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TBR's Global Delivery Market Landscape Research Highlights and Outlook

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  • 1. TBR’s Global Delivery Market Landscape Research Highlights and Outlook Technology Business Research (TBR) Quarterly Webinar Series Nov. 20, 2013
  • 2. Global Delivery Market Landscape Research Highlights Webinar presenters Ramunas Svarcas Senior Analyst and Engagement Manager, TBR’s Professional Services Practice Email: ramunas.svarcas@tbri.com Twitter: @rjstbr Boz Hristov Research Analyst, TBR’s Professional Services Practice Email: bozhidar.hristov@tbri.com Twitter: @boztbr 2 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 3. Global Delivery Market Landscape Research Highlights TBR’s Global Delivery Market Landscape delivers insight and value through in-depth analysis in a concise, consumable format • TBR Global Delivery Market Landscape Semiannual Report 3 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc. TBR reports are unique for their deep, holistic analysis of leading vendor businesses. • Financial modeling and TBR insights help customers gain a better understanding of vendor business models. • 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. • TBR’s strategic assessment provides an impartial check on a vendor’s progress toward meeting its strategic objectives. • Vendors covered in the GDML study include:
  • 4. Global Delivery Market Landscape Research Highlights The Global Delivery Market Landscape covers total, onshore and low-cost headcount trends, delivery support investments and profitability drivers Global Delivery Market Landscape Key Takeaways Why did headcount continue to decelerate in 2Q13? How are vendors improving support delivery and reducing costs? How are India-centric vendors climbing up the value chain? 4 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 5. Global Delivery Market Landscape Research Highlights India-centric vendors are moving up the value chain and expanding onshore consulting and delivery capabilities TBR Vendor Segments 2Q13 YTY low-cost headcount: up 1.1% Onshore headcount: down 6.8% 2Q13 YTY low-cost headcount: up 9.4% Onshore headcount: down 2% SIs SIs with Support & Maintenance •Accenture, Atos, Capgemini, •Dell Services, HP Services, CSC, Xerox Services IBM GS, T-Systems Low-cost leverage, •Vertical expertise, domestic •Cross-company industrialization, IP lower-cost labor, freshers capabilities, assets, emerging onshore, pyramid management global integration, market expansion, consulting cloud computing India-centric Vendors •Cognizant, HCLT, Infosys, TCS, Wipro ITS •High low-cost leverage, onshore local hiring, platform BPO, reliance on freshers 2Q13 YTY low-cost headcount: up 8.2% Onshore headcount: up 12.9% Vendor goals center on revenue expansion in emerging markets and global growth of cloud computing and cloud computing professional services. 5 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 6. Global Delivery Market Landscape Research Highlights Headcount growth continues at a slower pace industrywide as firms prepare for a rebound by cloud demand Global Delivery Market Landscape Key Takeaways Why did headcount continue to decelerate in 2Q13? Market uncertainty and vendors moving beyond the era of labor arbitrage forced continued deceleration. How are vendors improving support delivery and reducing costs? Vendors are expanding IP portfolios through in-house developments. How are India-centric vendors climbing up the value chain? India-based firms increased emphasis on industrialized delivery models and expanding onshore consulting delivery capabilities. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES 6 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 7. Global Delivery Market Landscape Research Highlights Headcount growth decelerated across all vendors; the focus remains on improving profitability through restructuring and IP assets Year-to-Year Headcount Changes in 2Q13 Along with the weakening demand for IT services, the key factor contributing to the slowing of headcount growth in the first half of 2013 was the heightened development and integration of IP assets in vendors’ delivery models. Vendors scaled back hiring as they shifted labor-intensive C&SI processes to scalable IP-based offerings to grow profits. 7 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 8. Global Delivery Market Landscape Research Highlights Only three countries offering diverse language skills and nearshore presence for clients experienced double-digit headcount growth Year-to-Year Headcount Changes by Region and Country 8 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 9. Global Delivery Market Landscape Research Highlights Nonlinear model will succeed at the expense of revenue expansion Severe Correction Continued Correction Note: Graph reflects a weighted average growth rate for the 14 IT services vendors. As the labor arbitrage model runs its course, the next inflection point in service delivery will be the shift from low-cost labor to no-labor models enabled by cloud and automation, helping vendors generate viable nonlinear growth. 9 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc. SOURCE: TBR ANALYSIS AND ESTIMATES Despite stalled IT services revenue growth, headcount growth continues at a slower pace as firms prepare for a rebound driven by cloud
  • 10. Global Delivery Market Landscape Research Highlights Standardized processes and tools coupled with internal initiatives are prime investment areas to break the link between revenue and headcount Global Delivery Market Landscape Key Takeaways Why did headcount continue to decelerate in 2Q13? Market uncertainty and vendors moving beyond the era of labor arbitrage forced continued deceleration. How are vendors improving support delivery and reducing costs? Vendors are expanding IP portfolios through in-house developments. How are India-centric vendors climbing up the value chain? India-based firms increased emphasis on industrialized delivery models and expanding onshore consulting delivery capabilities. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES 10 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 11. Executive Summary: Profit Results and Headcount Metrics While low-cost leverage is key to the profit equation, profitability is influenced by delivery efficiency, market conditions and offerings Profit Results and Correlating Changes in Headcount Metrics All vendors except HP increased low-cost headcount year-to-year. • Profit margins improved for eight of the 14 vendors examined in the study. • Margins are influenced by market conditions, effective staff pyramid management, leverage of industrialized delivery models, assets and tools as well as IPenabled and platform-based solutions. • Alternative corporate strategies for growth, such as acquisitions, R&D and new alliances, can also impact margin improvement. • Key: 2Q12 vs. 2Q13  Improvement  Deterioration  11 No change TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 12. Global Delivery Market Landscape Research Highlights Low-cost leverage is a key determinant of operating margin, but more vendors are turning to tools and IP to improve profitability Low-cost Leverage Impact on Operating Margin Successful execution of IP asset creation will positively impact margin performance; however, only a few vendors are realizing the benefits of such activity. 12 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 13. Global Delivery Market Landscape Research Highlights Vendors’ investments in profitability factors have varied degrees of success Overall Revenue per Employee and Operating Income per Employee Results Restructuring Automation Less than half of the vendors in the study saw increased operating income per employee through operational efficiency, global delivery, automation and high-margin offerings. 13 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 14. Global Delivery Market Landscape Research Highlights Vision and execution beyond the traditional “bread and butter” business model is required to become an India 2.0 vendor Global Delivery Market Landscape Key Takeaways Why did headcount continue to decelerate in 2Q13? Market uncertainty and vendors moving beyond the era of labor arbitrage forced continued deceleration. How are vendors improving support delivery and reducing costs? Vendors are expanding IP portfolios through in-house developments. How are India-centric vendors climbing up the value chain? India-based firms increased emphasis on industrialized delivery models and expanding onshore consulting delivery capabilities. SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES 14 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 15. Executive Summary: Profit Results and Headcount Metrics India-centric vendors are willing to sacrifice short-term margin gains for long-term competitiveness Profit Results and Correlating Changes in Headcount Metrics Successful low-cost labor use continues to drive the best profit margins for India-based vendors. • India-based vendors are adding onshore resources to: o Expand consulting capabilities o Overcome Visa issues o Increase proximity to the customer o Invest in manpower and IP • Key: 2Q12 vs. 2Q13  Improvement  Deterioration  15 No change TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 16. Global Delivery Market Landscape Research Highlights India-centric vendors recognize the importance of onshore resources India-centric vendors: •Expanded Continental Europe presence through M&As •Hired local freshers and experienced professionals to offset potential impact of U.S. visa reform and grow on-premises consulting capabilities •Boosted onshore headcount to increase client face time and pursue high-margin deals in consulting 16 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 17. Global Delivery Market Landscape Research Highlights Adoption of a nonlinear growth model and revenue cannibalization will allow India-centric vendors to better compete globally Balanced Approach India-centric vendors are expanding IP asset offerings through alliance partners and inhouse developments to cultivate a nonlinear growth model. • Revenue and headcount growth for India-centric vendors will continue to decelerate as the increased use of automation tools leads to revenue cannibalization and margin improvement. • 17 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 18. Global Delivery Market Landscape Research Highlights Questions? 18 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 19. Global Delivery Market Landscape Research Highlights Webinar presenters Ramunas Svarcas Senior Analyst and Engagement Manager, TBR’s Professional Services Practice Email: ramunas.svarcas@tbri.com Twitter: @rjstbr Boz Hristov Research Analyst, TBR’s Professional Services Practice Email: bozhidar.hristov@tbri.com Twitter: @boztbr Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel LinkedIn: http://www.linkedin.com/company/technology-business-research 19 TBR Quarterly Webinar Series | 11.20.13 | www.tbri.com | ©2013 Technology Business Research Inc.
  • 20. 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. All reports are available in PowerPoint and PDF. If you are viewing a PDF and require access to data, tables, etc. for use in internal documents, please visit www.tbri.com and download the PowerPoint version. 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.