Download - EMEA ISG Outsourcing Index Q3/2014
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James Goodman
Barclays Capital
16 October 2014
The EMEA ISG Outsourcing Index
Third Quarter 2014
Market Data and Insights
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Covering the state of the outsourcing industry for global and EMEA commercial
contracts.*
Welcome to the 48th Quarterly Outsourcing Index Review
Dr. David HowiePartner
Bernd SchaeferPartner
John KeppelPartner & President
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At a Glance
AS ISG PREDICTED, LIGHTER CONTRACTING ACTIVITY
DROVE GLOBAL BROADER MARKET ACV DOWN Y/Y
ITO AND BPO BOTH DECLINED BY DOUBLE DIGITS;
YTD, ITO REMAINS IN POSITIVE TERRITORY WHILE BPO CONTINUES TO PRODUCE UNEVEN RESULTS
EMEA PERFORMANCE WEAKER WITH DACH AND NORDICS SLIDING;
YTD, ACV SHOULD SURPASS 2013 WITH STRENGTH IN FRANCE AND SOUTHERN EUROPE
AMERICAS RESULTS TREND UPWARD Y/Y,
LARGE-DEAL ACTIVITY IN CANADA AND BRAZIL OFFSET FLAT U.S. PERFORMANCE
ASIA PACIFIC'S QUARTERLY PACE SLOWED BY ABSENCE OF LARGE DEALS
Scorecard 3Q14 3Q Y/Y 3Q Q/Q YTD YTD Y/Y
ACV (€B)* Change Change ACV (€B)* Change
Global Market € 3.7 -21% -28% € 13.7 13%
New Scope € 2.4 -10% -27% € 8.7 22%
Restructurings € 1.3 -36% -31% € 5.0 0%
Mega-relationships € 1.0 2% -21% € 3.8 23%
ITO € 2.7 -23% -31% € 10.4 22%
BPO € 1.0 -17% -18% € 3.3 -9%
Americas € 1.5 11% -17% € 4.9 18%
EMEA € 1.9 -36% -26% € 7.0 3%
Asia Pacific € 0.3 -27% -64% € 1.8 59%
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Global Broader Market Quarterly ACV is down 21% Y/Y on slower contracting
activity. YTD, ACV is still at the second-highest level ever, up 13% against 2013.
Year-to-date Broader Market (€B)*
Year-to-date Contracting Counts
Global Market Contract Award Trends
660 511
631 631 528 518
408 343 332 329
239 352
252 295 235 221
227 163 141 142
-
250
500
750
1,000
201413121110090807062005
1H Counts 3Q Counts
€ 10.0€ 7.4
€ 10.0€ 8.1€ 10.0€ 8.2€ 8.8€ 7.0€ 7.1€ 7.4
€ 3.7€ 4.7
€ 4.5€ 4.9
€ 3.5€ 3.4€ 3.6
€ 2.5€ 2.3€ 3.1
€ 3.7
€ 4.3€ 5.7€ 4.5€ 5.7€ 3.9
€ 4.9€ 3.6€ 4.4
201413121110090807062005
€ 0
€ 5
€ 10
€ 15
€ 20
1H ACV 3Q ACV 4Q ACV
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Both ITO and BPO quarterly ACV down Y/Y. Year-to-date, ITO ACV stands at all-time
high while BPO ACV has trended lower, down 9% from 2013.
BPO Year-to-date ACV (€B)*
Global ITO and BPO Contract Award Trends
ITO Year-to-date ACV (€B)*
BPO Year-to-date CountsITO Year-to-date Counts
484
327 396 400 336
364 271 228 202 224
173
248 161 185
139 146
140 108
81 92
-
100
200
300
400
500
600
700
201413121110090807062005
1H Counts 3Q Counts
176 184 235 231 192
154 137 115 130 105
66 104
91 110 96
75 87 55 60
50
-
100
200
300
400
201413121110090807062005
1H Counts 3Q Counts
€ 7.7
€ 5.0€ 6.2€ 5.4
€ 7.6€ 5.9€ 6.3
€ 5.0€ 5.3€ 5.4
€ 2.7
€ 3.5€ 2.9
€ 3.5
€ 2.5
€ 2.5€ 2.5
€ 1.7€ 1.4€ 2.2
201413121110090807062005
€ 0
€ 2
€ 4
€ 6
€ 8
€ 10
€ 121H ACV 3Q ACV
€ 2.3€ 2.4€ 3.7
€ 2.8€ 2.4€ 2.3€ 2.6€ 1.9€ 1.9€ 2.0
€ 1.0€ 1.2
€ 1.6
€ 1.3€ 1.0€ 0.9
€ 1.1€ 0.8€ 0.8€ 0.9
201413121110090807062005
€ 0
€ 2
€ 4
€ 6
1H ACV 3Q ACV
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EMEA quarterly ACV is down 36% Y/Y as the number of awards drop markedly.
Year-to-date, ACV is up slightly at 3% on the strength in ITO.
EMEA Year-to-date ACV (€B)*
EMEA YTD New vs. Restructuring ACV (€B)*
EMEA Contract Award Trends
EMEA Year-to-date Counts
316 257 275 298
225 237 198 159 140 173
115 176 110
144
110 106 116
77 76 66
-
100
200
300
400
500
201413121110090807062005
1H Counts 3Q Counts
€ 5.1€ 3.9€ 4.4€ 4.3€ 4.8
€ 3.7€ 5.8
€ 3.3€ 2.7€ 4.0
€ 1.9€ 2.9€ 2.4€ 2.9€ 1.6
€ 1.4
€ 2.0
€ 1.4€ 1.2
€ 1.4
€ 2.1€ 2.3€ 3.4
€ 2.8€ 3.3
€ 1.8
€ 2.0€ 1.9
€ 2.2
201413121110090807062005
€ 0
€ 2
€ 4
€ 6
€ 8
€ 10
€ 12
1H ACV 3Q ACV 4Q ACV
€ 4.3
€ 2.7
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
€ 4.5
€ 5.0
New Scope Restructuring
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
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€ 2.2
€ 1.2€ 1.1
€ 0.3
€ 1.1
€ 0.7
€ 0.3€ 0.2
€-
€0.5
€1.0
€1.5
€2.0
€2.5
€3.0
€3.5
U.K. &
Ireland
DACH Nordics Benelux France Southern
Europe
Africa &
Middle
East
E. Europe
& Russia
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
France and Southern Europe help support year-to-date gains in EMEA while the
more mature markets of the U.K., DACH and the Nordics pull back from 2013.
EMEA Contract Award Trends Detail
EMEA Sub-regions Year-to-date ACV (€B)* EMEA Industries YTD ACV (€B)*
€ 1.3
€ 1.5
€ 1.2
€ 1.2
€ 0.8
€ 0.4
€ 0.2
€ 0.3
€ 0.2
€ - € 0.5 € 1.0 € 1.5 € 2.0
Financial Services
Manufacturing
Travel, Transport &
Leisure
Energy
Telecom & Media
Business Services
Retail
Consumer Products
& Goods
Healthcare &
Pharma
Avg of Prior 4 YTDs YTD 3Q14
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ITO contract numbers in EMEA hit an all-time high year-to-date, while ACV reached
its second highest level ever, despite a slowdown in the third quarter
EMEA ITO Year-to-date ACV (€B)*
EMEA ITO YTD New vs. Restructuring ACV *
EMEA ITO Contract Award Trends
EMEA ITO Year-to-date Counts
243 166 187 214
165 187 156 122
87 129
95
124 78 103
77 82
78
51 42
49
201413121110090807062005
1H Counts 3Q Counts
€ 3.5
€ 2.4
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
New Scope Restructuring
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
€ 4.2€ 2.8€ 2.7€ 3.1
€ 4.1€ 3.1
€ 4.6€ 2.7€ 1.8
€ 3.3
€ 1.7€ 2.4€ 1.7
€ 2.4€ 1.2€ 1.2
€ 1.5
€ 1.0€ 0.7
€ 1.2
€ 1.6€ 1.4
€ 2.7€ 2.5€ 2.5
€ 1.5
€ 1.1€ 1.5
€ 1.5
201413121110090807062005
€ 0
€ 2
€ 4
€ 6
€ 8
€ 10
1H ACV 3Q ACV 4Q ACV
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Year to date, BPO ACV and counts fell more than a third, driven by a lack of
contracting activity by the Financial Services sector
EMEA BPO Year-to-date ACV (€B)*
EMEA BPO YTD New vs. Restructuring ACV*
EMEA BPO Contract Award Trends
EMEA BPO Year-to-date Counts
€ 0.9
€ 0.2€ 0.0
€ 0.5
€ 1.0
€ 1.5
€ 2.0
New Scope Restructuring
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
€ 0.9€ 1.1€ 1.7
€ 1.2€ 0.8€ 0.6
€ 1.2€ 0.6€ 0.8€ 0.7
€ 0.2€ 0.6
€ 0.7
€ 0.5
€ 0.4€ 0.2
€ 0.5
€ 0.4€ 0.5
€ 0.2
€ 0.4
€ 0.9
€ 0.7
€ 0.3€ 0.8
€ 0.3€ 0.9€ 0.4
€ 0.7
201413121110090807062005
€ 0.0
€ 1.0
€ 2.0
€ 3.0
€ 4.0
1H ACV 3Q ACV 4Q ACV
73 91 88
84 60
50 42 37 53 44
20
52 32 41
33 24 38
26
34
17
201413121110090807062005
1H Counts 3Q Counts
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Co. Revenues < €2 BCo. Revenues €2 -10 B
ISG Sourcing Market Standouts in EMEA
Large multinationals and providers with strong local “home market” profiles head
up both the Big 10 and Building 10 tiers.
SOURCING
STANDOUTS BY COMPANY SIZE
Co. Revenues > €10B
Capita
Carillion1
Cognizant1
EVRY
HCL1
Infosys1
Mitie Group
Orange Business Services
Tech Mahindra
Tieto
Accenture1
Atos1
BT1
Capgemini1
CSC
Fujitsu
HP
IBM1
TCS1
T-Systems
HH Global
iGATE
Innovation Group
Kelway
MAYKOR
NGA Human Resources
NNIT A/S
Quindell
Sitel
The Building 10Sourcing Standouts
The Breakthrough 10Sourcing Standouts
The Big 10Sourcing Standouts
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€ 3.1
€ 1.8
€ 2.9
€ 2.0
€ 0
€ 1
€ 2
€ 3
€ 4
€ 5
New Scope Restructuring ITO BPO
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
Americas quarterly ACV was up 11% Y/Y even as the number of contract awards fell
back. Year-to-date, ACV is up 18% from 2013 with New Scope ACV growing 30%.
Americas Year-to-date ACV (€B)*
Americas YTD Segment Details ACV (€B)*
Americas Contract Award Trends
Americas Year-to-date Counts
265 195
278 259 239
219 168 142 149 130
97 137
104 119 101
83 84
61 49 57
-
100
200
300
400
500
201413121110090807062005
1H Counts 3Q Counts
€ 3.4€ 2.8€ 4.0
€ 3.0€ 4.5
€ 3.4€ 2.5€ 2.8
€ 3.7€ 3.0
€ 1.5€ 1.4
€ 1.5
€ 1.6
€ 1.6
€ 1.5
€ 1.1€ 0.7
€ 0.9€ 1.5
€ 1.2
€ 1.5€ 1.9
€ 0.9€ 1.9
€ 1.4€ 2.2€ 1.4€ 1.6
201413121110090807062005
€ 0
€ 2
€ 4
€ 6
€ 8
1H ACV 3Q ACV 4Q ACV
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€ 0.33
€ 0.21
€ 0.02€ 0.05
€ 0.00
€ 0.05
€ 0.10
€ 0.15
€ 0.20
€ 0.25
€ 0.30
€ 0.35
€ 0.40
€ 0.45
Canada Brazil Mexico Other LatAm
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
€ 4.31
€ 0.0
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
€ 4.5
€ 5.0
€ 5.5
€ 6.0
U.S.
Year-to-date, U.S. ACV has risen 17% against 2013. Both Canada and Brazil ACV
have advanced as a result of some larger contract awards.
Americas Contract Award Trends Detail
Americas Sub-regions Year-to-date ACV (€B)*
€ 0.9
€ 1.7
€ 0.7
€ 0.7
€ 0.5
€ 0.4
€ 0.4
€ 0.7
€ 0.2
€ 0.0 € 1.0 € 2.0
Manufacturing
Financial Services
Telecom & Media
Healthcare & Pharma
Business Services
Retail
Consumer Products &
Goods
Energy
Travel, Transport &
Leisure
Avg of Prior 4 YTDs YTD 3Q14
Americas Industry YTD ACV (€B)*
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Co. Revenues < €2 BCo. Revenues €2 -10 B
ISG Sourcing Market Standouts in the Americas
Americas-based providers head up the Big 10 Sourcing Standouts. Providers with
substantial offshore profiles lead in both the Building and Breakthrough tiers.
The Building 10Sourcing Standouts
The Breakthrough 10Sourcing Standouts
CBRE Group
CGI
Cognizant1
CompuCom
Genpact
HCL1
Infosys1
Tech Mahindra
Teleperformance
Wipro
Accenture1
BT
Capgemini1
CSC1
Dell
IBM1
ISS
RR Donnelley
TCS1
Xerox1
Allscripts Healthcare Solutions
EXL
Garda World
iGATE1
KPIT Technologies
Minacs
Neoris
NIIT
Sitel
Syntel
SOURCING
STANDOUTS BY COMPANY SIZE
The Big 10Sourcing Standouts
Co. Revenues > €10B
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€ 1.3
€ 0.5
€ 1.7
€ 0.1€ 0.0
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
New Scope Restructuring ITO BPO
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
Asia Pacific quarterly ACV is down 27% Y/Y on the absence of large contract
awards. Year-to-date ACV is up almost 60% on substantial contracting activity.
Asia Pacific Year-to-date ACV (€B)*
Asia Pacific YTD Segment Details ACV (€B)*
Asia Pacific Contract Award Trends
Asia Pacific Year-to-date Counts
79 59
78 74 64
62 42 42 43
26
27 39
38 32
24 32
27 25 16 19
-
20
40
60
80
100
120
140
201413121110090807062005
1H Counts 3Q Counts
€ 1.5
€ 0.7
€ 1.6
€ 0.8€ 0.6€ 1.1
€ 0.6€ 0.9€ 0.8
€ 0.4
€ 0.3
€ 0.4
€ 0.6
€ 0.4€ 0.4
€ 0.5
€ 0.5€ 0.4
€ 0.2
€ 0.3
€ 0.4
€ 0.5
€ 0.4€ 0.8
€ 0.5
€ 0.7€ 0.7
€ 0.3€ 0.6
201413121110090807062005
€ 0.0
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
1H ACV 3Q ACV 4Q ACV
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YTD Asia Pacific ACV gains are the result of stepped up activity in ANZ and large
awards in Japan. China and India bounce back from weaker 2013 results.
Asia Pacific Contract Award Trends Detail
Asia Pacific Sub-regions Year-to-date ACV (€B)*Asia Pacific Industries
YTD ACV (€B)*
€ 0.39
€ 0.27
€ 0.51
€ 0.22
€ 0.14
€ 0.04
€ 0.06
€ 0.12
€ 0.03
€ - € 0.2 € 0.4 € 0.6
Telecom & Media
Financial Services
Manufacturing
Travel, Transport &
Leisure
Energy
Business Services
Healthcare &
Pharma
Consumer Products
& Goods
Retail
Avg of Prior 4 YTDs YTD 3Q14
€ 0.48
€ 0.37
€ 0.49
€ 0.25
€ 0.17
€ 0.01€ -
€ 0.2
€ 0.4
€ 0.6
€ 0.8
€ 1.0
€ 1.2
ANZ India and
South Asia
Japan Greater
China
Southeast
Asia
South Korea
Range of Prior 4 YTDs Avg of Prior 4 YTDs
YTD 3Q13 YTD 3Q14
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Co. Revenues < €2 BCo. Revenues €2 -10 B
ISG Sourcing Market Standouts in Asia Pacific
Japanese providers join large multinationals in the Big 10 Sourcing Standouts list.
Australian and India-based providers contribute greatly to the two smaller tiers.
SOURCING
STANDOUTS BY COMPANY SIZE
Co. Revenues > €10B
Cognizant1
HCL
Infosys1
Orange Business Services
Singtel Optus
Tech Mahindra
UGL Limited
Unisys
Wipro1
Accenture1
AT&T
Capgemini
CSC1
Fujitsu1
Hitachi
IBM1
NTT
TCS1
Telstra1
Aegis
ChinaSoft1
Hollysys Automation
Itron
Kratos Defense & Security
NGA Human Resources
Pactera
Ramco
Redknee Solutions
SITA
The Building 10Sourcing Standouts
The Breakthrough 10Sourcing Standouts
The Big 10Sourcing Standouts
Special Topic for 3Q14
ISG MOMENTUM® METHODOLOGY FOR
SOURCING OPPORTUNITIES ASSESSMENT
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Historic vs. Potential Industry Characterization
Historical Activity Frames an Industry
$0
$1
$2
$3
2014
YTD
'13'12'112010
Chemicals Oil & Gas Ops Utilities
Energy Industry ACV (€B)*
But more information is needed to Characterize the Industry PotentialMomentum® Vertical Reports gauge a market’s maturity and momentum
Amount of industry business
available but not yet captured
by service providers
vs UFARMINGHUNTINGAmount of industry growth that
can be cultivated from outsourcing
relationships in place
Utilities Historical Frameexhibits consistency — over €1B in
ACV for past five years — within
Energy, a consistent performer on
pace for a record high 2014 ACV
11
Utilities PotentialISG’s 2014 Momentum Vertical Report
rates Utilities as Medium Hunting and High Farming
22
WHY?
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Industry Challenges
local hiring
requirements, heavy
regulation and M&A
activity impact
service
standardization and
flexibility
Medium Hunting: Recent Growth Is Highest of 27 Verticals
$1,395 $1,612
$1,746 $1,695 $1,613
$1,824
$2,006
$3,078
$3,411 $3,340
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
US
$ M
illio
ns
Growth: 5% 16% 8% -3% -5% 13% 10% 53% 11% -2%
Utilities Market Spend (ACV)
18.5 % compound
annual growth rate
for outsourcing
spending by Utilities
clients is highest
among the 27
verticals
Momentum tracks
11
22
2014 Vertical Industry Report
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Innovative solutions
abound due to
deregulation, smart
grid technologies, and
ongoing service
efficiency needs
High Farming: Low Per-company ACV Leaves Room for Growth
2013 Utilities
Average Market Spend
€66.8 €99.8
Utilities
Market Average
50 58
Outsourcing
Not Outsourcing
108 Companies
2013 Utilities
Market Composition46% Penetration Rate
is in line with 47%
G2000 average
11
Below Average Spend
compared to G2000 in
2013
22
33
2014 Vertical Industry Report
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Who’s Winning the Utilities Contracts?
The utilities client base is served by a competitive set of service providers. Industry
specific BPO solutions and ITO cloud integration are key areas of focus.
18%
16%
14%
12%
12%
12%
12%
10%
10%
6%
6%
6%
6%
6%
6%
6%
Capgemini
TCS
Accenture
IBM
HP
Atos
CGI
CSC
Wipro
Fujitsu
Xerox
HCL
Aon Hewitt
TSystems
Cognizant
Carillion
Utilities Clients Focus on Solutions High BPO adoption focusing on industry-
specific solutions at a much higher rate than
the global average
► ITO services outsourced slightly below
the G2000 average
► Utilities maturing strategy around cloud
services increases demand for
integration with traditional IT
Infrastructure.
� Cloud services seen as a foundational
element for next-generation IT
infrastructures
� Cloud strategies needed in all
technology elements of a proposal
2013 Service Provider Penetration
in Momentum’s Utilities Vertical
n = 50 Companies
2014 Vertical Industry Report
T-Systems
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� As ISG forecast, Broader Market ACV lagged Y/Y on lower contract counts
� Weakness across both the ITO and BPO markets, although ITO will likely
surpass 2013’s results but BPO continues to yield patchy results
� All regions are ahead of 2013’s pace
� Americas ACV was up Y/Y as large awards in Canada and Brazil supported
growth in the region
� EMEA 3Q slipped as its key geographic markets pulled back; YTD sourcing
activity continues to spread geographically in the continent, especially in
France and Southern Europe
� Asia Pacific slowed from record 1H14 as large awards were absent; YTD
Australia rebounded and Japan becomes noteworthy
� Expect a pickup in activity in 4Q14 as we have noticed a buildup of
transaction activity likely to be awarded in next few quarters
� Expect 2014 ACV to exceed 2013 by double digits, although tepid 3Q14
performance may suppress comparisons against more robust periods like
the years 2010-12
3Q14 ISG Outsourcing Index Summary and Outlook
summarymarket
outlookmarket
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Please contact us with your questions and comments.
Learn More
Paul ReynoldsChief Research Officer
+1 508 625 2194
ISG insights serving providers and market analysts
www.isg-one.comDr. David Howie
Partner
+44 7789 771 665
Denise Colgan
EMEA and AP Media Contact
+44 1737 371523
Bhakti Gajjar
Cohn & Wolfe for ISG
+44 (0) 20 7331 5363
Third Quarter 2014
APPENDIX: SCORE CARD FOR TCV
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25
The ISG Outsourcing Index has moved to ACV as the primary measure of the
Broader Market. In transition, we will continue to provide a high-level TCV view of
the market via a Scorecard analysis.
3Q14 TCV Scorecard
*Contracts with TCV ≥ €25M from the ISG Contracts Knowledgebase®
Scorecard 3Q14 3Q Y/Y 3Q Q/Q YTD YTD
TCV (€B)* Change Change TCV (€B)* Change
Global Market € 18.2 -9% -17% € 61.1 15%
New Scope € 12.6 1% -14% € 40.9 23%
Restructurings € 5.6 -26% -24% € 20.2 1%
Mega-deals € 3.9 20% -30% € 12.1 26%
ITO € 13.1 -12% -21% € 45.1 27%
BPO € 5.0 -2% -6% € 16.0 -11%
Americas € 8.3 66% 15% € 22.1 32%
EMEA € 8.7 -35% -24% € 30.9 -1%
Asia Pacific € 1.2 -26% -64% € 8.1 54%
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 800 employees and operates in 21 countries.
knowledge powering results®
www.isg-one.com