1Q13 ISG Outsourcing Index, EMEA

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The ISG Outsourcing Index (formerly the TPI Index) provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

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1Q13 ISG Outsourcing Index, EMEA

  1. 1. The ISG Outsourcing Index, EMEA Market Data and Insights First Quarter 2013 Hosted by: John King Barclays Capital 15 April 2013
  2. 2. 2 Welcome to the 42nd Quarterly ISG Outsourcing Index EMEA Covering the state of the outsourcing industry for global, commercial contracts.* John Keppel Dr. David Howie President & Chief Partner Marketing Officer Bernd Schaefer Partner © 2013Information Services Group, Inc. All Rights Reservedisg-one.com *Contracts with ACV ≥ €4M
  3. 3. 3 At A Glance “ BROADER MARKET SAGGED IN 1Q13, BOTH Q/Q AND Y/Y MEGA-RELATIONSHIPS WERE UP OVER 50% Y/Y, BUT SMALL AWARDS SHOWED CONSIDERABLE WEAKNESS BPO MAINTAINED RECENT STRENGTH, WITH ACTIVITY UP Q/Q, BUT ITO RESULTS FELL SIGNIFICANTLY Y/Y MATURE MARKETS IN AMERICAS AND EMEA DECLINED SHARPLY Y/Y HEALTHY INCREASE IN ASIA PACIFIC PERFORMANCE, “ WITH POSITIVE RESULTS IN AUSTRALIA/NEW ZEALAND 1Q13 1Q Y/Y 1Q Q/Q 1Q13 1Q Y/Y 1Q Q/Q Scorecard ACV (€B)* Change Change Counts Change Change Global Market € 3.1 -27% -24% 223 -24% -16% New Scope € 1.7 -31% -37% 166 -22% -9% Restructurings € 1.4 -22% 1% 57 -28% -30% Mega-relationships € 1.0 54% 4% 7 -13% -79% ITO € 1.9 -35% -28% 127 -34% -30% BPO € 1.2 -10% -18% 96 -3% 16% © 2013Information Services Americas € 1.2 -39% -15% 90 -38% -16% Group, Inc. All Rights Reserved EMEA € 1.5 -20% -30% 105 -15% -17% Asia Pacific € 0.4 8% -23% 28 22% -7%isg-one.com *Contracts with ACV ≥ €4M
  4. 4. 4 Broader Market Contract Award Trends ACV of just over €4B was down 27% Y/Y and 24% Q/Q. However, the trailing 12- month ACV was on par with the previous 12 month period, tempering results. Broader Market ACV (€B)* Avg of Prior 1Qs € 4.5 € 4.9 € 4.3 € 4.3 € 3.1 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 Broader Market Counts New Scope vs. Restructuring ACV(B)* Avg of Prior New Scope Restructuring 349 1Qs 300 € 3.2 € 2.5 € 2.7 292 264 € 1.7 259 223 € 1.8 © 2013 € 1.4 € 1.4Information Services € 1.1 Group, Inc. All Rights Reserved 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13isg-one.com *Contracts with ACV ≥ €4M
  5. 5. 5 Broader Market Contract Trends for the Largest Deals Mega-relationships, deals with ACV of €80M+, were up 54% Y/Y and 4% Q/Q. Mid to small sized awards dipped, but the trailing 12-month compare was stable. ACV (€B)* by Bands € 4 - 79M € 40-79M € 80M + Mega-relationships in 8 Quarter Increments New Scope vs. Restructuring Counts 1.9 1.7 New Scope Restructuring 1.4 1.2 0.7 0.6 0.9 1.0 0.5 0.8 0.8 0.7 0.9 0.7 0.9 0.7 0.2 0.4 2Q11 - 1Q13 31 31 2Q09 - 1Q11 37 22 3.8 3.7 3.1 3.3 3.1 3.2 2.8 2.9 1.9 2Q07 - 1Q09 48 13 © 2013Information Services 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 Group, Inc. All Rights Reservedisg-one.com *Contracts with ACV ≥ €4M
  6. 6. 6 EMEA Contract Award Trends EMEA ACV of €1.5B was down 32% Q/Q and 21% Y/Y. Restructuring ACV grew modestly while New Scope ACV fell sharply. EMEA ACV (€B)* Avg of Prior 1Qs € 2.2 € 2.8 € 3.0 € 2.4 € 2.2 € 2.5 € 2.3 € 2.2 € 1.9 € 1.8 € 1.9 € 1.9 € 1.6 € 1.5 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 EMEA Counts by ACV Band EMEA New vs. Restructuring ACV(€B)* € 4 - 15M €16 - 79M € 80M + New Scope Restructuring 2 3 4 8 3 5 4 7 3 € 1.65 € 1.50 33 31 37 32 29 € 1.31 25 21 21 21 € 0.75 129 € 0.74 € 0.70 © 2013 96 97 83 82 91 81 € 0.55 € 0.60Information Services 76 69 Group, Inc. All Rights Reserved 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13isg-one.com *Contracts with ACV ≥ €4M
  7. 7. 7 EMEA Contract Award Trends Detail The UK and DACH had weak 1Q13 results. However, Nordics and Benelux, held steady. EMEA Sub-region ACV (€B)* EMEA Industry ACV (€B)* Prior 5 Like-Qtr Range Prior 5 Like-Qtr Avg 1Q12 1Q13 Prior 5 Like-Qtr Avg 1Q13 € 0.9 Manufacturing € 0.54 € 0.8 € 0.37 € 0.7 € 0.72 € 0.51 Financial Services € 0.38 € 0.6 Energy € 0.34 € 0.33 € 0.5 € 0.50 Travel, Transport, € 0.28 € 0.4 Leisure € 0.18 € 0.35 € 0.31 € 0.33 Telecom & Media € 0.24 € 0.3 € 0.30 € 0.06 € 0.29 € 0.2 € 0.22 Business Services € 0.10 € 0.09 € 0.1 € 0.09 € 0.08 € 0.06 € 0.04 € 0.05 € 0.05 € 0.03 € 0.05 Retail € 0.02 € 0.06 €- © 2013Information Services UK & DACH Nordics Benelux France Southern Africa & E. Europe Healthcare & € 0.05 Group, Inc. Ireland Europe Middle & Russia Pharma € 0.06 All Rights Reserved Eastisg-one.com *Contracts with ACV ≥ €4M
  8. 8. 8 EMEA ITO Contract Award Trends ITO ACV of €1.1B was down 15% Q/Q and 8% Y/Y. Contract numbers fell to their lowest point since 4Q 2008. EMEA ITO Annual ACV (€B)* Avg of Prior Qs € 1.4 € 2.5 € 2.3 € 2.0 € 2.0 € 1.7 € 1.6 € 1.6 € 1.2 € 1.2 € 1.2 € 1.1 € 1.3 € 1.1 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 EMEA ITO Counts EMEA ITO New vs. Restructuring ACV (€B)* New Scope Restructuring 122 Avg of Prior Qs 84 91 € 1.18 € 1.10 € 0.82 € 0.80 66 67 € 0.92 € 0.59 © 2013 € 0.55Information Services € 0.45 € 0.45 € 0.43 Group, Inc. All Rights Reserved 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13isg-one.com *Contracts with ACV ≥ €4M
  9. 9. 9 EMEA BPO Contract Award Trends While BPO contract numbers remained buoyant in the first quarter, ACV fell due to the absence of large BPO deals in the region. EMEA BPO Annual ACV (€B)* Avg of Prior 1Qs € 0.53 € 0.93 € 0.77 € 0.59 € 0.64 € 0.66 € 0.66 € 0.66 € 0.54 € 0.35 € 0.41 € 0.39 € 0.28 € 0.30 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 EMEA BPO Counts EMEA BPO New vs. Restructuring ACV (€B)* Avg of Prior New Scope Restructuring 42 1Qs 39 € 0.68 37 39 39 € 0.51 € 0.47 29 € 0.25 € 0.25 € 0.15 € 0.21 € 0.10 € 0.12 © 2013 € 0.19Information Services Group, Inc. All Rights Reserved 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13isg-one.com *Contracts with ACV ≥ €4M
  10. 10. 10 Top Service Providers in EMEA The top service providers based on 1Q13 ACV or TTM ACV awarded 1Q13 Trailing 12 Months EMEA Top 20 EMEA Top 20 Accenture Accenture AT&T AT&T Capgemini Atos CGI BT Communisis Capgemini Evry CGI Genpact CSC HCL Evry HP HCL Infosys HP Lottomatica IBM Nokia Infosys SQS ISS Global A/S Swisscom Jones Lang LaSalle TCS Mahindra Satyam Thales MITIE Tieto Serco Virtusa TCS © 2013 Xchanging T-SystemsInformation Services Group, Inc. Xerox Xchanging All Rights Reservedisg-one.com Note: Service providers in alphabetical order; no rankings implied. *Contracts with ACV ≥ €4M Placements based on ACV from commercial contract awards sourced from ISG Contracts Knowledgebase ®.
  11. 11. 11 Americas Contract Award Trends Americas ACV of €1.2B was down 39% Y/Y and 15% Q/Q. Americas BPO is up 17% Y/Y and 50% Q/Q, outperforming the ITO sector for the first time. Americas ACV (€B)* Avg of Prior 1Qs € 2.0 € 2.3 € 2.3 € 2.1 € 1.6 € 1.6 € 1.6 € 1.8 € 1.4 € 1.5 € 1.4 € 1.5 € 0.9 € 1.2 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 Americas ITO vs. BPO ACV (€B)* Americas New vs. Restructuring ACV(€B)* ITO ACV BPO ACV New Scope Restructuring € 1.23 € 1.44 € 1.11 € 0.95 € 0.99 € 0.87 € 0.62 € 0.72 € 0.84 € 0.74 € 0.59 € 0.50 € 0.53 © 2013 € 0.63 € 0.49 € 0.52Information Services Group, Inc. All Rights Reserved 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13isg-one.com *Contracts with ACV ≥ €4M
  12. 12. 12 Americas Contract Award Trends Detail The U.S. contributed most to the drop in the Americas ACV, down 43% Y/Y and 24% Q/Q. Mexico continues to enjoy large-deal activity, boosting the ACV numbers. Americas Sub-region ACV (€B)* Americas Industry ACV (€B)* Prior 5 Like-Qtr Range Prior 5 Like-Qtr Avg 1Q12 1Q13 Prior 5 Like-Qtr Avg 1Q13 € 2.5 € 0.20 Manufacturing € 0.53 € 0.19 € 0.16 € 0.18 Financial Services € 0.30 € 2.0 € 0.16 € 0.28 € 1.85 € 0.14 € 0.22 Telecom & Media € 0.43 € 1.5 € 0.12 Business Services € 0.20 € 0.10 € 0.09 € 1.0 € 1.08 € 0.08 € 0.08 Healthcare & € 0.25 € 0.08 Pharma € 0.16 € 0.06 Retail € 0.10 € 0.02 € 0.5 € 0.04 € 0.02 € 0.02 Energy € 0.09 € 0.02 € 0.05 € 0.01 © 2013 €- € 0.00Information Services €- €- Travel, Transport, € 0.09 Group, Inc. US Canada Brazil Other Mexico Leisure € 0.07 All Rights Reserved LatAmisg-one.com *Contracts with ACV ≥ €4M
  13. 13. 13 Asia Pacific Contract Award Trends Asia Pacific ACV of almost €360M was up 8% Y/Y but down 23% Q/Q. However, the trailing 12-month ACV is up over 80% from the prior 12 month period. Asia Pacific ACV (€B)* Avg of Prior 1Qs € 1.13 € 0.37 € 0.86 € 0.52 € 0.58 € 0.46 € 0.38 € 0.37 € 0.42 € 0.33 € 0.36 € 0.26 € 0.28 € 0.28 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 AP ITO vs. BPO ACV (€B)* AP New vs. Restructuring ACV(B)* ITO ACV BPO ACV New Scope Restructuring € 1.06 € 0.34 € 0.37 € 0.24 € 0.25 € 0.44 € 0.18 € 0.33 € 0.27 € 0.29 € 0.09 € 0.11 © 2013Information Services € 0.09 € 0.07 €- € 0.19 € 0.07 Group, Inc. All Rights Reserved 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13 1Q11 2Q 3Q 4Q 1Q12 2Q 3Q 4Q 1Q13isg-one.com *Contracts with ACV ≥ €4M
  14. 14. 14 Asia Pacific Contract Award Trends Detail Australia/New Zealand and Japan posted positive results due to several large awards. Energy and Travel & Transport were up over historical averages. Asia Pacific Sub-region ACV (€B)* AP Industry ACV (€B)* Prior 5 Like-Qtr Range Prior 5 Like-Qtr Avg 1Q12 1Q13 Prior 5 Like-Qtr Avg 1Q13 € 0.25 Telecom & € 0.09 Media € 0.01 Manufacturing € 0.09 € 0.20 € 0.07 Financial € 0.07 Services € 0.05 € 0.15 Travel, € 0.14 € 0.04 Transport, € 0.08 € 0.12 Leisure € 0.11 € 0.10 Energy € 0.02 € 0.13 € 0.08 € 0.07 Business € 0.02 € 0.06 Services € 0.00 € 0.05 € 0.05 Retail € 0.01 € 0.03 € 0.00 © 2013 € 0.01 € 0.01Information Services €- €- Healthcare & € 0.001 Group, Inc. Pharma €- All Rights Reserved ANZ India and Japan ASEAN Greater South Korea South Asia Chinaisg-one.com *Contracts with ACV ≥ €4M
  15. 15. Special Topic for First Quarter 2013 John Keppel President & Chief Marketing Officer
  16. 16. 16 Leading Providers Experience Shift in Market Share Market Share Shifts 2009 - 2012 CAGR Disparity 2005 - 2012 ACV 2005 2009 2012 13% Awards 12% India-heritage 16% 32% India-heritage Providers Western-heritage Providers 7% 0.4% 7% 9% ACV Awards Western-heritage © 2013Information Services Group, Inc. All Rights Reservedisg-one.com *Contracts with ACV ≥ €4M
  17. 17. 17 Opportunities and Challenges for Short-term Growth 1 Continue Winning in the Mature UK and US Restructuring Markets India-heritage Restructuring ACV 2 Capitalize on BPO Growth via Investment in Vertical Solutions India-heritage BPO ACV Market Share Market Share 36% 20% 16% 4% $ $ 2005 2009 2012 Investment 2005 2009 2012 Investment 3 Make New Inroads into the Global Public Sector Markets 4 Increase European Market Share via Enhanced Offshore Value Prop India-heritage European $ $ $$ ACV Market Share 7% 13% © 2013Information Services Group, Inc. All Rights Reserved 2005-08 2009-12isg-one.com *Contracts with ACV ≥ €4M
  18. 18. 18 Staying Ahead: What got you here will not get you there. Long-term, the best defense may be a good offense, a challenge for western providers with high overhead, India-heritage providers need long-term growth engines to stay on trajectory. Capturing the Expected Growth in the Mid-Market India-heritage Providers have proven offshoring credentials Western providers have started to create dedicated mid-market organizations Lower Cost of Switching Puts Everybody on Notice Equal threat to all providers, no matter their heritage Incumbency advantage disappearing as transitions become less painful ITO Challenge Get familiar with the new buyers of emerging technologies, who sit outside the CIO’s organization. © 2013Information Services BPO Challenge Pay for performance, rather than for bodies, is becoming the norm. Pricing Group, Inc. All Rights Reserved € based on labor mark-up is becoming less attractive.isg-one.com *Contracts with ACV ≥ €4M
  19. 19. 19 1Q13 ISG Outsourcing Index Summary and Outlook Market continues to struggle to regain traction with soft spots in ACV smaller deal space and in New Scope ITO performance is weak and BPO remains the bright spot Trailing 12 months is encouraging and the Mega-relationship market market was strong summary EMEA New Scope activity fell unexpectedly but restructurings rose. Financial Services was off and BPO ACV fell while contract awards remained strong Americas saw decline in the US market and a low number of ITO contracts. BPO gains rise above ITO in the region. Asia Pacific held steady, with ACV and activity increasing Y/Y, and positive results in Australia/New Zealand. Keep expectations in check for 2Q13 with softness in the overall market market Positive signs point to a healthier outlook for the full year outlook Strength in BPO Positivity in the emerging markets in the last 12 months © 2013 Impact of timing on deal flow should eventually reboundInformation Services Group, Inc. All Rights Reservedisg-one.com *Contracts with ACV ≥ €4M
  20. 20. 20 Learn More Please contact us with your questions and comments. ► John Keppel President & Chief Marketing Officer +44 (0)7879 432 212 john.keppel@isg-one.com --- Media Contacts --- ► Denise Colgan ► Louise Fernley Marketing Director, EMEA, ISG Cohn & Wolfe for ISG +44 1737 371523 +44 207 331 5365 denise.colgan@isg-one.com louise.fernley@cohnwolfe.com © 2013Information Services Group, Inc. All Rights Reservedisg-one.com blog.isg-one.com *Contracts with ACV ≥ €4M
  21. 21. First Quarter 2013
  22. 22. 22 1Q13 TCV Scorecard 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. 1Q13 1Q Y/Y 1Q Q/Q 1Q13 1Q Y/Y 1Q Q/Q Scorecard TCV (€B)* Change Change Counts Change Change Global Market € 14.8 -20% -23% 189 -21% -19% New Scope € 7.8 -30% -42% 141 -18% -17% Restructurings € 7.0 -4% 18% 48 -26% -26% Mega-deals € 4.0 213% 111% 3 200% 50% ITO € 8.6 -33% -28% 104 -34% -33% BPO € 6.2 8% -16% 85 5% 9% Americas € 6.3 -25% -7% 77 -31% -21% EMEA € 6.9 -21% -32% 87 -19% -21% Asia Pacific € 1.6 11% -33% 25 32% -7% © 2013Information Services Group, Inc. All Rights Reservedisg-one.com *Contracts with TCV ≥ €20M *Contracts with ACV ≥ €4M
  23. 23. www.isg-one.comknowledge powering results®Information Services Group is a leading technology insights, market intelligence and advisory services company, serving morethan 450 clients around the world to help them achieve operational excellence. ISG supports private and public sectororganizations to transform and optimize their operational environments through research, benchmarking, consulting andmanaged services, with a focus on information technology, business process transformation, program management services andenterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, thedeepest data source in the industry, and more than five decades of experience of global leadership in information and advisoryservices. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.

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