1st quarter 2012, emea tpi index
DESCRIPTION
The global outsourcing industry is constantly evolving through new contracting award characteristics and an expanding universe of successful service providers. ISG's TPI Index helps industry participants, enterprises and organizations keep pace and capitalize from the latest data on outsourcing trends. It is the authoritative source for marketplace intelligence related to outsourcing: transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.TRANSCRIPT
The TPI EMEA Index
Hosted by:
Marc Geall,
Deutsche Bank Software and IT
Services Team
First Quarter 2012
April 16, 2012
EMEA Outsourcing Market Data and Insights
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
Partner & President
North Europe, ISG
Covering the state of the outsourcing industry for global, commercial contracts
with total contract value greater than €20 million.
Welcome to the 37th Quarterly Outsourcing Index Call
Duncan Aitchison
2
Partner & Managing Director,
ISG Germany
Bernd Schaefer
John KeppelPartner & President Research
& Managed Services
and Chief Marketing Officer,
ISG
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
“
3
At A Glance
“
GLOBAL BROADER MARKET AWARDS AND TCV DROPPED
ON THE HEELS OF RECORD 2011 RESULTS
RESTRUCTURINGS NOTABLY ↑ Y/Y, WHILE
NEW SCOPE TCV CONTINUES TO DECLINE
EMEA TCV DECLINES ON DEARTH OF LARGE DEALS
AMERICAS TCV ↑ Q/Q
STRONG RESULTS INCLUDE THE LONE 1Q11 MEGA DEAL
Score Card
1Q12 TCV
(€B)
Q/Q
Change
1Q Y/Y
Change
1Q12
Counts
Q/Q
Change
1Q Y/Y
Change
Global Market € 14.9 -35% -22% 184 -18% -31%
Mega Deals € 1.2 -83% -93% 1 -80% -67%
New Scope € 8.5 -45% -46% 137 -23% -35%
Restructurings € 6.4 -13% 82% 47 2% -18%
ITO € 10.0 -37% -20% 120 -22% -29%
BPO € 4.9 -30% -20% 64 -11% -34%
EMEA € 6.9 -53% -32% 79 -23% -37%
Asia Pacific € 1.4 -33% -36% 18 flat -55%
Americas € 6.6 8% -3% 87 -16% -14%
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 13.8
€ 23.2 € 22.5
2 Prior
Qtrs Avg
€ 22.8
2Q061Q064Q05
€ 17.4 € 22.5 € 25.3
2 Prior
Qtrs Avg
€ 23.9
2Q101Q104Q09
€ 14.9 € 22.9 € 21.7
€ 15.7 € 19.2 € 19.8
€ 14.7 € 17.4 € 22.5
1Q12 4Q 3Q 2Q 1Q11 4Q 3Q 2Q 1Q10
4
1Q12 TCV declined a substantial 35% Q/Q and 22% Y/Y, not unusual after a strong
third and fourth quarter 2011.
Global Broader Market Contract Award Trends
Quarterly TCV (€B)* Comparison
↓40%↓27%
The TCV Hangover Effect - Previous Quarterly Precedence
↓35%
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 6.9
€ 14.6
€ 10.1 € 9.8
€ 7.3
1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
5
1Q12 TCV was down 53% Q/Q and 32% Y/Y. The ‘hangover’ effect and,
potentially, Eurozone financial concerns impacted results.
EMEA Contract Award Trends
Quarterly TCV (€B)* Comparison
€ 25.4
€ 26.1
€ 30.8
€ 25.0
€ 31.3
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
Quarterly TCV (€B)* ComparisonNew Scope vs. Restructuring TTM TCV (€B)* Comparison
€ 17.0
€ 9.5
€ 7.0
€ 9.7
€ 3.8
Restructuring TCV
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 2.5
€ 1.3 € 1.0
€ 1.4
€ 0.2 € 0.2 € 0.1 € 0.1 € -
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
€ 4.5
€ 5.0
UK &
Ireland
Scandinavia Benelux DACH France Southern
Europe
Africa &
Middle East
E. Europe &
Russia
Prior 5 Period Range Average 1Q11 1Q12
6
With the exception of a steady performance in DACH, and some activity in E.
Europe, EMEA sub-regions were down from their Prior Five-Like-Quarter averages.
EMEA Country Details in Contract Award Trends
Sub-Regional Like-Quarter TCV (€B)* Comparison
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 6.2 € 5.8
€ 1.8 € 2.5 € 4.7
€ 0.8 € 0.9
€ 3.6 € 4.7
€ 1.2 € 1.6
0
4
112
3
1122
1
0
2
1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09
TCV (B) Counts
7
Only one was signed in 1Q, an ITO mega deal in the Americas valued at €0.8B.
EMEA 1Q12 Mega Relationship counts were the 3rd highest in three years.
EMEA Mega Deals & Relationships Trends
Mega Deal TCV (€B)* Comparison
€ 0.4 € 1.1 € 1.0
€ 0.6 € 0.3
€ 1.4
€ 0.3 € 0.7 € 0.9 € 1.1
€ 0.2 € 0.1 € 0.3
4
8
332
6
234
9
113
1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09
ACV (B) Counts
75% of 1Q Mega
Relationships are
Restructurings
Mega Relationship ACV (€B)* Comparison
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 12.9
€ 7.6
€ 6.1
€ 9.0
€ 2.9
Restructuring TCV
€ 4.2
€ 10.1
€ 6.7
€ 8.6
€ 5.8
1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
8
EMEA ITO experienced Q/Q decreases of 38% in counts and 58% in TCV. The lack
of large deals meant that 1Q12 was the weakest ITO quarter for TCV since 3Q06.
EMEA ITO Contract Award Trends
Top ITO Providers
by TTM TCV
Note: Service providers in alphabetical order; no rankings implied.
Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.
TTM New Scope vs. Restructuring TCV (€B)*
New Scope
Accenture
Atos
BT
Capgemini
Capita
CSC
Dimension
Data
Fujitsu
HCL
HP
IBM
Infosys
TCS
T-Systems
Wipro
Restructuring
Atos
BT
Capgemini
CSC
HCL
Hexaware
HP
IBM
Infosys
T-Systems
Quarterly TCV (€B)* Comparison
€ 16.9
€ 19.8
€ 25.2
€ 16.9
€ 20.1
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 2.6
€ 4.5
€ 3.5
€ 1.1 € 1.6
1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
9
BPO saw a Q/Q increase of 26% in counts but a decrease of 42% in TCV. Against
two 4Q11 Mega Deals, the TCV compare is tough.
EMEA BPO Contract Award Trends
Quarterly TCV (€B)* Comparison
Top BPO Providers
by TTM TCV
TCS
Accenture
Capgemini
Capita
Carillion plc
Convergys
HCL
HP
Infosys
Johnson Controls
Logica
Sabre
Sodexho
Xchanging
Xerox
TTM New Scope vs. Restructuring TCV (€B)*
Note: Service providers in alphabetical order; no rankings implied.
Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.
€ 4.1
€ 4.0
€ 3.3
€ 3.4
€ 1.9
Restructuring TCV
€ 8.5
€ 9.4
€ 6.8
€ 6.5
€ 6.3
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 0.7
€ 2.2
€ 0.4 € 0.5
€ 2.5
€ 0.4 € 0.2
€ 0.0 € -
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
€ 4.5
€ 5.0 Prior 5 Period Range Average 1Q11 1Q12
10
With the exception of a record high 1Q in Manufacturing, all EMEA industry sectors
performed under their Prior Five-Like-Quarter TCV averages.
EMEA Industry Details in Contract Award Trends
Industry Like-Quarter TCV (€B)* Comparison
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 1.4
€ 2.1 € 2.2
€ 1.1 € 1.3
1Q124Q3Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
11
AP contracting counts were flat Q/Q. However, TCV was down by one-third both
Q/Q and Y/Y, ending up well below the recent first-quarter average.
Asia Pacific Contract Award Trends
Quarterly TCV (€B)* Comparison
New Scope vs. Restructuring TTM TCV (€B)* Comparison
€ 4.5
€ 7.0
€ 7.2
€ 7.9
€ 6.1
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
€ 2.1
€ 2.0
€ 2.5
€ 1.0
€ 1.2
Restructuring TCV
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
€ 6.6 € 6.2 € 6.8
€ 11.7
€ 7.5
1Q124Q3Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
12
Americas TCV rose 8% Q/Q, making it one of the three highest quarters since the
beginning of 2010. Americas posted the only 1Q12 Mega Deal.
Americas Contract Award Trends
Quarterly TCV (€B)* Comparison
New Scope vs. Restructuring TTM TCV (€B)* Comparison
€ 9.6
€ 7.7
€ 12.4
€ 6.9
€ 6.2
Restructuring TCV
€ 16.6
€ 18.8
€ 21.2
€ 20.2
€ 19.2
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
310
570690
13
Contract expirations are occurring at a faster rate as the result of dramatically
increased transaction counts and declining average contract durations.
Anticipating Increased Global Restructuring Volume
5
6933
377
20112002
Average Duration
Contract Awards
Record Levels of Expiring Contracts
Trends Impacting Restructuring Volumes
2012e2007
↑ 20% Y/Y
2011
↑ 250%
↓ 1 Yr.
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
14
Contract renegotiations can be driven by either the client or the service provider,
but the leverage is, more often than not, with the Client.
Motivations Behind Pre-emptive Renegotiation Efforts
Client Motivations Provider Motivations
Increase Scope or Service Levels
Reduce Price for Existing Scope
Add Emerging Services
� Chance for Sole Sourced Renewal
� Retain Full Scope
� Introduce New Services
Restructuring creates the opportunity for Best-of-Breed providers to win
new clients looking for targeted solutions
�
�
�
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
37%
32%
18%
13%
Americas Heritage Niche Providers India Heritage Major European
15
Applying the 80/80 rule: 80% of the time a deal is renegotiated with the
incumbent provider, and they typically retain about 80% of the scope.
Who will win these restructurings?
2012 Restructuring
by Provider Share of ACV
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
16
� Global Broader Market ↓1Q12 loses momentum aGer two
quarters of impressive growth
� Restructuring TCV ↑ Y/Y, not enough to make up for New
Scope declines
� Shortfall in previously robust EMEA TCV had the greatest
impact on the global market
� EMEA ITO values at their lowest since 2Q06; BPO TCV ↓
while contract numbers ↑ Q/Q
� Look for a soft first half 2012 and a reviving second half
� Restructuring 2H12 activity may lead an upswing in the
overall market
1Q12 TPI Index Summary and Outlook
summarymarket
outlookmarket
© 2012
Information
Services Group, Inc.
All Rights Reserved
ISG-one.com
*Contracts with TCV > €20M
Learn More
17
Please contact us with your questions and comments.
--- Media Contacts ---
► John Keppel ► Duncan Aitchison
www.considerthesourceblog.com
Partner & President Research &
Managed Services and Chief
Marketing Officer
+44 (0)7879 432 212
Partner & President
North Europe, ISG
+44 (0)1628 21702
► Paul Reynolds
Chief Research Officer,
ISG Momentum
+1 508 625 2194
► Denise Colgan
Marketing Director, EMEA, ISG
+44 1737 371523
► Louise Fernley
Cohn & Wolfe for ISG
+44 207 331 5365
www.isg-one.com