004and340,000seatsin2010CCOURSOURCERSAREEMERGINGBUTSTILLEXPLORING(I)Currently,CCoutsourcingbusinessisbrandnewinChinaNomorethan30paniesprovidingmerelyabout3,200seatsinserviceOver70-80%supplyconcentratedin4majorcitiesFutureoutsourcingdevelopmentishighlydependentoncurrentplayer’sperformanceandstrategiesPotentialcustomersconcernedaboutquality,ity,informationprocessingability,HR,andpriceGrowthwillfluctuatewidelyaccordingtotheindustry’sabilitytosatisfycustomerconcernsandrequirementsnowInshortterm,petitionwillbeminimumduetohighlydifferentiatedpositionsandlargenumberofunexploitedpotentialoutsourcingcustomersInmediumterm,pagingpaniescanbepowerfulanddesperatepetitorsinthelow-endoutsourcingmarketThatmightdistorttheindustryprofitabilityandtriggerviciouspetitionHoweverhigh-endoutsourcingmarketmightbeintactCurrently,onlylow-price/standardservicevendorsareprofitableUtilization,andtherefore,long-termcustomers,isthekeyforprofitabilityHowever,high-pricedoutsourcingsolutionsnotwidelyacceptedbythemarketButinthelong-run,webelievehigh-endserviceswillbevaluedbycustomersWeareencouragedbyrecentpositivenewsonclients’long-termmitmentstohigh-endoutsourcersWithChina’spendingWTOEntryandcontinuedeconomicgrowth,webelieveit’sthedirectionHigh-endoutsourcerscanwinthegamebyaggressivelyestablishinglong-termclientbase,andtargetingvariousoutsourcingopportunitiesalongthevaluechainFivesuccessfulstrategiesidentifiedfornewcustomerdevelopmentTelemarketingandvalue-addedinformationservicemostlikelytobeoutsourcedCCOURSOURCERSAREEMERGINGBUTSTILLEXPLORING(II)TCISHOULDPARTNERWITHRIGHTLOCALCCOUTSOURCERSApartneringstrategyisessentialforTCItocapturethegreatopportunitiesinChinaTCIlacksabunchoflocalcapabilities,whiletimeiscontingentTCIshouldtargetbothmoneymaking,andmoneylosingtechadvancedoutsourcersduringnegotiationprocess,basedontwoplausiblepartnershipstrategiesMoneymakingones:shareprofitsandleveragelocalstrengthMoneylosingones:controlandnegotiateforabargaindealConsideringthelimitednumberofcandidatesinChinaandTCI’stightschedule,abroadersearchcanstrengthenTCI’snegotiationpositionFivepromisingoutsourcersidentifiedduringtheinterviewprocessMoneymakingones:ChinaMotion,800Teleservices,andpaq-StarMoneylosingones:TCY,ITSShanghaiEC:ONLYSOFTWAREFIRMSANDSIsWORTHPURSUINGAlthoughunderbooming,ChinaEmercemarketareexperiencingbottlenecksOnlinepopulationandrevenuesgrew10timesinthepast3yearsHowever,macro-environmentandinfrastructureareproblematic……andonlyfewICP/ISPsaremakingmoneyICP,ISPandtechnologypanies,asasector,arenotworthTCI’spursuitICP:MarketisdownwhilemostChinaICPsarestillattheirearlystagedevelopmentISP:Highlyfragmentedandregulated,whichsuffocatebothforeignparticipationandprofitabilityTechpanies:SuperioronescanhardlysurviveinChinaHowever,severaltopventuresintheabovesectorsarequiteinteresting,whichareidentifiedandillustratedindetailforTCI’sfurtherinterestICP:51job;Stockstar;Alibaba;DangdangISP:263Net;EastnetTCI-TJ:RSTRUCTURINGANDBUILDINGSTRATEGICALLIANCESTCI-TJexperienceddifficultiesduetobothpromotionandmanagementissuesThoughimproving,thefirmisintrinsicallyupetitiveinChinamarketItshouldrestructureforbetterperformance…RedefinecorporatemissionsandstrategiesRestructureprojectarrangement,reporting,measurementandincentivesystemsRefocusitssalesonJapanesepaniesinChinaandinJapan…andfindstrategicallianceforTCI’sChinaexpansionTCIshouldonlypartnerwithprestigiouslocalsoftwarepanyorsystemintegratorsWisewayscreenedallthepotentialcandidateslistsandfunneleddown5mostpromisingpaniesforTCI’sfurthercontactLongshine;GlobaleForce;eBIS;Modernputer;HuatengSoftwareAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicspetitionRmendationsSuccessbusinessmodelPartneringstrategyEmerceMarketOverviewTCITianjinCurrentSituationAnalysisRmendationsCCMERELYABUSINESSPRACTICEBEFORE1997HightelchargeLowphonepenetrationWeakserviceattitudeWidespreadindustrymonopolymercialCClessthan10,000seatsin1997(2)Phonecallcharge(centsperminute)ChinaUSPhonepenetration(%)#ofphones(1)(million)1997825399229AutomotiveExample:ExpertSurvey1997Pricepetitionfocus(%)QualityServiceStyleNationalmonopolyBankingTelInsuranceUtilitityRegionalprotectedSteelAutoPetrochemicalTobacco...Monopolizedindustryestimated55%ofindustrialoutputHighertelpenetrationMERCIALCCTOOKOFFSINCE1998

EspeciallyinNon-PagingServiceSectorPenetration(%)YearCAGRFixedlineMobile37%83%Non-pagingCCseats(’000)YearCAGR=129%IntensifiedpetitionMostindustriescapacityoverproductionDecliningretailpricesGDPindexRetailpriceindexIndexGrowingawarenessoftechnologyInternetusers(mio)Emercerevenue(US$M)GraduallyreducedtelfeeSource:JardingFlemingResearch;ChinaStatisticsYearbook;interviews;OECD;ChinaTelLongdistance(RMB/min)(1.2)(0.8)(1.0)(0.7)

>800km<800kmCCINDUSTRYWILLREACH330-370KSEATSIN2010IllustrationIdentifymajordrivingfactorstoCCadoption- marketpetitionandserviceawareness- telchargesandphonepenetrationQuantifyrelationshipsbetweendriversandCCadoptionhereweusedUSbenchmarkProjectCCdevelopmentbyforecastingdevelopmentofdriversProjectCCpenetrationinmajoruser’sindustries- banking,tel,insurance…AddupnumbersofeachindustrytogiveaCCmarketoverviewInterviewindustryexpertsorknowledgeableindustrypractitionersfortheiropinionofCCmarketgrowth- systemintegratorsandexperts2004projection(1)(’000seats)1581321452010projection(1)(’000seats)368337N.A.DrivingfactoranalysisBottom-upanalysisExpertsopinionsTOP-DOWNAPPROACHREVEALSAPROMISINGENDGAMEPhonelineper1000peopleCCagentsper1000peopleUSbenchmarkY=0.00146X+4.79Phonelineper1000peopleChinaphonelineYearNon-pagingCCseats(‘000)1998992000010410REDUCINGTELCHARGESWILLBOOSTFIXED-LINEADOPTIONpetitionpushesfurthertelreductionMostalternativesatleast50%cheaperIP,internetphonecall,“callback”services…Ministrydeterminedtofurtherreducetelcharges“Currenttelchargestilldoesnotreachitsoptimumstageyet”- MinisterofMIITelreductionprojectionPhonepenetrationper1000Phonelineper1000peopleYearTELISTHEMOSTSIGNIFICANTCCUSERNOW

Bottom-upAnalysisIndustryTelMobileBankingInsurancePostserviceManufacturingputerAirlineSecurityCourierHomeapplianceTVsellingOthersOverallProjectedseatsCAGR200025,0007,6674,5452,0001,6001,5018005942572402403006,67551,419200435,71422,85711,1003,7606,0007,5195,2504,1004,1581,0002,4601,00026,669131,588201041,66750,00047,0009,85020,83325,18414,0009,60032,6003,3338,8002,00071,965336,8322000-049%31%25%17%39%50%60%62%101%43%79%35%41%26%2004-103%14%27%17%23%22%18%15%41%22%24%12%18%17%EXPERTOPINIONSREVEALAMARKETOF145,000IN2004“Fastdevelopmentisexpectedtocontinueinthenextfiveyears.Ibelievethatcallcentersseatswillgrowat30%ayearforthenextfiveyears(whichmeans145,000in2004)”Director,CTIForumparedto1999,in2000callcenterseatsincreasedby142%,or16,000seats”ChinaputerNews“Inthenextthreeyears,weprojectthatcallcenterseatswilldouble.It’sourconservativeestimate.”ManagerofBusinessDevelopmentDept,HuaweiAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicspetitionRmendationsSuccessbusinessmodelPartneringstrategyEmerceMarketOverviewTCITianjinCurrentSituationAnalysisRmendationsCHINACCUSERBASEVERYDIFFERENTFROMU.S.SelectedindustryexplanationTelChinatelcallcenterinvestmentisstillquitegovernmentdriven.Topromote“189”serviceline,MIIdemandcallcenterateachcity/countylevelManufacturingManufacturingCCusagestillnotwidelyadoptedyet.Moststate-ownedpaniesareunwillingandunabletoinvestinserviceRemoteshoppingAlthoughremoteshoppingisthebiggestCCuserintheUS,it’smerelythecaseherebecauseofinconvenientpayment,creditanddeliverysystem.Also,shoppingconvenienceinmetropolitanareaandgeneralpoorconsumptionpowermakeremoteshoppingeconomicallyunsoundOthersOutsourcingSecurityTVsellingNews&mediaAirlineputer/TechManufacturingPostserviceInsuranceBankingMobileFixed-lineTelChinaUSOthersOutsourcingTransportHealthcareUtilitiesRemoteshoppingSecuritiesAirlineTechnologyManufacturingInsuranceBankingTelOur1.5monthsinterviewshavewellcoveredtheaboveindustriesCCMARKETROUGHLYSEGMENTEDINTOFOURCATEGORIES

AccordingtoAreaofCCUsage,andWillingnesstoOutsourceSelectedindustryexamplesWillingnesstooutsourceHighLowService-orientedOutsourcingGenericserviceAdmin-drivenSecuritiesHomeapplianceputer/technologyCourierservicePublicationTVsellingMessagingTravelSimpleordertakingPagingTelInsuranceBankPostservicemunityserviceUtilityCoreareaNon-coreareaAreaofCCusageTHREECRITERIATODISTINGUISHCOREANDNON-COREAREAIndustryCoreAreaSecuritiesCourierserviceputer/technology“GreyArea”HomeapplianceBankingInsurancePublicationTelTravelingNon-coreArea(generic)PagingserviceMessagingTVsellingUtilitiesFunctionalityTechnicalassistanceAftersalesserviceCustomerplaintsettlementSourcing/suppliercoordinationCustomerinquirysettlementTelemarketingMessagedeliveringSimpleordertakingCallCenter’simpacttooverallbusiness- Core:WhenCCfunctioniscriticaltotheperformanceoftheindustryityrequirement- Core:Iftheindustry/functionalitymandsstrictityCallCenteroperationalplexity- Core:IfoperatingCCinthisindustryrequiresgreatsophisticationCriteriaManyindustrieshavebothcoreandnon-coreareasMANAGEMENTANDOWNERSHIPSTRUCTUREAFFECTWILLINGNESSTOOUTSOURCEConsiderationsOwnershipstructurepanysizepetitionManagementsophisticationReasonsSOEsconsidereconomicslessand“managementauthority”more- Prefertobuildin-houseinordertoincreasemanagementpowerandassetsCallCenterinvestmentislesssignificanttolargepanies.Also,theiragents’needscanjustifyasizablein-houseoperationMonopolizedindustrytendstobeadmin-driven,ortodisregardCCsolutiontotallyPoorlymanagedpanies/industriesseemuchlessvalueofcallcenterstotheirbusinessimprovementSOE(1)LargeMonopolizedindustryPoorlymanagedPrivatelyownedforeigninvestedSmall-to-mediumMarket-driven,petingindustryWellmanagedLesswillingMorewillingAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicspetitionRmendationsSuccessbusinessmodelPartneringstrategyEmerceMarketOverviewTCITianjinCurrentSituationAnalysisRmendationsADMIN-DRIVENSEGMENT:MOSTIMPORTANTFORNOWHigh%intotalnewCCdemandDrivenby“Pillarindustries”DemandsurgedinagroupofChina’simportantindustriessince1999,aimingtoimproveservicelevelBankPostserviceFixed-linetelInsuranceRequiredmostlymid-to-highendcallcentersolutions(Nortel,Lucent,IBM,Huawei…)Big,monopolized,profitablecorporationsHighcostoffailureBudgetapprovalfromaboveOfteninconjunctionwithstructuralreform4.9#ofnewCCseats(’000)Year11.229.5TotalnewdemandAdmin-driven66%76%62%HOWEVERDEMANDEXPECTEDTOFLUCTUATEINTHEFUTUREUnderlyingReasonsAdmin-drivensegmentorderseinbatchesCallcenterconstructionproposalofteninitiatedbygovernment-controlledcorporateheadquarters,orevenministriesBranchpaniesrequiredtopletecallcenterconstructionwithinsimilarperiodoftimeAdmin-drivencorporationstendtoover-investBranchofficesincentivizedtouseupthebudgetadvisedbyheadquarterHoweverfewadmin-drivenindustriesareexpectedtoinvestincallcentersforthefollowingyearsOnlytwoindustriesexpected:utilityandrailtransportation#ofnewcallcenterseats(’000)YearBankingexampleUNIQUETHREE-TIERDECISIONMAKINGPROCESS

SystemIntegratorsShouldPutEffortstoAllTop-downinitiativesAdvocateimprovingservicestandardMake“servicefacilities”anevaluationcriteriaMaysuggestcallcenterasanoptionDeterminerollingoutcallcentersinthecorporationRaisealistofrmendedsystemintegratorsPresentthelisttobranchpaniesSetabudgetfordifferentbranchpaniesDecidecallcentersizeandsophisticationbasedoncorporatebudgetNegotiateandselectasystemintegratormostlysuitabletothebranch’srequirementsSIshouldpayattentiontoMinistry’srecentserviceimprovementincentiveMinistrySIshouldapproachpromisingcorporateheadquartersinadvancetogetthenameonthelistCorporateheadquarterSIshouldputmosteffortstoinfluencebranchpany’sselectionProvincial/regionalbranchesOUTSOURCINGALMOSTNEVERANOPTIONFORADMIN-DRIVENPANIESOutsourcingisnotconsideredanoptionforCCadoptionatcorporatelevelWorriedaboutunforeseeableconsequencesMoneysavingisnotapriorityforthesebig,monopolizedSOEsUnabletodistinguishdifferentconditionsindifferentgeographysomeareasdon’thavesatisfactoryoutsourcersPoliticallyriskyforbranchmanagerstobe“creative”Ifusingoutsourcers,branchmanagershavetobearallresponsibilitiespotentialforfailureisconsiderableCCconstructionbudgetwouldbeinvainifnotusedupwhileoutsourcingbudgetneedstobereportedforupperapprovalAnd…themoneyisnotmineOnlyexceptionisGuangzhouMobilepany’soutsourcingofits“MobileSecretary”serviceBynatureapagingservice:Idealtobedonebyapagingpany“MobileSecretary”serviceisnotplannedandbudgetedfromthecorporation(ChinaMobile)Guangzhou’sbusinesspracticeismoreliberalthanrestofChinaSERVICE-ORIENTEDSEGMENT:ADRIVERFORLONG-TERMCCPENETRATIONRapidgrowthinthelong-termWidespreadadoptionexpectedinmarket-drivenindustriesHeatedpetitionwillstimulateCCusageinmass-marketindustriesWTOwillnotonlyliftvariouslocalprotectionism,butalsointroduceglobalpetitionCurrentover-capacitysituationwon’talleviateforthenextseveralyearsTherefore,servicewillbemoreandmoreimportanttocreatedifferentiationWithbettermarketenvironment,consumersareeducatedtoappreciateserviceWTOwillintroduceworld-levelserviceconcepts,includingcallcenter,toChinaTotalnon-pagingCCseats(’000)10Year50337TotalCCseatsService-oriented26%24%50%13242%MOREINDUSTRIESARELIKELYTOADOPTCCOVERTIMECCAdoptionAreaHomeapplianceAutomotiveputerMobileSecuritiesRetailingPetrochemicalDistributionFMCG(1)TaxiTextileMachineryChemicalPublicationHealthcareGovernmentEntertainmentBroadcasting/TVAviationGeneralTechnologyHighModerateLowpetitionintensityHighHorizontalwillextendovertimeImportanceofserviceHorizontalwillextendovertimePANIESQUITESELECTIVEONCCUSAGENotblindlychasingafterhigh-endsolutionsIntegratingcallcenterswithitscorebusinesspracticeInterviewssummary%Investmentperseat(’000RMB)Interviewssummary%AftersalesserviceOrdertakingInformationserviceTelemarketing10-70VERYCAUTIONSONCCOUTSOURCINGPrice“Thepriceforoutsourcingistoohighnow,forexample,95Infocharges15,000RMB/month(180,000RMB/year)perseat,mostpaniescannotundertakeit.”SalesManager,SIEMENSQuality“Chinesecallcenteroutsourcershaveinadequateservicementality,wemostlyworriedabouttheirservicequality.”HotLineSupervisor,EPSONChinaHumanresources“Ordinaryoutsourcer’sagentscanonlyhandlesimplequestions.Itrequiresexperiencedengineerstodealwithplexproblems.”HotLineSupervisor,EPSONChinaity“Weoncewantedtooutsourcemanagementto95Info,butsalesdataaresecrettothepany,sowegaveuptheoutsourcingoption.”CallCenterVice-Manager,FounderputerInformationprocessing“Ourcallcenterismainlyusedtoprovidecross-departmentinformationformanagement,outsourcingcallcentermightmaketheinformationprocessinglosingcontrol.”ExecutiveOfficerBeijing,GuangdongMacroMajorconcernsaboutoutsourcingTheiroutsourcingpossibilityhighlydependsonoutsourcers’abilitytosatisfytheirconcernsGENERICSERVICE:AGENERALLYDECLININGSEGMENT

ConsistsMainlyofPagingServices

Decliningpagingservicesegment...…Becauseofstrongsubstitution#ofpagingseats(’000)YearPagingservicemarkethasbeengraduallyerodedbywidespreadmobileandinternetmunicationservicesfulfilledpager’smessagefunction,butbeingeithermoreeconomical(internetmunication),ormoreversatile(mobilephone)pagingcustomerswilldeclinefrom50millionin1998to20millionin2010Small-to-medium,non-scaleablepagingpaniesarebeingsqueezedoutofbusiness#ofpanies199820002000173620045002010200GENERICSERVICEDEFINEDASACROSSOF

INDUSTRIESANDFUNCTIONSFunctionalityMessagetakinganddeliveringSimpleordertakingStandardtelemarketingStandardcustomerquestionansweringStandardvalue-addedinformationserviceIndustryPagingindustryTV/cataloguesellingUtilitiescollection“Secretary”servicesGENERICCCUSERSHAVESTRONGINCENTIVESTOOUTSOURCECost-effectiveforsmallCCusersResolvedconcernsSatisfactoryqualityStandardpracticeandtrainedagentsTrustedhumanresourcesProfessionalagents,centralrecruitedandtrained,familiarwiththeirjobsNoneedforinformationprocessingLittlerequirementonity(1)Assume10seats,andutilization100%Source:CTIforum;wisewaymodelingTVsellingexampleCost(’000RMB)permonthperagent10-12Self-build(1)OutsourcedAGENDAExecutiveSummaryCallCenterBusinessMarketOverviewCCCustomerSegmentationIn-houseusersOutsourcersDemandCustomerEconomicspetitionRmendationsSuccessbusinessmodelPartneringstrategyEmerceMarketOverviewTCITianjinCurrentSituationAnalysisRmendationsFOURDISTINCTIVETRAITSFORCHINA’SCCOUTSOURCERS

TraitsforAnEmergingSegmentJustemerging

HighGeographicconcentration

FocusongenericservicesInterviewsSummaryManyarelosingmoney

InterviewsSummary#ofoutsourcers%(%)#ofseats(’000)(%ofoutsourcers)DEMANDPROJECTIONDEPENDENTONACYCLEOFFACTORSWidevarianceinprojection...…dependentonagroupoffactors#ofoutsourcingseats(’000)Virtuousorviciouscycle?Outsourcer’sPriceOutsourcer’sprofessionalismCustomersatisfactionOutsourcer’sservicesophistication#ofnewcustomertrialEducationeffecttopotentialcustomersOutsourcingindustryreputationIt’shardtotellwhethertheindustrycanestablishitsreputationorgounderdeveloped,attheverybeginningofitsemergence51.26.6CAGR=100%CAGR=20%CAGR=20%POSITIVECUSTOMEREVOLUTIONOBSERVEDINCHINA’SOUTSOURCINGBUSINESSPositiveprojectionsforfutureHistoricaltrendsshowedincreasingpenetrationintohigh-endbusinessChina’smassivesmall-to-mediumbusinessconstitutesgoodpotentialcustomerbaseMassiveun-exploitedgeography:outsidetop3citiesGoodoutsourcerwillemergewithincreasedbusiness,whichwillgeneratemorebusinessfortheoutsourcingindustryOutsourcingservicesophisticationTimeLowHighBeforeRecent2yearsWebelieveinthepositiveargumentandprojectdemandtogrowatleast50%ayearforthenext4yearsPagingserviceoutsourcingforHongKong“Secretary”serviceSimpletelemarketingOrdertakingAfter-salesserviceNegativeprojectionsforfutureCustomer’snegativethoughtsaboutoutsourcer’squalityhaven’tchangedProfessionalismwillcontinuetobeaheadacheforChinaserviceindustry,includingoutsourcingLow-endentry(pagingpanies)willruinoutsourcingindustry’spricingstructureandmakegoodoutsourcer’sunprofitableBALANCEBETWEENLONG-TERMCLIENTSANDPERIODICASSIGNMENTSISCRITICALLong-termclientsLong-termclientsaremostimportanttotheprofitabilityofanoutsourcerJobnatureCustomerrequirementpensation“Secretary”serviceOrder-takingAfter-salesserviceValue-addedinformationOthersTrustbetweenpanyandcustomerTrainingtoagentsGoodunderstandingofclients’businessSmoothmunicationandfeedbackofimportantinformationAmonthlypaymentperagentseatTelemarketingCampaign/activityphonereceptionBrandnameinoutsourcingindustryTrainedagentsandeffectivemanagementInformationfeedbackReasonablepricePaymentpercallPeriodicassignmentsINTERVIEWEDOUTSOURCER’SLONG-TERMCUSTOMERLISTOutsourcerLong-termclientOutsourcedbusinesstypeLocationProfitable?TCYPfizerPharmacyChinaAftersalesBeijing,ShanghaiDeficitCCIDCallCenterChinaInfoWorld(Newspaper)InboundserviceBeijingDeficitGuangzhouMobileHighway&BridgeFeecollectioncalloutGuangzhouPAQAftersalesShanghaiNECMobileChinaAftersalesShanghaiChinaMotionChinaMobileManagementoutsourcingN.A.ProfitableBeijingHongfanSunMicroSystemsSimplequestionhandlingN.A.ChannelBeyondProfitablepaqStarProfitableAftersales“Secretary”serviceFeecollectioncalloutGuangzhouVankemunityserviceGuangzhouBeijingTelMessagingserviceBeijingDeficit95infoNokiaAftersales(mobile)BeijingDeficit800teleserviceMotorolaAftersales(mobile)ShanghaiN.A.ITSPharmacypaniesN.A.ShanghaiDeficitMULTINATIONALSNOTFULLYREADYFOROUTSOURCINGMultinationalsneedcustomerinformationtoassistdecisionmakingEspeciallyimportantininfo-scarceChinaityisalsoabigconcernTherearelittleestablishedoutsourcersinthemarkettouseManymultinationalsdon’tresorttooutsourcersatparentpanyHardforChinasubsidiarytooutsourceAnumberofmultinationalsoutsourcetheirsalesandservicefunctionstofocusoncorecapabilityNoneedforcallcenterOnlyafewmultinationalsoutsourcedtheircallcenteroperationsOUTSOURCINGSALESANDSERVICEHELPSMULTINATIONALSTOFOCUSONCORECAPABILITIESAdvancedproductdesignTechnologyFinancialmuscleOperationalmanagementManufacturingDistributionnetworkCustomerrelationshipsLocalmarketingFacilities(land,house…)RegulatoryknowhowServiceSourcingManufacturingSalesXXXMultinational’sstrengthsLocalpany’sstrengthsXXXXXXXXXXXXXXXXExampleofmultinationalsoutsourcingsalesandservicePanasonicShanghaiVolkswagenHIGH-ENDOUTSOURCERSAREGENERALLYLOSINGMONEYThekeydeterminant:UtilizationProfitabilityHiprofitsLowprofitsBreakevenLowdeficitsHideficitsPrice/seat(RMB/month)ChinaMotionShenghuaChengBopaq-StarCCIDHongFanTCYITS95InfoHigh-endoutsourcersMid-endoutsourcersLow-endoutsourcersUTILIZATIONISCRITICALTOCCOUTSOURCER’SPROFITABILITY

SimplifiedModelFora100-seatcallcenterMoney(‘000RMB)55%(0%,1414)(100%,3120)(100%,1954)100%Utilization(%)RMB80/hourMoney(‘000RMB)50%(0%,884)(100%,2340)(100%,1424)100%RMB60/hourMoney(‘000RMB)48%(0%,573)(100%,1560)(100%,933)100%RMB40/hourUtilization(%)Utilization(%)PriceASUBTLEBALANCEAROUNDUTILIZATIONRevenuePriceperseatCostEquipmentinvestmentServicelevelHumanresourcesTrainingRMB25,000/monthorhigherRMB200,000/seatCustomizedserviceCustomizedsoftwareSpeciallytrainedstaffIndividualservicelineAdditionalequipmentHighcaliberagentsMulti-languageHigheducationRMB3000abovemonthlysalaryIntensivetrainingOftentakemonthsbeforeactualworkRMB10,000/monthRMB10,000~70,000/seatStandardserviceUsingexistingfacilitiesNoadditionalagenttrainingNormalagentsNocollegeeducationRMB2,000monthlysalaryQuicktrainingAtmostweeksP&LCategoriesHigh-endLow-endHowmucharecustomerswillingtopay?Howmuchshouldoutsourcersinvesttoobtaincustomersatisfaction?GamearoundutilizationLITTLEPETITIONAMONGCURRENTCCOUTSOURCERSOurinterviewsrevealedthatpetitionamongcurrentoutsourcersarenotsignificantOnlyalimitednumberofplayers,eachsatisfiedwithseveralkeycustomeraccountsAhighlyrelationship-drivenbusiness,highbarriertomakepetitor’sclientsswitchTherearemanypromisingopportunitiesnotyetexploredServicerequirementsandindustryspecialtieswelldifferentiatedEntrybarriertonon-CCoperatorsisrelativelyhighSignificantup-frontinvestmentScarcehigh-qualityagents:traininginvestmentinevitableClientsarehardtodevelopinashorttimeCurrentbattlefield:HowtomakeCCoutsourcingacceptedbypaniesBUTHUGEANDDESPERATEPOTENTIALPETITORSAWAITINGPagingindustryshakeoutinevitableCCconsideredaplausibletransition#ofpagingpaniesArecentsurveyof62bigpagingCo.Plantolaunchcallcenterservic