first half 2012, asia pacific tpi index

Hosted by:

The Asia Pacific TPI Index

Mitali B Ghosh

Bank of America Merrill Lynch

First Half 2012

30 July 2012

© 2012 Information

Services Group, Inc. All Rights Reserved

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*Contracts with TCV > $25M

2

Partner & President, Asia Pacific

Covering the state of the outsourcing industry for global and regional commercial contracts.

Arno Franz

Welcome to the 12th Semi-Annual Asia Pacific TPI Index Call

Partner, South & East Asia

Gerry Clark

Partner, India

Dinesh Goel

© 2012 Information


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GLOBAL BROADER MARKET TCV DOWN 8% Y/Y

NUMBER OF CONTRACT AWARDS RETURNS TO HISTORICAL LEVELS

MEGA DEAL TCV ROSE 22%, STRENGTHENING THE GLOBAL MARKET

RESTRUCTURING TCV UP ALMOST 40%

ASIA PACIFIC RETURNS AN IMPRESSIVE HALF YEAR PERFORMANCE

YEAR TO DATE, STRONG MEGA DEAL AND ASIA PACIFIC RESULTS WERE NOT ENOUGH TO OFFSET BROADER MARKET DECLINE

At A Glance

“

“ Score Card

1H12 TCV ($B)*

1H Y/Y Change

1H12 Counts

1H Y/Y Change

Global Market $ 41.4 -8% 373 -28%

Mega Deals $ 7.8 23% 6 50%

New Scope $ 27.0 -22% 286 -30%

Restructurings $ 14.4 39% 87 -19%

ITO $ 26.8 - 6% 234 -24%

BPO $ 14.6 -13% 139 -33%

Asia Pacific $ 6.5 44% 59 -11%

EMEA $ 17.8 -24% 153 -32%

Americas $ 17.1 flat 161 -28%

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1H12 TCV was down 8%, contract numbers dropped 28% overall and were a little short of the five-year averages.

Half-year TCV ($B)*

Global Broader Market Contract Award Trends

Half-year Counts by TCV Bands

$41.4 $45.1 $51.1 $42.5 $49.0 $40.7

$57.2 $43.8 $52.9 $42.9 $45.4 $45.7

201220112010200920082007

1H TCV 2H TCV Avg of 5 Prior 1Hs

277

404

286 291 231 199

366

308 327

250 193 282

20121110090807

$25-99M TCV Band

1H 2H Avg of 5 Prior 1Hs

96 111 124 115 116 93

113 99 130 111 95 112

20121110090807

$100M+ TCV Band


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The effect of the continuing economic uncertainty impacting the Americas’ and EMEA outsourcing markets is less pronounced in Asia Pacific.

Half-year Contract Counts Compare

Regional Comparison of First Half Contract Trends

161

224

134 153

225

123

59 66

35

1H121H111H101H091H081H07

Americas EMEA Asia Pacific

Half-year TCV ($B)* Compare

$17.13 $17.1

$26.3

$18.4 $15.6

$15.3 $17.8

$23.5

$19.6

$6.5 $4.5 $5.8

1H121H111H101H091H081H07

Americas EMEA Asia Pacific

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Asia-Pacific TCV was up 44% Y/Y leading to the strongest first half performance in almost a decade. Contract awards counts fell slightly but remained ahead of recent halves.

Half-year Asia Pacific TCV ($B)*

Asia Pacific Contract Award Trends

Half-year Asia Pacific Counts by TCV Bands

$6.5 $4.5 $2.8

$6.4 $3.5

$5.8

$4.9 $7.1

$6.6 $8.0

$5.8

$4.6

201220112010200920082007

1H TCV 2H TCV Avg of 5 Prior 1Hs Includes a $1.2B Mega Deal in India

43 53

40 28 25 20

36 36

41 42

30 33

20121110090807

$25-99M TCV Band


16 13 8 19 11 15

9 11

18 13 11

13

20121110090807

$100M+ TCV Band


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With three years of consecutive first-half growth, new scope awards dominate in the region, accounting for 94% of TCV – the highest percentage ever.

Half-year Asia Pacific New Scope TCV ($B)*

Half-year Asia Pacific Restructuring TCV ($B)*

Asia Pacific New Scope & Restructuring Trends

$0.42 $0.78 $0.49

$2.08

$0.50 $0.65

$2.57

$0.24 $0.94

$0.05

$2.24 $2.10

$0.98

$0.56

$1.01

$0.55

$0.65

$0.81

$0.35 $0.90

201211100908070605042003


$6.1

$3.7 $2.3 $4.3 $3.0

$5.1

$2.9 $1.9

$6.2

$1.7

$2.6 $5.0

$5.6 $7.5 $4.8

$2.4 $4.1

$2.6

$2.3 $3.7

201211100908070605042003


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India TCV rebounds in the first half of 2012. Even discounting the mega deal award signed, India TCV grew significantly.

Asia Pacific Country Details in Contract Award Trends

Like-half Asia Pacific TCV ($B)* by Country

$1.44

$3.23

$0.76 $0.68

$0.35

$0.03 $0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

ANZ India Japan Greater China ASEAN South Korea

Prior 5 Period Range Average 1H11 1H12

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Telecom & Media and Financial Services sectors together accounted for 65% of all TCV signed in the region.

Asia Pacific Industry Segment Contract Trends

Like-half Asia Pacific TCV ($B)* by Industry

$2.33

$1.88

$0.85

$0.49

$0.18 $0.12

$0.58

$0.05 $0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

Telecom &Media

FinancialServices Manufacturing

Travel,Transport,

Leisure

Energy Healthcare &Pharma

BusinessServices

Retail


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Despite the drop in number of contracts awards in 1H12 all sectors, except for Manufacturing, met or exceeded their five year averages.

Asia Pacific Industry Segment Contract Trends

Like-half Asia Pacific Contract Counts by Industry

12

18

7

5 5

3

8

1 0

2

4

6

8

10

12

14

16

18

20

Telecom &Media

FinancialServices Manufacturing

Travel,Transport,

Leisure

Energy Healthcare &Pharma

BusinessServices

Retail


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ITO TCV rose 10% Y/Y. The number of smaller contracts dropped, while the number of larger contracts increased slightly.

Asia Pacific ITO Contract Award Trends

Half-year Asia Pacific ITO Counts by TCV Bands

TCV Leaders Capgemini

CSC HP

IBM TCS

Counts Leaders

HCL HP

IBM Infosys

TCS

Top Asia Pacific ITO Providers by 1H12 Contracts

Half-year Asia Pacific ITO TCV ($B)*

Note: Service providers in alphabetical order; no rankings implied. Placements based on ISG contracts database.

$3.3 $3.0 $1.8

$6.0 $2.8

$4.9

$3.7 $6.4

$3.5

$3.4

$4.3

$3.7

201220112010200920082007


30 33

22 20 18 14

22

25 31

29

20 21

20121110090807

$25-99M TCV Band


10 9 6 19

9 12 8

8

10

7 8 11

20121110090807

$100M+ TCV Band


© 2012 Information


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BPO accounted for almost half of the regional market in 1H12 as TCV, driven by a rise in larger contract awards, more than doubled Y/Y

Asia Pacific BPO Contract Award Trends

Half-year Asia Pacific BPO Counts by TCV Bands

TCV Leaders Genpact

IBM Mahindra^

Sykes WNS

Counts Leaders Genpact

Mahindra^

$3.2

$1.5

$1.0 $0.3 $0.7 $0.9

$1.2 $0.7

$3.0

$4.6

$1.5 $0.9

201220112010200920082007


Half-year Asia Pacific BPO TCV ($B)*

Top Asia Pacific BPO Providers by 1H12 Contracts

Note: Service providers in alphabetical order; no rankings implied. Placements based on ISG contracts database.

^Includes both Mahindra Satyam and Tech Mahindra

13

20 18

8 7 6

14

11

10 13

10 12

20121110090807

$25-99M TCV Band 2H 1H Avg of 5 Prior 1Hs

6 4 2

0

2 3

1 3 8 6 3 3

20121110090807

$100M+ TCV Band 2H 1H Avg of 5 Prior 1Hs

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India-heritage companies outperformed US-heritage firms in every category.

Asia Pacific Market Share Comparison by Provider Category

1H12 Asia Pacific Market Share by Service Provider Category Contract Numbers and TCV ($B)* of Awards

27%

28%

14%

11%

ITO TCV

ITO Counts

BPO TCV

BPO Counts

US-heritage

31%

38%

8%

32%

Other

42%

35%

77%

58%

India-heritage

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With an active contracts CAGR of 12% and annualised revenue CAGR of 6%, Asia Pacific market shows robust performance.

Asia Pacific Outsourcing Revenue Trends

Annualized Revenue & Active Contract Trends

2007 to 2012 Active Contracts CAGR: ↑ 12% 2007 to 2012 Annualized Revenue CAGR: ↑ 6%

$10.8 $10.5

$8.1

551 521

316

201220112010200920082007

Annualized Revenue ($B)Active Contracts

*

Special Topic for First Half 2012

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6.35 6.48 6.14 6.10 6.07 5.95 5.88 5.72 5.48 5.31 5.10 4.98 5.05 4.85

6.4 6.0

5.5

5.1

1999 00 01 02 03 04 05 06 07 08 09 10 2011 1H12

Avg Duration Duration Plateau

Declines in duration may appear small, but even a slight decline can have large impact on TCV levels.

Duration Trend Impact on the Global Market

Average Contract Durations Over Time

What if all 1H12 contracts* had 1999 average durations of 6.4?

$41 B

$57 B

1H12 Actual TCV

Hypothetical 1H12 TCV with 1999-2000 Durations

38%

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Durations decreased across a range of contract types.

Does the 1H12 duration-dip signal the start of a step down?

32%

46%

22% 34%

51%

15%

Durations< 5 Years

Durations5 - 6.9 Years

Durations7+ Years

2009 1H12 2009 1H12 2009 1H12

Distribution of Contracts* Moves Towards Lower Durations

Average Durations Fall for All Contract Sizes*

4.9

6.6

4.8

6.1

4.9

6.2

4.6

6.0

TCV < $200M TCV > $200M

2009 1H12 2011 2010 2009 1H12 2011 2010

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Factors Influencing Downward Trend in Contract Durations

Stepped Up Market Competition Amidst increased provider competition, companies – particularly New Sourcing Adopters – push for shorter contract commitments, leveraging the providers’ desire to seal the deal.

Outsourcing Savvy Clients and Providers Solution improvements enable more efficient and effective delivery of innovations, making the best solutions at the best prices available via more frequent contract negotiations.

Disposability of Cloud Solutions Service Providers note that contracts with Cloud in scope are shorter in duration than Managed Services deals.

5.1 4.4

2009 1H12

↓14%

Average Duration for New Adopters

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Global Broader Market TCV down 8% Y/Y

Asia Pacific growth of 44% propped up the global broader market, Americas remained flat and EMEA struggled

New scope awards in Asia Pacific accounted for 94% of TCV

BPO accounted for almost half of Asia Pacific TCV

India TCV rebounded strongly

India-heritage service providers outperformed their US-heritage counterparts across all categories

Anticipate a soft 3Q globally though 4Q TCV may pick up because of larger deals in the pipeline

Unprecedented levels of TCV in 2H12 are required for the global market to meet the record-high 2011 TCV result

Asia Pacific on track to have it’s best year yet for BPO awards

Asia Pacific need only deliver its five year average performance to result in a banner year for outsourcing

Asia Pacific 1H12 TPI Index Summary and Outlook

summary market

outlook market

© 2012 Information


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Learn More Please contact us with your questions and comments.

► Arno Franz

www.considerthesourceblog.com

Partner & President, Asia Pacific +61 (0) 2 9006 1610 [email protected]

► Gerry Clark Partner, South & East Asia +65 (0) 9634 5927 [email protected]

► Dinesh Goel Partner, India +91 98458 93787 [email protected]

www.isg-one.com