Differentiating Your IT Services Company: Understanding Key Value Determinants Cherry Tree

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Differentiating Your IT Services Company
Understanding Key Value DeterminantsCherry Tree
Co.Voice [phone] / Fax (612)
893-9036E-mail info_at_cherrytreeco.comWeb
www.cherrytreeco.com
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Presentation Outline

• Growth Expectations for IT Services
• Todays Services Market
• Shifting Value Determinants
• Technology Advancements Drive Growth
• Challenges for IT Services Firms

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IT Services Growth Expectations
In billions
14 CAGR
Source Dataquest
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IT Services Index18-Month Relative Stock
Performance
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Measurement Public IT Services Companies

• Growth Rates
• Margins
• Sustainability of Business Model

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Shifting Value Determinants

• 1998
• Technology as Enabler
• Scale
• Profitability
• Domain Expertise - ERP
• Geography
• Client Base

• 1999
• Technology as Business Definition
• Internet - E-commerce
• Application Outsourcing
• Domain Expertise
• - CRM
• - SCM
• Vertical Industry Knowledge
• Client Retention
• Account References

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Technology Advancements Drive Growth Potential

• Companies Forced To Re-think Business Processes
  and Strategies
• Ability To Access New Client Markets
• Technology Solutions Expand Across Corporate
  Infrastructure
• Creates New Financial/Investment Model

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Value 1 Internet / E-commerce Solutions

• Segments Continue To Proliferate
• Strategic business consulting, network
  infrastructure maintenance, design, web-enabled
  applications
• New Competitive Weapon
• Speed To Market Is Paramount
• High Demand - Scarcity of Supply
• Crosses Corporate Infrastructure

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Technology Examples

• USWeb/CKS, Sapient, Proxicom, Scient
• Valued on price/revenue
• Future earnings potential
• Recent IPOs Filed - Agency.com, Cysire
• Acquisitions 1x - 12x TTM Revenue
• Revenues 1.5 MM

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Value 2 Application Outsourcing Back to
the Future Reincarnation of Service Bureau Model

• ASP Model Penetrates New Markets
• Recurring Revenue Model Introduced
• Capital Investment/Outlay De-Emphasized
• Corporate IT Focus Shifts To Strategic
  Initiatives

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Value 3 Domain Expertise - Front End
Solutions

• Technology Expands Beyond Back Office
• To CRM
• Leverages ERP Investment
• Customer-Centric Focus Drives Revenue
• and ROI
• Move Beyond Big 5 ERP to Best of Breed
  Solutions
• Entrance To New Client Markets

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Value 4 Vertical Industry Knowledge

• Business Process Understanding is Paramount
• Key to Differentiation
• Compete on Time Value vs. Price
• Expands Geographic Boundaries
• High Value-Added Solutions

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Value 5 Client Retention

• Leverage Relationships with Clients
• Provide Additional Value-Added Solutions
• Opportunity to Gain Competitive Advantage
• Mitigate competitive bidding process through
  preferred status.
• Retain margin reduce price pressure
• Customer Value time reduced risk
• Extend Business Model into New Growth Areas
• Evolutionary approach vs. revolutionary

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Value 6 Account References

• High Profile Clients - Satisfaction
• Scope of Services
• Business Impact - Measurement
• Sales Credibility/Leverage

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Long-term Value Creation Strategy

• Expanding Competitive Environment
• Differentiation is Key
• Balance Long-term vs. Short-term
• Long-term diversification strategy
• Technology Skill Set Capabilities Must
• Stay Current
• Customer Relationships Are Everything

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Differentiating Your IT Services Company
Understanding Key Value DeterminantsCherry Tree
Co.Voice [phone] / Fax (612)
893-9036E-mail info_at_cherrytreeco.comWeb
www.cherrytreeco.com