2q 2016 emea isg index™

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Group, Inc.All Rights Reserved

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Hosted by:

John King

Bank of America Merrill Lynch

18 July 2016

The ISG Index™

Second Quarter and First Half 2016

EMEA Combined Outsourcing and As-a-Service Market Insights



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Covering the state of the combined sourcing and as-a-service industry for EMEA commercial contracts

Welcome to the 55th Quarterly ISG Index™ Review

John KeppelPartner & President

Bernd SchaeferPartner



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€ 0.9€ 0.8 € 0.7 € 0.7 € 0.7 € 0.7 € 0.7 € 0.6 € 0.6 € 0.6

€ 1.4 € 1.3 € 1.2 € 1.1

€ 0.8 € 0.8 € 0.7 € 0.6 € 0.7 € 0.8

€ 2.3 € 2.1 € 1.9 € 1.8

€ 1.6 € 1.5 € 1.4 € 1.3 € 1.3 € 1.3

2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14

Global SaaS Global IaaS

New!

Growing As-a-Service Market Featured in the ISG Index

As-a-Service as a % of Combined ACVNEW! As-a-Service ACV (€B) by Type

36%

30%

24%

19%20%

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2Q16 As-a-Service % of the Combined

Market up 16 pts over 1Q14 %

Combined Market ACV = Outsourcing ACV

+ As-a-Service ACV (IaaS and SaaS)

2Q16 As-a-Service ACV had a

growth rate of 45% from it’s 2015 like-quarter compare



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At a Glance

2Q ACV OF €6.4B DRIVEN BY RECORD AS-A-SERVICE GROWTH;HALF-YEAR ACV OF €13.4B UP 10% Y/Y

AMERICAS 2Q ACV OF €3.4B UP 7%, ECLIPSING EMEA FOR FIRST TIME SINCE 2013;HALF-YEAR AMERICAS ACV OF €7B UP NEARLY 20%

EMEA 2Q ACV FALLS 18% Y/Y; WEAKNESS DUE TO FEWER LARGE AND RESTRUCTURING

AWARDS; TENTATIVE AS-A-SERVICE GROWTH CAN'T BOOST COMBINED RESULTS

ASIA PACIFIC 2Q ACV UP 13% Y/Y, DRIVEN BY 50%+ GAINS IN IAAS; TRADITIONAL MARKET FLAT, REMAINING IN A TIGHT RANGE

Contracts with ACV ≥ €4M from the ISG Contracts Knowledgebase®

Scorecard 2Q16 2Q Y/Y 2Q Q/Q 1H16 1H Y/Y

ACV (€B)* Change Change ACV (B)* Change

Global Combined Market € 6.4 -2% -9% € 13.4 10%

By Type Outsourcing € 4.1 -17% -16% € 9.0 -1%

As-a-Service € 2.3 47% 9% € 4.4 44%

By Service ITO € 2.9 -24% -14% € 6.3 -4%

BPO € 1.2 4% -21% € 2.7 6%

IaaS € 1.4 70% 9% € 2.8 69%

SaaS € 0.9 16% 8% € 1.6 14%

By Region Americas € 3.4 7% -4% € 7.0 19%

EMEA € 2.2 -18% -22% € 4.9 0%

Asia Pacific € 0.8 13% 18% € 1.5 7%



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2Q16 Combined Market ACV down 2% Y/Y on New Scope weakness; YTD, Combined Market ACV up 10% with As-a-Service increasing 44% and traditional sourcing flat.

Global Combined Quarterly ACV (€B)

Global Combined Half-Year ACV (€B)

Global Combined Market Contracting Trends

Global Combined Half-Year ACV by Type (€B)


€ 6.25

€ 2.65€ 1.62

€ 2.76

$0

$2

$4

$6

$8

$10

ITO BPO SaaS IaaS

Range of Prior 4 Halves Avg of Prior 4 Halves

2H15 1H16

€ 9.0 € 9.9 € 9.0 € 10.1 € 10.8

€ 4.4 € 3.7 € 3.1

€ 2.7 € 2.6

€ 13.4 € 13.7 € 12.1 € 12.8 € 13.4

1H162H151H152H141H14

Outsourcing As-a- Service

€ 4.1 € 4.9

€ 5.5 € 4.4 € 4.9

€ 4.1

€ 5.5 € 4.6

€ 5.5 € 5.3 € 2.3

€ 2.1 € 1.9

€ 1.8 € 1.6 € 1.5

€ 1.4 € 1.3

€ 1.3 € 1.3

€ 6.4 € 7.0 € 7.5

€ 6.2 € 6.5 € 5.6

€ 6.8 € 5.9

€ 6.8 € 6.6

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Outsourcing ACV As-a-Service ACV



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2Q16 Combined Market down 18% Y/Y; As-a-Service growth unable to compensate for 30% shortfall in traditional sourcing; YTD, EMEA flat, with lack of larger market awards and sluggish Restructuring activity.

EMEA Combined Quarterly ACV (€B)

EMEA Combined Half-Year ACV (€B)

EMEA Combined Market Contracting Trends

EMEA Combined Half-Year ACV by Type (€B)


€ 2.63

€ 1.21

€ 0.42 € 0.64 $-

$1

$2

$3

$4

$5

ITO BPO SaaS IaaS


2H15 1H16

€ 1.6

€ 2.2

€ 3.0

€ 2.1 € 2.3 € 1.9

€ 2.7 € 2.2

€ 2.7 € 2.7 € 0.6

€ 0.5

€ 0.4

€ 0.4 € 0.4 € 0.4

€ 0.3

€ 0.3 € 0.3 € 0.3 € 2.2

€ 2.7

€ 3.5

€ 2.5 € 2.7 € 2.3

€ 3.0

€ 2.5 € 3.0 € 3.0

2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14


€ 3.8 € 5.1 € 4.2 € 4.9 € 5.4

€ 1.1

€ 0.9 € 0.8

€ 0.6 € 0.6 € 4.9

€ 6.0 € 5.0

€ 5.5 € 6.0

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Outsourcing As-a-Service



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Outsourcing MarketFleetCor

Frontica Business SolutionsGFI Informatique

ISON GroupLuxoft

MindtreeNNIT

TranscomVirtusaPolaris

WNS

Co. Revenues < $2 B

Outsourcing MarketHCL

CapitaCGI

Genpact Infosys

Jones Lang LaSalleSercoWipro

As-a-Service MarketAdobe Systems

Equinix

Co. Revenues $2 -10 B

Outsourcing MarketAccenture

AtosBT

CapgeminiCognizant

HPEIBMTCS

T-Systems

As-a-Service MarketAmazon Web Services

ISG Combined Market Standouts in EMEAVery little leader board turnover across the region, except for a few As-a-Service firms and a couple of traditional sourcing providers in the high-growth category.

Placements based on the annual value 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

The Big 10

Sourcing Standouts

Co. Revenues >$10 B

SOURCINGSTANDOUTS GROUPED BY COMPANY SIZE



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ACV in the Nordics and France is up sequentially and Y/Y. UK rises 39% compared to previous quarter, but falls 11% Y/Y while DACH ACV declines despite increased contracting activity.

EMEA - Half-Year ACV (€B) by Sub-region - Traditional Outsourcing Only

EMEA - Half-Year ACV (€B) by Industry - Traditional Outsourcing Only

EMEA Traditional Outsourcing Award Trends


€ 1.0 € 0.8

€ 0.5 € 0.4 € 0.4 € 0.2 € 0.2 € 0.1

€ 0.3 $0.0

$0.5

$1.0

$1.5

$2.0

$2.5

FinancialServices

Manufacturing Energy Travel,Transport &

Leisure

Telecom &Media

BusinessServices

Healthcare &Pharma

ConsumerPackaged

Goods

Retail

Range of Prior 4 Halves Avg of Prior 4 Halves 2H15 1H16

€ 1.57

€ 0.59 € 0.70

€ 0.20 € 0.24 € 0.18 € 0.33

€ 0.04 $0.0

$0.5

$1.0

$1.5

$2.0

$2.5

U.K. & Ireland DACH Nordics Benelux France Africa &Middle East

SouthernEurope

E. Europe &Russia




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2Q16 Combined Market ACV up 7% Y/Y on surging As-a-Service activity; YTD, Americas shows promise with 6% sourcing growth and 48% As-a-Service ACV growth.

Americas Combined Quarterly ACV (€B)

Americas Combined Half-Year ACV (€B)

Americas Combined Market Contracting Trends

Americas Combined Half-Year ACV by Type (€B)


€ 3.13

€ 1.06 € 1.10

€ 1.67

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

ITO BPO SaaS IaaS


2H15 1H16

€ 2.0 € 2.2 € 2.1

€ 1.8 € 2.2

€ 1.8 € 2.2 € 2.1 € 2.0

€ 1.7

€ 1.4 € 1.4 € 1.2

€ 1.1 € 1.0

€ 0.9 € 0.8 € 0.8 € 0.8

€ 0.8

€ 3.4 € 3.6 € 3.3

€ 2.9 € 3.2

€ 2.7 € 3.0 € 2.9 € 2.8

€ 2.5

2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14


€ 4.2 € 3.9 € 4.0 € 4.3 € 3.7

€ 2.8 € 2.3 € 1.9 € 1.6

€ 1.6

€ 7.0 € 6.2 € 5.8 € 5.9

€ 5.3

1H162H151H152H141H14




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Outsourcing Market LuxoftMinacs

MindtreeMphasis

SITELSutherland Global

SynacorSyntel

VirtusaPolaris

As-a-Service MarketWorkday

Co. Revenues < $2 B

Outsourcing MarketCGIDell

Genpact HCL

InfosysWipro


EquinixRackspace

Salesforce.com


Outsourcing MarketAccentureCapgeminiCognizant

HPEIBMTCS


GoogleOracle

SAP

ISG Combined Market Standouts in the AmericasWell-established IaaS and SaaS firms enter the Big 10 leader board; moderate turnover in the medium- and small-size firms.


The Building 10

Sourcing Standouts

The Breakthrough 10

Sourcing Standouts

The Big 10

Sourcing Standouts

Co. Revenues > $10 B




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While ACV in traditional sourcing market is flat, number of contracts sets record high each year; YTD ACV activity led by Financial Services and Healthcare.

Americas - Half-Year Contract Counts - Traditional Outsourcing Only

Americas - Half-Year ACV (€B) by Industry - Traditional Outsourcing Only

Americas Traditional Outsourcing Award Trends


391 383 318 221 291 266 272 231 192 164

305 297

278 227 259 200 219 196

150

391

688 615

499 518 525 472 450

388 314

201615141312111009082007

1H Counts 2H Counts

€ 1.02

€ 0.67 € 0.64

€ 0.44 € 0.46

€ 0.22 € 0.21€ 0.30 € 0.25

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

FinancialServices

Manufacturing Healthcare &Pharma

BusinessServices

Telecom &Media

Energy Travel,Transport &

Leisure

Retail ConsumerPackaged

Goods




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2Q16 Combined Market ACV up 13% Y/Y while traditional sourcing stays flat for the sixth quarter; YTD, IaaS ACV responsible for positive market trajectory.

Asia Pacific Combined Quarterly ACV (€B)

AP Combined Half-Year ACV (€B)

Asia Pacific Combined Market Contracting Trends

Asia Pacific Combined Half-Year ACV by Type (€B)


€ 0.5€ 0.4€ 0.4€ 0.4€ 0.5€ 0.5

€ 0.6

€ 0.4

€ 0.8€ 0.8 € 0.3€ 0.3€ 0.3€ 0.3€ 0.2€ 0.2

€ 0.2

€ 0.2

€ 0.2€ 0.2 € 0.8€ 0.7€ 0.7€ 0.7€ 0.7€ 0.7

€ 0.8

€ 0.6

€ 1.0€ 1.1

2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14


€ 0.9€ 0.9€ 1.0€ 1.0

€ 1.6

€ 0.6€ 0.5€ 0.4€ 0.4

€ 0.4 € 1.5€ 1.4€ 1.4€ 1.4

€ 2.1

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$0.49$0.37

$0.15

$0.45

$0.0

$0.5

$1.0

$1.5

$2.0

ITO BPO SaaS IaaS


2H15 1H16



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Outsourcing MarketAegisAjilonASG

ChinaSoftHollysys Automation

Interactive PtyMinacsNeusoft

Sutherland Global

As-a-Service MarketXero

Co. Revenues < $2 B

Outsourcing MarketAvayaHCL

Indra SistemasInfosysUnisysWipro


EquinixRackspace

Salesforce.com


Outsourcing MarketCapgeminiCognizant

FujitsuHPEIBM

SodexhoTCS


China TelecomKT Corp.

ISG Combined Market Standouts in Asia PacificTurnover of 30%-40% in the leader board across all Service Provider segments with prominent As-a-Service firms making the Top 10 in large-firm category.


The Building 10

Sourcing Standouts

The Breakthrough 10

Sourcing Standouts

The Big 10

Sourcing Standouts

Co. Revenues > $10 B




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YTD, contracting activity remains muted; ACV half-year gains come from Manufacturing and Telecom while most other Industry groups struggle.

Asia Pacific - Half-Year Contract Counts - Traditional Outsourcing Only

Asia Pacific - Half-Year ACV (€B) by Industry - Traditional Outsourcing Only

Asia Pacific Traditional Outsourcing Award Trends


67 81 91 69 88 84 71 68 50 45

78 81 74

81 69 80 82 70

48 67

159 172

143 169

153 151 150

120 93

201615141312111009082007

1H Counts 2H Counts

€ 0.13

€ 0.23 € 0.24

€ 0.12€ 0.05

€ 0.00€ 0.06

€ 0.02 € 0.01$0.0

$0.1

$0.2

$0.3

$0.4

$0.5

$0.6

FinancialServices

Manufacturing Telecom &Media

Travel,Transport &

Leisure

Energy ConsumerPackaged

Goods

BusinessServices

Healthcare &Pharma

Retail




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Discussion Topic Second Quarter 2016

DEFINING THE AS-A-SERVICE MARKET VALUE

John KeppelPartner & President



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Market Size in Perspective

As-a-Service vs. Traditional Outsourcing Market Size billions

Growing As-a-Service Market Now Featured in ISG Index

Defining the As-a-Service Market

550+

$100M+CoRevs

17% with

< $100MCoRevs

83% with

Across Functional Domains

leading

SaaS Providers

The ISG SaaSMarket Basket

The ISG IaaS

Market Basket

Nearly 30leading

IaaS Providers

carrier

cloud firms

co-location firms

public cloud infra providers

IaaS€ 19

SaaS€ 41

Outsourcing€ 91

Combined

Market

40%

€ 151



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Comparing Global Outsourcing and As-a-Service ACV (€B)

Comparing the As-a-Service and Outsourcing MarketsThe Global SaaS and IaaS markets are trending upward with Infrastructure building at a more pronounced rate; Americas leads in As-a-Service growth.

Regional As-a-Service ACV (€B)

36%

30%

24%

19%20%

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As-a-Service as a % of Combined ACV

As-a-Service ACV (€B) by Type

Americas€ 1.4

EMEA€ 0.6

AP€ 0.3

2Q162Q152Q14

€ -

€ 0.3

€ 0.5

€ 0.8

€ 1.0

€ 1.3

€ 1.5

€ 4.1 € 4.8

€ 5.5 € 4.4

€ 4.9 € 4.1

€ 5.5 € 4.6

€ 5.5 € 5.3

€ 2.3 € 2.1 € 1.9 € 1.8 € 1.6 € 1.5 € 1.4 € 1.3 € 1.3 € 1.3

2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14

Outsourcing ACV Global As-a-Service

€ 0.9€ 0.8 € 0.7 € 0.7 € 0.7 € 0.7 € 0.7 € 0.6 € 0.6 € 0.6

€ 1.4 € 1.3 € 1.2 € 1.1

€ 0.8 € 0.8 € 0.7 € 0.6 € 0.7 € 0.8

€ 2.3 € 2.1 € 1.9 € 1.8

€ 1.6 € 1.5 € 1.4 € 1.3 € 1.3 € 1.3

2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14

Global SaaS Global IaaS



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Combined Market dips slightly Y/Y in 2Q16; outsourcing market endures a rougher than expected stretch in 2Q and falls by double digits

YTD, Combined Market rises 10%, driven by As-a-Service segment, specifically high-growth area of IaaS; outsourcing segment comes in basically flat

Americas shows promising YTD growth with nearly 50% growth in As-a-Service and a 6% growth in outsourcing segment

EMEA edges down YTD with weakness in outsourcing, most notably a shortfall in large-contract activity and Restructuring awards

Asia Pacific is on an upswing at the half year point, due to growth in the as-a-service segment that counteracted stagnant traditional sourcing activity

The As-a-Service space is growing at a fast pace and likely will continue that trajectory

Outsourcing markets pull back in 2Q and come in at lower levels than initially projected. Even though sourcing demand is increasing, 2nd half results will face a difficult compare; outsourcing ACV may come in slightly lower than in 2015

Factoring in As-a-Service contract flow into the Combined Market, ACV likely will finish 2016 with high single-digit growth

2Q/1H 2016 ISG Index™ - Global Summary and Outlook

summarymarket

outlookmarket



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Please contact us with your questions and comments.

Learn More

Paul ReynoldsPartner & Chief Research Officer,

ISG Momentum+1 508 625 2194

[email protected]

www.isg-one.comJohn Keppel

Partner and President+44 (0)7879 432 212

[email protected]

Denise Colgan EMEA and AP Media Contact

+44 1737 [email protected]

Bill McNeeCEO Saugatuck Technologies,

an ISG Business+1 203 820 8987

[email protected]

Laura MountainCohn & Wolfe for ISG+44 (0) 20 7331 5372

[email protected]

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

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

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



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Second Quarter and First Half 2016

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.

2Q and 1H 2016 TCV Scorecard – Outsourcing Market

*Contracts with TCV ≥ €20M from the ISG Contracts Knowledgebase®

Scorecard 2Q16 2Q Y/Y 2Q Q/Q 1H16 Y/Y

TCV (€B)* Change Change TCV (€B)* Change

Global Market € 15.7 -2% 2% € 31.1 -8%

New Scope € 9.3 -17% -13% € 20.1 -17%

Restructurings € 6.4 32% 38% € 11.0 15%

Mega-deals € 0.0 0% -100% € 2.9 -26%

ITO € 11.7 1% 24% € 21.2 -14%

BPO € 4.0 -10% -33% € 10.0 10%

Americas € 7.1 15% 30% € 12.6 5%

EMEA € 7.0 -13% -9% € 14.7 -17%

Asia Pacific € 1.6 -12% -26% € 3.8 -3%



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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 1,000 employees and operates in 21 countries.

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