GS100 Survey


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The 2010 Global Services 100 Study is the annual research done by Global Services Media along with neoAdvisory, the globalization and sourcing advisory firm. The study involves an extensive survey that seeks both quantitative and qualitative information from service providers who voluntarily opt to participate. We hope to present much more detailed analysis on these companies, analyze key industry sub-segments, and assess company differentiators and market positioning, to draw a more complete picture of the landscape of the global outsourcing service provider industry.

The objective largely remains the same: to recognize excellence amongst service providers and to help buyers of services choose the right service provider.
This Study identifies the top 100 service providers in ITO and BPO and the top companies across various segments

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GS100 Survey

  1. 1. JUNE 2010 The gateway to the global sourcing of IT and BPO services phaSe i induStry analySiS & outlook Shaping the Battleground for gS100 Service providerS outlook 2010: Slow Start great proSpectS the growth Story contract SizeS: the lifeline of the BuSineSS Spread of gloBal delivery centerS analySiS of riSk ManageMent acroSS SegMentS hr and eMployeeS SegMent analySiS analySiS of MergerS & acquiSitionS in it ServiceS & Bpo
  2. 2. Special Report TABLE OF CONTENTS 2010 GS100 STUDY The Global Services 100 study will be published in 5 phases and multiple formats to give a detailed view of the entire global outsourcing landscape. Below is a table which repre- sents the various phases, coverage area, formats and publishes dates. PHASE COVERAGE PUBLISH DATES Industry Analysis & Outlook June 2010 • Shaping the Battleground for GS100 Service Providers.............05 • Outlook 2010: Slow Start Great Prospects................................09 • The Growth Story........................................................................11 Phase I • Contract Sizes: The Lifeline of the Business..............................13 • Spread of Global Delivery Centers.............................................14 • Analysis of Risk Management Across Segments.......................15 • HR and Employees Segment Analysis.......................................16 • Analysis of Mergers & Acquisitions in IT Services & BPO..........17 Webinar GS100 Facts & Figures – The Story Behind the Numbers 16th July IT Outsourcing Analysis & Trends July 2010 • Application Dev. & Maintenance • Enterprise Applications Phase II • Outsourced Product Development • Infrastructure Management • Engineering Services BPO Analysis & Trends July 2010 • Finance & Accounting Outsourcing • Procurement Outsourcing Phase III • Human Resource Outsourcing • Knowledge Process Outsourcing • Contact Center and Customer Service • Industry Specific BPO Webinar Phase II & III August 2010 The GS100 LIST July 2010 • The GS100 Methodology • The GS100 List • The GS100 Category List - Top 10 ITO Providers - Top 10 BPO Providers - Top 10 ADM Providers Phase IV - Top 10 FAO Providers - Top 10 OPD Providers - Top 10 Contact Center Management - Top 10 Infrastructure Management - Top 5 Latin America - Top 5 Central & Eastern Europe - Top 5 China - Top 5 Asia (Excluding India) THE GS100 REPORT – CONSOLIDATED August 2010 • Over and above 60 pages Phase V • All Phases Consolidated • Expert Views/Opinions GS100-2010 www. GlobalServices 3
  3. 3. Phase I: Industry Analysis & Outlook Shaping the Battleground for GS100 Service Providers ...... 05 Outlook 2010: Slow Start Great Prospects .......................... 09 The Growth Story ........................................................................ 11 Contract Sizes: The Lifeline of the Business ......................... 13 Spread of Global Delivery Centers ........................................... 14 Analysis of Risk Management Across Segment .................... 15 HR and Employees Segment Analysis..................................... 16 Analysis of Mergers & Acquisitions in IT Services & BPO ... 17 4 GlobalServices www. GS100-2010
  4. 4. Special Report Shaping the Battleground for GS100 Service providers The recession changed several rules in global sourcing. The GS100 is a study in how service providers withstood the shocks and adapted. by Ed Nair GS100-2010 www. GlobalServices 5
  5. 5. W Hen the economy buckled down into half of 2009. In fact, the industry put up an impres- a recession in 2008, the global out- sive performance in the last quarter (Q409) with sourcing industry still seemed very market’s total contract value (TCV) reaching $24.7 robust. Slowly, but surely, the im- billion, an increase of 47 percent sequentially and pact of the recession was felt by the industry dur- 8 percent year-over-year and the best quarterly ing 2009. Companies clammed up on ambitious performance since the second quarter of 2008, ac- technology projects that required huge outlays cording to figures from TPI. However, TPI’s report in investment and CIOs were forced to operate stated: “Full-year 2009 results could not overcome on constrained IT budgets which largely focused the market’s weak showing during first two quar- on squeezing more bang from the ters. TCV for the year declined 13 bucks that were spent in the earlier percent to $74.5 billion, its lowest years. Spending was guided by dis- The industry put point since 2001.” cretion into areas that were neces- sary to ‘keep the lights on’ and sav- up an impressive Fruits of a Crisis ing costs became the driving factor A monumental crisis like a historic re- in decisions. performance in the cession has a monumental impact on Outsourcing’s potential to save the dynamics of the industry. So did costs actually helped. Service provid- last quarter (Q409) the recession change several rules ers (vendors) were forced to operate in a new environment in which they with market’s total in global sourcing which led to new behaviors both on the clients and on got paid for business outcomes rath- contract value (TCV) the service providers end. In 2010, er than effort. On the BPO side, a few we see the permanence of these be- of the processes related to industries reaching $24.7 haviors, which in effect is about set- directly affected by the recession or ting the ‘new agenda’ or realizing the industries directly responsible for billion, an increase ‘new normal’, whatever you call it. recession (like mortgage process- From an efficiency point of view, ing, title management, etc.) almost of 47 percent buyers have been looking at consoli- vanished. In other areas, where dating the number of vendors they BPO partnerships were already un- sequentially have to deal with. At the same time, der way, the service providers were buyers have also started splitting tasked with delivering business outcomes at lower their scope and engaging with broader set of special- cost. There were very bright spots if at all in both IT ist vendors. This trend known as multisourcing has services and BPO. given access and opportunity to many mid-tier ven- The market reached a bottom in the first half dors but it has also led to reduction in value and du- of 2009 and then started recovering in the second ration of outsourcing contracts. This has led to more The Global Services 100 Survey Significant Sample Participants Spread Revenue Range % Number of Companies $1M to $10M 12 Global Coverage $10M to $100 M 30 $100M to $1B 45 Country % Number of Companies $1B + 13 US and Canada 37 Industry Size Coverage India 33 Category Aggregate Revenue 2009 (in $M) China 6 $1M to $10M 55 Europe 9 $10M to $100 M 1,393 $100M to $1B 12,917 Latin America 9 $1B + 58,999 Asia 5 Total 73,364 6 GlobalServices www. GS100-2010
  6. 6. Special Report EPAM Systems is the #1 full-cycle software services company in Central & Eastern Europe. We help businesses leverage IT innovation to make a leap forward through our well-honed skills and unmatched technology expertise: Outsourced Product Development Experience: since 1993 Financial Services and Capital Markets Talents: 5,000+ Enterprise Application Development / Integration Quality: CMMI L4, SAS 70 Type II, ISO 9001:2000, SAP advanced technologies ISO 27001:2005 Application Testing and QA Our Awards Application Maintenance and Support Mobile, Embedded, and Open Source Sample clients: GS100-2010 www. GlobalServices 7
  7. 7. competition amongst vendors. GS100: Recognizing and Celebrating The recession also brought into focus many is- Service Provider Excellence sues related to contracts, SLAs, performance man- The Global Services 100 is an effort to recognize and agement, and pricing. Price renegotiations were celebrate service provider excellence. It enlists ser- all too common. More importantly, most vendors vice providers who possess the maturity to deliver had to deliver under outcome-based pricing. Along high standard services in IT and BPO using the glob- with pricing, practices about risk management and al delivery model. The GS100 service providers pos- governance were topics of interest. sess many other attributes that lead These areas moved from being con- to market leadership and the study cepts to practices. Other factors not The storms they is intended to take a closer look at related to recession like the poten- these. tial of cloud computing and its im- braved were far more This year we had over 150 com- pact on delivery of services, integra- panies that participated in the study tion or convergence of IT and BPO, severe than the ones and voluntarily shared lot of quan- M&As between service providers, maturing of service providers from faced by the buyers. titative and qualitative information about their companies. The absence Central and eastern europe, Latin These are the of a few Tier1 companies like Ac- America and China, threatened to centure, IBM, H-P and Cognizant , change the landscape of the servic- Global Services 100 amongst others is explained either es industry. by their unwillingness to share data companies, the list During this entire episode, the ser- due to policy or by their unwilling- vice provider community was both ness to put in the effort required to resilient and adaptive. The storms of 100 companies participate. From a statistical signifi- they braved were far more severe cance point of view, the study rep- than the ones faced by the buyers. that will released resents relevant samples across all These are the Global Services 100 companies, the list of 100 companies in the last phase of categories (revenue bands) of com- panies. Therefore, the observations that will released in the last phase of this study remain statistically significant and this study. conclusive. GS 8 GlobalServices www. GS100-2010
  8. 8. Special Report GS100-2010 www. GlobalServices 9
  9. 9. Outlook 2010: Slow Start, Great Prospects Sluggish demand for new scope projects, continued emphasis on cost reduction , large contract restructurings, and a wobbly macroeconomic situation in Europe are impeding full recovery of the outsourcing market. But cloud-based services, a promising mid-market, and healthcare by Ed Nair T He first quarter of 2010 indicated a 25 per- cent growth in total contract value compared to the same quarter last year. According to 1Q10 Global TPI Index, which measures commercial outsourcing contracts valued at $25 m and more, al value of about $12 B are due to expire in 2010. These contracts would get restructured in 2010. When contracts come up for restructuring, com- panies look at breaking up the scope to include a few new vendors. Many of the Indian vendors are the total value of such contracts stood at $19.5 B. reaping benefits here because when these contracts The story behind the quarter performance is inter- were signed, typically five to seven years back, the esting: 42 percent of the contracts were renewals of global outsourcing vendors like IBM and Accenture contracts that got expired or came up measured up better in terms of for renegotiation. This is an unusually capabilities. Over time, the In- high number according to TPI experts. On the BPO front, dian vendors have matured both Said Mark Mayo, Partner & President, in capabilities and in scale and TPI, “The previous record for this was companies have are competitive in pricing. This 29% and it happened way back in 2006. explains the anomaly between We didn’t expect this number to be so changed tracks and the recent quarter performance high for 1Q2010.” One reason for this of large global vendors and the is that many of these were contracts instead of going for India-based vendors. IBM and Ac- that were supposed to be signed in centure reported sluggish results the previous quarter, but were pushed large multi-tower whereas TCS, Infosys, and Cogni- out into this one. Consequently, ‘new scope’ contracts fell by 15 percent. deals, they are zant amongst others had far bet- ter performance and outlook. looking for well- Companies have not exactly First Quarter and Beyond started opening their purses wide Delving deeper into the quarter’s per- defined projects and cost reduction continues to formance, it bears out that ITO domi- be the dominant agenda in 2010. nated the story: application develop- that are smaller in This works well in generating de- ment and maintenance (ADM) and mand for cheaper India-based ap- ADM combined with infrastructure scope and shorter in plication outsourcing companies. services contributed the major share to On the BPO front, companies have the total contract value. In fact, three duration changed tracks and instead of go- out of the four megadeals (deals over ing for large multi-tower deals, 100M) were ITO. For the Americas, the quarter was they are looking for well-defined projects that are a coup with 47 percent of the deals, which made smaller in scope and shorter in duration. Says Mark, it the best quarter since 2006. That said, it was the “Companies are taking a step back and rethinking manufacturing, travel, transportation and hospital- the way BPO work is handled. Instead of going to ity verticals that lifted up the performance, unlike one major player they are looking for a small group usual suspects like financial services and telecom. of preferred suppliers. This is very much unlike The rest of 2010 has got quite a few contracts when companies signed up large multi-tower BPO that would come up for renewal but Mark does deals.” Overall, BPO remained slow as clients post- not expect the proportion to be as high as in this poned transformational deals. quarter. Mark estimates that contracts with annu- europe, led by UK, has been an important mar- 10 GlobalServices www. GS100-2010
  10. 10. Special Report ket for outsourcing services. While the action is be the most active shifting away from UK to continental europe, re- 4 Main drivers are cost reduction, desire to global- cent reports suggest that in the short term europe ize business operations and to transform / re-en- would dampen the overall outlook for the industry. gineer business processes Companies like Cognizant and Tech Mahindra have 4 Inhibitors are other priorities brought on by the already reported weakness in europe in the current economic crisis and internal politics / resistance quarter. Recent incidents like the bailout of Greece, to change risks associated with other european economies, 4 Customer-willingness to evaluate cloud-based and other macroeconomic factors pose an addition- “business utility” offerings is strong as they in- al risk to companies (like Accenture, Infosys, CSC, creasingly look at hybrid IT/BPO solutions etc.) who have a substantial footprint in europe. 4 Strong signs of increased adoption of industry- Overall, the recovery of the outsourcing market specific BPO solutions, most notably in the Fi- is slow. Mark says,”It is going to continue to come- nancial Services and Life Sciences sectors back slowly, in fits and starts, a bit of ITO here, a bit Going forward, one would expect to see large of BPO there. Definitely, it is not a year of bounc- deals being broken down into deals of smaller ing back.” scopes. This would directly affect the large vendors like IBM and Accenture but their losses would be Opportunities gained over by some of the larger Indian vendors. In a survey conducted jointly by Global Services, The impact of cloud computing and cloud-based Horses for Sources, and SSOn, in January 2010 re- services is an essential conversation these days garding the outlook of the industry, the key points in every IT deal and in some BPO deals. It would that emerged were: translate into real market opportunities during the 4 Key areas of increased outsourcing scope are rest of the year. expected to be in areas with heavy low-cost la- This year should be remembered more for bor arbitrage support (nearshore and offshore) Obama’s historic healthcare bill and less for BP’s oil –software applications, call center, engineering spill. The former holds great opportunity both for management, finance & accounting, analytics IT as well as BPO for many years to come and 2010 and human resources would be the year when vendors would start attack- 4 The middle-market ($750m-$3000m)is poised to ing the tip of the healthcare iceberg. GS GS100-2010 www. GlobalServices 11
  11. 11. The Growth Story Revenue growth rates across the industry fell to modest levels by Ed Nair T He 2010 GS100 survey participants repre- sents about $73 B in revenues. This is a sig- nificant measure though it is the aggregate of companies of different sizes and therefore diverse customer types. According to a recent report by tion on projects, subcontracted programming and others. Clearly, this was neither the year for such companies to get work from companies with ma- ture outsourcing practices nor it was the year to get work from companies who were venturing out to TPI, the Forbes Global2000 companies collectively outsource the first time. spent $71B in annualized contract value on out- There are many bright spots of excellence sourcing in 2009. amongst companies in the revenue range of $10M Since the companies in the GS100 survey repre- sents a diverse set of companies, it would be useful Revenue Growth to look at growth patterns across different catego- ries of company sizes. The average industry revenue Category 2008 (in $M) 2009 (in $M) Growth % growth rate is 15.7 % over 2008. $1M to $10M 48 55 14 It was decidedly a bad year for upstarts in the out- $10M to $100M 1,237 1,393 12.6 sourcing industry represented by companies with $100M to $1B 12,298 12,917 5 annual revenues of less than $ 10M. Many of these $1B+ 49,810 58,999 18.4* companies have very narrow specializations or they Total 63,393 73,364 15.7 offer undifferentiated services like staff augmenta- *due to merger between Stream and eTelecare. Leaving this outlier, the growth rate is 3.5% 12 GlobalServices www. GS100-2010
  12. 12. Special Report to $100M. Such companies have the critical mass $1M-$10M $10M-$100M $100M-$1B $1B+ and the ability to aggregate resources into one or North America 60 62 52 57 more areas of specialization- often in areas like ap- Latin/ South plication development, product development, low 4 5 7 5 America footprint infrastructure services like desktop man- EMEA 18 25 29 27 agement, and others. These companies often look for opportunities to scale up. In 2009, this group of Asia 14 7 9 10 companies that traditionally enjoyed high growth Japan 1 0 1 0 levels had to settle in for tapered down growth of Australia 3 1 2 1 12.6 %. Companies in the revenue range of $100M industry average growth rates (XChanging, Wipro, to $1B, a wide swath of revenue, make the most HCL Technologies), a few of them posting single digit promising group. These service providers are large growth figures (Genpact, TCS, Infosys, nCO, CSC, enough to handle almost two-thirds of the market CGI) and a few of them posting declines in revenues. opportunities (in terms of scope, contract sizes, The geographical revenue splits for companies etc.) and they are small enough to concentrate their across all categories are nearly uniform. It shows efforts, seek leadership, and innovate. While these that north America continues to be the most im- companies have the ambition to scale up to $1B portant market followed by europe. Asia and Latin and are constantly seeking growth new opportuni- America are emerging markets partly due to local ties, they also go through the excruciating pains of companies serving the domestic market ( and many growing up. Unfortunately, these are also the com- of them are represented here) and the rest due to panies who get stuck in the ‘mid-tier conundrum’. large companies by foreign companies. For exam- The year was the toughest for this group: a growth ple, a Chinese provider like neusoft handling the rate of 5 % due extreme price pressure, unwilling- domestic Chinese market or an IBM Global Services ness from companies to hand out projects with new handling strategic outsourcing for an Indian bank scope, clients rationalizing their vendor portfolio, would have higher revenues in Asia. and a depressed demand from verticals like finan- Despite being the largest market, the share of cial services, telecom, retail, and CPG amongst oth- north America in 2009 has come down from what it ers that were the mainstay verticals for companies was in 2008. This is due to the combined effect of the in this category. relative but temporary softness of the US market and Amongst the larger companies ( above $1B) the the geographic de-risking strategies employed by ser- growth rate of 18.4% that we see is an anomaly that vice providers. especially, many of the Indian vendors stems from one outlier- the merger between Stream ramped up focus on the european market (which in Global Services and eTelecare. Read the growth rate 2009 seemed more stable) because of the softening of here as a very modest 3.5 %. Such a growth rate comes demand from US financial services segment and the on the back of a few of the vendors posting above mid-year rupee-dollar fluctuations. GS Top 5 Fastest Growing Companies Top 5 Fastest Growing Companies $10M to $100M $100m- $1B No. Company Country No. Company Country 1 Bleum Inc. China 1 Hildebrando Mexico 2 Corbus USA 2 Aegis Limited India 3 Transactel S.A Guatemala 3 CPM Braxis Brazill 4 eClerx Services Limited India 4 VanceInfo Technologies China 5 Globant Argentina 5 ITC Infotech India Notes: 1. Company revenues and revenue growth rates are not published as per GS100 survey guidelines. Revenue growth rates reflect both organic and inor- ganic growth but excludes internal reorganization of business units that may lead to an upsizing of the company. 2. Fastest growing companies are listed for company sizes $10M-$100M and $100M-$1B only because revenue growth in these two categories are better evidence of companies’ quest for growth. GS100-2010 www. GlobalServices 13
  13. 13. Contract Sizes: The Lifeline of the Business Contracts below $25 M continue to the most important, even as ITO and BPO contract sizes are by Ed Nair C OnTRACTS are the lifeline of the outsourcing business: the number of contracts signify the general pace of the business and the size of the contracts (in terms of total contract value and an- nual contract value) denote the overall momentum search does not offer much visibility into that band. Hence, we look at some published research from TPI Inc. , a sourcing research and advisory company that tracks contracts on a quarterly basis. From this, we can infer that contract sizes less than of the industry. $25M are important for not only mid-tier companies It is very clear that contract sizes of less than $50 but also for Tier 1 companies. There were nearly 600 M (total contract value) are the mainstay of the in- contracts with total contract value of more than $25M dustry. This is more so for companies in the mid-tier. in 2009. ITO contracts clearly lead the way with at The dynamics of the band of contract sizes less than least three out of four contracts being an ITO contract, $50M is far more interesting. Unfortunately, this re- though this is not the case in Fig.1 in the $1B plus cat- FIG.1 AREA ITO BPO COMPANY SIZE 1M-10M 10M-100M 100M-1B 1B+ 1M-10M 10M-100M 100M-1B 1B+ CONTRACT SIZES Less than $50M 197 1203 6260 396 76 337 2404 534 $51M-$99M 5 26 52 16 2 1 44 52 $100 M- $ 299 M 0 16 8 0 0 4 10 Source: TPI Inc. FIG.3 FIG.2 # of Relative Percent of Total Contracts Awarded by TCV Band Quarter Contracts Area > $25 M TCV In 2009, almost 70% of all ITO BPO 66% 68% 67% 69% Broader Market contracts were 1Q2009 141 101 40 53% valued at under $100M in TCV. 2Q2009 148 118 30 3Q2009 140 108 32 4Q2009 168 110 58 24% 23% 23% Total 597 437 160 16% 15% 18% 16% 18% 16% 15% Source: TPI Inc. egory because the study sample Less than $ 100 M $100M-$199M Greater than$200M includes more BPO companies n 2005 n 2006 n 2007 n 2008 n 2009 Source: TPI Inc. in the $1B plus category. The above slide from TPI’s presentation clearly shows that Average TCV ($M) of Industrywide Contracts >$25M from 2006 onwards contract sizes have been shrinking. For Both ITO and BPO at lowest average 231 TCV level in the past five years. example, in 2009, nearly 70% 201 of the contracts were less than 173 161 157 $100M in TCV compared to 145 148 140 147 142 127 126 128 53% in 2005. The figure also 105 97 shows that 2009 was a tough year with both ITO and BPO at All Industrywide Contracts ITO BPO lowest average TCV level in the n 2005 n 2006 n 2007 n 2008 n 2009 Source: TPI Inc. past five years. GS 14 GlobalServices www. GS100-2010
  14. 14. Special Report Fig. 1 Top 20 Locations Country Total 1 India 514157 2 Philippines 97740 3 United States 42808 4 China 34672 5 Canada 32690 6 England /United Kingdom 23494 7 Brazil 10213 Spread of 8 Germany 9269 9 Australia 8544 10 Mexico 8412 Global 11 Ukraine 5816 12 Russia 5113 13 Belarus 4534 Delivery 14 Chile 3572 15 Sri Lanka 3317 16 Argentina 3241 Centers 17 18 19 Malaysia South Africa Singapore 2868 2855 2833 20 Poland 1963 by Ed Nair Note: Figures are based on data from over 150 companies I nDIA, Philippines and the US are the three larg- est locations in terms of number of people de- ployed. India has a gigantic majority and heavily polarizes the distribution to the extent that the num- ber of people deployed in India is far higher than Fig. 2 Next 10 Top Locations 21 22 23 Costa Rica Japan Hungary the total of number of people in rest of the 32 coun- 24 Romania tries. On an industry-wide basis, this would again 25 Bulgaria hold true because companies like IBM, Accenture, 26 Czech Republic HP Cognizant, Capgemini, who are not part of this , 27 Vietnam sample also have India as their largest locations. GS 28 Uruguay 29 Ireland 30 Egypt GS100-2010 www. GlobalServices 15
  15. 15. GS 100: Analysis of Risk Management Across Segments Cross-border project development and management system, automated production control, resuable assets, and the focus on ‘people’ is the new mantra for managing risks by Ashwin Razdan T He last decade witnessed a substantial growth in No. of companies having a system to mitigate various risks. outsourcing. existing services providers evolved Risk Factor No. of companies into becoming market leaders and many new (having a system)* ones took birth to address the need of niche markets. 1 Labour operations Costs/Non-Labour 69 The dawn of recession compelled the industry to adopt Operations Costs new practices and embrace automation to improve 2 Security Risk 82 productivity at various stages in a project lifecycle. The 3 Employee Attrition/ Scalability risks 88 patience level of the customer dropped. It was impor- 4 Bringing processes onshore due to 54 tant to deliver. Hence, service providers (at all levels) government regulations began analyzing risks more seriously and built impres- 5 Uneven Performance 78 sive mitigation strategies. 6 Risk of SP failing to deliver 59 Most Band 1 (with annual revenue between 1M- Note: Figures are based on data from over 150 companies 10M) companies continue to depend on third-party nisms defined to capture any failures or non-perfor- certification (like ISO) to manage security risks. 46% mances proactively. These monitored mechanisms of respondants in this category claimed to have unique include tools such as internal and external audits, dash- employee assessment system, proprietary career devel- boards, quality score cards, management reviews etc. opment system, and free certification and education which ensures failure avoidance in the standard proce- for their employees to manage increasing attrition rate. dures. A few use online HR systems to statistically pre- A common pratice noticed across the band is the usage dict and analyze the labor cost. These costs are moni- of reward program for employees. 15% routed projects tored and analyzed in real time at corporate level. to delivery centers at cheaper locations when labor Band 3 (with annual revenue between 100M-1 B) and costs went up. One of the favorite destination being Band 4 (with annual revenue of over 1B) companies lay China’s tier 2 cities. significant focus on the global delivery model. excellent The trend noticed in Band 2 (companies with an- coordination is maintained between onsite, offsite and nual revenue between 10M-100M) was significantly offshore delivery locations to produce a low risk, cost ef- different. Companies depend highly on technology to fective, predictable project outcome. Over 80% of band manage risks associated with labor and non-labor op- 4 companies have made significant investments in mul- erations costs. Over 70% have a system for production tiple areas to mitigate the risks associated with labor and control where cost of services, projects and back office non-labor operations costs. Reuse has been identified as is registered. This information is periodically analyzed an integral part of the organization strategy to improve and contrasted with the estimated budgets for each op- productivity. Development of tools, assets, prototypes eration, and actions are established to control the cost and references to the single source of ‘legacy’ informa- level, avoiding deviations from the established thresh- tion ensures that the project teams continually deliver olds. 18% maintain a dedicated audit team that ensures high quality and consistent services leading to a lower every project team complies with all policies set by the cost of software delivery. Further, 40% of respondants company and their clients. employees working for this continue to hire fresh talent in great numbers from local band are often subject to desktop inspections at any universities to keep labor costs low. time, and the audit group performs random inspec- Only a handful use proprietory tools that accurately tions periodically. All employees are required to sign identify and mitigate risk as well as determine an internal nDA and also client-specific nDAs. appropriate contingency dollar estimates. 5% also use Most service providers manage risks by adhereing to key performance indicators that provides comprehensive global standards such as ISO, COPC, CMM and PCMM. real-time data and statistical analysis on individual Adopting these models ensures that there are mecha- performance. GS 16 GlobalServices www. GS100-2010
  16. 16. Special Report HR and Employees Segment Analysis While increase in head count, and emphasis on rewards and recognition program remains the highlight this year; cultural compatibility/acclimatization for expats and lodging cost, are the prime restraining factors for moving human resource globally by Ashwin Razdan T He analysis of HR practices and employees during the GS100 study, clearly shows signs of a recovering economy. Last year, there was a substantial increase in hiring across the service pro- vider landscape. While the average increase in head count has been 23% across the respondent to the survey; Band 1 (with annual revenue between 1M- 10M) companies saw the highest growth at 31% and Band 3 (with annual revenue between 100M-1B) had the least with 16%. Over the last one year, service providers made 4 (with annual revenue of over 1B+) with 117 em- significant investment to decrease the attrition rate. ployees to a single HR personnel, and 49:1 for Band The top 2 areas for this being a more comprehensive 1 companies. reward and recognition program, and increase in bo- Increasingly, companies have realized the poten- nuses. This was closely followed by healthcare ben- tial of rotating their project team across destinations. efits and rotation among project teams. nearly 63% It has not only decreased attrition rates but in many in Band 1, focused on community service programs ways enhanced the skill-sets of high performing indi- while equity or stock ownership programs led the viduals. However, there are a number of restraining way in Band 2 (with annual revenue between 10M- factors for such a campaign. Almost 57% companies 100M) and 3. believe that cultural compatibility/acclimatization While over 70% of companies have an initial train- for expats is the leading constraint followed close- ing program of over 3 weeks and nearly 55% have ly by lodging costs. Though these factors remained an annual ongoing training program for 10 days and a consistent trait amongst companies in Band 1, 2 above; nearly 5% still continue have the same for less and 3, it was not the case in majority of the Band 4 than 4 days. companies. 33% of companies with over 1 Billion in The ratio of employees to HR personnel stands turnover thought of housing availability, quality and at 74:1. It is significantly higher in the case of Band security for expats as the prime restraining factor. Average number of days (per year) for Restraining factors for moving human ongoing training resource globally 40 35 30 30 25 20 20 15 10 10 5 0 0 1. Lodging 2. Cultural 3. Housing 4. Access to Over 15 10-15 5-9 3-4 Less then Cost Compatibility/ availability, health care/ days days days days 3 days Acclimatization quality and Insurance for Expats security for planning Expats GS100-2010 www. GlobalServices 17
  17. 17. Analysis of Mergers & Acquisitions in IT Services & BPO M&As went slow in 2009 but there are signs of accelerated activity in 2010. IT services ac- counts for over two-thirds of the deals in value and domestic deals are in favor over cross- border ones. by Ashwin Razdan T He pace of mergers & acquisitions (M&A) was significantly slower in 2009. However, with the economic recovery getting ground- ed in reality early this year, organizations rein- stated their zest for inorganic growth. In the last 35 30 25 Domestic Deals Cross-Border Deals 20 # of Deals two months, deal size has crossed over US $30mn 15 as compared to the average deal size of below US 10 $20mn in the last quarter of 2009 and first quarter 5 of 2010. 0 The overall data for M&A includes software and Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 services. In the last one year nearly 340 deals were signed worth over US $18 bn. The number of deals per month was within the range of 25-35. The peri- nearly 61% indulged in domestic deals over cross- od witnessed three billion dollar deals; largest be- border ones, indicating that the buyers are still not ing US $5.8 B acquisition of Sybase by SAP in May very open to deals outside of their geographies due 2010. The two others were US $3.9 B acquisition to remote management and regulatory concerns. of Perot Systems by Dell, and US $1.8 bn acquisi- tion of Omniture by Adobe in September 2009. Segment-wise Deal Analysis $7,000 45 Deal Value # Deals 40 $6,000 35 BPO Total Deal Value (US$mn) $5,000 30 IT Services # of Deals $4,000 25 $3,000 20 IT Consulting $5.8bn SAPSvbase 15 $2,000 $3.9bn Dell-Perot and $1.8bn Adob-Omniture 10 $1,000 5 0 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 54% of the deals have been in the IT services space, followed by 32% in the BPO industry. Deals in $35 these segments are yet to pick up and greater activity Avg ExBn$Deals Period Avg $30 is expected to be seen in 2010. Average Deal Value (US$mn) $25 $20 US continues to be a predominant country in the $15 M&A activity. Deals in the areas of virtualization in- $10 cluding, SaaS and cloud computing, are being con- $5 sidered. Offshore locations like India & China have $0 started showing increased interest in client geogra- Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 phy acquisitions, but the number of deals are still significantly low. 18 GlobalServices www. GS100-2010
  18. 18. Special Report Acquirer Acquirer Country Target Target Country Sector Deal size in $M July iMedX U.S. Medware U.S. BPO NA NTT Communications Corp. Japan Integralis Germany IT Services 104.9 TietoSaab Saab Sweden Systems Finland IT Services NA Cegedim France Nomi Group Sweden IT Services NA BPO Management Services (Canada August CriticalControl Solutions Canada Centers) Canada BPO 2.4 Hobs Legal Docs U.K. Datalex UK BPO NA Bunker Hill Capital U.S. Nspro Canada IT Consulting NA AIG Systems Solutions MphasiS India (AIGSS) India IT Services NA Indust & Financial MultiPlus System Sweden Solutions Sweden IT Services NA SpringSource U.S. Cloud Foundry U.S. IT Services NA Siemens AG Germany Energy4U Germany IT Services NA Ace BPO Services Pvt. October Ltd India BPO 0.76 BPO/ Altair Technologies UK Services NA Sparta Consulting Inc USA IT Consulting 38 2B Interactive Netherlands IT Services NA RIPE B2B Inc. USA IT Services NA Focus Systems, Inc. USA IT Services NA UBS India Service Centre Private Limited (UBS ISC) India KPO 73.83 McCamish November Infosys Technologies India systems USA BPO 38 Virtusa Corporation USA InSource, LLC USA IT Consulting 7.3 S7 Software Solutions Pvt. Blue Coat Systems Inc USA Ltd India IT Services 5.25 Silicon Tech AurionPro Solutions India Corporation USA IT Services NA January Iris Data Services USA Lexsum, Inc USA BPO NA CA Inc. USA Oblicore Inc. USA IT Services 20 Diversified Information Bowman February Technologies USA Enterprises Inc. USA BPO NA Synopsys, Inc USA CoWare, Inc. USA High Tech NA K3 Business March Technology Group PLC UK Digimis Ltd UK IT Services 1 Nordic Research Anametrix Inc USA Corp USA IT Services NA General Electric Co USA MedPlexus Inc USA IT Services NA SKT Business Communication West Corp USA Solutions USA IT Services NA BoundaryMedical IMI Health Inc USA Inc USA IT Services NA The Cambridge April On Assignment, Inc USA Group, Ltd. USA BPO 5.5 Medical Accounting and Billing, Inc. MTBC USA (MABCO) USA BPO NA DJSP Enterprises, Inc. USA Timios, Inc. USA BPO 5.1 Patni Computer Systems India CHCS Services USA BPO NA Kerdock Perficient, Inc. USA Consulting USA IT Consulting 6 Customer Connect USA Streamlogic Inc USA IT Consulting N/A Fahlgren Inc USA Grip Technology USA IT Services N/A Twitter Inc USA Atebits LLC USA IT Services N/A ConnXion Ventures Ltd Australia KAZ Singapore Singapore IT Services N/A Pacific Crest Prodapt India Technology USA IT Services NA GS100-2010 www. GlobalServices 19
  19. 19. GATEWAY to the Global Sourcing of IT and BPO Services Connecting the global buyers and providers of IT and business process outsourcing services. Global Services, your own global media platform, not only helps you to choose your partner but also enables you to leverage its media solutions to make your outsourcing relationship work. Global Services’ authentic and on-time content facilitates right outsourcing partnerships. Our portfolio includes an e-magazine, a website, newsletters, events and custom solutions. 20 GlobalServices www. GS100-2010