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Are traditional ITO revenue streams making way for cloud?

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The TBR Professional Services research team invites you to an invitation-only webinar on Thursday, Feb. 13, 2014, for a recap and analysis of the ITO service line in 3Q13, key trends and vendors’ …

The TBR Professional Services research team invites you to an invitation-only webinar on Thursday, Feb. 13, 2014, for a recap and analysis of the ITO service line in 3Q13, key trends and vendors’ performances and strategies as reported in TBR’s IT Services Vendor Benchmark.

Analysts Stephanie Artigliere and Elitsa Bakalova and Senior Analyst Ramunas Svarcas will share their perspectives on the latest IT services vendor results and provide additional insight into vendor performance and the future of the IT services market.

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  • 1. TBR’s Professional Services Business QuarterlySM Research Highlights and Outlook Are traditional ITO revenue streams making way for cloud? Technology Business Research (TBR) Quarterly Webinar Series Feb. 13, 2014 TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  • 2. Professional Services Business Quarterly Research Highlights and Outlook: Webinar Presenters TBR Patrick Heffernan Senior Analyst and Engagement Manager, Professional Services Practice Email: patrick.heffernan@tbri.com Twitter: @TBR_PatrickH Telephone: 603.758.1833 Ramunas Svarcas Senior Analyst and Engagement Manager, Professional Services Practice Email: ramunas.svarcas@tbri.com Twitter: @rjsTBR Telephone: 603.758.1833 Elitsa Bakalova Analyst, Professional Services Practice Email: elitsa.bakalova@tbri.com Twitter: @ElitsaBakalova Telephone: 603.929.1166 2 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 3. Professional Services Business Quarterly Research Highlights and Outlook: Webinar Overview TBR TBR’s IT Services Vendor Benchmark delivers unique insight and value through in-depth analysis in a concise, consumable format Clients are gaining advantages and better understanding revenue opportunities through our reports and their personal relationships with TBR. • The Professional Services Practice publishes quarterly and semiannual reports, continually covering 33 vendors. • TBR Professional Services Business Quarterly (PSBQ) Portfolio Of those vendors, 31 are included in our IT Services Vendor Benchmark. o o Financial modeling and TBR insights help customers gain a better understanding of vendor business models. o TBR reports and webinars are responsive to client timelines, clear and concise, and provide insights across multiple layers of a vendor’s organization and infrastructure. o 3 TBR reports are unique for their deep holistic analysis of leading vendor businesses. TBR’s strategic assessment provides an impartial check on a vendor’s progress in its strategic objectives. TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 4. PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends TBR Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth Professional Services Vendor Trends for 3Q13 ITO Performance: IT services growth decelerates to low single digits as clients invest in shorter-term tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET Cloud Adoption: Vendors embrace cloud-centric business models as managed cloud eats into traditional ITO opportunities. SOURCE: WWW.HSCI2012.ORG Industry Change: IT services leaders invest in cloud, analytics, mobility and social media to retain industry-leading market positions. SOURCE: WWW.FREEICONSVECTOR.COM 4 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 5. PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends TBR Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth Professional Services Vendor Trends for 3Q13 ITO Performance: IT services growth decelerates to low single digits as clients invest in shorter-term tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET Cloud Adoption: Vendors embrace cloud-centric business models as managed cloud eats into traditional ITO opportunities. SOURCE: WWW.HSCI2012.ORG Industry Change: IT services leaders invest in cloud, analytics, mobility and social media to retain industry-leading market positions. SOURCE: WWW.FREEICONSVECTOR.COM 5 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 6. PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance TBR ITO growth will continue to trail behind other service lines and decelerate to an estimated 0.6% average trailing 12-month growth in 4Q13 While technology- and analytics-enabled solutions supported BPO’s leading average trailing 12-month growth in 3Q13, cloud, mobility and analytics technologies stemmed the rate of C&SI revenue growth deceleration relative to outsourcing services. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES NOTE: Includes total trailing 12-month service line revenues from TBR’s IT Services Vendor Benchmark, not representative of a total global market view. Dots indicate year-to-year growth and arrows indicate directional change relative to the year-ago quarter. 6 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 7. PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance TBR The ongoing shift to lower-priced cloud computing pressured traditional ITO revenue streams in 3Q13 Average trailing 12-month ITO growth decelerated since 1Q12, as deal completions, price pressures, demand for shorter-term tactical projects in place of traditional ITO deals and an ongoing shift to cloud computing slowed ITO revenue performance. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES NOTE: Includes total trailing 12-month ITO revenue from TBR’s IT Services Vendor Benchmark; not representative of a total global market view. 7 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 8. PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance TBR HP’s ITO revenue decline followed a shift in demand from outsourcing to cloud hosting engagements with lower initial spend Bringing HP’s Technology Services segment into its Enterprise Group better aligns support and IT outsourcing services with the technologies they manage and support. However, customer demand is shifting to shorter-cycle, smaller contracts to manage IT spending, driving down ITO revenue. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES 8 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 9. PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends TBR Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth Professional Services Vendor Trends for 3Q13 ITO Performance: IT services growth decelerates to low single digits as clients invest in shorter-term tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET Cloud Adoption: Vendors embrace cloud-centric business models as managed cloud eats into traditional ITO opportunities. SOURCE: WWW.HSCI2012.ORG Industry Change: IT services leaders invest in cloud, analytics, mobility and social media to retain industry-leading market positions. SOURCE: WWW.FREEICONSVECTOR.COM 9 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 10. PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption TBR Cloud computing overlaps vendors’ traditional outsourcing portfolios and revenues, forcing vendors to adjust business models to the new era Professional Services Vendor Trends for 3Q13 — Cloud Adption Managed private cloud and cloud professional services are rapidly gaining popularity in the market. The initial influx of cloud drove consulting engagements that then informed and educated customers on the benefits of cloud on IT operations and business outcomes. “If it is a new application, we would much rather have someone else host it and manage it.” — IT Director of a U.S.-based, higher-education organization Cloud environments offer cost-effective, secure alternatives to investments in on-premises or traditionally hosted and managed IT, driving fundamental changes in vendors’ legacy outsourcing business models. SOURCE: TBR 3Q13 MANAGED PRIVATE & PROFESSIONAL SERVICES CLOUD BENCHMARK 10 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 11. PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption TBR IT outsourcing revenues are increasingly turning into managed cloud revenue dollars as vendors adjust to cloud-driven business models IT outsourcing revenue growth fluctuated between 0% and -5% year-to-year over the past five quarters, while managed private cloud revenue growth ranged between 30% and 35% over the same period, indicating a real threat to traditional ITO vendors. SOURCE: TBR 3Q13 MANAGED PRIVATE & PROFESSIONAL SERVICES CLOUD BENCHMARK NOTE: Graph is based on data for 22 vendors: Accenture, Atos, Capgemini, Cisco, Cognizant, CSC, Dell, Deloitte, Dimension Data, EMC, Fujitsu, HCLT, HP, IBM, Infosys, Oracle, SAP, TCS, T-Systems, Wipro, Xerox and Unisys. 11 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 12. PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption TBR Expertise and comprehensive portfolios outweigh lower costs when customers evaluate and decide between cloud vendors Attributes Driving Cloud Professional Services Vendor Selection Most Popular Cloud Professional Services Vendors in 2013 according to TBR’s 2013 Cloud Professional Services Study: 1. IBM 2. Microsoft 3. SAP 4. HP 5. Oracle 6. Accenture SOURCE: TBR’S 2013 CLOUD PROFESSIONAL SERVICES STUDY 12 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 13. PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends TBR Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth Professional Services Vendor Trends for 3Q13 ITO Performance: IT services growth decelerates to low single digits as clients invest in shorter-term tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET Cloud Adoption: Vendors embrace cloud-centric business models as managed cloud eats into traditional ITO opportunities. SOURCE: WWW.HSCI2012.ORG Industry Change: IT services leaders invest in cloud, analytics, mobility and social media to retain industry-leading market positions. SOURCE: WWW.FREEICONSVECTOR.COM 13 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 14. PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change TBR Client demand for analytics, cloud, mobility and digital fueled 3 main strategies: Acquire, hire and consolidate New technologies require vendors keep pace with ever-accelerating changes. With business models built on low-cost delivery and/or differentiated IP, vendors that adjusted fastest lead the pack. To invest in emerging technologies, IT services vendors have: Acquired companies, pulling in new talent, expanding offerings and gaining new IP SOURCE: WWW.STATICFLICKR.COM Hired experienced professionals and/or expanded the low-cost resource base Consolidated offerings around emerging technologies, either through new delivery centers or wholesale corporate reorganization around digital SOURCE: WWW.MOMENTUMNI.COM SOURCE: WWW.STANFORD.EDU SOURCE: TBR RESEARCH AND COMPANY DATA 14 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 15. PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change TBR Acquisitions provide an immediate boost to revenues, expand offerings and create a platform for new IP Acquisitions enable vendors to expand their industry expertise and bring solutions to market faster than through internal R&D activity, though these avenues require concessions such as revenue sharing, reduced control and integration costs. Vendor Target Description IBM Xtify (4Q13) Xtify provides cloud-based mobile messaging tools that help organizations improve mobile sales, drive in-store traffic and engage customers with personalized offers. IBM The Now Factory (4Q13) The Now Factory specializes in analytics software that helps communications service providers deliver better customer experiences and drive revenue opportunities. IBM CSL Int’l (2Q13) CSL International’s CSL-Wave software enables clients to monitor and manage z/VM and Linux on IBM System z environments; facilitates setting up and managing clouds on the mainframe, enabling companies to provide enhanced services and support around big data, analytics and mobility. CSC ServiceMesh (4Q13) The ServiceMesh Agility Platform automates the deployment and management of applications across the private, public and hybrid clouds. CSC Infochimps (3Q13) Infochimps provides PaaS related to big data, enhancing CSC’s presence in the cloud and big data market. Accenture Acquity Group (3Q13) As a digital marketing company, Acquity provides strategy, digital marketing and technical services to help companies enhance their brand experiences and ecommerce performance. SOURCE: TBR RESEARCH AND COMPANY DATA 15 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 16. PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change TBR All IT services vendors face challenges recruiting and retaining talented staff with skills in emerging technologies Leading vendors set aggressive hiring targets and looked for mature professionals (with experience in emerging technologies or industry expertise) and talented “freshers.” TOP THREE TTM REVENUE GROWTH TBR 3Q13 CGI 109.4% COGNIZANT 3Q12 3Q13 Cognizant will increase hiring of experienced, client-facing professionals to upsell social, mobile, analytics and cloud solutions in 2014. 10.9% 19.5% 22.4% 3Q12 15.5% 3Q12 16.0% TCS announced plans to increase its FY14 hiring target from 45,000 to 50,000. TCS 3Q13 0% 20% 40% 60% 80% 100% 120% YTY Growth SOURCE: TBR AND COMPANIES Vendors struggle to find low-cost talent with necessary skills in emerging technologies, as well as experienced hires capable of blending industry expertise and digital, analytics, or cloud capabilities. With all vendors seeking the best talent, competitive pressures lead to higher attrition rates across nearly the entire sector. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES 16 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 17. PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change TBR Digital, cloud computing and strategy services pave the way for new routes to market for IBM and Accenture Leading companies make investments concrete by opening delivery centers and changing organizations and portfolios to meet new digital demand. Accenture IBM IBM Digital Front Office Pulls together mobile, social, business analytics; integrates IBM Global Business Services with IBM Software and IBM Research to drive holistic transformation for clients IBM Interactive Experience Fuses strategy, data and design from IBM Interactive and 100+ IBM Researchers from the Customer Experience Lab to drive personalization and business model redesign 17 IBM Global Cloud Footprint IBM is investing $1.2 billion in 2014 to expand its global cloud footprint to deliver cloud services from 40 data centers in 15 countries and five continents. IBM will open 15 new data centers adding to its 13 global data centers from SoftLayer and 12 from IBM. Accenture Digital Pulls digital marketing, mobility and analytics services into one organization Accenture Strategy Combines business, technology, and operations strategy services into one organization TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 18. PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends TBR Vendors will convert technologies and analytics outputs into client business value to succeed IT Services Key Trends and 2014 Outlook 2012 2013 Building Capabilities In 2012 it was about building capabilities — through acquisitions, alliances and innovations — in technology trends such as cloud, digital, mobility and analytics. 18 2014 Increasing Value In 2013 vendors continue acquiring and partnering for technology-centric services to bring scale to their offerings. Clients are shifting from learning about emerging technologies to understanding exactly how those technologies disrupt business models, creating opportunities for IT services vendors. In 2014 increased customer awareness and vendor capabilities will fuel rapidly expanding demand for emerging technologies, pressuring vendors to get to scale quickly. TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 19. PSBQ 3Q13 Research Highlights and 2014 Outlook: 3Q13 Key Topics TBR TBR will analyze IT services vendors’ investments and strategies to expand capabilities in financial services, security and digital technology PSP Research • Select Vendor Reports: o Accenture o Atos o Capgemini o Cisco Services o Cognizant o CSC o Dell Services o Fujitsu o HP Services o IBM Global Services o Infosys o TCS o T-Systems o Wipro ITS o Xerox • Benchmarks: Management Consulting, Healthcare IT Services, Public Sector, Global Delivery Market Landscape, Managed Private & Professional Services Cloud 19 Current Topics 4Q13 Report Key Themes Vertical Strategy: Financial Services Analyze leading and lagging performers and the go-to-market strategies and  investments made by vendors to craft industry-specific solutions. Security Analyze how IT services vendors position to take advantage of the changing security  landscape. Assess vendors’ security offerings and how offerings are scaled. Digital Assess how vendors distinguish digital offerings from mobility and social consulting services and if vendors pair  analytics with digital solutions. Compare and contrast industries that vendors target most for digital. TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 20. PSBQ 3Q13 Research Highlights and 2014 Outlook Questions? 20 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc. TBR
  • 21. TBR IT Services Vendor Benchmark Webinar Contact Information TBR Patrick Heffernan Senior Analyst and Engagement Manager, Professional Services Practice Ramunas Svarcas Senior Analyst and Engagement Manager, Professional Services Practice Elitsa Bakalova Analyst, Professional Services Practice Email: Patrick.heffernan@tbri.com Twitter: @TBR_PatrickH Telephone: 603.758.1834 Email: ramunas.svarcas@tbri.com Twitter: @rjsTBR Telephone: 603.758.1833 Email: elitsa.bakalova@tbri.com Twitter: @ElitsaBakalova Telephone: 603.929.1166 James McIlroy Vice President of Sales Email: mcilroy@tbri.com Telephone: 603.929.1166 21 Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
  • 22. TBR Professional Services Practice Syndicated Coverage TBR PSP Syndicated Research Coverage IT Services Vendors Public Sector Vendors Benchmarks (Benchmark XLS data also available) • Accenture • Atos • Capgemini • CGI* • Cisco Services • Cognizant • CSC • Dell Services • Fujitsu • Genpact* • HCL Technologies • HP Services • IBM Global Services • Infosys • KPN Corporate Market* • Tata Consultancy Services • T-Systems • Unisys • Wipro IT Services • Xerox Services • Booz Allen Hamilton* • CACI International* • General Dynamics IS&T* • L3 Communications* • Lockheed Martin IS&GS* • ManTech* • Northrop Grumman IS&TS* • Raytheon Intelligence, Information & Services* • Global Delivery Market Landscape • Healthcare IT Services Vendor Benchmark • IT Services Vendor Benchmark • Management Consulting Benchmark • Public Sector IT Services Vendor Benchmark • Software Alliance Benchmark Healthcare IT Services Vendors • Accenture HITS* • CSC HITS* • Dell HITS* • HP HITS* • IBM HITS* Management Consulting Vendors • Bain & Company* • Booz & Company* • Boston Consulting Group* • Deloitte Consulting* *Semiannual publication • McKinsey & Co.* TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc. 22
  • 23. About TBR Contact Us Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. 1.603.929.1166 info@tbri.com www.tbri.com 11 Merrill Drive Hampton, NH 03842 USA Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. To learn how our analysts can address your unique business needs, please visit our website or contact us today. TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C . This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.