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2007 Global Outsourcing Growth Excellence & Customer Value Leadership Award Award Recipient: LUXOFT

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2007 Global Outsourcing Growth Excellence & Customer Value

Leadership Award

Award Recipient: LUXOFT

Market Overview

The Russian software outsourcing industry, though small by global standards is one of the fastest growing in the world today due to its fundamental advantages of low cost and high expertise. There are other benefits such as the Russian population’s linguistic skills, the country’s European culture, the low attrition rate, the increasing investment in

telecommunications infrastructure, the growing domestic market, the country’s strategic location near attractive markets, the shorter distance from Europe, and the country’s increasing political and economic stability. Russian software companies are renowned for their effective delivery of services and their ability to perform ‘non-standard’ tasks. They opt for intensive projects and deliver high quality work. Russian software engineers and researchers are highly qualified with excellent programming skills and are competent in developing complex programs.

In 1998 Motorola, Intel, LG, Sun Microsystems, and Samsung opened their software development centers in Russia. However, the Russian software segment became a

substantial force in 2002 with intensive certification to ISO 9001/2000, the first CMM Level 4 certifications and delivery of specialized products and services to Fortune 500 companies such as IBM, Dell, Motorola, CSC, Boeing, Texas Instruments, NEC, Sun Microsystems, Toshiba, Samsung, Panasonic, and others.

Almost all the major software developers in Russia cater in varying degrees to foreign customers, their work share ranging from 20.0 percent to 100.0 percent of the total outsourcing revenues. Russian expertise in application development is considered the best in the world. The packaged software market, which is geared toward basic business

processes, is a high value-added market and has a great potential for growth in Russia. Russian software developers have an advantage due to their high level of scientific education and engineering know-how. Systems software and applications are the most important sub segments.

Competitive Landscape

The Russian software outsourcing industry typically consists of small firms - with close to 50.0 percent of existing companies having less than 30 employees. Even though Russian firms have many important MNC clients like IBM, Dell, Citibank and Boeing, their small size curtails their ability to handle the largest and most sophisticated projects. Companies additionally face the challenge of utilizing their strength of technically sophisticated engineers bringing out cutting-edge research and distinguishing themselves. It is likely that Russian firms will seek to grow strongly via mergers and acquisitions, and have a strategic focus on large clients.

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2007 Global Outsourcing Growth Excellence & Customer Value Leadership Award Award Description

The Frost & Sullivan Growth Excellence and Customer Value Leadership in Outsourcing Award is given to the company that has excelled in growth parameters within the

outsourcing industry and serviced customers with superior business value. The recipient provides a host of high quality engineering solutions while staying competitively priced and has demonstrated outstanding responsiveness to customer needs and flexibility in product offerings to suit customer businesses.

Research Methodology

To choose the recipient of this award, the analysts track competitor features, product portfolio and prices within the industry along with customer service methods on an ongoing basis. This is achieved through extensive secondary research of proprietary data sources, interviews with key market participants and their key end users. Collected data is cross tabulated to ascertain the number one ranking company.

Measurement Criteria

In addition to the methodology described above, there are specific criteria used to ascertain final competitor ranking in this industry. The recipient has excelled by staying competitive in the following criteria:

• Strong technical expertise - provision of value-added services

• Vertical domain experience

• High Quality of Processes

• Price against Performance

• Growth in services portfolio within the industry

• Growth in geographical markets

• Innovative growth strategies

• Customer satisfaction- ROI to customer

• Responsiveness to customer needs

• Quality of talent pool and employee retention

The 2007 Frost & Sullivan Growth Excellence and Customer Value Leadership in

Outsourcing Award is presented to LUXOFT for outstanding growth in delivery of high end value added IT Outsourcing services. LUXOFT has demonstrated deep technical expertise, vertical domain experience and strict adherence to stringent quality and security

standards. Highly satisfied customers testify that the flexible engagement model of

LUXOFT customizes precisely to client needs the consistently high quality and cost effective services provided by their superior engineering talent. This provides their customers with higher return on investment as well as reliable and long standing client-vendor

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At Critical Mass and Growing Fast

LUXOFT with anticipated employee strength of 3200 in 2007 is by far the largest

outsourcing company in Russia providing it with the unique advantage of critical mass to cater to large and sophisticated clients. In 2006, one fourth of the total aggregate revenue of the 10 largest Russian software development services exporters could be credited to LUXOFT alone. With a five year annual average growth rate of 65.0 percent and at anticipated revenue strength of $110 million in 2007, LUXOFT has led the way in the Russian Outsourcing market primarily through organic growth –with a newfound growth focus on acquisitions to broaden and deepen its expertise. Organic growth is set to continue at its present aggressive pace. LUXOFT is a premium IT Outsourcing brand in Russia and with research and development centers in Russia and Ukraine as well as sales and marketing presence spanning U.S, Canada and Europe, it truly has a global footprint.

High Technical Expertise

LUXOFT is a high quality, process oriented company driven by high technical and

engineering skills. The hallmark of LUXOFT is value-driven outsourcing- characterized by top-quality and low-price programming. Strong engineering background of its sound programmers, architectural skills, characteristic Russian efficiency and dedication and acute focus and adherence to standard methodology assures top quality. High individual productivity, minimal managerial efforts and low attrition rates result in low costs and value for money to customers.

LUXOFT provides a broad spectrum of custom software development services for IT

solutions on various platforms and technologies. LUXOFT was the first in Europe to achieve Level 5 CMMI quality certification assuring its clients of the highest level of process

maturity. Customers testify that the custom built offshore engagement model

and flexible delivery models of LUXOFT bring highly valued scalability and flexibility to outsourcing.

Broad Vertical Expertise

LUXOFT brings to the counter deep vertical industry knowledge and domain expertise across multiple industry verticals. Customers benefit from LUXOFT’s longstanding experience in banking and finance, industrial manufacturing, technology software and energy utilities verticals. LUXOFT is further deepening its multi-discipline expertise in aviation, automotive & transport and telecommunications.

Top Class Technology Personnel

Customers particularly laud LUXOFT’s ability to attract and retain the very best technology talent from the already rich intellectual resources of Russian IT labor. Recruitment of LUXOFT has wide reach with collaborations and comprehensive training programs with universities and relocation and re-training policies across Russia and Ukraine. Training

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centers together with universities offer graduate internships, technical courses and language courses. It’s highly selective screening process cull out best and most

appropriate skill sets in selected IT disciplines and industry segments. With more than 80.0 percent of LUXOFT's staff equipped with Masters and PhD degrees, more than 70.0 with work experience in excess of 7 years and more than 60.0 percent having fluent English proficiency- LUXOFT leverages on the technical qualification, seniority and multi-lingual competencies of its staff as well.

LUXOFT is highly committed to the professional and personal development of its personnel. It has world class employee retention policies in place consisting of rotation programs and various mentoring programs. This provides LUXOFT with the distinction of record high employee retention of 94.0 percent – with an industry average of 80.0-85.0 percent. Clients greatly value the resultant continuity in servicing teams increasing stability and reliability.

Strong and Growing Global Footprint

LUXOFT has successfully transitioned from being a Russian software developer exporting IT services to a truly global IT outsourcing services provider. It is equipped with the largest delivery capabilities in Russia and CIS with four development centers in Russia (in Moscow, St. Petersburg, Omsk and Dubna) and three in Ukraine (in Kiev, Odessa). In addition it has delivery offices in the U.S. (in New York, Seattle, San Jose), in Canada (Vancouver) and in the U.K to present their U.S and European clients with their unique value proposition. LUXOFT has adopted innovative growth strategies like extending its delivery model to target companies in the U.S. and Europe looking for different variants- in form and degree- of near shoring. This has provided LUXOFT with commendable success particularly in Western European markets from 2006.

Growth in Services Portfolio

LUXOFT has established itself as a premium service provider of high end complex

outsourcing services focusing on new product engineering, application development and embedded systems development. It has established its deep vertical expertise in the financial services, IT and aerospace industries. In addition to these and other capabilities in software quality assurance and IT Infrastructure management, LUXOFT is offering an exciting extension of its services portfolio. Premium services like architecture, security and process consulting as well as performance engineering are from recently available as separate quality high end front offerings. As a natural extension of their services, LUXOFT is also foraying into the IT Solutions space as well.

Outstanding and Enduring Client relationships

The key driver of and indeed the ultimate testimonial to the success of LUXOFT is the high quality, stability and maturity of its working relationships with its clients- which range from global leaders to independent software vendors. Clients with smaller project requirements commend LUXOFT with the same quality of service, attention and resources as its larger

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clients do. LUXOFT was the first Russian company to develop a ‘flexible engagement model’ to custom make delivery models for its clients resulting in invaluable flexibility and a perfect fit of client expectations with actual service delivery. This has manifested in a record high rate of client retention of over 95.0 percent. Clients testify that LUXOFT provides them with a skill set that allows them to bring in ‘transformational outsourcing’ and ‘growth sourcing’ – to transform and grow their businesses. It exhibits exceptional client-focus and a positive approach to customer satisfaction. Clients testify that the highly technical, committed and ‘zero error’ approach of management and developers alike evoke a high level of trust in LUXOFT. Customers also testify to a true willingness of LUXOFT to partner with its clients by even taking on critical project risks and its optimistic, creative and innovative approach to problem solving.

Figure 1: Flexible Engagement Model of LUXOFT

Engagement Model Flexible Top Notch Talent Satisfied Customers

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In recognition of its outstanding growth performance in IT Outsourcing services and its strong commitment to customer service, Frost and Sullivan is proud to present LUXOFT with the Growth Excellence and Customer Value Leadership in Outsourcing Award for the year 2007.

About Best Practices

Frost & Sullivan Best Practices Awards recognize companies in a variety of regional and global markets for demonstrating outstanding achievement and superior performance in areas such as leadership, technological innovation, customer service, and strategic product development. Industry analysts compare market participants and measure performance through in-depth interviews, analysis, and extensive secondary research in order to identify best practices in the industry.

About Frost & Sullivan

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and

corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies,

Figure

Figure 1: Flexible Engagement Model of LUXOFT

References

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