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Third Quarter 2012, EMEA 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 …

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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  • 1. The TPI EMEA IndexEMEA Outsourcing Market Data and Insights Third Quarter 2012 Hosted by: John King Barclays Capital 19 October 2012
  • 2. 2 Welcome to the 40th Quarterly Outsourcing Index Call Covering the state of the outsourcing industry for global, commercial contracts. Duncan Aitchison Partner Bernd Schaefer Partner © 2012 InformationServices Group, Inc.All Rights Reservedisg-one.com *Contracts with ACV > €4M
  • 3. 3 Milestones 40th quarterly presentation signals a decade of TPI Index Conference Calls Spring Winter Summer Fall Spring Today 2003 2004 2005 2008 2011 Inaugural Recognised Identified the Led in calling Identified the Global and India-heritage growing influence out the growing shift of EMEA providers as an of restructurings, industry-wide sourcing growth Index Calls emerging entity and their impact on sourcing towards emerging that would affect service providers downturn markets how SPs compete The Index audience routinely includes 250 analysts, clients and service providers. © 2012 InformationServices Group, Inc. The ISG Contracts Knowledgebase®All Rights Reserved exceeds 24,000 contract records.isg-one.com *Contracts with ACV > €4M
  • 4. 4 Refocusing on ACV as the Primary Measure of the Market Going forward, an ACV-based analysis of the market will avoid masking the effects of declining contract durations on TCV. TCV Change Over Time ACV Change Over Time Year-to-date at 3Q Year-to-date at 3Q Growth since 2003 = 9% Growth since 2003 = 40% € 57 € 12 € 52 €8 2003 04 05 06 07 08 09 10 11 2012 2003 04 05 06 07 08 09 10 11 2012 © 2012 InformationServices Group, Inc. Typical Quarterly ACV = €4BAll Rights Reserved Typical Annual ACV = €16Bisg-one.com *Contracts with ACV > €4M
  • 5. 5 At A Glance 3Q12 ACV 3Q Y/Y 3Q Q/Q YTD ACV YTD Y/Y Scorecard (€B)* Change Change (€B)* Change Global Market € 3.8 -6% -10% € 11.8 3% New Scope € 2.6 16% -19% € 7.9 2% Restructurings € 1.2 -33% 17% € 4.0 6% Mega-Relationships € 1.2 1% -26% € 3.6 51% ITO € 2.5 -13% 8% € 7.3 -3% BPO € 1.3 12% -32% € 4.5 17% © 2012 EMEA € 2.0 -12% 14% € 5.5 -8% InformationServices Group, Inc. Americas € 1.3 -11% -8% € 4.3 2%All Rights Reserved Asia Pacific € 0.5 55% -51% € 1.9 72%isg-one.com *See Appendix for TCV Scorecard *Contracts with ACV > €4M
  • 6. 6 Global Market Contract Award Trends ACV was down 6% Y/Y and 10% Q/Q; YTD, ACV of $14.8B is up 3.5%. Global Market YTD ACV (€B)* $15 1H ACV 3Q ACV $13 $10 € 3.2 € 4.1 € 3.8 € 2.7 € 3.0 € 3.2 $8 € 2.7 € 2.0 € 2.3 € 3.2 $5 $3 $0 2003 04 05 06 07 08 09 10 11 2012 Global Market YTD Counts* 800 1H Counts 3Q Counts 700 600 243 500 196 189 187 400 179 112 129 147 300 115 80 200 © 2012 100 InformationServices Group, Inc. -All Rights Reserved 2003 04 05 06 07 08 09 10 11 2012isg-one.com *Contracts with ACV > €4M
  • 7. 7 Global Market Contract Trends for the Largest Deals 26 mega-relationships have been awarded YTD, surpassing total for all of 2011; greater percentage of larger deal activity occurring in emerging markets. YTD Contracts Counts with ACV > €80M 1H Counts 3Q Counts 30 3 6 8 20 9 10 5 6 4 4 10 5 0 2003 04 05 06 07 08 09 10 11 2012 Emerging Markets Contract Counts with ACV > €40M Emerging Markets 16 e defined as outside 8 8 North 7 American, Western 4 Europe and ANZ © 2012 markets. InformationServices Group, Inc.All Rights Reserved 2008 2009 2010 2011 2012eisg-one.com *Contracts with ACV > €4M
  • 8. 8 EMEA Contract Award Trends EMEA ACV was down 13% Y/Y but up 18% Q/Q; both restructuring and new scope activity is down year to date. EMEA YTD ACV (€B)* 1H ACV 3Q ACV $8 $6 € 1.6 € 1.4 € 2.3 $4 € 2.0 € 1.1 € 1.3 € 1.2 € 1.5 € 1.0 € 1.2 $2 $0 2003 04 05 06 07 08 09 10 11 2012 EMEA YTD Counts* EMEA New Scope vs. Restructuring YTD ACV (€B)* 1H Counts 3Q Counts YTD New Scope YTD Restructured 400 € 3.9 300 109 € 3.2 € 3.6 € 3.6 93 80 200 87 85 60 100 € 0.3 € 1.9 € 2.2 € 1.9 © 2012 Information -Services Group, Inc.All Rights Reserved 07 08 09 10 11 2012 2003 04 05 06 07 08 09 10 11 2012isg-one.com *Contracts with ACV > €4M
  • 9. 9 EMEA Country Details in Contract Award Trends ACV awards in the UK rose substantially YTD, while DACH fell almost 40% on a tough compare with 2011 and Nordics dropped by 17% YTD Sub-regions for EMEA - ACV (€B)* Low Average 3Q11 YTD 3Q12 YTD € 3.0 € 2.8 € 2.5 € 2.40 € 2.3 € 2.0 € 1.8 € 1.5 € 1.3 € 1.0 € 1.05 € 0.83 € 0.8 € 0.61 € 0.5 € 0.3 € 0.22 € 0.09 € 0.16 € 0.17 €- © 2012 Information UK & Ireland DACH Scandinavia Benelux France Southern Africa & E. Europe &Services Group, Inc.All Rights Reserved Europe Middle East Russiaisg-one.com *Contracts with ACV > €4M
  • 10. 10 EMEA ITO Contract Award Trends Third quarter ITO ACV was one of the strongest on record, up 40% Q/Q . Year to date ACV is down around 20%, while contract numbers fell 24% EMEA ITO YTD ACV (€B)* 1H ACV 3Q ACV €5 Top EMEA ITO € 1.1 €4 € 1.1 € 1.9 Providers € 0.9 €3 € 0.9 € 1.1 € 1.4 by YTD ACV* €2 € 1.0 € 1.3 € 0.5 Accenture €1 Atos €0 BT 2003 04 05 06 07 08 09 10 11 2012 Capgemini CSC Fujitsu EMEA ITO YTD Counts* HCL 1H Counts 3Q Counts HP 250 IBM Infosys 200 69 Mahindra Satyam 70 150 59 61 56 Orange 100 37 TCS 21 31 T-Systems 29 32 50 Wipro © 2012 Information -Services Group, Inc.All Rights Reserved 2003 04 05 06 07 08 09 10 11 2012 Note: Service providers in alphabetical order; no rankings implied.isg-one.com *Contracts with ACV > €4M
  • 11. 11 EMEA BPO Contract Award Trends Year to Date ACV in 2012 has been the highest ever in EMEA, though the pace of contract awards has slowed. EMEA BPO YTD ACV (€B)* 1H ACV 3Q ACV € 2.5 Top EMEA BPO € 2.0 € 0.61 Providers € 1.5 € 0.47 € 0.41 by YTD ACV* € 1.0 € 0.44 € 0.23 € 0.26 € 0.20 € 0.18 Accenture € 0.5 € 0.32 € 0.35 Capgemini € 0.0 CGI 2003 04 05 06 07 08 09 10 11 2012 HCL HP EMEA BPO YTD Counts* Infosys Interserve Plc 1H Counts 3Q Counts ISS Global A/S 125 Johnson Controls Jones Lang LaSalle 100 40 Mahindra Satyam 24 75 33 Mitie 50 28 23 24 Serco 12 14 23 Sodexho 25 11 © 2012 Xchanging Information -Services Group, Inc.All Rights Reserved 2003 04 05 06 07 08 09 10 11 2012 Note: Service providers in alphabetical order; no rankings implied.isg-one.com *Contracts with ACV > €4M
  • 12. 12 EMEA Industry Details in Contract Award Trends The Financial Services sector accounted for the lion’s share of contract awards in 2012, up almost 60% Y/Y. YTD Industry Details for EMEA - ACV (€B)* Low Average 3Q11 YTD 3Q12 YTD € 2.5 € 2.0 € 1.95 € 1.5 € 1.22 € 1.0 € 0.86 € 0.5 € 0.56 € 0.41 € 0.20 € 0.21 € 0.12 €- © 2012 InformationServices Group, Inc.All Rights Reservedisg-one.com *Contracts with ACV > €4M
  • 13. 13 Americas Contract Award Trends Americas ACV was down 11% Y/Y and 8% Q/Q; YTD, ACV is flat; the U.S. is becoming a predominantly restructuring-based market. Americas YTD ACV (€B)* 1H ACV 3Q ACV €8 €6 € 1.4 €4 € 0.9 € 1.4 € 0.9 € 1.5 € 1.9 € 1.5 € 1.3 € 0.8 € 1.0 €2 €0 2003 04 05 06 07 08 09 10 11 2012 Americas YTD Counts* Americas New Scope vs. Restructuring YTD ACV (€B)* 1H Counts 3Q Counts YTD New Scope YTD Restructured 350 300 106 € 3.4 € 3.9 250 86 € 3.0 79 77 200 67 € 2.4 150 63 100 € 1.9 € 1.9 50 € 1.1 € 1.2 © 2012 Information -Services Group, Inc.All Rights Reserved 07 08 09 10 11 2012 2003 04 05 06 07 08 09 10 11 2012isg-one.com *Contracts with ACV > €4M
  • 14. 14 Asia Pacific Contract Award Trends Asia Pacific ACV was up Y/Y and Q/Q; YTD, ACV is up significantly; over 90% of YTD awards are new scope. Asia Pacific YTD ACV (€B)* 1H ACV 3Q ACV € 2.5 € 2.0 € 1.5 € 0.54 € 0.44 € 1.0 € 0.29 € 0.15 € 0.35 € 0.35 € 0.46 € 0.5 € 0.36 € 0.12 € 0.22 € 0.0 2003 04 05 06 07 08 09 10 11 2012 Asia Pacific YTD Counts* Asia Pacific New Scope vs. Restructuring YTD ACV (€B)* 1H Counts 3Q Counts YTD New Scope YTD Restructured 100 80 28 30 € 1.83 60 24 18 € 0.80 24 25 € 0.33 40 20 € 0.01 € 0.33 € 0.11 © 2012 Information -Services Group, Inc.All Rights Reserved 07 08 09 10 11 2012 2003 04 05 06 07 08 09 10 11 2012isg-one.com *Contracts with ACV > €4M
  • 15. 15 Assessing the Level of Cloud Adoption 1 Percentage of ISG Advised Contracts with Cloud in Scope 27% 2 Number of Industrywide Contracts with Cloud in Scope* 20% ↑100% 300e 9% 220 110 2010 2011 2012 YTD 2010 2011 2012e 3 ISG Quarterly Provider Survey: Cloud Computing Provider Pipeline ► Half have cloud scope in 25% of their pipeline opportunities ► Cloud-based opportunities are up over previous periods ► All providers expect cloud services to grow faster than traditional ITO, predominantly in the U.S. market © 2012 InformationServices Group, Inc.All Rights Reservedisg-one.com *ISG Contracts Knowledgebase® *Contracts with ACV > €4M
  • 16. 16 Recognising the Realities of Cloud Deployment Cloud Strategy Cloud Deployment Models Public Cloud Private Cloud Shared Infrastructure Dedicated Infrastructure Opportunity Perceived Risk Caution! • Economies Security & data Does not fully of Scale privacy concerns realise cloud’s • Standard promise • Modern Converged / Utility / Dynamic IaaS SaaS BPaaS Computing © 2012 InformationServices Group, Inc.All Rights Reserved Cloud Service Modelsisg-one.com *Contracts with ACV > €4M
  • 17. 17 Opportunities and Challenges in the Provider Community Traditional Multinational Providers Expansion of existing ITO business India-heritage Pure-play SaaS and IaaS Providers Integrating acquisitions Providers Application Unbound by legacy 1 transformation and constraints modernisation 2 5 Security and privacy Solution Reliance on infrastructure concerns Assessment partners 4 Mid-market Traditional Software 3 Hosting Providers Companies Innovative shared hosting Existing relationship with platforms IT and procurement Supporting large, complex © 2012 Cannibalisation of licence clients InformationServices Group, Inc. revenue streamsAll Rights Reservedisg-one.com *Contracts with ACV > €4M
  • 18. 18 Cloud Trends Cloud’s disruptive effects on sourcing will accelerate, especially for the sourcing market’s traditional IT providers. Less Disruptive Trends IaaS will lag in favour of dedicated, standardised and virtualised infrastructure services Cloud growth will be choppy at the enterprise level with SaaS leading the way in HR, CRM and collaboration Traditional IT providers face significant pressure from well- known software vendors, nimble mid-market players and emerging pure-play infrastructure and SaaS providers Buyer type shifting from the IT department to the functional business units, especially SaaS-based HR and CRM Highly © 2012 Disruptive InformationServices Group, Inc. TrendsAll Rights Reservedisg-one.com *Contracts with ACV > €4M
  • 19. 19 3Q12 TPI Index Summary and Outlook  EMEA ACV rose 14% Q/Q but year-to-date is down 8%  Broader Market 3Q ACV down due to tough 3Q11 compare market  YTD ACV strengthened slightly on larger contracts, BPO summary and Asia Pacific results  Contract counts fell Q/Q and year-to-date from 2011 but remain within broader historical norms  While TCV performance may lag, from an ACV perspective, market the end result will likely be in line with recent year’s outlook performance of approximately €16 billion © 2012 InformationServices Group, Inc.All Rights Reservedisg-one.com *Contracts with ACV > €4M
  • 20. 20 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 7879 471 758 +44 7879 432 212 duncan.aitchison@isg-one.com 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 © 2012 InformationServices Group, Inc.All Rights Reservedisg-one.com blog.isg-one.com *Contracts with ACV > €4M
  • 21. Third Quarter 2012
  • 22. 22 3Q12 TCV Score Card The TPI 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. 3Q12 TCV 3Q Y/Y 3Q Q/Q YTD TCV YTD Y/Y Scorecard (€B)* Change Change (€B)* Change Global Market € 19.6 -12% -2% € 57.1 -3% Mega Deals € 4.5 -22% -11% € 10.8 0% New Scope € 13.0 12% -13% € 38.4 -3% Restructurings € 6.6 -38% 31% € 18.7 -2% ITO € 12.7 -21% 7% € 36.2 -7% BPO € 6.9 10% -15% € 20.9 6% EMEA € 10.0 -21% 18% € 27.1 -15% Americas € 7.1 -8% -6% € 22.2 4% Asia Pacific € 2.5 37% -37% € 7.8 45% © 2012 InformationServices Group, Inc.All Rights Reservedisg-one.com *Contracts with ACV > €4M
  • 23. www.isg-one.com