GS100 - The growth story


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GS100 - The growth story

  1. 1. 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
  2. 2. 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