2011 2nd half & full year, asia pacific tpi index
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Mark Bryan
Bank of America Merrill Lynch
Second Half and Full Year 2011
31 January 2012
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Arno Franz Partner & President, Asia Pacific
2
Partner, North Asia
Partner, India
Michael Rehkopf Dinesh Goel
Welcome to the 11th Semi-Annual Asia Pacific TPI Index Call Covering the state of the outsourcing industry for commercial contracts with total contract value greater than $25 million.
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BUSIEST YEAR EVER IN THE BROADER MARKET WITH 870 CONTRACTS AWARDED
EVERY REGION EXPERIENCED RECORD SETTING CONTRACT ACTIVITY IN 2011
80% OF ALL 2011 MEGA DEAL TCV IN EMEA
ASIA PACIFIC & AMERICAS TCV OFF WHILE EMEA TCV AT ALL-TIME HIGH IN 2011
ITO TCV BEAT ITS 5-YEAR AVERAGE, BUT WAS DOWN Y/Y
BPO TCV ↑ Y/Y WITH RECORD ACTIVITY LEVELS
“ At A Glance
3
“ Score Card
2H11 TCV ($B)*
2H11 Y/Y Change
2H11 Counts
2011 TCV ($B)*
2011 Y/Y Change
Global Market $ 52.6 22% 410 $ 95.0 3%
Mega Deals $ 16.0 20% 6 $ 22.4 -3%
Asia Pacific $ 4.8 -32% 43 $ 8.9 -10%
EMEA $ 32.6 43% 188 $ 55.3 27%
Americas $ 15.2 16% 179 $ 30.9 -20%
ITO $ 37.1 11% 251 $ 64.2 -9%
BPO $ 15.5 62% 159 $ 30.9 43%
*Contracts with TCV > $25M
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$30.9 $38.7
$50.7 $55.3
$43.6
$22.1
$8.9 $9.9
$9.9
2011 10 09 08 07 06 05 04 03 2002
Americas EMEA Asia Pacific
366
358
214
397
332
121 107 95
42
2011 10 09 08 07 06 05 04 03 2002
Americas EMEA Asia Pacific
Regional Full Year Contract Trends 4
While every region experienced record-setting contract activity, only EMEA translated that into increased TCV for the year
Annual TCV ($B)* Annual # Contracts
*Contracts with TCV > $25M
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663
384
212 197
149
10 16
201110090807060504032002
$25M-$99M $100M-$999M $1B+
5
Contract counts in the smallest band, $25M to $99M in TCV, have grown strongly since 2005
Broader Market Shift Towards Smaller Contracts
2007 – 2011 CAGR ↑ 15%
Annual Counts Comparison by TCV Bands
*Contracts with TCV > $25M
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107 95
42
Avg of Prior 5 Yrs 85
201110090807060504032002
$8.9 $9.9 $12.5 $11.1 $11.2
$8.2 $6.8 $10.3
$4.3
$9.9
Avg of Prior 5 Yrs $10.6
201110090807060504032002
Asia Pacific Full Year Contract Trends 6
TCV was down in 2011 as more contracts than ever were signed in the region but of smaller value.
Annual TCV ($B)* Comparison
Annual Counts Comparison
↓10%
*Contracts with TCV > $25M
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43
47
21
Avg of Prior 5 2Hs 46
2H112H102H092H082H072H062H052H042H032H02
$4.8
$7.1 $6.1
$7.9 $5.7
$2.8 $4.7
$3.4 $2.5
$6.6
Avg of Prior 5 2Hs $5.9
2H11 2H102H092H082H072H062H052H042H032H02
Asia Pacific Half Year Contract Trends 7
TCV for the second half of 2011 fell 32% year-on-year. It was the weakest second half performance in 5 years for TCV & in 4 years for contract numbers
Half Year TCV ($B)* Comparison
↓32%
Half Year Counts Comparison
*Contracts with TCV > $25M
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Asia Pacific Comparison of Activity by TCV Bands 8
Robust growth in the number of smaller contracts added strength to the market and partly offset the rollercoaster effect of mega relationship awards
$0.26 $0.36 $0.27 $0.35 $0.39 $0.24 $0.24 $0.30 $0.22
$0.42
Avg of Prior 5 Yrs $0.32
201110090807060504032002
Average Contract Size for $100M + Band
86
21 21 21
201110090807060504032002
Contract # by TCV Band
$25M-$99M $100M +
Distribution of Contracts by TCV Bands
$3.3
$1.0
$5.5
$8.8
201110090807060504032002
TCV by Band
*Contracts with TCV > $25M
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$6.5 $8.2 $9.2
$5.9 $8.8
$6.8 $4.3
$8.2
$4.0
$8.1
Avg of Prior 5 Yrs $7.8
201110090807060504032002
Asia Pacific ITO Contract Trends 9
The number of ITO contract awards increased Y/Y but TCV was pulled down by smaller contract values and fewer mega deals/mega relationships
ITO Annual TCV ($B)*
70 61
28
Avg of Prior 5 Yrs 59
201110090807060504032002
ITO Annual Counts
*Contracts with TCV > $25M
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Asia Pacific BPO Contract Trends 10
BPO showed robust Y/Y growth in the region with TCV up 35% and contract numbers up by 9%
$2.3 $1.7
$3.3
$5.2
$2.4 $1.3
$2.5 $2.0 $0.4 $1.8
Avg of Prior 5 Yrs $2.8
201110090807060504032002
37 34
14
Avg of Prior 5 Yrs 26
201110090807060504032002
BPO Annual TCV ($B)*
BPO Annual Counts
*Contracts with TCV > $25M
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$4.59
$2.70
$0.57 $0.31 $0.18 $0.03
$0.49
$-
$1
$2
$3
$4
$5
$6
$7
Australia &New Zealand
India Japan China Thailand South Korea Other
Prior 5 Yr Range Average 2010 2011
Asia Pacific Trends by Country 11
Smaller contract values in India drove down TCV in 2011
2011 TCV ($B)* Compared with Prior 5 Years by Country
51% of contracts won by HP, IBM and Telstra
70% of contracts won by HCL, IBM, TCS and Wipro
*Contracts with TCV > $25M
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$3.00 $3.09
$0.99 $0.68 $0.64
$0.00 $0.40
$0.07 $0
$1
$2
$3
$4
$5
$6Prior 5 Yr Range Average 2010 2011
Asia Pacific Industry Segment Trends by TCV Financial Services and Manufacturing TCV lowest in the last 5 years, while other sectors finished close to their 5 year average
12
2011 TCV ($B)* Compared with Prior 5 Years by Industry
*Contracts with TCV > $25M
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Asia Pacific Industry Segment Trends by Contract Number Almost all sectors recorded an increase in contract awards, albeit at smaller contract values
13
34
23 21
12
8
0
7
2 0
5
10
15
20
25
30
35
40Prior 5 Yr Range Average 2010 2011
65% of contracts won by IBM, Infosys, TCS and Tech Mahindra
2011 Contract Numbers Compared with Prior 5 Years by Industry
47% of contracts won by HCL, IBM, Infosys and TCS
43% of contracts won by Genpact, HCL, IBM
*Contracts with TCV > $25M
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$10.4 $10.6
547
502
20112010200920082007
Annualized Revenue ($B)* Active Contracts
Asia Pacific Outsourcing Revenue Trends 14
As evidenced by a CAGR of 8% in active contracts and 4% in annualised revenues, the Asia Pacific market remains an attractive region for providers
2007 to 2011 Active Contracts CAGR: ↑ 8%
2007 to 2011 Annualized Revenue CAGR: ↑4%
Annualized Revenue & Active Contract Trends
*Contracts with TCV > $25M
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5
7 8
18 20
8 11
26
5
2011 10 09 08 07 06 05 04 03 2002
Americas Asia Pacific EMEA
$9.9
$12.7
$0.2
$3.3
$9.3
$1.2
$4.1
$0.1
2011 10 09 08 07 06 05 04 03 2002
Americas Asia Pacific EMEA
Telco to Telco Regional Trends 15
Following a banner year in each region in 2010, TCV and contract numbers dropped in 2011
* Telco to Telco ITO Contracts with TCV > $25M
Annual Contract # Annual TCV ($B)*
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Asia Pacific Market Share Comparison by Provider Category 16
India-heritage firms dominated contract activity but this dominance has not yet translated to TCV
2011 Asia Pacific Market Share by Number and TCV of Awards
by Service Provider Category
46%
27%
41%
22%
India-heritage
41%
55%
22%
25%
Other
13%
18%
37%
53%
BPO Contract #
BPO TCV
ITO Contract #
ITO TCV
US-heritage
*
*
*Contracts with TCV > $25M
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Asia Pacific Top 5 Service Providers by TCV and Contracts 17
The Top 5 Service Providers, based on TCV awarded and Contracts in 2011, listed in alphabetical order
BSA
Downer
Genpact
IBM
TCS
Note: Service providers in alphabetical order; no rankings implied. Placements based on 2011TCV commercial contract awards sourced from ISG contracts database.
HP
IBM
Infosys
Mahindra Satyam
Telstra
BPO* ITO*
Fujistu
HCL
HP
IBM
Infosys
Mahindra Satyam
Genpact
HCL
IBM
Infosys
TCS
TCV Contracts TCV Contracts
*Contracts with TCV > $25M
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18
Key Long-term Trends in Sourcing Structure
1 Shift in Enterprise Decision Maker’s Solution Requirements
3
Shift in ITO Enterprise Pricing Strategies
Longevity Disposability Pricing Bands Utility Pricing
$
Shift in BPO Enterprise Purpose, Spurring Activity
Industry Specific
Traditional Back-office
4 Global Service Provider Community Changing Shape
2
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19
The 15 top service providers in each region based on Total 2011 TCV awarded.
Emerging Set of Global Service Providers?
Note: Service providers in alphabetical order; no rankings implied. Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.
Asia Pacific EMEA Americas Accenture
BT
HCL
HP
IBM
TCS
RR Donnelly
CGI
Cognizant
T-Systems
Capgemini
CSC
Xerox
Fujitsu
Xchanging
Logica
Capita
Aegis
Atos
Genpact
Telstra
BSA
Downer EDI
Infosys
Mahindra Satyam
Wipro
T-Systems
CSC
Sabre Holdings Inc.
Capgemini
Fujitsu Genpact Infosys
Global Providers
Multi-Regional
Regional
Accenture
BT
HCL
HP
IBM
TCS
Accenture
BT
HCL
HP
IBM
TCS
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Asia Pacific TPI Index 2011 Summary and Outlook
20
► Busiest year ever for contracting activity as all regions set a record for number of contract signings
► Global TCV in 2011 up 3% Y/Y, slightly above our 2011 forecast
► Increase of smaller deals in Asia Pacific provides stability to the underlying market
► ITO still dominated the market in Asia Pacific, though BPO value and volume grew strongly
Summary market
Outlook market
► 5-7% growth in 2012 contracting activity expected from Asia Pacific and BPO sectors
► Global TCV to hold firm in 2012
► Emergence of a new set of Global Service Providers?
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Learn More 21
Please contact us with your questions and comments.
►Arno Franz Partner & President, Asia Pacific +61 (0) 2 9006 1610 [email protected]
www.considerthesourceblog.com
►Michael Rehkopf Partner, North Asia +61 (0) 414 430 519 [email protected]
►Dinesh Goel Partner, India +91 98458 93787 [email protected]
www.isg-one.com