1st Quarter 2012, Global TPI Index

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The global outsourcing industry is constantly evolving through new contracting award characteristics and an expanding universe of successful service providers. ISG's TPI Index helps industry participants, enterprises and organizations keep pace and capitalize from the latest data on outsourcing trends. It is the authoritative source for marketplace intelligence related to outsourcing: transaction structures and terms, industry adoption, geographic prevalence and service provider metrics.

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1st Quarter 2012, Global TPI Index

  1. 1. The TPI IndexGlobal Sourcing Market Data and Insights First Quarter 2012 Hosted by: Darrin Peller, Barclays Capital April 12, 2012
  2. 2. 2 Welcome to the 38th Quarterly Outsourcing Index Call Covering the state of the outsourcing industry for global, commercial contracts with total contract value greater than $25 million. John Keppel Partner & President Research & Managed Services and Chief Marketing Officer, ISG Duncan Aitchison Partner & President North Europe, ISG Paul Reynolds Chief Research Officer, © 2012 ISG Momentum InformationServices Group, Inc.All Rights ReservedISG-one.com *Contracts with TCV > $25M
  3. 3. 3 At A Glance “ GLOBAL BROADER MARKET AWARDS AND TCV DROPPED ON THE HEELS OF RECORD 2011 RESULTS RESTRUCTURINGS NOTABLY ↑ Y/Y, WHILE NEW SCOPE TCV CONTINUES TO DECLINE EMEA TCV DECLINES ON DEARTH OF LARGE DEALS AMERICAS TCV ↑ Q/Q “ STRONG RESULTS INCLUDE THE LONE 1Q11 MEGA DEAL 1Q12 TCV Q/Q 1Q Y/Y 1Q12 Q/Q 1Q Y/Y Score Card ($B) Change Change Counts Change Change Global Market $ 18.7 -35% -22% 184 -18% -31% Mega Deals $ 1.5 -83% -93% 1 -80% -67% New Scope $ 10.7 -45% -46% 137 -23% -35% Restructurings $ 8.0 -13% 82% 47 2% -18% ITO $ 12.6 -37% -20% 120 -22% -29% BPO $ 6.1 -30% -27% 64 -11% -34% EMEA $ 8.6 -53% -32% 79 -23% -37% © 2012 Information Asia Pacific $ 1.8 -33% -36% 18 flat -55%Services Group, Inc.All Rights Reserved Americas $ 8.3 8% -3% 87 -16% -14%ISG-one.com *Contracts with TCV > $25M
  4. 4. 4 Broader Market Contract Award Trends 1Q12 TCV declined a substantial 35% Q/Q and 22% Y/Y, not unexpected after a strong third and fourth quarter 2011. Quarterly TCV ($B)* Comparison ↓35% $28.1 $24.8 $24.0 $27.1 $28.7 $21.7 $18.4 $19.6 $18.7 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 The TCV Hangover Effect - Previous Quarterly Precedence 2 Prior 2 Prior Qtrs Avg Qtrs Avg $28.5 $29.9 ↓40% ↓27% $28.1 $29.0 $31.6 $28.1 $17.2 $21.7 © 2012 InformationServices Group, Inc.All Rights Reserved 4Q05 1Q06 2Q06 4Q09 1Q10 2Q10ISG-one.com *Contracts with TCV > $25M
  5. 5. 5 Broader Market Mega Deals & Relationships Trends Only one was signed in 1Q, an ITO mega deal in the Americas valued at $1.5B. 1Q12 Mega Relationship counts were the 3rd highest in three years. Mega Deal TCV ($B)* Comparison TCV (B) Counts 5 4 3 2 $8.8 1 $7.1 $4.1 $2.0 $1.5 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Mega Relationship ACV ($B)* Comparison ACV (B) Counts 11 75% of 1Q Mega 7 7 Relationships are 6 3 $1.8 Restructurings $1.6 $0.9 $0.9 $0.5 © 2012 Information 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12Services Group, Inc.All Rights ReservedISG-one.com *Contracts with TCV > $25M
  6. 6. 6 Broader Market New Scope & Restructuring Trends While down 13% Q/Q, 1Q12 Restructuring TCV almost doubled Y/Y. New Scope was off by nearly 50% Q/Q and Y/Y. New Scope vs. Restructuring Quarterly TCV ($B)* Comparison New Scope Restructured $19.6 $19.5 $16.4 $17.2 $10.7 $11.0 $9.2 $8.0 $3.8 $4.4 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 New Scope vs. Restructuring TTM TCV ($B)* Comparison New Scope TCV Restructuring TCV 2Q11-1Q12 $58 $36 2Q10-1Q11 $65 $24 66% of Large Deals ($100M - $999M TCV) 2Q09-1Q10 $74 $27 have been Restructurings © 2012 Information 2Q08-1Q09 $66 $22 in the past 3 quartersServices Group, Inc. 2Q07-1Q08 $14All Rights Reserved $71ISG-one.com *Contracts with TCV > $25M
  7. 7. 7 ITO Contract Award Trends ITO experienced Q/Q decreases of 22% in counts and 37% in TCV. ITO mirrors the Broader Market pattern of a ‘hangover’ quarter following two robust quarters. Quarterly TCV ($B)* Comparison Top ITO Providers $22.2 $20.0 by TTM TCV $15.6 $13.0 $12.6 New Scope Restructuring Accenture Atos BT BT Capgemini CGI 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 Cognizant CSC CSC Dell Dell HCL New Scope vs. Restructuring TTM TCV ($B)* Fujitsu HP New Scope TCV Restructuring TCV HCL IBM HP Infosys 2Q11-1Q12 $37.8 $26.2 IBM Xerox 2Q10-1Q11 $47.0 $17.8 Infosys TCS 2Q09-1Q10 $55.1 $20.8 Telstra 2Q08-1Q09 $39.9 $16.4 T-Systems © 2012 2Q07-1Q08 Xerox Information $45.3 $10.1Services Group, Inc.All Rights Reserved Note: Service providers in alphabetical order; no rankings implied.ISG-one.com Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database. *Contracts with TCV > $25M
  8. 8. 8 BPO Contract Award Trends BPO experienced Q/Q decreases of 10% in counts and 30% in TCV. The Q/Q comparison is tough against the strong 2011, the result of Mega Deal activity. Quarterly TCV ($B)* Comparison $8.3 $8.7 Top BPO Providers $7.2 by TTM TCV $5.9 $6.1 Accenture Capgemini Capita 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 Carillion Cognizant Genpact New Scope vs. Restructuring TTM TCV ($B)* HCL IBM New Scope TCV Restructuring TCV Infosys 2Q11-1Q12 $20.3 $9.8 Logica RR Donnelly 2Q10-1Q11 $17.9 $6.2 Sabre 2Q09-1Q10 $18.9 $6.6 TCS Xchanging 2Q08-1Q09 $26.5 $5.7 Xerox © 2012 2Q07-1Q08 $25.5 $3.9 InformationServices Group, Inc.All Rights Reserved Note: Service providers in alphabetical order; no rankings implied.ISG-one.com Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database. *Contracts with TCV > $25M
  9. 9. 9 EMEA Contract Award Trends 1Q12 TCV was down 53% Q/Q and 32% Y/Y. The ‘hangover’ effect and, potentially, Eurozone financial concerns impacted results. Quarterly TCV ($B)* Comparison $18.3 $12.2 $12.7 $9.2 $8.6 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 New Scope Quarterly TCV ($B)* Comparison Comparison vs. Restructuring TTM TCV ($B)* New Scope TCV Restructuring TCV 2Q11-1Q12 $31.7 $21.3 2Q10-1Q11 $32.6 $11.9 2Q09-1Q10 $38.5 $8.8 © 2012 2Q08-1Q09 $31.3 $12.1 InformationServices Group, Inc.All Rights Reserved 2Q07-1Q08 $39.2 $4.7ISG-one.com *Contracts with TCV > $25M
  10. 10. 10 Asia Pacific Contract Award Trends AP contracting counts were flat Q/Q. However, TCV was down by one-third both Q/Q and Y/Y, ending up well below the recent first-quarter average. Quarterly TCV ($B)* Comparison $2.8 $2.7 $1.6 $1.8 $1.4 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 New Scope vs. Restructuring TTM TCV ($B)* Comparison New Scope TCV Restructuring TCV 2Q11-1Q12 $5.6 $2.7 2Q10-1Q11 $8.8 $2.5 2Q09-1Q10 $9.0 $3.2 © 2012 2Q08-1Q09 $9.8 $1.3 InformationServices Group, Inc. 2Q07-1Q08All Rights Reserved $7.6 $1.6ISG-one.com *Contracts with TCV > $25M
  11. 11. 11 Americas Contract Award Trends Americas TCV rose 8% Q/Q, making it one of the three highest quarters since the beginning of 2010. Americas posted the only 1Q12 Mega Deal. Quarterly TCV ($B)* Comparison $14.6 $9.4 $8.5 $7.7 $8.3 1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 2Q 3Q 4Q 1Q12 New Scope vs. Restructuring TTM TCV ($B)* Comparison New Scope TCV Restructuring TCV 2Q11-1Q12 $20.7 $12.1 2Q10-1Q11 $23.5 $9.6 2Q09-1Q10 $26.5 $15.4 © 2012 2Q08-1Q09 $25.2 $8.6 InformationServices Group, Inc.All Rights Reserved 2Q07-1Q08 $24.0 $7.7ISG-one.com *Contracts with TCV > $25M
  12. 12. 12Special Topic for First Quarter 2012 Paul ReynoldsChief Research Officer, ISG Momentum
  13. 13. 13 Anticipating Increased Restructuring Volume Contract expirations are occurring at a faster rate as the result of dramatically increased transaction counts and declining average contract durations. Trends Impacting Restructuring Volumes ↑ 250% 933 Contract Awards 6 5 Average Duration 377 ↓ 1 Yr. 2002 2011 Record Levels of Expiring Contracts ↑ 20% Y/Y 690 570 310 © 2012 InformationServices Group, Inc.All Rights Reserved 2007 2011 2012eISG-one.com *Contracts with TCV > $25M
  14. 14. 14 Motivations Behind Preemptive Renegotiation Efforts Contract renegotiations can be driven by either the client or the service provider, but the leverage is, more often than not, with the Client. Client Motivations Provider Motivations Increase Scope or Service Levels   Chance for Sole Sourced Renewal Reduce Price for Existing Scope   Retain Full Scope Add Emerging Services   Introduce New Services © 2012 Information Restructuring creates the opportunity for Best-of-Breed providers to winServices Group, Inc.All Rights Reserved new clients looking for targeted solutionsISG-one.com *Contracts with TCV > $25M
  15. 15. 15 Who will win these restructurings? Applying the 80/80 rule: 80% of the time a deal is renegotiated with the incumbent provider, and they typically retain about 80% of the scope. 2012 Restructuring by Provider Share of ACV 37% 32% 18% 13% Americas-heritage Niche Providers India-heritage Major European © 2012 InformationServices Group, Inc.All Rights ReservedISG-one.com *Contracts with TCV > $25M
  16. 16. 16 1Q12 TPI Index Summary and Outlook  Global Broader Market ↓1Q12 loses momentum after two quarters of impressive growth  Restructuring TCV ↑ Q/Q, not enough to make up for New Scope declines market summary  Short fall in previously robust EMEA TCV had the greatest impact on the market  ITO and BPO ↓ Q/Q in contract number and TCV  New Scope ITO ↓, but New Scope BPO ↑ in the last Trailing Twelve Months market  Look for a soft first half 2012 and a reviving second half outlook  Restructuring 2H12 activity may lead an upswing in the overall market © 2012 InformationServices Group, Inc.All Rights ReservedISG-one.com *Contracts with TCV > $25M
  17. 17. 17 Learn More Please contact us with your questions and comments. ► John Keppel ► Duncan Aitchison Partner & President Research & Partner & President Managed Services and Chief North Europe, ISG Marketing Officer +44 (0)1628 21702 +44 (0)7879 432 212 duncan.aitchison@isg-one.com john.keppel@isg-one.com ► Paul Reynolds Chief Research Officer, ISG Momentum +1 508 625 2194 paul.reynolds@isg-one.com --- Media Contacts --- ► Andrew Park ► Rhena Wallace Director, Global Communications & Cohn & Wolfe for ISG Branding, ISG +1 212 798 9832 +1 919 259 9252 rhena.wallace@cohnwolfe.com © 2012 Information andrew.park@isg-one.comServices Group, Inc.All Rights ReservedISG-one.com www.considerthesourceblog.com *Contracts with TCV > $25M
  18. 18. www.isg-one.com

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