Please see page 5 for rating definitions, Clinton D. Fendley, CPA (443) disclosure information, and required

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1 November 21, 2003 We Traveled To India And Back Offshore Growth Is Rapid And Accelerating--Pricing And Margins Are Stable--Leaders Established--CTSH Best Positioned Stock FY EPS CY P/E Company Name Ticker Rating Price 2003E 2004E Accenture Ltd. ACN 2 $24.16 $1.05 A $ x 21.4x Answerthink, Inc. ANSR 2 $5.80 $0.01 $ x 58.0x BearingPoint, Inc. BE 2 $8.70 $0.29 A $ x 17.8x CIBER, Inc. CBR 2 $9.16 $0.32 $ x 20.4x Cognizant Technology Solutions Corp. CTSH 1 $43.82 $0.87 $ x 39.8x DiamondCluster International, Inc. DTPI 2 $8.49 ($0.41) A $0.19 NM 25.7x Keane, Inc. KEA 2 $13.29 $0.48 $ x 22.5x Sapient Corporation SAPE 2 $5.28 ($0.05) $0.04 NM 132.0x Source: Company data and Wachovia Capital Markets, LLC estimates NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful * Some EPS estimates presented on a pro forma basis to exclude non-recurring items and match to First Call definition. Key Points OFFSHORE GROWTH ACCELERATING. We spent last week in India visiting 15 companies. It was very clear to us - offshore work in India is growing even faster than we previously thought with many growing 50% plus, if not doubling. There is no longer any missionary work just competitive positioning. MARGINS STABILIZING. Pricing has stabilized and has a slight upward bias. Wages are rising, but have not yet become a meaningful issue. Operating margin appears to have stabilized. The rising value of the Rupee relative to the dollar is also a drag. SERVICE PROVIDER POSITIONING SET. The leading IT providers are now set (TCS, INFY, WIT, CTSH, SAY, ACN, IBM) with the rest needing to find partners or niches to survive. Domestic only IT service providers will be significantly handicapped in winning business. BPO STILL EMBRYONIC. The BPO market is seeing rapid growth with no clear market leaders. The model is trying to transition to a transaction based one from a call center based one to reduce turnover and increase margin. CTSH STILL THE BEST STOCK OPPORTUNITY. We believe that Cognizant (CTSH) is executing well on an expanding market opportunity that should lead to an upward bias in EPS estimates. We reiterate our Outperform investment rating. Market Perform rated Accenture (ACN) and Keane (KEA) are both growing very rapidly offshore, but the revenue mix shift may drag margins. The bias in their shares is modestly up. Sapient s (SAPE) new development offering appears to be getting limited traction, but metrics have slight upward bias. The bias in SAPE s shares is modestly down. Information Technology (IT) Services WCM does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and Investors should consider this report as only a single factor in making their investment decision. Edward S. Caso, Jr., CFA (443) edward.caso@wachovia.com Please see page 5 for rating definitions, Clinton D. Fendley, CPA (443) disclosure information, and required clint.fendley@wachovia.com analyst certifications. For certain non-u.s. institutional readers, this research is issued by Wachovia Securities International Limited, which is regulated in the U.K. by the Financial Services Authority. Wachovia Securities International Limited provides investment services in certain countries, and each has approved the contents of this document for viewing by approved parties in the country in which it does business. Not all investments or related services are available to residents of every country. Please consult your Financial Advisor or the Wachovia Securities office in your area for additional information. U.S. residents are directed to Wachovia.com for investment and related services.

2 Information Technology (IT) Services KEY TAKEAWAYS: - Business momentum constrained only by ability to attain and assimilate middle level management. Some service providers have multiple daily client visits, and their ability to sell to U.S. clients appears to be dramatically improved. Growth appears to be accelerating, but bias to applications maintenance remains. - Enterprise focused firms, such as CTSH, are enjoying relatively stronger growth, as technology R&D and work for Telecoms remains relatively weaker. - Pricing has stabilized with some modest signs of improvement. There is also some benefit from a slight shift to more development and more fixed priced work. - Ironically, political noise around tightening (H1b and L1) visa limits in the U.S. is accelerating the transition of work offshore, which is a plus for margins. Many of the providers are now using fewer visas than last year. - Overall turnover is trending up given the market s rapid growth trajectory, but is still manageable. Poaching of middle management, especially by Accenture and IBM, is the biggest challenge, leading to sharp wage pressure for those with 3-7 year s of experience. This is the key growth governor to watch. - Tier I (TCS, INFY, WIT) moving to vertical market approach, which is indicative of entering a mature growth phase. In this case, mature means sustainable growth, not slowing growth. We also see meaningful improvement in the sales process, which had been an issue. Their operations were all impressive. - A still embryonic BPO market is enjoying very rapid growth, but remains biased to lower margin call center work. The challenge is to move away from just third shift work. Beginning to see mix transition to more data/ transaction work, which should help billable turnover and operating margin. - ACCENTURE (ACN): Headcount is expected to more than double by April. Most companies that we visited believe ACN has got it right, but we could not get a handle on the margin drag given the exponential growth and very aggressive bidding for 3-7 year people. We were impressed with the operation. Reiterate Market Perform rating, but believe bias is up. - COGNIZANT (CTSH): The pace of business seems only to be accelerating with CTSH a Tier I player for enterprise client work. Improving pricing and relationship leveraging should be a plus for margins. Base of operations being in Chennai a plus re turnover, as is the relatively more variable compensation scheme. Capacity is coming on rapidly. We remain very comfortable with our Outperform investment rating (despite high absolute, not relative, valuation) and the potential for continuing upward bias to the Street estimates. - KEANE (KEA): Growing rapidly and benefiting from taking established high-end middle market clients offshore. Strategy appears to be working, but mix shift (away from onsite work) should dampen overall revenue growth in the near-term. Reiterate Market Perform given valuation, but the bias is modestly up. - SAPIENT (SAPE): Growing, but much slower than others, as SAPE s type of software development has yet to return. Reiterate Market Perform rating as sector share price momentum should offset relatively weaker fundamentals. INTRODUCTION -- TO INDIA, AND BACK, IN SEVEN DAYS We spent the last week in India visiting with 15 companies. They are the Big-3 IT offshore Information Technology (IT) service providers Tata Consulting, Infosys (INFY), and Wipro (WIT); emerging Tier I provider Cognizant (CTSH); leading business process outsourcing (BPO) providers WiproSpectramind, EXL and WNS; Indian-based subsidiaries of the U.S. firms Accenture (ACN), Keane (KEA) and Sapient (SAPE); as well as HCL Technologies, Birlasoft, MphasiS, e4e, which offer IT and BPO services and the first three being publicly traded in India; and finally independent outsourcing consultant neoit. This is our third trip to India with the last being several years ago. We were stunned by the growth and maturity of the market place. Our observations are as follows: REVENUE GROWTH ACCELERATING AND MARKET LEADERS NOW ESTABLISHED. Missionary work is no longer. The offshore concept is now enjoying very rapid supply-constrained growth. The leaders appear to be established within their respective markets - ACN and IBM owning the mega deals, with Tier I providers INFY, TCS and WIT grabbing meaningful share among Global 1000 clients and CTSH, HCL Technologies and Satyam (SAY) as growing threats. There are numerous smaller service providers; the 2

3 We Traveled To India And Back more successful ones benefiting from existing U.S or U.K. based client relationships, such as Keane. The remaining smaller providers without scale or access to clients are left to fight it out in the very price sensitive lower end of the middle market. If they do not offer specific in demand skills (e.g. SAP implementation), they are unlikely to survive and will need to hook up with a U.S. or European provider to survive. WAGE PRESSURE REMAINS FOCUSED IN 3-7 YEAR RANGE. We heard of billable turnover as low as 4% and as high as 20-25% with most being in the low-to-mid teens. Year one employees have the highest turnover rate (as should be expected) with part of this reflecting poaching by firms that do not have access to Day One schedules for the top schools. In addition, the number of newspaper pages of local employment offers has increased several fold. Turnover and wage increases the most challenging for those with several years experience as the industry struggles to add the middle layers of management to handle the rapid growth. Turnover for this group was well above corporate averages and compensation increases where in the 30-35% range. Part of this though reflects several years of no increases when growth slowed after the telecom sector meltdown. We note that India was far more impacted by the downturn in spending by Telecom providers and manufacturers than by the demise of dotcoms. We believe that turnover is the primary factor to watch for future signs of market and company trouble, although we believe this has not yet become a notable issue, in our opinion. MORE FIXED PRICED WORK SHOULD HELP MARGINS. One of the factors that has helped ease the pressure from wage increases has been a shift to more fixed price work. Given the historic process focus of the Indian technology community, we do not see this as a meaningful increase in the risk profile. ENGINEERING GRADUATE POPULATION RISING. Several managements noted that the annual number of engineering graduates was increasing from the current 100,000 level to upwards of 350,000 over the next few years. This should help some of the upward pressure on wages and reduce constraints to growth. POSSIBLE TIGHTENING OF U.S. VISA RESTRICTIONS PROVING TO BE A POSITIVE. Our biggest fear six months ago was that the politically driven focus in the U.S. to limit the use of H1b and L1 visas would become a detriment to growth. Instead, it has acted to accelerate the acceptance rate of the offshore model driving more business (and U.S. jobs) offshore at a faster rate. While onsite gross margin is in the 30-35% range, offshore margin is in the 60-65% range. Another interesting fact is that the H1b program had a minimum ($60,000) wage requirement put in when the level was temporarily raised to 195,000 per year from 65,000 per year. Now that the level has returned to 65,000 offshore providers can again reduce wages paid to employees while in the U.S.. It is unclear (for political reasons) whether service providers will lower the wages of their visa holders. MODEST EARLY SIGNS OF SOFTWARE DEVELOPMENT ACTIVITY. Most of the IT service providers we met with indicated a growing level of applications development work. This often came as an extension of existing maintenance work, as the client had become comfortable with both the offshore concept and that particular provider. BPO BUSINESS GROWING RAPIDLY, BUT NOT WITHOUT ISSUES. The BPO businesses we met with are growing 100%, or more. One provider suggested that the potential pool of U.S. processes to be outsourced was less than 5% penetrated with the max penetration potentially getting as high as 20%. Longer-term, we believe the providers that focus on transaction processing instead of call centers will be the big winners. Despite what one might think, we did not visit any sweatshops. Rather, they were very comfortable work environments. So far, approximately 75-85% of the work is lower margin call center operations. Turnover is 40% plus in part reflecting the third shift nature of voice work. Several BPO providers had U.K. clients, so the work was the more attractive second shift. Given that the industry is only a few years old, the biggest challenge is finding mid level management. All those we met were working on increasing the percentage of process (or data) work. This often can be done during normal business hours, and tends to be much higher margin. We saw several providers offering P.H.D. level analytical work, U.S. tax return preparation and (UGGH!!) equity and bond research analytical support. We were impressed that several providers, particularly HCL Technologies, were linking their data entry processing work into outbound calling efforts. This allowed for increased utilization of facilities. It is important to note that the dynamics and issues in the BPO space are much different than the IT services space, and those that have both are running 3

4 Information Technology (IT) Services the operations separately. Our impression is that BPO could become supplied constrained more quickly than IT given the need for (clear) English speaking employees, the lower wages, less attractive work schedule and structurally higher turnover rate. FINANCIAL SERVICES, INSURANCE AND HEALTH CARE THE STRONGEST VERTICALS. As has been the case for some time, the strongest clients remain in just a few industries. There appears to be some signs of growth in retail and to a lesser extent manufacturing and logistics. Business with technology companies appears to have stabilized, while work for telecom providers remains depressed. Work for governments is almost non-existent. We note that most major clients have three providers with one often being more niche focused (as opposed to just small). We note that little offshore work comes from the European continent, primarily because of language issues. THE GE FACTOR. General Electric (GE) was an early player in India and their influence in the IT and BPO business remains strong. Several firms that have a large concentration of work with GE suffer lower pricing and margins. We note that Infosys long ago walked away from work with GE. TCS and Satyam have a large GE revenue concentration. We also note that GE has the largest BPO operation in India with approximately 15,000 employees. AMEX is second with about 10,000. This makes both firms prime targets for poaching in what is still a management starved start up business in India, especially in the Delhi area. INFRASTRUCTURE NOT AN ISSUE. We were amazed how quickly new seat centers (buildings) could be constructed. The comment was that we could put up a fully operational center in nine months. Nearly everyone was building out new space. Bandwidth is also not an issue given the still significant excess capacity globally. The availability of power and quality of roads have improved dramatically in the last few years, but a lot of work is left to be done. This is still a third world country. HPS PEROT UPDATE. The management of HCL Technologies, the 50% JV partner with Perot Systems in an offshore venture, indicated that both parties wished to gain 100% control of the JV. We got the sense that they were going to be partners for a while. In general, most people we chatted with indicated that a JV model just does not work. ACCENTURE RAMPING RAPIDLY. ACN indicated that they current have 4,500 employees in India with an expectation to grow to 10,950 by April They will be in seven centers in four cities. The current work force is one-third BPO and two-thirds IT. IBM also indicated as a factor in poaching 3-7 year people, although it appears IBM remains primarily focused on supporting internal functions, so is less of an issue on the new business front. ACN appears to being leveraging a legacy consulting workforce in India to provide management capabilities instead of bringing in much more expensive ex-pats. COGNIZANT MEETING VERY POSITIVE. CTSH is the only major IT provider headquartered in Chennai, which is one of the countries major cities with strong (as good as it gets in India) infrastructure and schools. The management highlighted a rapid ramp up (from 212 to 709 in the last year) for a major money center bank, which is now the largest client, and significant ongoing cutting edge development work for a leading retailer. The company indicated that it is convincing clients to allow them to do develop work with funds saved from offshoring maintenance. The company s variable compensation model (both cash and stock based) and strong stock price have been a plus for retention. We visited CTSH s new three building complex and were told another adjacent building was about to be started. The company is also expanding into Calcutta, and to a lesser extent Bangalore, Pune and Hyderabad. KEANE MEETING INDICATING STRONG ACTIVITY LEVELS. Of all the sites we visited, KEA s had the greatest buzz of activity. This may reflect that they are over capacity and within days of opening a new and much larger facility in the Delhi area. The company has recently doubled offshore staffing and turnover is just 12-13%. KEA is currently hiring 80 people per month, and is expected to be hiring (net) per month in The CEO recently stated his intent to move up to 35% of the workforce offshore or nearshore (i.e. Canada). We noted sizeable and expanding work areas for several major Fortune 500 sized clients, although conversations during the week lead us to believe they are more of a (viable) threat in the top end of the middle market. The key issue is when does the off-shore business move from being a defensive 4

5 We Traveled To India And Back benefit to an offensive one, as a shift of KEA s billable employees offshore should be a drag on revenue growth and dollars of contribution margin (but a plus on the percentage side) for a while. SAPIENT MEETING OFFERED MIXED SIGNALS. Of all the meetings we had, this was the least positive, but it was still a positive one. The operation seems to be moving up with the market. It was clear that SAPE has successfully transferred its historic rapid development model to India, although it is unclear if the still weak market for applications development is ready for the SAPE approach. We also noted that the workforce was older (relatively speaking), which may help explain the high level of turnover and lower margins. Local management indicated they are not the cheapest model given their higher end approach, but it did not seem to us that is what the market wants at the moment. SAPE currently has 700 in India with the buildup 100% organic. 51% of billable employees are now in India. I certify that: To view price charts for all companies rated in this document, please go to or write to 7 Saint Paul Street, 1st Floor, MD5202, Baltimore, MD ATTN: Research Publications Additional Information Available Upon Request 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. Wachovia Capital Markets, LLC maintains a market in the common stock of ANSR, CTSH, DTPI, SAPE. Wachovia Capital Markets, LLC or its affiliates managed or comanaged a public offering of securities for ACN, KEA within the past 12 months. Wachovia Capital Markets, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in the next three months from ACN, ANSR, CBR, KEA. Wachovia Capital Markets, LLC or its affiliates received compensation for investment banking services from ACN, ANSR, CBR, KEA in the past 12 months. Wachovia Capital Markets, LLC and/or its affiliates, have beneficial ownership of 1% or more of any class of the common stock of DTPI, KEA. Wachovia Capital Markets, LLC does not compensate its research personnel for specific investment banking services transactions. The (an) author(s) of this note/report receives compensation that is based on (among other factors) Wachovia Capital Markets, LLC's overall investment banking revenues. 1 = Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2 = Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3 = Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL As of: November 21, % of companies covered by Wachovia Equity Research are rated Outperform. Wachovia has provided investment banking services for 43% of its Outperform-rated companies. 53% of companies covered by Wachovia Equity Research are rated Market Perform. Wachovia has provided investment banking services for 36% of its Market Perform-rated companies. 9% of companies covered by Wachovia Equity Research are rated Underperform. Wachovia has provided investment banking services for 39% of its Underperform-rated companies. This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wachovia Capital Markets, LLC to be reliable, but Wachovia Capital Markets, LLC does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wachovia Capital Markets, LLC at this time, and are subject to change without notice. Wachovia Capital Markets, LLC, or its affiliates may from time to time provide advice with respect to, acquire, hold, or sell a position in, the securities or instruments named or described in this report. Wachovia Capital Markets, LLC, member NYSE, NASD and SIPC, is a subsidiary of Wachovia Corp. and an entity separate and distinct from its affiliated banks. Copyright 2003 Wachovia Capital Markets, LLC SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE 5