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The inflection point of consulting and systems integration - Insights from the TBR 4Q12 IT Services Benchmark

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The TBR Professional Services research team recorded a webinar on Tuesday, April 30, 2013, recapping vendor performance reported in TBR’s 4Q12 PSBQ IT Services Vendor Benchmark. These slides are from …

The TBR Professional Services research team recorded a webinar on Tuesday, April 30, 2013, recapping vendor performance reported in TBR’s 4Q12 PSBQ IT Services Vendor Benchmark. These slides are from that webinar.

Senior Analyst Ramunas Svarcas and Analyst Bryan Belanger shared their perspectives on the results and provided additional insight into vendor performance and the future of the IT services market.

Questions for discussion included:

• How is the C&SI market currently performing? Who are the leaders and laggards?
• What C&SI services will see the greatest long-term demand?
• How are vendors positioning their resource models to drive C&SI growth?

For more information visit www.tbri.com
Follow us on twitter @TBRInc

Published in: Technology, Business

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  • 1. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C.The Inflection Point of Consulting andSystems Integration: Insights fromTBR’s 4Q12 IT Services Vendor BenchmarkTechnology Business Research Quarterly Webinar SeriesApril 30, 2013
  • 2. TBR2 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: Webinar PresentersBryan BelangerAnalyst, Professional Services Practicebryan.belanger@tbri.com@bbelangerTBRRamunas SvarcasSenior Analyst and Engagement Manager,Professional Services Practiceramunas.svarcas@tbri.com@rjsTBR
  • 3. TBR3 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.• The Professional Services Practices continually covers 35vendors, publishing quarterly and semiannual reports.• Of those vendors, 30 are included in our IT ServicesVendor Benchmark.o TBR reports are unique due to their deep, holisticanalysis of leading vendor businesses.o Financial modeling and TBR insights help customersbuild a better understanding of vendor business models.o TBR reports and webinars are designed to be responsiveto client timelines, to be clear and concise, and toprovide insights across multiple layers of anorganization.o TBR’s strategic assessment provides an impartial realitycheck on how vendors are performing in regard to theirstrategic objectives and the overall market.Clients are gaining advantages and are better understanding revenue opportunities through ourreports and their personal relationships with TBR.PSBQ 4Q12 Research Highlights and Outlook: Webinar OverviewTBR’s IT Services Vendor Benchmark delivers unique insight and valuethrough in-depth analysis in a concise, consumable format
  • 4. TBR4 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: Key TrendsProfessional Services Vendor Trends for 4Q12Portfolio: As the industry reaches its inflectionpoint, pent-up demand will release for C&SI servicesthat support emerging technology adoption.People: Traditional offshore-centric vendors areaccelerating onshore hiring to address this pent-upC&SI demand.Performance: Buyers are trimming consulting andsystems integration (C&SI) budgets in the nearterm to minimize costs and preserve margins.The C&SI industry is nearing an inflection point, at which near-term costtakeout needs give way to emerging technology implementations
  • 5. TBR5 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: Key TrendsProfessional Services Vendor Trends for 4Q12Portfolio: As the industry reaches its inflectionpoint, pent-up demand will release for C&SI servicesthat support emerging technology adoption.People: Traditional offshore-centric vendors areaccelerating onshore hiring to address this pent-upC&SI demand.Performance: Buyers are trimming consulting andsystems integration (C&SI) budgets in the nearterm to minimize costs and preserve margins.The C&SI industry is nearing an inflection point, at which near-term costtakeout needs give way to emerging technology implementations
  • 6. TBR6 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.C&SI revenue is contracting as vendors focus on BPO and AOservices that offer near-term cost reduction:• Total trailing 12-month C&SI revenues contracted 2.5% year-to-year in 4Q12 for the 30 vendors covered in the benchmark.• C&SI revenue growth decelerated for the fifth consecutivequarter in 4Q12.Long-term growth leaders will offer portfolios capable ofaddressing demand for near-term cost takeout and long-termemerging technology adoption.Professional Services Vendor Trends for 4Q12 — PerformancePSBQ 4Q12 Research Highlights and Outlook: PerformanceC&SI revenue will contract in 2Q13 as IT services spending remainsfocused on outsourcing projects that support operational efficiency goals
  • 7. TBR7 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.Average trailing 12-month C&SI revenue growth trailed all other service lines in1Q13 as buyers in the U.S. and Europe continue to extend decision cycles forlong-term transformational projects to cope with macroeconomic uncertainty.PSBQ 4Q12 Research Highlights and Outlook: PerformanceSoft spending for transformational C&SI projects due to uncertaintyovershadows demand drivers in the space11.6%0.6%10.5% 10.6%16.1%5.9%8.5%2.6%$3,290 $3,312$1,253$1,386 $1,435$1,519$2,736$2,8060.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%$-$500$1,000$1,500$2,000$2,500$3,000$3,5004Q11 4Q12 4Q11 4Q12 4Q11 4Q12 4Q11 4Q12C&SI BPO AO ITOYTYGrowthRevenuein$millionsTTM LOB REVENUE AND TTM LOB REVENUE GROWTHTBRSOURCE: TBR
  • 8. TBR8 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.India-centric vendors drive C&SI expansion by investing in onshore talent, andanalytics, cloud and mobility solutions, while technology-centric vendors’ growthbenefits from small revenue bases and niche solutions expertise.PSBQ 4Q12 Research Highlights and Outlook: PerformanceNew market entrants, including a mix of India-centric vendors andtechnology firms, outpace MNC peers in C&SI revenue growthGrowth drivenby acquisition
  • 9. TBR9 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.$35 $37 $38 $44 $47$169 $173 $171$181$1920%10%20%30%40%50%60%$-$50$100$150$200$250$3001Q12 2Q12 3Q12 4Q12 1Q13 Est.Advanced Services Advisory ServicesAdvisory Services YTY Growth Advanced Services YTY GrowthPSP Average TTM C&SI YTY GrowthCisco Services will deepen its technology expertise and expand emergingmarket and channel investments to sustain leading C&SI growthPSBQ 4Q12 Research Highlights and Outlook: PerformanceCisco Services C&SI Segment Revenue, Growth, and Overall BenchmarkAverage C&SI GrowthSOURCE: TBR RESEARCHSegmentRevenue(In$Millions)Year-to-yearRevenueGrowthHigh-value,differentiatedtechnologyexpertiseSmall revenuebase relative toMNC peersEmergingmarketinfrastructureopportunityTap newmarketsthrough channelpartners
  • 10. TBR10 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: Key TrendsProfessional Services Vendor Trends for 4Q12Portfolio: As the industry reaches its inflectionpoint, pent-up demand will release for C&SI servicesthat support emerging technology adoption.People: Traditional offshore-centric vendors areaccelerating onshore hiring to address this pent-upC&SI demand.Performance: Buyers are trimming consulting andsystems integration (C&SI) budgets in the nearterm to minimize costs and preserve margins.The C&SI industry is nearing an inflection point, at which near-term costtakeout needs give way to emerging technology implementations
  • 11. TBR11 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.Demand for C&SI projects related to analytics,mobility and cloud continues to grow, but suchprojects remain small in scope and offer limitedcontribution to revenue.As discretionary budgets fully recover andenterprises become “buried” under increasinglycomplex IT ecosystems, demand will grow forvendors that can provide end-to-end C&SIservices supporting analytics-, cloud- andmobility-fueled IT transformation.Professional Services Vendor Trends for 4Q12 — PortfolioPSBQ 4Q12 Research Highlights and Outlook: PortfolioAs market conditions improve, clients will seek third-party supportto generate business value from long-term IT transformation projects
  • 12. TBR12 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.Analytics and other emerging technology adoption offers a long-term C&SIgrowth opportunity for vendors that are investing in services capability.SOURCE: TBRPSBQ 4Q12 Research Highlights and Outlook: Industry ChangeVendors investing ahead of demand foremerging technology C&SI servicesbenefit as clients aggressively deploydiscretionary budgets on large-scaleprojects supporting IT transformation.At the inflection point, small POC projects in areas such as analytics willgive way to bundled, high-revenue transformation engagementsRevenueGrowth/PortfolioInvestmentActivityCurrent MarketScenarioFuture MarketScenarioLowHighInflectionPointVendor Investment ActivityC&SI Revenue Growth
  • 13. TBR13 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.C&SI growth will accelerate when customer demand for emerging technology-enabled transformation aligns with vendors’ portfolio capabilities.PSBQ 4Q12 Research Highlights and Outlook: PortfolioVendors’ investments in emerging technology C&SI solutions will align withdemand, fueling rapid industry revenue expansionLegacy C&SI MarketDriversFuture C&SI MarketDriversCustomerDemandVendorInvestmentCost-drivenFunctionality-focusedISV partnerships are keyConsolidation, optimization,efficiencyLow-cost leverageT&M pricingBusiness value ITtransformationVertically drivenEmerging technologiesGlobal deliveryScalable IP assetsOutcome-based pricing
  • 14. TBR14 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.IBM invests in vertical-specific, emerging technology-enabled C&SIsolutions to fuel long-term GBS growth and profitabilityPSBQ 4Q12 Research Highlights and Outlook: Portfolio•IBM GBS and IBM Researchcollaborate to create IP such asAdvanced Analytics for AssetPerformance Optimization•Continued traction withSmarter Planet portfolio•Customer-centric and front-office transformationagendas•Leveraging partners tocommercialize Watson intohealthcare-specific analyticssolutions•Unveiled MobileFirst•Acquired Star Analytics•Continues to invest in end-to-end cloud and socialbusiness technology andC&SI capabilityEmergingTechnologiesVertical-specificSolutionsScalable IP AssetsBusiness ValueFocusIBM GBS C&SI Investment Strategy and Recent Initiatives
  • 15. TBR15 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: Key TrendsProfessional Services Vendor Trends for 4Q12Portfolio: As the industry reaches its inflectionpoint, pent-up demand will release for C&SI servicesthat support emerging technology adoption.People: Traditional offshore-centric vendors areaccelerating onshore hiring to address this pent-upC&SI demand.Performance: Buyers are trimming consulting andsystems integration (C&SI) budgets in the nearterm to minimize costs and preserve margins.The C&SI industry is nearing an inflection point, at which near-term costtakeout needs give way to emerging technology implementations
  • 16. TBR16 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.Vendors realize the growth and profit potential of the C&SIinflection point and are optimizing global resource deploymentsto ensure competitiveness.• Software and hardware vendors are building global C&SIpractices to wrap services around technology offerings.• MNCs are investing in technology-specific CoEs and opening localdelivery centers in emerging regions.• India-centric vendors are aggressively building an on-sitepresence through M&As and targeted hiring.Professional Services Vendor Trends for 4Q12 — PeoplePSBQ 4Q12 Research Highlights and Outlook: PeopleVendors across the IT services spectrum will optimize resource footprintsto ensure competitiveness for C&SI deals in the long term
  • 17. TBR17 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: PeopleIndia-centric vendors will accelerate onshore recruitment in matureregions to compete for C&SI-led strategic IT transformation dealsChange 4Q11 to 4Q12TotalHeadcount Attrition UtilizationOperating MarginDirection 4Q12Total#%Low-costOnshore#TotalOnshoreLow-costTotalOnshoreLow-costExpectedMarginActualMarginActual(%)SIs withSupport& Maint.Dell Svcs            13.6%HP Svcs            10.0%IBM GS            18.5%T-Systems            2.4%SIsAccenture            14.5%Atos            3.2%Capgemini            7.1%CSC            5.6%Xerox Svcs            11.2%India-centricVendorsCognizant            18.3%HCLT            19.8%Infosys            25.7%TCS            27.3%Wipro ITS            20.8%Based on Metrics, Expected Profit Change =Profit Results and Correlating Changes in Headcount MetricsKey: 4Q11 vs. 4Q12  Improvement  Deterioration  No changeSOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE SPRING 2013All five India-centric vendorscovered in TBR’s 4Q12 GlobalDelivery Market LandscapeStudy registered year-to-yearonshore headcount growth.India-centric vendors willcontinue to add on-site staff,particularly in C&SI, tocounter visa regulations andcompete more favorably forconsulting-led deals.
  • 18. TBR18 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.37,430 38,710 40,270 42,200 44,380218,890 217,280214,040212,210 210,350-10%-5%0%5%10%15%20%25%050,000100,000150,000200,000250,000300,0004Q11 1Q12 2Q12 3Q12 4Q12Total other GDML onshore C&SI headcount India-centric vendor onshore headcountIndia-centric vendor onshore headcount YTY growth Total other GDML onshore C&SI headcount YTY growthIndia-centric vendors will utilize acquisitions and delivery center openingsto expand their local market C&SI bases in the U.S. and Europe during 2013.PSBQ 4Q12 Research Highlights and Outlook: PeopleDespite their small revenue bases, India-centric vendors are aggressivelyadding on-site C&SI resources relative to MNC peersIndia-centric Vendor Onshore C&SI Headcount and Growth versus Industry PeersOnshoreC&SIHeadcountYear-to-yearHeadcountGrowth(%)SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE SPRING 2013
  • 19. TBR19 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.TCS, Infosys and Wipro ITS accelerated onshore C&SI recruitment in 4Q12,as onshore C&SI headcount grew for all 5 India-centric providersPSBQ 4Q12 Research Highlights and Outlook: Industry Change0%5%10%15%20%25%30%35%40%45%50%02,0004,0006,0008,00010,00012,00014,00016,0004Q11 4Q12 4Q11 4Q12 4Q11 4Q12 4Q11 4Q12 4Q11 4Q12Cognizant HCLT Infosys TCS WiproTCS is countering visa restrictions and positioning for long-term C&SI growth bydeveloping new centers and recruiting laterals in the U.S. and Europe.India-centric Vendor Onshore C&SI Headcount and GrowthOnshoreC&SIHeadcountYear-to-yearHeadcountGrowth(%)SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE SPRING 2013Opened TCS Solutions Center inMinnesota, recruiting laterals withmobility and analytics expertise
  • 20. TBR20 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSBQ 4Q12 Research Highlights and Outlook: Key TrendsAs enterprises continue to adopt big data, cloud and mobility solutions, andtechnology shifts from the IT function to business lines and the CxO level, demandwill grow for advisory and implementation services providers that can help translatetechnology capability and bid data outputs into strategic initiatives that createbusiness value.Translating new technology into business value will require C&SI support,and vendors are repositioning C&SI capabilities to address this demandC&SI OPPORTUNITY
  • 21. TBR21 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.PSP Research Current Topics 1Q13 Report Key Themes• Vendor Reports:o Accentureo Atoso Capgeminio Cognizanto CSCo Dell Serviceso Fujitsuo HP Serviceso IBM GlobalServiceso Infosyso TCSo Wipro ITS• Benchmarks:ManagementConsulting, HITS,Public Sector,Software AllianceWhat priority markets are vendors targeting forhealthcare IT services growth, and how are theyinvesting in portfolio and delivery capabilities toaddress these markets?What are the key delivery differentiators separatingthe delivery models of industry leaders andlaggards? What markets hold priority for globaldelivery expansion? What dominant strategies arevendors using to invest in these markets?How are leading IT services providers buildingSoftware as a Service (SaaS) portfolios? Whatdifferentiates leaders and laggards in the space?How does SaaS fit into vendors’ overall cloudservices strategies?VerticalGrowthStrategy:HealthcareVendor GlobalDeliveryStrategySoftware as aServicePSBQ 4Q12 Research Highlights and Outlook: 1Q13 Key TopicsVendors will optimize delivery models to manage margins while investingin high-growth verticals and service lines to drive revenue growth in 2013
  • 22. TBR22 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.Questions?PSBQ 4Q12 Research Highlights and 2013 Outlook
  • 23. TBR23 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.For further information, please contact:Lindy Hanson James McIlroyDirector, Professional Services Practice Vice President, Saleslindy.hanson@tbri.com mcilroy@tbri.comBryan BelangerAnalyst, ProfessionalServices Practicebryan.belanger@tbri.com@bbelangerTBRRamunas SvarcasSenior Analyst andEngagement Manager,Professional ServicesPracticeramunas.svarcas@tbri.com@rjsTBRTwitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannel
  • 24. TBRT ECH N O LO G Y B U SIN ESS RESEARCH , IN C.About TBRTechnology Business Research (TBR) is a leading independent technologymarket research and consulting firm specializing in the business and financialanalyses of hardware, software, networking equipment, wireless, portal andprofessional services vendors.Serving a global clientele, TBR provides timely and accurate market researchand business intelligence in formats that are tailored to clients’ needs. Ouranalysts are available to further address client-specific issues or informationneeds 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, pleasevisit our website or contact us today.Contact Us1.603.929.1166info@tbri.comwww.tbri.com11 Merrill DriveHampton, NH 03842USAThis 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. TechnologyBusiness 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 notand 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 reportis copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.

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