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TBR Professional services vendor performance benchmark webinar deck

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On January 22nd, 2013 the TBR Professional Services research team recorded a recap of vendor performance reported in TBR's 3Q12 PSBQ IT Services Vendor Benchmark, focusing on how specific vendor, …

On January 22nd, 2013 the TBR Professional Services research team recorded a recap of vendor performance reported in TBR's 3Q12 PSBQ IT Services Vendor Benchmark, focusing on how specific vendor, go-to-market and resource management strategies impacted financial performance. TBR Senior Analyst Ramunas Svarcas and Analyst Bryan Belange shared their perspectives on the results and provided additional insight into the performance and future of the services market. This deck is from that presentation.

Questions answered in the webinar included:

1. What is changing in the IT services market, and which segments are growing?
2. How is cloud impacting IT services revenue growth?
3. Is IT outsourcing disappearing?

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  • 1. TBR’s Professional Services BusinessQuarterlySMResearch Highlights and OutlookTechnology Business Research Quarterly Webinar SeriesJan. 22, 2013
  • 2. PSBQ 3Q12 Research Highlights and Outlook: Webinar Presenters Ramunas Svarcas Senior Analyst and Engagement Manager, TBR’s Professional Services Practice ramunas.svarcas@tbri.com @rjsTBR Bryan Belanger Analyst, TBR’s Professional Services Practice bryan.belanger@tbri.com @bbelangerTBR2 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 3. PSBQ 3Q12 Research Highlights and Outlook: Webinar OverviewTBR’s IT Services Vendor Benchmark report delivers unique insight andvalue through in-depth analysis in a concise, consumable formatClients are gaining advantages and are better understanding revenue opportunities through notonly our reports, but also through their personal relationships with TBR.• We cover, on an ongoing basis, 35 vendors in our Professional Services Practice, publishing quarterly and semiannual reports.• Of those vendors, 30 are included in our IT Services Vendor Benchmark.  TBR reports are unique due to their deep holistic analysis of leading vendor businesses.  Financial modeling and TBR insights help customers build a better understanding of vendor business models.  TBR reports and webinars are designed to be responsive to client timelines, to be clear and concise, and to provide insights across multiple layers of an organization.  TBR’s strategic assessment provides an impartial reality check on how vendors are performing in regard to their strategic objectives and the overall market.3 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 4. PSBQ 3Q12 Research Highlights and Outlook: Key TrendsMigration of legacy IT to cloud and new client demands stress traditionalITO revenue streams and compel vendors to adjust business modelsProfessional Services Vendor Trends for 3Q12 Client Conservatism: IT services growth continues to decelerate as clients employ a “wait and see” approach to IT investment. Emergence of Cloud: Demand continues to grow for migration and management of legacy IT infrastructure in cloud environments. Industry Change: Adoption of cloud and shifting client IT spending priorities are challenging vendors’ near-term IT outsourcing growth. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES4 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 5. PSBQ 3Q12 Research Highlights and Outlook: Client ConservatismMigration of legacy IT to cloud and new client demands stress traditionalITO revenue streams and compel vendors to adjust business modelsProfessional Services Vendor Trends for 3Q12 Client Conservatism: IT services growth continues to decelerate as clients employ a “wait and see” approach to IT investment. Emergence of Cloud: Demand continues to grow for migration and management of legacy IT infrastructure in cloud environments. Industry Change: Adoption of cloud and shifting client IT spending priorities are challenging vendors’ near-term IT outsourcing growth. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES5 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 6. PSBQ 3Q12 Research Highlights and Outlook: Client ConservatismVendors will face further revenue deceleration in 4Q12 as clients displaycontinued conservatism in IT services spendingProfessional Services Vendor Trends for 3Q12 — Client Conservatism Enterprises are prioritizing “run the business” tactical projects over long-term “change the business” awards: •Total TTM IT services revenue growth decelerated to 4.6% in 3Q12 from 10.4% in 3Q11 and 7.9% in 2Q12. •Growth decelerated across all service lines, as well as the Americas and EMEA geographies. Long-term growth leaders will position business models to address three core objectives: (1) cost takeout (2) business outcome enablement and (3) emerging technology adoption. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES6 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 7. PSBQ 3Q12 Research Highlights and Outlook: Client ConservatismITO will trail other service lines in growth during 4Q12 as clients eschewlong-term deals in favor of short-term, tactical projects Growth decelerated across all service lines in 3Q12. BPO led growth due to its near-term cost takeout and ROI benefits, while deal completions, price pressures, and demand for shorter-term projects plagued ITO expansion. TTM LOB REVENUE AND TTM LOB REVENUE GROWTH $3,500 16.0% $3,210 $3,295 14.8% $3,000 14.0% 12.4% $2,683 $2,737 11.4% 12.0% $2,500 10.9% 10.0% $2,000 8.6% $1,356 8.0% $1,223 $1,384 $1,503 6.6% $1,500 w G o h Y T m 6.0% r t R o u n $ e v s l i $1,000 4.0% $500 2.0% 2.7% 2.0% $- 0.0% 3Q11 3Q12 3Q11 3Q12 3Q11 3Q12 3Q11 3Q12 C&SI BPO AO ITO SOURCE: TBR7 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 8. PSBQ 3Q12 Research Highlights and Outlook: Client ConservatismAPAC will outpace other geographies in 4Q12 growth as MNC clients seeksupport to scale up operations in the region APAC growth accelerated in 3Q12 due to demand for large-scale infrastructure and business model modernization, while EMEA revenues contracted year-to- year due to persistent regional uncertainty and soft discretionary spending. TTM REVENUE AND TTM REVENUE GROWTH BY GEOGRAPHY $5,000 12.0% 10.8% $4,327 $4,023 $3,978 10.0% $3,950 $4,000 7.9% 8.6% 8.0% 7.9% 7.6% $3,000 6.0% $2,061 m $1,885 4.0% R o u n $ e w v s G $2,000 o h Y l i T r t 2.0% $1,000 0.0% -0.7% $- -2.0% 3Q11 3Q12 3Q11 3Q12 3Q11 3Q12 Americas EMEA APAC SOURCE: TBR8 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 9. PSBQ 3Q12 Research Highlights and Outlook: Client Conservatism Cognizant will forgo industry-leading margins in 2013 to position its business model for long-term revenue growth COGNIZANT YTY REVENUE GROWTH VERSUS INDIA- COGNIZANT OPERATING MARGIN VERSUS INDIA- CENTRIC PEERS CENTRIC PEERS 50.0% 25.0% 24.0% 45.0% 23.0% 40.0% 22.0% 35.0% 21.0% 30.0% 20.0% 19.0% 25.0% 18.0%a oe % w G R o h u n M aY -t -y v r % t ) ( O n p e a g 20.0% r t ) ( i 17.0% 15.0% 16.0%er 10.0% 15.0% 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Peer Average YTY Revenue Growth* Cognizant YTY Revenue Growth Cognizant Operating Margin Peer Average Operating Margin* SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES *NOTE: PEER AVERAGE YTY REVENUE GROWTH AND PEER AVERAGE OPERATING MARGIN ARE TOTAL AVERAGES FOR THE FOLLOWING INDIA-CENTRIC FIRMS COVERED IN TBR’S IT SERVICES VENDOR BENCHMARK: COGNIZANT, GENPACT, HCLT, INFOSYS, TCS, AND WIPRO ITS. Cognizant will drive industry-leading revenue growth in the long-term by prioritizing reinvestment in consulting, vertical-specific expertise, and SMAC solutions over maintaining margin performance in-line with India-centric peers. 9 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 10. PSBQ 3Q12 Research Highlights and Outlook: Emergence of CloudMigration of legacy IT to cloud and new client demands stress traditionalITO revenue streams and compel vendors to adjust business modelsProfessional Services Vendor Trends for 3Q12 Client Conservatism: IT services growth continues to decelerate as clients employ a “wait and see” approach to IT investment. Emergence of Cloud: Demand continues to grow for migration and management of legacy IT infrastructure in cloud environments. Industry Change: Adoption of cloud and shifting client IT spending priorities are challenging vendors’ near-term IT outsourcing growth. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES10 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 11. PSBQ 3Q12 Research Highlights and Outlook: Emergence of CloudCloud computing will drive vendors’ long-term outsourcing growth asdemand expands for end-to-end cloud managed servicesProfessional Services Vendor Trends for 3Q12 — Emergence of Cloud Cloud computing continues to gain market acceptance as a cost-efficient, secure alternative to investments in on- premise IT, driving fundamental change in vendors’ legacy ITO and AO business models. “Cloud and less is our motto used during managed services discussions, as cloud drives managed services sales opportunities.” – Wim Los, Atos VP of Cloud Services, Atos Managed Services Industry Analyst Day, December 2013 SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES11 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 12. PSBQ 3Q12 Research Highlights and Outlook: Emergence of CloudEnterprises will increasingly consider purchasing cloud-based infrastructureservices to trim costs and improve operational efficiency TBR survey results indicate enterprises are now educated on the capabilities and merits of migrating legacy IT to cloud, and are actively considering or purchasing cloud-based applications and/or infrastructure services. SOURCE: TBR 2012 CLOUD PROFESSIONAL SERVICES STUDY12 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 13. PSBQ 3Q12 Research Highlights and Outlook: Emergence of CloudDell leverages acquisitions to fill gaps in its cloud portfolio and addressclient demand for cloud infrastructure migration and management Utilize Build Vertical Invest in Channel to Consulting Expertise access SMBs Cover Use, Leverage Build, Hardware integrate, Base Operate Cycle Dell Services will invest in acquisitions to address demand for bundled, end-to-end C&SI and outsourcing services supporting Dell Services Cloud Investment migration of infrastructure and Strategy applications to cloud. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES13 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 14. PSBQ 3Q12 Research Highlights and Outlook: Industry ChangeMigration of legacy IT to cloud and new client demands stress traditionalITO revenue streams and compel vendors to adjust business modelsProfessional Services Vendor Trends for 3Q12 Client Conservatism: IT services growth continues to decelerate as clients employ a “wait and see” approach to IT investment. Emergence of Cloud: Demand continues to grow for migration and management of legacy IT infrastructure in cloud environments. Industry Change: Adoption of cloud and shifting client IT spending priorities are challenging vendors’ near-term IT outsourcing growth SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES14 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 15. PSBQ 3Q12 Research Highlights and Outlook: Industry ChangeClient demand for smaller ITO deals addressing cloud adoption andinnovation will precipitate changes in vendors’ ITO strategies during 2013Professional Services Vendor Trends for 2012 — Industry Change ITO providers are at a crossroads, as client demands and technology changes are challenging traditional revenue streams and requiring new go-to-market approaches: •Emergence of cloud computing •Demand for outcome-based services •Emphasis on smaller deals •Increased pricing structure flexibility/innovation •Demand for blended offshore and onshore delivery capabilities •Vertical-specific sales and delivery expertise SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES15 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 16. PSBQ 3Q12 Research Highlights and Outlook: Industry ChangeBenchmark ITO revenues will contract further in 4Q12 as shifting marketdynamics pressure traditional revenue streams in the space Total benchmark TTM ITO growth has decelerated rapidly since 1Q12, as clients continue to pass on large-scale, traditional ITO engagements in favor of short- term, tactical deals focused on migrating elements of IT infrastructure to managed private or hybrid cloud environments. TTM ITO REVENUE, GROWTH, AND OVERALL INDUSTRY GROWTH $87.0 12.0% $85.6 $86.0 $86.0 $85.4 10.0% $85.2 $85.0 $84.2 8.0% $83.9 $84.0 $83.4 6.0% $83.0 $82.0 4.0% $81.5 $80.5 $80.7 oe % w G R o h u n a -t -y v $81.0 r t ) ( 2.0% M B R o u n $ e T v s ) ( I l i $80.0 0.0% M e Y T a r $79.0 -2.0% $78.0 $77.0 -4.0% 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Est. TTM ITO Revenue TTM YTY ITO Revenue Growth TTM YTY IT Services Revenue Growth SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES NOTE: INCLUDES TOTAL TTM ITO REVENUE FROM TBR’S IT SERVICES VENDOR BENCHMARK, NOT REPRESENTATIVE OF A TOTAL GLOBAL MARKET VIEW.16 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 17. PSBQ 3Q12 Research Highlights and Outlook: Industry ChangeTraditional ITO leaders such as IBM GS will face growth headwinds due toIndia-centric vendor competition and demand for smaller cloud deals ITO growth leaders emphasize global delivery models and leverage acquisitions and alliances to bolster their cloud infrastructure portfolios. 3Q12 ITO SERVICES TTM REVENUE AND YTY GROWTH 68% 30% ATOS Avg. ITO TTM Y/Y ≈ 25% Grow th: 2.0% COGNIZANT 20% EMC SERVICES GENPACT TCS 15% FUJITSU CGI HCLT ITO Growth CAPGEMINI WIPRO 10% ACCENTURE Leaders DELL SERVICES XEROX SVCS INFOSYS 5% IBM GS Avg. Total Services TTM Y/Y 0% HP SERVICES Grow th: 4.6% CONVERGYS CSC -5% BT SERVICES M w G R o h u n Y e T a v S c s r t i l -10% KPN CORP. MKT ORACLE SERVICES UNISYS T-SYSTEMS -15% -20% -10% 0% 10% 20% 30% ≈54.6% 40% ITO TTM Revenue Growth YTY LEGEND: SIZE OF BUBBLE = ITO TTM REVENUE SOURCE: TBR ESTIMATES AND COMPANY DATA SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES17 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 18. PSBQ 3Q12 Research Highlights and Outlook: Industry ChangeWhile cost takeout drives India-centric vendors current ITO growth, long-term segment growth will be fueled by demand for IT innovation Infosys continues to gain share in ITO by bolstering its onsite presence in the U.S. and Europe and emphasizing bundled C&SI and outsourcing services to deliver business value beyond cost reduction. INDIA-CENTRIC VENDORS TTM ITO REVENUE, INDIA-CENTRIC VENDORS TTM YTY ITO REVENUE GROWTH, AND OVERALL INDUSTRY GROWTH GROWTH $6,000 35.0% 60.0% $4,832 30.0% $5,000 50.0% $4,448 $4,631 $4,244 25.0% $4,058 $4,000 $3,816 40.0% $3,346 $3,569 20.0% $3,094 $3,000 15.0% 30.0% % w 10.0% oe G R o h u n a -t -y v r t ) ( $2,000 20.0% 5.0%M 10.0%Roun$ $1,000eTvs)(Ili 0.0% M M % w O G R o h u n e Y T v e Y T a r t ) ( I r 0.0% $0 -5.0% 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 India-centric vendor TTM ITO Revenue -10.0% India-centric vendor YTY TTM ITO Revenue HCLT Cognizant Genpact Total TTM YTY ITO Revenue Growth Infosys TCS Wipro SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES NOTE: INDIA-CENTRIC VENDOR TTM ITO REVENUE = SUM OF ITO REVENUE FOR THE FOLLOWING FIRMS: HCLT, COGNIZANT, GENPACT, INFOSYS, TCS, WIPRO.18 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 19. PSBQ 3Q12 Research Highlights and Outlook: Industry ChangeITO vendors will catalyze segment growth by building cloud-basedinfrastructure services capabilities in areas of growing demand Legacy ITO vendors will align for long-term segment growth by extending their ability to manage clients’ core IT infrastructure in private or hybrid clouds. As traditional IT outsourcing revenue streams are displaced by cloud, opportunity exists for vendors that can deliver standardized IaaS offerings for: •Data Backup, Business Continuity, and Disaster Recovery •PCs (Desktop, Laptop, Tablet) •Servers •Storage SOURCE: TBR 2012 CLOUD PROFESSIONAL SERVICES STUDY19 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 20. PSBQ 3Q12 Research Highlights and Outlook: Key TrendsMigration of legacy IT to cloud and new client demands stress traditionalITO revenue streams and compel vendors to adjust business modelsProfessional Services Vendor Trends for 3Q12 Client Conservatism: IT services growth continues to decelerate as clients employ a “wait and see” approach to IT investment. Emergence of Cloud: Demand continues to grow for migration and management of legacy IT infrastructure in cloud environments. Industry Change: Adoption of cloud and shifting client IT spending priorities are challenging vendors’ near-term IT outsourcing growth. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES20 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 21. PSBQ 3Q12 Research Highlights and Outlook: 4Q12 Key TopicsVendors will counter further revenue deceleration in 4Q12 by aligningportfolios to high-growth verticals, technologies, and emerging marketsPSP Research Current Topics 4Q12 Report Key Themes • Vendor Reports: Vertical How are vendors leveraging alliances, acquisitions o Accenture Growth and/or R&D investments to bolster healthcare- Atos o Strategy:  specific solutions breadth and capture opportunity Healthcare o Capgemini in the space? o Cognizant o CSC Vendor IP and What strategies and approaches (R&D, alliances, o Dell Services Asset and/or acquisitions) are vendors employing to Investment  develop and integrate IP assets into their services o Fujitsu Strategy portfolios? Who are the leaders/laggards in o HP Services building IP? o IBM Global Services How are leading/lagging vendors investing in and ITO as-a- o Infosys Service  repositioning their delivery models and portfolios o TCS to accommodate cloud IT services demand? o Wipro ITS • What vendors are leading/lagging in expansion • Benchmarks: Emerging Markets into the Middle East and Africa? What markets Management Growth are leaders targeting for regional development? Consulting, HITS,  Strategy: • What are the predominant IT services demand Public Sector, Middle East trends and growth drivers for leading vendors in Software Alliance and Africa the Middle East and Africa? SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES21 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 22. PSBQ 3Q12 Research Highlights and 2012 Outlook Questions?22 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 23. Ramunas Svarcas Bryan Belanger Senior Analyst and Analyst, Professional Engagement Manager, Services Practice Professional Services Practice bryan.belanger@tbri.com ramunas.svarcas@tbri.com @bbelangerTBR @rjsTBR@TBRincwww.slideshare.net/TBR_Market_Insightwww.youtube.com/user/TBRIChannelFor further information, please contact:Lindy Hanson James McIlroyDirector, Professional Services Practice Vice President, Saleslindy.hanson@tbri.com mcilroy@tbri.com23 TBR Quarterly Webinar Series | 1.22.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 24. About TBR Contact Us Technology Business Research (TBR) is a leading independent technology 1.603.929.1166 market research and consulting firm specializing in the business and financial analyses of hardware, software, networking equipment, wireless, info@tbri.com portal and professional services vendors. www.tbri.com 11 Merrill Drive Serving a global clientele, TBR provides timely and accurate market research Hampton, NH 03842 and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information USA 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.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 Researchwill 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 beinvestment 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 useof the recipient. Contact Technology Business Research, Inc. for permission to reproduce.

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