MMICC 2009 - 2nd Place - NUS

At Exeter, it is our business to improve yours.

Key Issues1. Choosing The Right Clients & The

Right Project

Profits/ Diversify Revenue Streams

T lLarge Large Management

Tulane University Client

Private University

Consulting Firm

2. Growth and Staying Ahead

Key Issues

Situational AnalysisExclusively Exeter Inc

Service Oriented Quality Service

Exclusively Exeter. Inc

Service Oriented Quality Service1. Blended Teams- MultidisciplinaryService OrientedOffshoring Services - Multidisciplinary

- Strong Technical Expertise

2. Capable Consultants4 Business Segments

p

3. Credible Reputation

Business Focus

Key Issues Exclusively Exeter


Service Oriented I di


Service Oriented IndiaBenefits:A T h i l E iService OrientedOffshoring Services A. Technical Expertise

B. Substantial Savings

4 Business Segments

Business Focus



Service Oriented


Service OrientedExeter’s Segments• Government

Service OrientedOffshoring Services • Healthcare

• Finance

4 Business Segments • Higher Education

Business Focus



Service Oriented E t ’ F


Service Oriented Exeter’s Focus• Large-Client Approach

Service OrientedOffshoring Services • Blended Teams

• Developing Individuals

4 Business Segments

Business Focus


Strategy: E²Quality Service

•Blended Teams-MultidisciplinaryStrong Technical

India

Benefits:

A. Technical

Segments

• Government

• Healthcare

Focus

• Large-Client Approach

-Strong Technical Expertise

•Capable Consultants

•Credible

A. Technical Expertise


Healthcare

• Finance

• Higher Education

• Blended Teams


ReputationIndividuals


Overall Strategy: E²

Strategy: E²Quality Service

•Blended Teams-MultidisciplinaryStrong Technical

India

Benefits:

A. Technical

Segments

• Government

• Healthcare

Focus

• Large-Client Approach

Enabling Education-Strong Technical Expertise

•Capable Consultants

•Credible

A. Technical Expertise


Healthcare

• Finance

• Higher Education

• Blended Teams


•Tulane

•Large UniversityReputation

IndividualsLarge University

E di I t I diE

Expanding Into India•Public Universities E•Private Universities

E


Enabling Education – Tulane & The Large University Option

U d O Sh d R f

Tulane & Large University 1 Similar Product

Under One Shared Roof

1. Similar Product, Implementation Project

2. Vendor Unable to deliver

3. Larger scale projects

4. Significant Risks involved g

5. Significant Opportunities For Long Term Growth


Overall Strategy: E Enabling Education

Syne rgies

2. Knowledge2. Knowledge Sharing across working tteams

3. Higher cost 1. Same Product,

Same Issues, Same Problems

gsavings across with twin projects

Problems



Human Talent Management & Training

Human Talent Management

1. 7-8 Senior Consultants

2. 80 consultants

Tulane Project

a. 1 Senior Consultant

b. 10 Consultants

c. 10 Developers

Benefits

1. Cross Project learning

2 Interchangeable2. 80 consultants

3. 80 Developers in India Large University Project

a. 2 Senior Consultant

b. 20 Consultants

c. 10 Developers

2. Interchangeable team

3. Accelerated Training and Development of Staff

Tulane/Time Frame

1. Pre-Development

2. Project Development

3 Testing

2 Months 6 Months 4 Months 6 Months Completion

3. Testing

4. Systems Roll-Out

Large University/Time

1. Pre-Development

2. Project

3 Months 10 Months 6 Months 6 Months Completion

18 Months

jDevelopment

3. Testing

4. Systems Roll-Out 25 Months



Potential Issues in taking up Tulane

Human Resource

Reallocation from F

“Star Managers” from

Staffing Foregone Project

Opportunity to

from Chicago/Boston

GainingNew Product

Opportunity to Increase Scope of Revenue Streams

Gaining Competency in New Segment

KEY driver to propelling LongTerm Growth

Opportunity Cost – 6 months

Increasing capability in current e G o to t sStrength Area –Education Growing at 6%



Convincing the Large University

ProjectFirm’s KEY Right tool will

only yield whenProject Management

STRENGTH lie in Proprietary Methodology

only yield when used by the right team

Fixed fee ALONE to include Performance Based Fees

Value-Added Competition

Payment period stretched out + Key Performance Indicators

Vendor Issues

Collaboration & Key Alliance

Microsoft Partner Program SAPAlliance

Development Program, SAP Certified

Overall Strategy: E¹ Enabling Education


Solving the Issues

1. Choosing The Right Clients & The Right ProjectRight Project

TulaneLarge University Client

Adding Interesting work

gValue to Client

Future PotentialInteresting work in new segment


Exclusively Exeter

Expanding into India

Why India?

F t t i k t f IT• Fastest growing market for IT consultancy services estimated CAGR of 6.8%, US$22 billion

Demand growth for IT services• Demand growth for IT services 30 - 32%

• Leverage on current presence in India’s offshoring operationsIndia’s offshoring operations

Trends

H th i h d t d i t t t d hi h•Huge growth in headcounts and investments towards high valued consulting

•IBM Global Services, Tata Consulting Services, Accenture, F jit C lti Wi C ltiFujitsu Consulting, Wipro Consulting


Exclusively Exeter

Overall Strategy: E² Expanding India

Key Issues

Expanding into India - Education

Entrance into Education Market Average public spending

35004000

Segment

•India lagging in public spending on higher education per student

US$Average public spending

per student

1500200025003000

IndiaRussiaChinaBrazil

•Fiscal spending to counter economic recession – 6% of GDP, USD$1440 million on higher

0500

1000

2007

Brazil education

•Lucrative Private education –growth USD$40bn to US$120bn in 1010 years


Exclusively Exeter


Key Issues


India HeadquartersIndia Headquarters

BangaloreO E t I Offi•Open new Exeter.Inc Office

•Hire 4 senior consultants and 30 junior consultants

Bangalore


Exclusively Exeter


Key Issues


India HeadquartersBangaloreClient Selection Criteria

310 Private Universities

Private Higher EducationVariables Weighted Average

Annual IT Spending 30%•13 Indian Institutes of Technology (IITs)

•3 IITs to open in 2008 and 3

Annual IT Spending 30%

Size of Client 15%

Allows for blended 15% 3 IITs to open in 2008 and 3 more slated in the next 5 years

•Set up cost per IIT: USD$625 million to USD$1 billion

Allows for blended teams

15%

Opportunities for future endeavors

25%$

•High growth market segment expected to triple in size by 2018

Developing Individuals

15%


Exclusively Exeter


Key Issues


Public Higher Education

200 U i iti d 8000200 Universities and 8000 colleges

•Services in excess of USD$5bn

•3 states with top literacy rates: Kerala, Goa, Tamil Nadu

Higher Education Information Systems Project (HISP)

•Grants Management, Integrated g , gSystem for Admissions, Central Knowledge Bank, Research Projects


Exclusively Exeter


Key Issues


US and Bangalore Headquarters

Team Blending

Job Rotation

New hires: 4 Senior Consultants and 30 Junior Consultants from IIT Madras and IIT Bombay over 4 years

80 consultants from US

34 consultants in India

Average project(10-12) requires: 10 consultants

Target 20% US-based consultants to work in India

Target 50% Indian based consultants to work in US




Financials

Beta of Exeter – .981

Obtained from 3 competitors

•Accenture

•Oracle

•SAP

Market Rate of Return – Annual Return of S&P 500

Risk Free rate – 20 Year T-bill Rate

Weighted Average Cost of Capital (WACC) of Exeter – 10.6%



FinancialsOverall Strategy: E² Expanding India

Financials

Key AssumptionsCost: Initial InvestmentsEd ti $4 1 illi•Education $4.1 million

•Opportunity Cost $4 million•Factory Investment $10000•Office Supplies $10000Recr itment $0 5 million

Other Assumptions

•Tax rate 35 05%•Recruitment $0.5 million

Revenue StreamsT l

•Tax rate 35.05%

•Depreciation accounted for

•Exchange rate Rupee/USD 50 65•Tulane

•Large University Client•New Domestic Market•India Private Education SectorI di P bli Ed ti S t

50.65

•India Public Education Sector




Financials

NPV –$12,262,826 2011 2012 2013 2014

Growth Rate 6% 13% 19% 17%

Sensitivity Growth Rate

Growth Rate 6% 13% 19% 17%

Reached the Goal of Tripling Growth Sensitivity

Analysis (USD mil)

Growth Rate

4.5% 5.5% 6.5%

gRate

mil)

WACC 9.6% 12.1 15.9 22.1

10 6% 9 7 12 3 16 110.6% 9.7 12.3 16.1

11.6% 7.9 9.8 12.4




Implementation

2009 2010 2011 2012 2013 2014

Tulane

Large university

1st Phase of Enhancing Education

Large university

New Domestic Market

Tulane over 1 ½ years

Large university of 2 g y¼ years

New Domestic Market openp



ImplementationFinancialsOverall Strategy: E² Expanding India

Implementation

2009 2010 2011 2012 2013 2014

Tulane

Large university

2nd Phase: Expanding into India

Hiring and Job Large university

New Domestic Market

Hiring and Job Rotation

4 Private University

S i P bliHiring and Rotation

Seize Public University Market

Private University

Public Universityy



Financials ImplementationOverall Strategy: E² Expanding India

Enabling Education•Tulane

•Large UniversityLarge University

E di I t I diE

Expanding Into India•Public Universities E•Private Universities

E


Implementation

Question & AnswerQuestion & Answer


Exclusively Exeter


Key Issues Implementation

Complimentary Slides1. Comparison between 4 options

2. Why not Large private university?

Slides

3. Why not the management consultancy?

4. Key Assumptions for cost savings to Large University

5 Issues Pertaining to Synergy (TU + LU)5. Issues Pertaining to Synergy (TU + LU)

6. Cooperation with Competing with Vendor

7. Customer Relationship Management for Rejected Projects

8. Economic Downturn affecting Consulting

9. Off shoring is not a main strategy in The Short Run

10. Country Comparison for Offshore options

11. Offshoring Options: China in the Long Run

12. Jonathan & Mark do not interact with each other’s clients

13. Decentralized nature of Healthcare & Education Group13. Decentralized nature of Healthcare & Education Group

14. Financials

15. Why not the financial industry?

Complimentary Slides

1. Comparison between options

Variables/Options Tulane Large University Private University Management Consulting

Project Type Systems Integration + Implementation of New Product

Systems Integration of New Product

Strategy + Implementation

Customized System Development

Ease of Implementation/Success rate

Relatively Harder Relatively Harder Medium – Hard Relatively Easier

Concurrence with true Business Model

No – attachment of staff to organization



Yes, blended team development project

Revenue $5M over two years $7M over 4 years NA NA

Significant Opportunity Costs

Preferred manager’s transfer issues

NA NA NA

Other Issues 1. Losing capability for 6 mths 1. Need to manage 3rd 1. Constantly acceding 1. Communication issuesg p y

2. New product

gparty staff

2. New product

3. Client’s preferred engagement method

y gto requests on projects

2. Small project & margins

2. Differing cultural issues

3. No new development, old capability

Positives 1. Previous working 1. Synergy with 2nd option Maintaining Client New segment, new set of relationship

2. Synergy with 2nd option

3. New Revenue Stream

2. Higher margin, bigger project

3. New Revenue Stream

relationship customers

Longer Term potential Potential Future projects with Org and other org in new P d

Potential Future projects with Org and other org in

P d

Can remain positive despite not picking up

j

Basic exploration stage, non‐committal

Product new Product project


2. Why not large private university?

a. Always been taken advantage off, need to bend over backwards

b Resulting in significant opportunity costs of tied up seniorb. Resulting in significant opportunity costs of tied up senior staff

c. Senior staff assigned on projects with low margins

d. No adherence to core business model

e. No new development, traditional business segment

f. Hinders long term growth – opportunity costs, no newf. Hinders long term growth opportunity costs, no new development


3. Why not Management Consultancy?

a. No new development, same traditional business

b. Culturally and subsequently working relationship issues in two high performance organizationstwo high performance organizations

c. Potential for poaching of current staff and lost of proprietary intellectual property

f fd. Does not support long term growth, no diversification of income streams


4. Key assumptions for Cost Savings for Large University


5. Issues Pertaining to Synergy (TU+LU)

a. Proprietary information, methodologies and solutionsa. Proprietary information, methodologies and solutions to be kept private and confidential

b. Only generic common information, solutions, problems encountered, learning points that are cross platforms will be shared


6. Cooperation with Competing Vendor

Collaboration Plan

1. Select and pick key industry software vendors

2. Enter into exclusive strategic alliances as sole preferred technical partners (For. E.g. SAP)

3. Alliance will see Exeter being certified technical partners for key g p ysoftware products (SAP certified gold partner)

4. Exeter will serve as marketing agent for their products in relevant and appropriate projects

5. Giving vendors more reach


7. CRM for Rejected Projects

a. Convey the company’s concern of why they elected not to undertake the engagement

b Con e possible alternati e firms that can ndertake the jobb. Convey possible alternative firms that can undertake the job

c. Actively engage these firms on the longer term basis and convey latest developments, capabilities and to not lose future engagement opportunitiesengagement opportunities

Complimentary Slides8. Economic Recession affecting Exeter’s Segments

a. Education, government & Healthcare sectors are core public services that require high reliability and delivery rates

b IT is a long term capital e pendit re and in estment that isb. IT is a long term capital expenditure and investment that is beyond economic cycles

c. Government’s fiscal policies spend on these 3 sectors to stimulate economy in a slowdown it would in fact drive evenstimulate economy, in a slowdown, it would in fact drive even more engagements to be made available


9. Offshoring is not a main strategy in S.R.

Variables India OthersWages Approximately 55.4 Approximately 58.5 g

USD/daySet to Increase by 15%: 63.71 USD

USD/day

Initial Capital Investments

•Existing Physical Infrastructure•Require only 3-4 Additi l C lt t

New Marketa) New Facilitiesb) New consultants

Additional Consultants

Consequences •Strengthen Core Competencies

•Disruption to Business Operations

•Fertile Ground for Talents (Existing Projects)•Disadvantages

Offshoring is not a option in the short run Price Differentials: 8 9%Offshoring is not a option in the short run as the SMALL cost savings cannot mitigate the BIG costs involved.

Price Differentials: 8.9%


9. Country Comparison for Offshoring

Variables India China Asia Eastern Europe

Industry T d

Wages Low Wages Low Wages Low WagesTrendEase of Entrance

ExperiencedExisting Physical Infrastructure

•No Prior Experience•Open Economy

•No Prior Experience•Some Countries: Politically

•No Prior Experience•Politically Unstable:•Government

Encourages Investments

Politically Unstable

Unstable: Changing Market Reforms

Education High •Increasing Standards of

Low •Increasing Standards ofStandards of

Education•Government initiatives to Promote English

Standards of Education•Government initiatives to Promote English

Proximity to India

Nil Close Far Far

Capital Outlay

Increasing costs Very LowA)Proximity to India

Low Lowy ) y

B)Favorable factors


9. Offshoring Options: China in the Long Run

Variables India China Asia Eastern Europe

Industry T d

Wages Low Wages Low Wages Low WagesTrendEase of Entrance

ExperiencedExisting Physical Infrastructure

•No Prior Experience•Open Economy

•No Prior Experience•Some Countries: Politically

•No Prior Experience•Politically Unstable:•Government

Encourages Investments

Politically Unstable

Unstable: Changing Market Reforms

Education High •Increasing Standards of

Low •Increasing Standards ofStandards of

Education•Government initiatives to Promote English

Standards of Education•Government initiatives to Promote English

Proximity to India

Nil Close Far Far

Capital Outlay

Increasing costs Very LowA)Proximity to

Low Lowy ) y

IndiaB)Favorable

factors


10. Country Comparison for Offshoring

(NOTE: HYPER LINK)(NOTE: HYPER LINK)

India: 2,800 Rupees ≈ 55.4 USD China: 400 RMB ≈ 58.5 USD

Assuming 8 Work Hours

Set to Increase by 15%: 63.71 USDChina: 400 RMB 58.5 USD

Source: Pay scale, http://www.payscale.com/research/CN/Country=China/Hourly_Rate/by_Job

Complimentary Slides11. Jonathan and Mark do not interact with

each other’s clientseach other s clients

1. Need to for both managing partners to critically client relationship management system

2. Best to involve both or even more staff in interaction

3. Aids Business Continuity System in times of emergencies

4. Double perspective from 2 or more partners would improve decision making

1. Decentralized nature of Healthcare & Education Group


12. Decentralized nature of Healthcare

& Ed ti G& Education Group

• Hinders disciplined client portfolio management

To circumvent beyond the traditional weekly meetings and follow up• To circumvent, beyond the traditional weekly meetings and follow up, Exeter should actively involve Group managers and senior consultants to not just weigh in but be part of the decision process

• Ensure entire organization understands and is committed to Exeter’s• Ensure entire organization understands and is committed to Exeter s

13. Complimentary Slides – Beta

All numbers in thousandsLevered Beta Tax Rate Value of Debt Value of Equity Unlevered Beta

Accenture 0.77 29.30% 1087952 16880000 0.736Oracle 1 09 29 53% 10235000 89750000 1 009Oracle 1.09 29.53% 10235000 89750000 1.009SAP 1.05 32.23% 24000 42060000 1.050

Accenture Oracle SAPIncome Before Tax 3107762 7834000 4173000Income Before Tax 3107762 7834000 4173000Income Tax Expense 910574 2313000 1345000Tax rate 29.30% 29.53% 32.23%

Average Unlevered Beta 0.932Average value of Debt 3782317Average value of Equity 49563333Debt/Equity Ratio 0.0763Average Tax rate 30.35%Implied Beta for Exeter 0.981

Values obtained from Yahoo! Finance

Complimentary Slides – WACC

ExeterEquity/Value 0.9237Debt/Value 0.0763Beta 0.9812

1988 16.61%1989 31.69%1990 -3.10%1991 30 47%

S&P500 Average Annual Return

Beta 0.9812Average Market Return 11.34%Risk Free rate 5.77%Cost of Debt 4.17%Tax Rate 30.35%

1991 30.47%1992 7.62%1993 10.08%1994 1.32% -1995 37.58%1996 22 96%Tax Rate 30.35%

Wacc 0.1061996 22.96%1997 33.36%1998 28.58%1999 21.04%2000 -9.10%2001 -11 89%2001 -11.89%2002 -22.10%2003 28.69%2004 10.88%2005 11.07%2006 15 79%2006 15.79%2007 5.49%Average Annual Return 11.34%

Obtained from Yahoo! FinanceFinance

Complimentary Slides – WACC

20 Year T-Bill RateYear Return

1993 6.29%1994 7.49%1995 6.95%

SAPLong Term Debt 24000000Net Borrowings 1000000Cost of Debt 4.17%

1996 6.83%1997 6.69%1998 5.72%1999 6.20%2000 6.23%2001 5 63%

Obtained from SAP 2007 Financial Statements

2001 5.63%2002 5.43%2003 4.96%2004 5.04%2005 4.64%2006 5.00%2007 4.91%2008 4.36%

Average 5.77%

Obtained from http://www.federalrese

Complimentary Slides – Projected I/SProjected Cashflowin USDLifetime Index 0 1 2 3 4 5Year 2009 2010 2011 2012 2013 2014Revenue:Tulane 1000000 1000000 3000000Tulane 1000000 1000000 3000000Large University Client 1000000 1000000 2000000 6000000New Domestic Market 10000000India Private 157961 236941.56 355412.34India Public 5663349 8495023.5Other Revenue Stream 39394642 41718926 44180342 46786982 49547414Total Revenue 41394641.71 43718926 49338303 58687273 68397850- Expenses 39676764.08 41904590 47290764 56251751 65559339Education -4164175.578Factory Investment -10000Office Supplies -10000Opportunity Cost -4000000Opportunity Cost -4000000Recruitment 500000EBITDA -7684175.578 1717877.631 1814335 2047540 2435521.8 2838510.8 - Depreciation 1000 1000 1000 1000 1000EBIT 1716877.631 1813335 2046540 2434521.8 2837510.8 -Tax 521072.361 550347.3 621124.8 738877.37 861184.52EBIT(1-t) 1195805.27 1262988 1425415 1695644.5 1976326.3 + Depreciation 1000 1000 1000 1000 1000NATCF 1196805.27 1263988 1426415 1696644.5 1977326.3Discount Factor 1 1.105857346 1.22292 1.352376 1.4955345 1.6538478

Complimentary Slides – Projected I/S

Terminal Growth Rate 5.5%Terminal WACC 10.6%Terminal Value 21901276

Calculation of Terminal Value

Terminal Value 21901276Discount Factor at year 5 1.654PV of Terminal Value 13242619

2011 2012 2013 20142011 2012 2013 2014Growth Rate 6% 13% 19% 3%

NPV 12262826 59NPV 12262826.59

Achieve Positive NPV of 12.262 million and Tripled Growth rate by 3 X

Complimentary Slides – Projected I/S

DepreciationBook Value (Beg) 11000 10000 9000 8000 7000 6000

Depreciation Figures

Book Value (Beg) 11000 10000 9000 8000 7000 6000Depreciation 1000 1000 1000 1000 1000 1000Book Value (End) 10000 9000 8000 7000 6000 5000

Initial Book Value 11000Depreciate over 10 yearsDepreciate over 10 yearsSalvage Value 1000

Complimentary Slides – Cost

Education Cost for new softwareAdminstration Cost 40914.326Faculty Cost 40914.326Student Cost/Opp. Cost 4091432.6Materials Cost 40914.326Total Cost 4214175 578Total Cost 4214175.578

No. Of EmployeeSenior Consultant 3Consultants 30Developers 10T t l N f E l 43Total No. of Employees 43

Student CostRevenue per Consultant 113023 50% of SeniorRevenue per Senior 226046Revenue per Developer 2260.46 1% of Senior

Total Student Cost30 Consultant 33906903 Senior 67813810 Developer 22604.6

Obtained from http://www.reuters.com/finance/industries/benchmarks?industryCode=57211

Total Student Cost 4091432.6

No. of People in OfficeIndian Consultants 4American Consultant 2Developers 10pTotal 16

Complimentary Slides – Revenue

No. of Staff Accenture 160000Accenture Revenue 25313826000No. of Staff ExeterUS 80India 80Puerto Rico 9EGS 80Total No. of Staff Exeter 249Re en e of E eter 39394642Revenue of Exeter 39394642

Gross Margin of Industry 4.15%Obtained from reuters.com

Complimentary Slides – Revenue

%Go ernment Spending on Ed cation 3 80%%Government Spending on Education 3.80%GDP of India 2008 USD 3311900000Government Spending Education USD 125852200Obtained from www.everonn.com. Report by Credit Suisse% on Tertiary Institutes 0.09Govt Spending on Tert Education 11326698Govt Spending on Tert. Education 11326698

Year 1 Year 2Assuming Exeter obtains 50% 75%Revenue 5663349 8495023.5

No. Of Private Schools 50000% that are tertiary Institutes 9%No. Of Private tertiary Institutes 4500No. Of Private tertiary Institutes in Region 310

Amt Private School in US Spend on IT USD 2000000Amt Private School in India Spend on IT Rupees 2000000pExchange Rate ruppe/USD 50.6454Amt Private School in India Spend on IT USD 39490.25973

Assume Private School Contract Growth rate of 50%2012 2013 2014

Complimentary Slides – Why not the financial sector?

1. Recognize the opportunity during this current economic crisis

2 Increased number of consolidation of banks through2. Increased number of consolidation of banks through mergers and acquisitions (M&A)

3. Not Exeter’s expertise4. Exeter specialises in investment management and hedge

funds5. Strong competitions among incumbent firms e.g. Tata

Consultancy6. These M&A are a current trend, not sustainable6. These M&A are a current trend, not sustainable 7. Not in line with our long term goal

MMICC 2009 - 2nd Place - NUS

Business

Transcript of MMICC 2009 - 2nd Place - NUS