1q15 isg outsourcing index - global

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Group, Inc. All Rights Reserved

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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

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Hosted by: Moshe Katri,

Cowen and Company

16 April 2015

The ISG Outsourcing Index™

First Quarter 2015

Global Market Data and Insights



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Covering the state of the outsourcing industry for global, commercial contracts.*

Welcome to the 50th Quarterly ISG Outsourcing Index™ Review

Esteban Herrera Partner

John Keppel Partner & President

Dr. David Howie Partner




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At a Glance BROADER MARKET ACV COMES IS LIGHTER

DOWN 18% Y/Y AS MID-SIZE AND LARGER AWARDS FALL SHORT

WEAKNESS SPREAD BETWEEN NEW SCOPE AND RESTRUCTURING AWARDS

AMERICAS ACV UP 10% Y/Y WITH BPO, ENERGY, HEALTHCARE AND PHARMA SECTORS PARTICULARLY ACTIVE

EMEA ACV DOWN 26% Y/Y; DESPITE A STRONG SHOWING IN FINANCIAL SERVICES AND IN THE DACH MARKET; SLOWING IN THE UK AND FRANCE TURNED OVERALL RESULTS NEGATIVE

ASIA PACIFIC ACV DOWN 45% Y/Y; INDIA STEPS UP ITS CONTRACTING PACE WHILE ANZ REMAINED SLUGGISH

Scorecard 1Q15 1Q Y/Y 1Q Q/Q 1Q15 1Q Y/Y 1Q Q/Q ACV ($B)* Change Change Counts Change Change

Global Market $ 5.1 -18% -22% 305 -7% -16% New Scope $ 3.2 -19% -7% 213 0% -11% Restructurings $ 1.9 -16% -39% 92 -20% -26% Mega-relationships $ 1.2 -32% -34% 8 -27% -11% ITO $ 3.5 -27% -26% 201 -16% -21% BPO $ 1.6 13% -12% 104 18% -4% Americas $ 2.1 10% -13% 143 27% -8% EMEA $ 2.4 -26% -29% 128 -24% -23% Asia Pacific $ 0.6 -45% -19% 34 -24% -15%



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As we forecast last quarter, 1Q15 Broader Market ACV declines, down 18% Y/Y, as midsize and larger awards fall short.

Broader Market Quarterly ACV ($B)*

Broader Market Quarterly Contract Counts

Broader Market Contract Award Trends

$5.1

$6.5

$5.1

$6.6 $6.2

$4.7

$6.2

$3.9

$5.9 $5.6 $6.0 $6.5

$7.0 $7.3 $6.6

$4.7

$6.0

1Q151Q141Q131Q121Q11

305 327 308 360 379

1Q151Q141Q131Q121Q11 -

50 100 150 200 250 300 350 400



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1Q15 Americas ACV are up 10% Y/Y with first quarter contract award counts up for the third straight year. BPO ACV, up 7% Y/Y, has its best quarter in two years.

Americas Quarterly Counts

Americas Contract Award Trends

Americas Quarterly ACV ($B)*

Like-Quarter Segment Details ACV ($B)* Americas Trailing 12 Months ACV ($B)*

$2.1 $1.9 $1.9

$2.7 $3.1

$2.1

1Q151Q141Q131Q121Q11 $-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

143 113 131

174 146

1Q151Q141Q131Q121Q11 -

50

100

150

200

$1.0 $1.1 $1.2 $0.9

$0.5

$1.0

$1.5

$2.0

$2.5

New Scope Restructuring ITO BPO

Range of 5 Prior 1Qs Avg of 5 Prior 1Qs1Q14 1Q15

$9.1

$6.5 $8.8 $9.4

$8.3

585

454 470 555

457

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11

ACV Counts



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$0.22

$0.01 $0.00 $0.03

$0.00$0.05$0.10$0.15$0.20$0.25$0.30

Canada Brazil Mexico Other LatAm

Range of 5 Prior 1Qs Avg of 5 Prior 1Qs 1Q14 1Q15

$1.84

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

U.S.

$0.34 $0.37 $0.24

$0.40

$0.13 $0.11

$0.32

$0.07 $0.13 $0.0

$0.2

$0.4

$0.6

$0.8

$1.0

Manufacturing FinancialServices

Telecom& Media

Healthcare& Pharma

BusinessServices

Retail Energy ConsumerProducts & Goods

TravelTransport

Leisure


1Q15 ACV increases due to strength in the major markets of U.S. and Canada. Healthcare & Pharmaceutical and Energy sectors are particularly active.

Americas Sub-regions Like-Quarter ACV ($B)*

Americas Industry Like-Quarter ACV ($B)*

Americas Contract Award Trends Detail



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Co. Revenues < $2 B Co. Revenues $2 -10 B

ISG Sourcing Market Standouts in the Americas Providers with substantial offshore profiles led in the Building tier. Several contact center firms are now positioned in the Breakthrough 10.

Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings

The Building 10 Sourcing Standouts

The Breakthrough 10 Sourcing Standouts

Aon Hewitt CBRE CGI

Cognizant CompuCom

Genpact HCL

Infosys Teleperformance

Wipro

Accenture Atos BT

Capgemini Dell IBM

RR Donnelley State Street

TCS Xerox

Alorica APAC Customer Services

EXL Firstsource Solutions

ICF International IGATE

KPIT Technologies Luxoft Syntel

TeleTech

The Big 10 Sourcing Standouts

Co. Revenues > $10B

SOURCING STANDOUTS GROUPED BY COMPANY SIZE



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$1.7

$0.7

$1.8

$0.6

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0



EMEA ACV in 1Q15 fall 26% Y/Y as the region sees decreases in both Restructuring and New Scope awards. ITO ACV accentuates the decline, shrinking 36% Y/Y.

EMEA Quarterly Counts

EMEA Contract Award Trends

EMEA Quarterly ACV ($B)*

Like-Quarter Segment Details ACV ($B)* EMEA Trailing 12 Months ACV ($B)*

$2.4

$3.3 $2.7

$3.4 $3.2

1Q151Q141Q131Q121Q11 $-

$1.0

$2.0

$3.0

$4.0

$5.0

128 169

143 153

181

1Q151Q141Q131Q121Q11 -

40

80

120

160

200

$11.6 $12.1 $11.6 $14.2

$11.6

569 629

541 593 553

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11

ACV Counts



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$0.75

$0.10

$0.65

$0.18

$0.50

$0.05 $0.16 $0.02

$0.0

$0.5

$1.0

$1.5

$2.0

U.K. & Ireland Nordics DACH France Benelux SouthernEurope

Africa & MiddleEast

E. Europe &Russia


$1.23

$0.32 $0.18 $0.15 $0.20

$0.04 $0.01 $0.17 $0.12

$0.0$0.2$0.4$0.6$0.8$1.0$1.2$1.4

FinancialServices

TravelTransport

Leisure

Manufacturing Telecom& Media

Energy BusinessServices

ConsumerProducts & Goods

Retail Healthcare& Pharma


Despite a strong showing in Financial Services and in the DACH market, slowing in the U.K. and a difficult comparison in France cause overall results to turn negative.

EMEA Sub-regions Like-Quarter ACV ($B)*

EMEA Industry Like-Quarter ACV ($B)*

EMEA Contract Award Trends Detail



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ISG Sourcing Market Standouts in EMEA Large multinationals and providers with strong local “home market” profiles head up each of the service provider segments.


Co. Revenues > $10B


Cognizant Capita

CGI EVRY HCL

Infosys MITIE Serco Tieto Wipro

Accenture Atos

Balfour Beatty BT

Capgemini Fujitsu

HP IBM TCS

T-Systems

Endava HH Global

IGATE InnerWorkings

Kuehne & Nagel Luxoft

MAYKOR Mindtree NNIT A/S

Xchanging






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Asia Pacific 1Q15 ACV is down 45% Y/Y versus a robust quarter a year ago. Contract counts are down 24% Y/Y yet are in line with 1Q12 and 1Q13.

Asia Pacific Quarterly Counts

Asia Pacific Contract Award Trends

Asia Pacific Quarterly ACV ($B)*

Like-Quarter Segment Details ACV ($B)* Asia Pacific Trailing 12 Months ACV ($B)*

$0.54

$0.98

$0.56 $0.53

$0.73

1Q151Q141Q131Q121Q11 $-

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

34

45

34 33

52

1Q151Q141Q131Q121Q11 -

10

20

30

40

50

60

$2.6 $2.5

$3.6

$2.1 $2.7

139 141 169

135 166

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11

ACV Counts

$0.42

$0.12

$0.50

$0.04 $0.0

$0.2

$0.4

$0.6

$0.8

$1.0





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$0.03

$0.30

$0.10 $0.08

$0.02 $0.02 $0.0$0.1$0.1$0.2$0.2$0.3$0.3$0.4

ANZ India and SouthAsia

Japan Greater China Southeast Asia South Korea


$0.18

$0.02

$0.10 $0.12

$0.06 $0.00

$0.03 $0.03 $0.00 $0.0

$0.1$0.1$0.2$0.2$0.3$0.3$0.4

FinancialServices

Manufacturing Telecom& Media

TravelTransport

Leisure

Energy BusinessServices

ConsumerProducts & Goods

Retail Healthcare& Pharma


India steps up its contracting pace. However, ANZ remains sluggish, holding back overall regional results.

Asia Pacific Sub-regions Like-Quarter ACV ($B)*

Asia Pacific Industry Like-Quarter ACV ($B)*

Asia Pacific Contract Award Trends Detail



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ISG Sourcing Market Standouts in Asia Pacific Several Japanese providers joined the large multinationals in the Big 10 Sourcing Standouts list. Australian and India-based providers contributed greatly to the two smaller tiers.


Co. Revenues > $10B


Cognizant HCL

Infosys NEC

Orange Business Services Tech Mahindra

Transfield Services Unisys

United Group Services Wipro

Accenture BT

Fujitsu HP

Hitachi IBM

NTT Data Ricoh TCS

Ericsson

Aegis Limited ChinaSoft

Hollysys Automation Itron

Kratos Defense & Security NGA Human Resources

Ramco SITA

Vertex Group WNS






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Relative to the Commercial Sector, Public Sector ACV grows in the past five years. Most ACV is generated by ITO awards, with BPO ACV varying by geography.

Public Sector Trailing 12 Months Counts

Global Public Sector Award Trends

Public Sector Trailing 12 Months ACV ($B)*

Public Sector ITO vs. BPO TTM ACV ($B)* Public Sector Regional ITO vs. BPO % TTM ACV

$23.3

$47.3 $38.9

$27.7 $25.1 $27.6

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11

Commercial Sector Public Sector

1,293 1,224

1,180 1,283 1,176 1,400 1,188

978 891 876

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11


88%

36%

91%

38%

12%

64%

9%

62%

U.S. & Canada U.K. ContinentalEurope

Australia

ITO BPO

$35.9 $30.0

$20.9 $18.0 $20.7

$11.4 $8.8 $6.8 $7.1 $6.9

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11

Public Sector ITO ACV Public Sector BPO ACV



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North America, led by Defense and Healthcare spending, account for a large share of sourcing. Average ACV remains steady while durations fall.

Share of Public Sector ACV for Trailing 12 Months Top Public Sector Providers in Recent 12 Months*

Global Public Sector Award Trends Continued

67%

17% 7% 6% 2%

U.S. &Canada

U.K. ContinentalEurope

Australia Other

Global Average Deal Size and Duration Compare

3.81 4.15

3.12

4.36

$18.0 $19.2

$33.8 $31.5

2Q14 -1Q15

2Q13 -1Q14

2Q12 -1Q13

2Q11 -1Q12

2Q10 -1Q11


*Service providers in alphabetical order; no rankings implied. Placements based on counts of public sector contract awards sourced from ISG Contracts Knowledgebase ®.

Accenture BT

Capita Carillion

CGI CSC HP

Accenture Atea Atos

Capgemini CGI HP

IBM Indra Sistemas

Serco

Accenture Boeing Fujitsu

Harris Corp. IBM

NEC Corp. Serco

Avg. Duration in Yrs.

Avg. Contract Value ($K)

U.S. & Canada Asia Pacific

U.K. Continental Europe

General Dynamics L-3 Communications

Leidos Holdings Lockheed Martin

Northrop Grumman Raytheon

Science Applications



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Special Topic for First Quarter 2015

THE COMPOUNDED IMPACT OF AUTOMATION, ROBOTICS AND CLOUD – THE ARC HEIGHTENS SOURCING PRICE WARS

John Keppel Partner & President



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The ARC Effect Accelerates and Broadens Pricing Changes Automation, Robotics and Cloud (ARC) impact the managed service marketplace more rapidly and broadly than anticipated. Clients look to benchmarking to take advantage.

obotics

utomation

Most Recent

loud ? SaaS PaaS

IaaS

A Buyer’s Market

reveals price declines more than 20% in

some cases

Stirring Up the

Status Quo



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Providers Adjust – Talk of New Service Investments Abound Providers are trying to leverage what they have, protect existing revenues and invent their future businesses all at the same time – a significant challenge.

ARC leads to

supplant on-premises, fixed-pricing

models

Not just short-term contracts, but effectively pay-as-you-go models to ensure flexibility

$4

$1

revenue is replaced with

only $1 of cloud-based

revenue

?

$3 to $4 dollars in hardware/software

Significant Provider Challenge



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As we forecast, Broader Market ACV fell short Y/Y even as smaller deal flow remained constant

Americas results stayed consistent as the U.S. and Canada and several industries (Energy and Healthcare/Pharmaceuticals) saw stepped-up activity

EMEA and Asia-Pacific fell back Y/Y as they struggled with difficult comparisons against a more robust quarter a year ago

Positive results in selected geographic markets like India and DACH and Financial Services in Europe were not enough to counterbalance declines in larger, more established sourcing markets like the U.K. and ANZ

We expect a difficult comparison in 2Q15 as markets such as France and Japan have tough targets to match

ACV should remain muted through the first half but we expect will turn more positive in 2H15 – especially with strength in verticals like Energy and Transportation, coupled with solid results in the larger sourcing markets like the U.S. and DACH

1Q15 ISG Outsourcing Index™ - Global Summary and Outlook

summary market

outlook market



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Please contact us with your questions and comments. Learn More

Paul Reynolds Chief Research Officer

+1 508 625 2194 [email protected]

ISG insights serving providers and market analysts

www.isg-one.com John Keppel

Partner and President +44 (0)7879 432 212

[email protected]

Will Thoretz Americas Media Contact

+1 203 517 3119 [email protected]

Denise Colgan EMEA and AP Media Contact

+44 1737 371523 [email protected]

http://www.isg-one.com/

http://www.isg-one.com/connect/



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First Quarter 2015 APPENDIX: SCORE CARD FOR TCV



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The ISG Outsourcing Index has moved to ACV as the primary measure of the Broader Market. We will continue to provide a high-level TCV view of the market via a Scorecard analysis.

First Quarter 2015 TCV Scorecard

*Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase®

Scorecard 1Q15 1Q Y/Y 1Q Q/Q 1Q15 1Q Y/Y 1Q Q/Q

TCV ($B)* Change Change Counts Change Change

Global Market $ 22.4 -17% -25% 305 -7% -16%

New Scope $ 16.0 -8% 13% 213 0% -11%

Restructurings $ 6.4 -32% -60% 92 -20% -26%

Mega-deals $ 4.4 40% -61% 8 -27% -11%

ITO $ 16.7 -14% -23% 201 -16% -21%

BPO $ 5.6 -23% -32% 104 18% -4%

Americas $ 7.0 -14% -29% 143 27% -8%

EMEA $ 12.7 -10% -26% 128 -24% -23%

Asia Pacific $ 2.7 -42% -11% 34 -24% -15%



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Information Services Group is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 900 employees and operates in 21 countries.

knowledge powering results®

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1q15 isg outsourcing index - global

Documents

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