modernization and migration: ao and cloud in 2014
DESCRIPTION
Application outsourcing (AO) revenues are slowing for all but the top professional services vendors. These large vendors continue to grow revenues by successfully migrating clients to cloud, orchestrating a completely new landscape for IT services and generating new earnings opportunities. Revenue growth has spurred investment, acquisitions, new partnerships and additional product developments in the IT services sector. On Wednesday, April 30, 2014, Principal Analyst Patrick Heffernan, Principal Analyst Ramunas Svarcas and Analyst Elitsa Bakalova shared their perspectives on the latest IT services vendor results and provide additional insight into vendor performance as reported in TBR’s IT Services Vendor Benchmark, with a focus on AO and cloud, and how the vendors covered in TBR’s IT Services Vendor Benchmark are growing revenue in a challenging market.TRANSCRIPT
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
TBR’s Professional Services Business QuarterlySM
Research Highlights and Outlook
Modernization and Migration: Applications Outsourcing (AO) and Cloud in 2014 Technology Business Research (TBR) Quarterly Webinar Series
April 30, 2014
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Professional Services Business Quarterly Research Highlights and Outlook: Webinar Presenters
Jennifer HamelProfessional Services Analyst
Email: [email protected]: @jenhameltbr
Elitsa BakalovaProfessional Services Analyst
Email: [email protected]: @ElitsaBakalova
Patrick HeffernanIT Services Practice Manager/Principal Analyst
Email: [email protected]: @TBR_PatrickH
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• The Professional Services Practice provides continual coverage of 33 vendors in published quarterly and semiannual reports.
• Of those vendors, 31 are included in our IT Services Vendor Benchmark.o TBR reports are unique for their deep holistic analysis of
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Professional Services Business Quarterly Research Highlights and Outlook: Webinar Overview
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TBR Professional Services Business Quarterly (PSBQ) Portfolio
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 4Q13
Cloud Adoption: As vendors help clients migrate legacy workloads to the cloud, AO engagements shift, forcing new strategies and opportunities.
Industry Change: Partnerships fill gaps in technology, industry capabilities and geographic reach, while automation and IP take over in AO delivery.
AO Performance: AO growth decelerated to 4.2% year-to-year in 4Q13 as clients invested in shorter-term tactical projects and migrated legacy applications to cloud.
The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits
SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 4Q13
Cloud Adoption: As vendors help clients migrate legacy workloads to the cloud, AO engagements shift, forcing new strategies and opportunities.
AO Performance: AO growth decelerated to 4.2% year-to-year in 4Q13 as clients invested in shorter-term tactical projects and migrated legacy applications to cloud.
The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits
SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
Industry Change: Partnerships fill gaps in technology, industry capabilities and geographic reach, while automation and IP take over in AO delivery.
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Performance
Outsourcing growth, including AO, is decelerating due to widespread commoditization of services and adoption of lower-priced cloud offerings
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATESNOTE: Includes average trailing 12-month ITO revenue from TBR’s IT Services Vendor Benchmark; not representative of a total global market view.
Soft demand for traditional packaged applications, price pressures, services commoditization, demand for shorter-term tactical projects and shift to cloud drove a deceleration in AO revenue growth in 4Q13
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While AO was No. 2 in average trailing 12-month revenue growth, vendors have opportunities in application modernization and migration to cloud- and mobility-enabled IT environments and provision of industry-aligned application development
PSBQ 4Q13 Research Highlights and 2014 Outlook: Performance
Cloud, mobility and industry specialization are key factors for AO revenue growth as vendors seek to accommodate clients’ needs
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATESNOTE: Includes average trailing 12-month service line revenues from TBR’s IT Services Vendor Benchmark; not representative of a total global market view. Dots indicate year-to-year growth and arrows indicate directional change relative to the year-ago quarter.
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Vendors such as Accenture and TCS bundle AO with ITO and C&SI to deliver end-to-end solutions that drive AO growth
PSBQ 4Q13 Research Highlights and 2014 Outlook: Performance
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
TCS bundles applications solutions with offerings across its service lines to create additional value for clients and pursue larger-scale signings opportunities. TCS focuses on development and management of mobile applications.
Accenture gains AO opportunities by bundling AO with C&SI and ITO to meet clients’ transformation needs, as well as tying AO with mobility capabilities. For example, Accenture works with YSPay in China to develop and deploy the Accenture Mobility Platform and provide related AO services.
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 4Q13
Cloud Adoption: As vendors help clients migrate legacy workloads to the cloud, AO engagements shift, forcing new strategies and opportunities.
AO Performance: AO growth decelerated to 4.2% year-to-year in 4Q13 as clients invested in shorter-term tactical projects and migrated legacy applications to cloud.
The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits
SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
Industry Change: Partnerships fill gaps in technology, industry capabilities and geographic reach, while automation and IP take over in AO delivery.
TBR
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Professional Services Vendor Trends for 4Q13 — Cloud Adoption
Cloud computing overlaps vendors’ traditional outsourcing portfolios and revenues, forcing vendors to adjust business models to the new era
PSBQ 4Q13 Research Highlights and 2014 Outlook: Cloud Adoption
SOURCE: TBR AND COMPANY DATANOTE: Includes only 21 of the 29 vendors covered in TBR's Managed Private and Professional Services Cloud Benchmark.
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As cloud cuts into AO, vendors adjust long-term strategies and anticipate some near-term activity, particularly around migration
PSBQ 4Q13 Research Highlights and 2014 Outlook: Cloud Adoption
Long-term strategies
Example textThis is an example text.
Short-term burst of
activity and revenue
Bundling with other
Outsourcing services
Migrating legacy apps to
the Cloud
Developing vertically
aligned apps
Upgrading and modernizing apps for the
Cloud
IMAGE SOURCE: WWW.EMWARETECHNOLOGIES.COM
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AO vendors with the largest, most innovative and most vertical-focused expertise will succeed in the new cloud environmentAs every vendor adjusts, three distinct types will outpace their peers in the AO space
PSBQ 4Q13 Research Highlights and 2014 Outlook: Cloud Adoption
Innovation-led
Cloud-heavy
Vertical expertise
Atos
IBM
CapgeminiLeveraging strategic
alliances, partnerships and acquisitions to expand
breadth and depth
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 4Q13
Cloud Adoption: As vendors help clients migrate legacy workloads to the cloud, AO engagements shift, forcing new strategies and opportunities.
Industry Change: Partnerships fill gaps in technology, industry capabilities and geographic reach, while automation and IP take over in AO delivery.
AO Performance: AO growth decelerated to 4.2% year-to-year in 4Q13 as clients invested in shorter-term tactical projects and migrated legacy applications to cloud.
The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits
SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Industry Change
Vendors will bridge the gap between legacy application systems and cloud-based management platforms to pursue long-term AO growth
Cutting IT Costs Preparing for IT Future
AO Key Trends and 2014 Outlook
2012 2013 2014
2012 2013 2014
• IT spending is up; the recession is over.
• Vendors bundle applications services into end-to-end outsourcing portfolios.
• Vendors look to add value to AO offerings beyond cost takeout to differentiate.
• Strategic alliances emerge as the key method to quickly integrate industry expertise to improve AO solutions.
• Growing client interest in cloud and mobility will drive application modernization services.
• Vendors will use industry-oriented systems integration to shepherd clients toward platform-based managed application services.
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Clients embrace India-centric vendors’ ability to reduce AO costs and deliver modernization outcomes
PSBQ 4Q13 Research Highlights and 2014 Outlook: Industry Change
India-centric vendors took market share from global firms by pricing aggressively to win contracts up for renewal in mature markets and cross-selling AO transformation
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATESNOTE: Graph is based on data for Cognizant, Infosys, HCLT, TCS and Wipro ITS.
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SOURCE: TBR RESEARCH AND COMPANY DATA
Partnerships help India-centric firms fill gaps in emerging technologies, industry expertise and geographic reach.
Alliances enable India-centric vendors to maintain competitiveness as clients transition to cloud and mobile application environments
PSBQ 4Q13 Research Highlights and 2014 Outlook: Industry Change
Vendor Partner DescriptionHCLT CSC (1Q14) HCLT and CSC will jointly deliver application modernization services to help enterprises
transition to cloud-enabled platforms, with CSC providing its BizCloud platform and HCLT contributing its low-cost delivery resources. The partners will establish two delivery centers in India and a Center of Excellence for banking.
TCS Nissan (4Q13) TCS partnered with Nissan to release the TCS Embedded Code Analyzer, a software assurance life cycle solution that helps automotive, high-tech and manufacturing companies improve time to market for products that rely on embedded software.
Wipro Tele2 (4Q13) Wipro ITS continued to show interest in the M2M segment, collaborating with Tele2 to design and implement solutions for M2M and the Internet of Things with a focus on Europe.
Wipro SOA Software (4Q13)
Wipro will implement SOA Software’s API management solutions.
Cognizant Infinite Corp. (3Q13)
Infinite Corp. specializes in migrating applications from IBM’s AS/400 application platform to newer environments, including the cloud. Cognizant offers Infinite’s application modernization services to its global client base.
Infosys SAP (2Q13) Infosys expanded its partnership with SAP to release an enhanced version of the SAP Retail Execution mobile application, which helps retail industry clients to glean sales insights via tablets and smartphones.
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IT services vendors will continue to strip labor out of their AO operating models through automation and IP monetization
PSBQ 4Q13 Research Highlights and 2014 Outlook: Industry Change
While services will continue to require a human component, the number of people involved in basic redundant tasks will decline as automation takes over
Application Services Commoditization
SOURCE: TBR’S GLOBAL DELIVERY BENCHMARK SPRING 2014Note: AO headcount for 14 IT services vendors including Accenture, Atos, Capgemini, Cognizant, Dell Services, CSC, HCLT, HP Services, IBM GS, Infosys, TCS, T-Systems, Wipro ITS and Xerox.
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Vendors build out their portfolios and rebalance their personnel to best deliver services in the new age of IT
PSBQ 4Q13 Research Highlights and 2014 Outlook: Industry Change
IBM GS: AO headcount will face consistent long-term contraction as the firm transitions its portfolio from resource-intensive bespoke applications development services to SaaS-based industry-specific applications delivery.
HP Svcs: HP Services is enhancing its global delivery capabilities by increasingly utilizing offshore and nearshore talent to lower its cost profile and better appeal to local customers.
Cognizant: Cognizant is ramping up hiring of onshore personnel with skills in cloud and mobility to meet regional clients’ demand for application modernization and offset the potentially negative impact of H-1B visa reform.
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PSBQ 4Q13 Research Highlights and 2014 Outlook: Summary
At the leading edge of cloud adoption, AO growth will continue until cloud adoption matures, revealing vendors with new revenue streams
Vendors must develop new cloud-related, innovative or vertically specific revenue streams or shift to managed services to avoid trailing further behind IT services leaders.
Application outsourcing vendors with the foresight to recognize the changing dynamics and commoditization of
outsourcing services will emerge from the convergence into the cloud
environment as winners.
SOURCE: WWW.IMOMENTOUS.COM
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PSP Research Current Topics 1Q14 Report Key Themes• Select Vendor Reports:o Accenture o Atoso Capgeminio Cisco Serviceso Cognizanto CSCo Dell Serviceso Fujitsuo HP Serviceso IBM Global Serviceso Infosyso TCSo T-Systemso Wipro ITSo Xerox
• Benchmarks: Management Consulting, Healthcare IT Services, Public Sector, Global Delivery Market Landscape, Managed Private & Professional Services Cloud
Assess value propositions, key industries of investment and IP development in specific industry verticals. Assess leading and lagging vendors’ approaches to creating and developing IP (e.g., R&D, M&A, joint ventures, alliances, customer engagements).
Analyze how IT services vendors position to take advantage of the changing security landscape. Assess vendors’ security offerings and how offerings are scaled.
Understand IT services vendors’ near-term outlook for Canada and what their strategies are for local market expansion. Identify the verticals being targeted by IT services vendors in Canada, and which service offerings are gaining the most traction among clients in the region.
Industry-specific IP
Security
Canada
PSBQ 4Q13 Research Highlights and 2014 Outlook: 1Q14 Key Topics
TBR will analyze IT services vendors’ investments and strategies to expand capabilities in financial services, security and digital technology
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Questions?
PSBQ 4Q13 Research Highlights and 2014 Outlook
TBR
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Patrick HeffernanIT Services Practice Manager/Principal Analyst
Email: [email protected]: @TBR_PatrickHTelephone: 603.758.1834
Jennifer HamelProfessional Services Analyst
Email: [email protected]: @jenhameltbrTelephone: 603.758.1875
James McIlroy Vice President of SalesEmail: [email protected]: 603.929.1166
Elitsa BakalovaProfessional Services Analyst
Email: [email protected]: @ElitsaBakalovaTelephone: 603.929.1166
TBR IT Services Vendor Benchmark Webinar Contact Information
Twitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannelLinkedIn: www.linkedin.com/company/technology-business-research
TBR 4Q13 Syndicated Research Topics | Confidential and Proprietary
TBR
©2014 Technology Business Research Inc.
PSP Syndicated Research CoverageIT Services Vendors Public Sector Vendors Benchmarks
(Benchmark XLS data also available)
• Accenture• Atos• Capgemini• CGI*• Cisco Services• Cognizant• CSC• Dell Services• Fujitsu• HCL Technologies• HP Services• IBM Global Services• Infosys• T-Systems• Tata Consultancy Services• Unisys• Wipro IT Services• Xerox Services
• Booz Allen Hamilton*• CACI International*• General Dynamics IS&T*• L-3 Communications*• Leidos*• Lockheed Martin IS&GS*• ManTech*• Northrop Grumman IS&TS*• Raytheon Intelligence, Information &
Services*• SAIC*
• Global Delivery Market Landscape • Healthcare IT Services Vendor
Benchmark• IT Services Vendor Benchmark • Management Consulting Benchmark• Public Sector IT Services Vendor
Benchmark• Software Alliance Benchmark
Healthcare IT Services Vendors• Accenture HITS*• CSC HITS*• Dell HITS*• HP HITS*• IBM HITS*
Management Consulting Vendors• Bain & Company*• Booz & Company*• Boston Consulting Group*• Deloitte Consulting*• McKinsey & Co.*
TBR Professional Services Practice Syndicated Coverage
23
*Semiannual publication
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
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