BT\'s market view


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Presentation prepared for HULT in Dubai (23 July 2009) explaining the role of ICT to thrive in a global recession

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  • Background notes Customers counted are the multi-site, multi-national major accounts looked after by BTGS (hence the 2,500 customer number in UK) The sum of customers allocated to each region is greater than the 8,500 total because we count the number of customers served in those regions. The high proportion of people in UK reflects the fact that we have (a) HQ functions in UK and (b) some of our largest customers (e.g. NHS).
  • Blue bar: Growth rate for global trade, very negative, 8% decline (source EIU and IMF) Very slow and flat recovery next year Now we have reached the bottom of the crisis cycle, best guest we can get Still risks for the recovery Role of the media? Forecasts are self fullfilling prophecy if someone is very influential predicts a downturn it can happen and the other way around The image for the Middle East would be much sharper in ups and downs
  • Different countries are in different positions Despite the recession China is still growing 7% (coming from a double digit growth) Decline in Emerging markets Do not mix decline and recession even if the effects can be the same (ie people losing jobs, factories closing down, etc)
  • CUSTOMER TRENDS: Summary of what is happening from a customer viewpoint: bcs of recession SURVIVAL is KEY, if above that they need to improve their business models Smaller outsourcing deals: mega deals not successful, too complex, now tendence for best in breed suppliers, 4-5 suppliers instead of 1 mega supplier, multisourcing instead of MEGA DEALS outsourcing Short ROI is a prerequisite, need to demonstrate the ROI of the money spent Focus on CORE activities bcs of recession, look at what is CORE for them and avoid non core areas (even at BT) Small nb of stronger player that take advantage of the region, buy assets and increase footprint – Satyan (indirect result of the crisis bcs cannot hide the accounting irregularuties), 3M Consolidation, ex: HP taking over EDS TECHNOLOGY AND SUPPLIER UCC, social computing, the crisis is an accelerator to their adoption REGULATORY, POLITICAL, ECO Slowdown of globalisation KEY trend, even if not advertised, negative trend in global trade 1 st since WWII Protectionism (ie France in automotive sector) IMPLICATIONS Outsourcing, hosting, managed services, demand is increasing Sustainability and GREEN are more and more key Key concern in IT is to reduce operating costs (ie cooling and power sources) have more efficient data centres Significant regulations to reduce carbon emissions Mindshift from customer perspective COMPETITOR Increasing rivalry, smaller profitable deals, less M&A, AT&T still investing in network
  • USE this Reorganisation Write offs: opportunity to clean up your balance sheet the market is open to that you wont stand out Loss of business Trust: many scandals related to bonuses, increase transparency Green issues: still top of agenda Restructuring Organisational restructuring in the form of layoffs Financial restructuring by de-leveraging their financial structures Corporate restructuring through entity consolidation Industry restructuring through the failure and survival of different players and business models Write-offs Assets no longer deemed as core to the business need to be disposed off CEOs will take the opportunity to clean-up their companies, whilst minimising disruption Loss of Business Trust The collapse of some established players has led to a loss of trust on businesses CEOs will need to improve the transparency within their organisations to improve business trust Globalisation Instability Current crisis may result in increased calls for protectionism and reduced global trade CEOs of large MNCs will need to take this into account and set up contingency plans New Regulatory Burden CEOs expect new regulatory burdens to affect their business as a result of the problems highlighted by the current crisis However, there is little visibility into what they will be Green issues CEOS are keen to keep green issues in the agenda despite of the crisis as they consider this to be good for business
  • Use this slide Reduce facilities: ie data center that uses a lot of energy => make them more sustainable Offshoring: new technologies to decrease costs Spend money of customer facing projects instead of internal issues (hence CRM is key) Value of IT in the organisation
  • Network services are an intelligent enabler Customers are almost completely dependant on the underlying network infrastructure to drive their business critical applications. Its these applications such as SAP, Oracle that power business processes like supply chain and logistics. These processes are vital to an organisations business strategy. Ultimately the network touches everything, every user, every server, every function , every site, anything that has any value to an organisation is touched by the network. a lot like the human nervous system in that it sees everything……... The network become the intelligent enabler for the applications, processes, companies strategies. They are all highly interdependent E.G We discussed this topic at a recently seminar at MIT with a number of execs from the manufacturing sector. The head of logistics for one company said they spent 15% of revenue on logistics, which is more than what they spend on operating their factories (incl personnel, utilities ). They spend roughly only 2% of revenue on IT. He admitted that logistics has numerous dependencies on applications and network so small expenditures in IT can result in significant improvements to performance of the logistics function. If applications stop working so does the business. If applications stop working customers can’t……..Take orders, they cant ship, they cant bill, they cant execute supply chain functions, process bank deposits. The business cost of application downtime can be significant There is a misconception in the industry – not helped by the OSI 7 layer model, which implies that the network and applications are independent of each other. It is a misconception that Applications teams can live in their world and the network manager can live in their world, that new application developments ‘over the wall’ to the network manager and they are expected to make it work. This is not true…the applications and network are intimately connected. Also the performance of business processes and strategies are intimately connected to the performance of Applications and the underlying network. Without a reliable IT and network infrastructure – applications are little more than expensive space on a server.
  • So in summary 21CN securely connects our customers global operations It provides the foundation for global collaboration It enables our customers to maintain legacy whilst harnessing new technologies It provides a rich source of open innovation It strengthens our customers operational risk profile Enables them to globalise efficiently It also enables them to: Reduced operational costs Improved enterprise performance Deliver exceptional customer service (CRM) Securely, resiliently with minimum risk
  • So in summary 21CN securely connects our customers global operations It provides the foundation for global collaboration It enables our customers to maintain legacy whilst harnessing new technologies It provides a rich source of open innovation It strengthens our customers operational risk profile Enables them to globalise efficiently It also enables them to: Reduced operational costs Improved enterprise performance Deliver exceptional customer service (CRM) Securely, resiliently with minimum risk
  • So in summary 21CN securely connects our customers global operations It provides the foundation for global collaboration It enables our customers to maintain legacy whilst harnessing new technologies It provides a rich source of open innovation It strengthens our customers operational risk profile Enables them to globalise efficiently It also enables them to: Reduced operational costs Improved enterprise performance Deliver exceptional customer service (CRM) Securely, resiliently with minimum risk
  • BT adopts a consistent methodology for delivery of services. The evolution of IT and network technology over the past decades has resulted in most IT estates being constructed of fragmented, high maintenance solutions. The opportunity provided by consolidation in both IT and communications technology around IP and associated Web 2.0 software technologies enables BT to offer a transformation solution to customers that reduces complexity, overhead, operational costs and enhances performance. This transformation is carried out over three phases. The pace of the transformation is dictated by the scale and complexity of the transformation, but the consistent methodology and approach enables clear understanding and cooperation between BT its customers and its partners. BT starts by consolidating or transitioning multiple supply agreements to one single BT contract therefore removing supplier management complexity whilst reducing risk and costs. With contract supply now with BT, we start to transform and converge these multiple suppliers onto a single BT Global MPLS, this further reduces cost, improves productivity, improves business flexibility and enables the enterprise to react to business change faster, and speed new services to market. In the Extend stage of our approach we start to truly innovate – here we tune the infrastructure to enable the client to better compete and improve customer experience as well as enabling client resources to focus on value creation versus managing complexity. The underlying objective of our approach is to reduce the total cost of ownership whilst improve business agility enabling our client to better compete and grow.
  • Let me take you through the following example which illustrates how inefficient communications can impact the bottom line of your business. We can show directly, how today’s communication experience can result in slow decision making, missed deadlines and lost time that could otherwise be spent generating value for your business. First of all, the number of communication devices & apps employees use is proliferating. According to research the average business person uses over 6 types of communication devices Employees are also traveling more. The average organization at least 47% of staff travel at least once per month. In an effort to reach coworkers, research shows that on a Daily basis, 52% of employees needed to use multiple methods in order to reach them. (Weekly 32%, Occasionally 12%) As a result employees are unable to reach coworkers on the first try… research indicates that this is 70-80% of the time, every single day The result this ends up in delays & missed deadlines. (Weekly 13%, Monthly 22% and Quarterly 12%.) Which of course, impacts the bottom line TRANSITION: What businesses really need and people really want is a simpler more efficient way of staying in touch.
  • Large organisations today face the challenges of increasingly complex contact centres. Businesses must juggle customers communicating via multiple channels across multiple sites. Agents with different skills are spread across numerous geographic and departmental locations. Contact centres need to run multiple systems efficiently and manage data compliantly. BT’s Generating Smart Customer Interactions (GSCI) can help. Businesses must juggle customers communicating via multiple channels across multiple sites (telephone, email, SMS, online). Agents are spread across numerous geographic and departmental locations (outsourced contact centres, home-based workers, different departments within same organisation). Contact centres need to run multiple systems efficiently (WFO/WM/PM) and manage data compliantly. Agents have different skills (language, sales, marketing, service).
  • But using the data you have within your contact centre can really take you to the next level. Can use to improve experience at point of contact.
  • So how can BT Global Services help our customers achieve profitable growth? The Smart 2020: Enabling the low carbon economy in the information age report sums up perfectly the role we can play in delivering sustainable business solutions to our customers “ While the sector (ICT) plans to significantly step up the energy efficiency of its products and services, ICT’s largest influence will be by enabling energy efficiencies in other sectors, an opportunity that could deliver carbon savings five times larger than the total emissions from the entire ICT sector in 2020” In effect we are able to deliver sustainable business through our Networked IT portfolio...
  • Crowdsourcing: getting information from the crowd (ie Wikipedia) prediction markets: bets on things happening or not, predict the future, ie sales forecasts could be more accurate than traditional way Augmented reality: like virtual reality, wearing glasses with ads , when you walk along a store you get a special discount according to your needs
  • Size of the ICT market ME still shows strong growth
  • IDC view, TOV ww has declined since 2006 bcs of fewer mega deals and smaller/shorter contracts Commercial only: excl. gov incl. domestic Commercial only: excl. gov global scope
  • Finance sector has been hit dramatically – bcs crisis was financial sector driven + had a lot of mergers in the past EMEA IT Outsourcing Deals: 2008 Review March 2009
  • The recession means you need better CRM to serve your customers better
  • Use this slide – high level summary OnG M&A: BP expected to acquire Santos (Australia), Shlumberger acquired JHB Intl Petroleum….British Gas, acquired Thailand, DLS ltd in India CPG: Consumer Packaged Goods Classify the companies in survival mode, cost cutting, operational efficiency, low impact, benefiting
  • Sources:- IDC Predictions 2009: An Economic Pressure Cooker Will Accelerate the IT Industry Transformation Eyeing a Return to Growth, CIOs and Business Leaders Plan for Change in People, Profiles and Practices Predicts 2009: The Future of Carriers and Vendors Hinges on Successful Business and Operational Transformation
  • Sources:- Worldwide Outsourcing Services 2009 Top 10 Predictions: The Impact of a Turbulent Economy and Continued Disruptions Predicts 2009: Recession-Accelerated Shifts in IT Services IDC Predictions 2009: An Economic Pressure Cooker Will Accelerate the IT Industry Transformation
  • Sources:- European Business Network Services 2009 Top 10 Predictions Predicts 2009: Challenges Ahead for Social Software in the Enterprise
  • Sources:- European Business Network Services 2009 Top 10 Predictions
  • BT through Balance technology has tested motion-sensing technology for use with mobile devices such as tablet PCs and laptops, making the use of keyboard or mouse redundant.
  • BT\'s market view

    1. 1. BT’s market v i e w Benedicte Hennebo Head of Marketing BT Global Services, Middle East and North Africa HULT Intl, 23 rd July 2009
    2. 2. £21,4bn Revenue £2.9bn Profit 111,858 people Sir Michael Rake BT Group Chairman BT Global Services Hanif Lalani CEO 41% BT Wholesale Sally Davis CEO 16% BT Retail Gavin Patterson CEO 38% 5% Openreach Steve Robertson CEO BT Group Ian Livingstone BT Group CEO Group Operations & Strategy BT Group Al-noor Ramji CEO & Group CIO BT Design Matt Bross Group CTO BT Innovate Roel Louwhoff CEO BT Operate
    3. 3. BT Global Services BTGS serves 8,500 major multi-site customers worldwide UK Professional Services experts: 3,000 UK 12,600 employees 2,500 major customers 9,000 connections North America 2,600 employees 3,500 customers 8,000 connections Asia Pac Professional Services experts: 2,000 Asia Pac 4,750 employees 650 customers 11,000 connections EMEA Professional Services experts: 3,000 US Professional Services experts: 2,000 MEA 250 employees 600 customers 3,000 connections Western Europe 8,300 employees 6,700 major customers 46,000 connections CEE/Russia 400 employees 350 customers 3,000 connections Latin America 1,000 employees 500 major customers 2,000 connections
    4. 4. If a picture is worth 1000 words…
    5. 5. Recession?
    6. 6. World economy in deep recession Source: EIU, May 2009 Economy <ul><li>World economy recovery is not expected until 2010 </li></ul><ul><li>The recovery will be slow , and growth take longer to return </li></ul><ul><li>However, some leading indicators point to the fact that economy is approaching the bottom of the cycle , e.g.: </li></ul><ul><ul><li>Global Stock Market mini rally starts in March 2009, oil price moves higher </li></ul></ul><ul><ul><li>OECD report (published in May 2009): Index of composite leading indicators for major economies indicates that some of them may have now reached the through of the economic cycle </li></ul></ul><ul><ul><li>The above signs are still tentative </li></ul></ul><ul><li>2009 will be the first year after WWII that the global economy will decline </li></ul><ul><li>World trade is expected to decline by 8.2% in 2009, as a result of the recession </li></ul>
    7. 7. “ Don’t waste the crisis” Source: EIU, 30 May 2009 Economy EU BRICs Developed Asia North America <ul><li>Developed countries: In recession in 2009 and they will see little growth in 2010. USA and Canada will be the first to see the recovery. </li></ul><ul><li>BRIC countries: mixed picture for 2009 , all BRICs are expected to grow in 2010, India and China continue with strong growth throughout the recession </li></ul>
    8. 8. The shifting power equation -3.7% GDP estimated growth 2009 4.8% GDP estimated growth 2009 $1.4bn raised in IPOs last quarter 21 million page views per month 3.8 billion page views per month 6.7 million eBay listings added per day Sovereign wealth funds $3.22 trillion 60 days+ to build a datacentre West East Public listing Sovereign Wealth Funds Corporate Community Infrastructure Customer
    9. 9. Crisis: unleash your innovation 1948/9 1 st Post war Recession Cellphone, Transistor 1958 GDP depression Lazer 70’s Graphic User Interface Ethernet, TCP/IP, DNA recombination 80’s PC, Walkman,… .com bubble Google, YouTube… Innovation Don’t waste the crisis
    10. 10. How does this impact the marketplace? Companies <ul><li>Useable Business Intelligence </li></ul><ul><li>Virtualisation end user in charge </li></ul><ul><li>Mobility , always on </li></ul><ul><li>Social Computing , everyone is an information source </li></ul><ul><li>UCC , your colleague is one click away </li></ul>Technology <ul><li>Outsourcing/hosting/managed services continues to be very relevant </li></ul><ul><li>Federated approach to IT . Global players </li></ul><ul><li>Leverage green IT capabilities as customers look to be ‘ Lean and Green ’ </li></ul><ul><li>Provide them top class service to end customer . Customer dictates the market </li></ul>Business Opportunities / Implications <ul><li>Severe economic downturn </li></ul><ul><li>Stalled globalisation </li></ul><ul><li>Increased Gov. intervention and regulatory burdens </li></ul><ul><li>Increase in protectionism and nationalism </li></ul><ul><li>Continued importance of green and CSR issues </li></ul>Regulatory, political & economic <ul><li>Increasing competitive rivalry some providers are chasing smaller but more profitable deals </li></ul><ul><li>Keeping the customer is key , sometimes to the price of margin </li></ul><ul><li>M&A activity has expectedly cooled in 2009 </li></ul>Competition <ul><li>Most companies are trying to survive , contain costs and/or improve operational efficiency </li></ul><ul><li>Short term demonstrable ROI is a pre-requisite for CAPEX investment </li></ul><ul><li>Focus on core business activities/disposal of non-core </li></ul>
    11. 11. Sector view Finance Impact of the crisis on companies: survival mode cost cutting operational efficiency low impact benefiting Oil & Gas Retail Government Utilities Packaged goods Manufacturing/ Automotive Pharmaceutical
    12. 12. <ul><li>New Regulatory Burden </li></ul>CEO Priorities for 2009 CEO Priorities Source: Gartner CEO Concerns 2009: Dealing With the Downturn, March 2009 Restructuring Write-offs Loss of Business Trust Globalisation Instability Green issues
    13. 13. <ul><li>80-20 ratio : Spend less on internal IT issues and more on external, customer-facing projects </li></ul><ul><li>Capture and communicate the business value of IT efforts and expenses on global projects </li></ul><ul><li>Shifting the internal outlooks of worldwide IT organisations to reflect global perspectives rather than domestic ones </li></ul>CIO Priorities for 2009 CIO Priorities Sources: Global CIO Survey, Information Week, May 2009, Goldman Sachs Global CIO Survey, March 2009 Reducing overall IT function costs by <ul><li>Reducing facilities costs , including through energy efficiency initiatives </li></ul><ul><li>Increasing off-shoring where possible </li></ul><ul><li>Exploring cost saving benefits of cloud computing , e.g. SaaS </li></ul><ul><li>Rationalisation of software purchasing, vendor standardisation </li></ul><ul><li>Reducing staff , scaling back projects, delaying purchases </li></ul>
    14. 14. Network is the intelligent enabler Strategies: Business Process: Applications: Infrastructure: Highly-interfaced applications automate and standardise information-intensive business processes Complex transactions unique to the enterprise Growth, profitability and efficiency <ul><li>Performance </li></ul><ul><li>Availability </li></ul><ul><li>Scalability </li></ul><ul><li>Security </li></ul>Must be able to support requirements for: The network becomes an intelligent enabler of strategies, processes and applications Best practice
    15. 15. 21 CN global networked services platform Single BT Global Contract Converged Service Management £857m Open Innovation
    16. 16. 21 CN global networked services solutions iVPN, SOI Platform, Virtualisation, SaaS & Re-usable Capabilities
    17. 17. 21 CN global networked services benefits Securely connects global operations Enables efficient globalisation Provides foundation for global collaboration Strengthens operational risk profile Enables technology renewal and transformation Provides access to open innovation <ul><li>Reduced operational costs </li></ul><ul><li>Improved enterprise performance </li></ul><ul><li>Service delivery transformation (CRM) </li></ul><ul><li>Securely. Resiliently with minimum risk </li></ul>
    18. 18. A consistent and proven methodology Transition Transformation Innovation
    19. 19. Existing barriers to effective communication Impacting the bottom line Sources: Sage Research At least Monthly 35% … results in lost time, delays and missed deadlines Daily 52% … have to use multiple methods of reaching coworkers… Up to 6 types of devices Communication devices and apps proliferating… 47% travel at least once per month employees increasingly mobile…
    20. 20. Communication today and tomorrow
    21. 21. What is Unified Communications? Unified communications link communication and collaboration technologies to improve and accelerate business processes
    22. 22. Squeeze the lemon: Travel ban <ul><li>Gartner’s CIO priorities survey 2009, </li></ul><ul><ul><li>Business Process Improvement </li></ul></ul><ul><ul><li>Reducing Enterprise Cost </li></ul></ul><ul><li>ICT is seen as a major tool for improving business processes and operational efficiency </li></ul><ul><li>Telepresence at Southbank Symphonia </li></ul>
    23. 23. Cherish your customer: “Fragvergence” Getting things right presents opportunities ICT Spend is focused on customer-centric activities Sources: 1 Datamonitor 2 & 3 Contact Babel 6 4 Dimension data Just 36% of organisations have a single view of the customer across their multiple channels/systems 4 Multiple systems Only 40% of contact centres advisors have previous experience 3 Different levels of agent skills & knowledge 41% of organisations don’t record channel preference 1 Multiple Communication Channels Multiple sites 56% of contact centres have more than one operational site Contact centre Customer experience
    24. 24. Smart Customer Interact i ons <ul><li>Extracting maximum potential from today’s complex contact centres </li></ul>
    25. 25. Sustainability is a key road to profitable growth While the sector (ICT) plans to significantly step up the energy efficiency of its products and services, ICT’s largest influence will be by enabling energy efficiencies in other sectors, an opportunity that could deliver carbon savings five times larger than the total emissions from the entire ICT sector in 2020 Smart 2020: Enabling the low carbon economy in the information age Enterprise green IT services spending will grow by 60% annually to reach $4.8 billion in 2013. BT is able to deliver sustainable business through its Networked IT portfolio
    26. 26. From Web 1.0 to Web 2.0 to Web 3.0 Source: Social Media Bootcamp by Akanksha Goel
    27. 27. The importance of new media Iranian elections Corporate usage of social media Source: Technorati
    28. 28. The new marketing rules Source: Social Media Bootcamp by Akanksha Goel
    29. 29. Key Emerging Technologies for 2009 Emerging Technologies Source: Gartner, Forrester, Morgan Stanley Technologies rated as the key and emerging by most technology analysts: <ul><li>Machine to Machine (M2M) </li></ul><ul><li>User Interfaces </li></ul><ul><li>Crowdsourcing </li></ul><ul><li>Semantic Web </li></ul><ul><li>Augmented Reality </li></ul>Given the weak economic scenario most organisations are currently focusing on cost reduction. For many short term ROI is a pre-requisite for IT investment. In 2009, technologies like Unified Communications, Telepresence, SaaS, Outsourcing that help organisations reduce costs and capex will experience growth , while spending on SOA, Enterprise Mash-ups, Virtualisation are expected to be delayed <ul><li>Cloud Computing </li></ul><ul><li>SaaS </li></ul><ul><li>Virtualization (Desktop, Server) </li></ul><ul><li>Green IT </li></ul><ul><li>Social Computing </li></ul><ul><li>Unified communications </li></ul><ul><li>Mash-ups and Enterprise portals </li></ul><ul><li>Business Intelligence </li></ul><ul><li>Mobility – Mobile apps and Internet </li></ul><ul><li>Web Oriented Architecture </li></ul>Disruptive technologies that radically transform markets, create wholly new markets or destroy existing markets for other technologies Source: Analyst & Industry Reporting
    30. 31. M o r e I n f o ? [email_address]
    31. 32. T h a n k Y o u
    32. 33. Appendixes
    33. 34. Total size of the business market for ICT in 2009 North America $809.3bn YOY Growth in 2010 = 1.2% CAGR 2007-12 = 2.5% North America is the largest market but it experiencing the second lowest growth due to economic pressure Latin America $115.4bn YOY Growth in 2010 = 4.1% CAGR 2007-12 = 6.1% Mexico is the largest market in terms of size in Latin America followed by Argentina Western Europe $597.7bn YOY Growth in 2010 = 0.2% CAGR 2007-12 = 2.1% The UK is by far the largest market but economic pressure has meant that WE has the lowest YoY growth and CAGR Asia Pacific $485bn YOY Growth in 2010 = 3.1% CAGR 2007-12 = 4.5% Japan is by far the largest market in the Asia-Pac Region followed by Korea which is less than half the size of Japan Middle East & Africa $81bn YOY Growth in 2010 = 3.4% CAGR 2007-12 = 6.7% Turkey represents the largest market in this region followed by the UAE Russia, Central & Eastern Europe $69.3bn YOY Growth in 2010 2.2% CAGR 2007-12 = 7.4% The smallest regional market but RC&EE has the largest CAGR The worldwide ICT market in 2009 in worth US$2.2tr and is expected to grow YoY (2010) by 1.6% with a 2007-12 CAGR of 3.3% The severity of global economic pressures are impacting on the regions at different levels with North America and Western Europe seeing the brunt of the economic downturn with many countries in recession. Source: BTGS Market Sizing Team May 2009 (figures rounded to the nearest 0.1 of a billion/percentage point) NB: Market size is indicative of the total business market Market Data
    34. 35. Worldwide IT outsourcing contracts analysis Source: IDC, May 2009 Analysis based on IDC’s IT contracts database on deals >$10m Worldwide TCV and growth rates – 11 year view <ul><li>Worldwide TCV ($10M+ deals) reached $115B, resulting in a decline of 17% in 2008, though levels are still higher than all years previous to 2005. </li></ul><ul><li>$10M+ deals declined in TCV and across all metrics due to the economic downturn and deferring of contracts. </li></ul><ul><li>Large decline in TCV and small decline in number deals indicates customer preference for smaller deals. </li></ul><ul><li>Rise in the number/value of deals with global scope as global enterprises look to generate savings via a federated IT approach. </li></ul><ul><li>Average TCV in Government has fallen by 30% from 2007 to 2008. Mega deals numbers fallen from 38 in 2007 to 11 in 2008. </li></ul>Outsourcing Deal Analysis -7% -7% 2% -2% -9% Commercial (only) 19% -5% 5% 2% 22% Commercial (global scope) -4% -3% -9% -13% -17% Worldwide (all sectors) Number of Deals Average Contract Length Run Rate Average Contract Value Total Contract Value 2007 to 2008 YoY Growth 60 78 64 78 95 104 112 169 138 115 90 -29% -17% -19% 30% 15% 23% 21% 10% 8% 50% 0 50 100 150 200 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 (US$B) -40% -20% 0% 20% 40% 60% TCV - Worldwide Y/Y Growth Rate
    35. 36. Outsourcing Deals in 2008 - EMEA Help desk and/or support services were in highest demand in 2008 Source: Forrester, March 2009 Source: Forrester, March 2009 <ul><li>Forrester tracked 341 deals (> €10m) in 2008 </li></ul><ul><li>Overall spending significantly down . </li></ul><ul><li>Preference for smaller, shorter deals increases resulting in decline in number of mega deals (3 in 2008 down from 7 in 2007) </li></ul><ul><li>Q408 saw a dramatic increase signed deals from 59 in Q308 to 92 in Q408. </li></ul><ul><li>UK firms continue to lead outsourcing in EMEA followed by Germany and the Netherlands. </li></ul><ul><li>Finance saw the largest YoY drop in spending (over $6bn) </li></ul><ul><li>Manufacturing enterprises spent the most money while Government and the public sector closed the most deals . </li></ul><ul><li>51% of deals in government were for less than €20m (35% and 33% in finance and manufacturing. respectively). </li></ul>Outsourcing Deal Analysis
    36. 37. Trends driving the ICT demand (1/3) Source: IMF, Reuters; industry reporting Market Trends Improve Operational Efficiency IP/IT, Optimise Network Centric Security For the first time in decades, growth in world trade will lag behind growth in world GDP. This implies that the share of trade in world GDP will decline - a poignant illustration of ‘stalled globalisation’. Globalisation is a major driver of ICT needs, especially connectivity and integration, in the enterprise world; stagnation in the activity is likely to inject passivity in the market Stalled Global-isation Key Trends Implications Positive/ Negative Potential Head -line Props Severe Global Economic Recession Under the scenario, ICT projects with longer pay-back period are likely to be deferred in most industries, impacting growth rate of the overall ICT market negatively. ICT trend in emerging countries is likely to face significant downward pressure. The abrupt change in scenario will negatively impact on ICT opportunities. Improve Operational Efficiency IP/IT, Make Contact Centres Efficient Focus on Operational Efficiency and Cost Reduction Technology leaders are faced with the challenge of trimming the fat out of their budgets. Gartner’s CIO survey on their top10 business priorities for 2009, 'Business Process Improvement' and 'Reducing Enterprise Cost' ranked 1 st and 2 nd respectively. ICT is seen as a major tool for improving business processes and operational efficiency; the focus is most likely to contribute positively to the ICT market revenues Improve Operational Efficiency IP/IT Downtrend in M&A Activity So far this year, the merger volumes in Americas, Europe, Asia Pacific and Japan have declined by 30%, 47%, 34% and 11% respectively. M&A is a major driver of ICT needs, especially connectivity and integration needs; the downtrend in the activity comes as a major offsetting factor from the global ICT opportunity standpoint. Improve Operational Efficiency IP/IT, Unify Comms
    37. 38. Trends driving the ICT demand(2/3) Source: Gartner; Forrester; industry reporting Market Trends Unify Comms, Improve Operational Efficiency IT and Optimise Network Centric Security Process and technology strategies in 2009 will focus on risk standardisation, increasing oversight, performance and risk management coordination, evolving expectations of corporate responsibility and big shifts in governance, risk, and compliance (GRC) technologies. Increasing focus on compliance management should impact the overall ICT market positively. Increased Focus on Compliance Management Unify Comms, and Improve Operational Efficiency IP/IT Through 2010, the adoption of social computing software in IT operations will increase by 100%. Social computing comes as a major driver for connectivity and integration needs in the enterprise world. The growth in its trend should contribute to increase the overall ICT market revenues markedly. Increasing Adoption of Social Computing Improve Operational Efficiency IP/IT and Optimise Network Centric Security Virtualisation remains a high priority for CIOs as they look to increase the capacity and reduce the cost. Benefits of virtualisation are being increasingly recognised in the enterprise world. The market is expected to experience good growth in the next few years, representing an opportunity enhancing trend for the overall ICT market. Virtualising the Enterprise Key Trends Implications Positive/ Negative Potential Headline Propositions Increasing Interest in Green IT More often than not disguised as cost reduction in the current economic climate. Enterprise green IT services spending will grow by 60% annually to reach $4.8 billion in 2013. Green IT is a driver of enterprise ICT needs, acceleration in its demand is going to strengthen it further. Unify Comms, and Improve Operational Efficiency IP/IT
    38. 39. Trends driving the ICT demand (3/3) Source: Gartner; Forrester, Yankee; industry reporting Market Trends Unify Comms and Improve Operational Efficiency IP The tough economy is forcing companies to restrict travel while keeping distributed teams in touch. Changes in the composition of the workforce mean enterprises must capture the knowledge of retiring Baby Boomers and provide Gen Yers with their favored tools to work efficiently. These trends have created opportunities for collaboration vendors within global and multi-national enterprises. Collaboration Vibrant Unify Comms and Improve Operational Efficiency IP During the next few years, cloud computing will advance further to underpin Anywhere IT as four distinct “clouds”—the enterprise cloud, software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS). Growth in “Anywhere IT” market comes as a major positive trend from the ICT opportunity standpoint. Anywhere IT/Cloud Computing Advances Work Anywhere and Improve Operational Efficiency IP/IT Mobility is a top priority for enterprises and will continue to place a high priority on mobility initiatives primarily for productivity increases, with mobility activities heating up in emerging markets. Increase in demand for mobility solutions would have positive impact on overall ICT market. Mobility Continues to be a Top Priority Key Trends Implications Positive/ Negative Potential Headline Propositions Interest in Offshoring and Outsourcing Continues Outsourcing will continue to grow in 2009 despite economic slowdown. Although things look gloomy for the larger global economy, the outsourcing market represents a dichotomy: on the downside, organisations' cost-cutting outsourcing strategies may negatively impact market growth, but at the same time, the upside is that outsourcing will be adopted by more organisations to help them work through financial and competitive challenges. Improve Operational Efficiency IP/IT, Unify Comms, Work Anywhere and Optimise Network Centric Security
    39. 40. Sector Trends <ul><li>CPG </li></ul><ul><li>Increasing importance of emerging markets </li></ul><ul><li>Recession leads to lower disposable income for consumers which leads to declining brand loyalty and increasing price pressures </li></ul><ul><li>Oil & Gas </li></ul><ul><li>Lower oil price results to capex reduction </li></ul><ul><li>New exploration and production is having low return. Companies will invest in IT that will enable them to explore difficult oil fields more effectively </li></ul><ul><li>M&A activity will result to some mid-size players being acquired by larger, stronger competitors </li></ul><ul><li>Government </li></ul><ul><li>Government spending results in large deficits, which will bring budget cuts in future years </li></ul><ul><li>Drive to improve efficiencies </li></ul><ul><li>Utilities </li></ul><ul><li>Energy efficiency becomes a priority </li></ul><ul><li>Opportunities to invest in innovative projects such as intelligent grid, carbon management, smart metering </li></ul>Sector trends <ul><li>Manufacturing </li></ul><ul><li>Focus on improving supply chain </li></ul><ul><li>Manufacturing activity is low </li></ul><ul><li>Retail </li></ul><ul><li>Lower demand results to capex reductions </li></ul><ul><li>Retailers scale back expansion plans </li></ul><ul><li>Finance </li></ul><ul><li>Need to improve risk management </li></ul><ul><li>M&A: players that find themselves in a strong position will act as consolidators </li></ul><ul><li>Customer acquisition and retention </li></ul><ul><li>Business intelligence seen as key to success </li></ul>
    40. 41. Analyst predictions – business focus (1/2) Predictions IDC predicts global IT spending growth to slow to 2.6% (half of 2008's 5% growth rate). The slower growth will effectively strip out $35 billion of potential growth in 2009 and will take three years for IT to return to 2008 growth rates. As a result of this poor growth environment, it will be critically important for suppliers to look below the surface and more quickly and decisively orient their businesses toward customer segments that are spending at above-market growth rates, and toward offerings with benefits that are magnified in a down market. Whether the economy is running low or high, finding qualified people remains a full-time pursuit. When it comes to the types of expertise they will seek in the future, CIOs expect to increase expertise in information design, business process design, and relationships and sourcing, while decreasing their expertise in technology infrastructure and services. Growth opportunities for telecom services in mature economies can come only from a wide range of advanced digital services. In emerging markets, carriers need to innovate to face competition and support advanced users, but they can only invest marginally in the more advanced services needed in mature economies. Services will include mobile messaging m/presence, advertising, information services, video and identification. Global growth will be cut in half and take three years to come back Through 2012, business demand for IT-driven growth and innovation will outstrip the supply of qualified people to fulfil it. Through 2012, truly global companies offering communications and cloud computing will show more revenue growth than their peers not offering these services. Source: Gartner Forrester, IDC and Industry Reporting
    41. 42. Analyst predictions – business focus (2/2) Predictions Outsourcers will look to make strategic investments, part of which will be acquiring (or merging with) other services firms with the goal of achieving the extension of capabilities, ensuring scalability for growth, pursuing more strategic investments for long-term growth and competitive advantage. IDC believes that with the economic downturn, the services industry will enter a new phase of restructuring over the coming years, with these host-based models becoming a more focused option for meeting customer outsourcing needs. In the last decade, Indian service providers and traditional service providers have been competing in the market while focusing on filling their respective delivery gaps. As Indian providers seek new revenue growth opportunities, the potential for acquiring an indigenous European service provider versus organic growth presents a favourable option in terms of speed, access to an existing client base, local country presence, and optimizing complementary strengths. The capital crisis will further exacerbate consolidation in the telecom sector, stimulating more mergers in all regions. Telcos will expand aggressively into cloud services. The emerging cloud services delivery model presents a once-in-a-generation opportunity for the telecom industry to accelerate what they've attempted do for decades with limited success: diversify into broader business and consumer value-added services Outsourcing services market to consolidate and restructure By 2011 a large Indian service provider will buy a large European service provider. The telecom industry will consolidate, and expand, in 2009 Source: Gartner Forrester, IDC and Industry Reporting
    42. 43. Analyst predictions – technology focus (1/2) Predictions The purpose of UC is to expand the scope of traditional coms possibilities. IDC believe UC will change the way companies do business internally and externally, and ultimately the coms culture of companies. This means that UC will shape enterprise coms, infrastructure, and related services for many years to come. The impact will be seen in the changing nature of enterprise telephony (with software becoming more dominant), business applications, enterprise mobility, and in consulting, integration, and managed services. As part of outsourcing engagements, customers will increasingly look toward new technologies (e.g., virtualization, Web services, and unified communications) and service models (e.g., SaaS, cloud/utility computing, hosting, and homeshoring) to support customers' need to drive down costs as well as improve quality of service and operational capabilities. Most organizations are already using, piloting or investigating at least some social software such as social networking tools, wikis. Although awareness, interest and willingness to deploy social software will continue to increase, several factors will prevent large organizations from investing in broad pre-integrated suites of social software functionality for use by all their employees such as uncertainties about business benefits Unified communications will change the way companies do business Acceleration in offering new technologies and new delivery options as part of outsourcing engagements By 2012 more than 30% of large organizations will have deployments of social software suites available to all their employees Source: Gartner Forrester, IDC and Industry Reporting
    43. 44. Analyst predictions – technology focus (2/2) Predictions According to IDC's 2008 European WAN Manager survey, the overall number of companies that expect to be using legacy data network services at the end of 2009 is, unsurprisingly, down on 2008. The number of companies expecting to use carrier Ethernet services is 15% higher, making Ethernet the only service to see any significant increase in customer numbers. Awareness initiatives by the MEF and individual providers will further highlight the attractiveness of Ethernet services in 2009. With the global economy on hold, enterprises are seeking to maximize efficiency, reduce capital spending, rationalize assets and infrastructure, and control opex. In the datacenter, this translates into a continued increase in the use of blade servers, looking for energy efficiency gains, higher utilization rates, datacenter consolidation, and greater use of third-party datacenters in the form of collocation. Virtualization is becoming standard on x86 servers in the datacenter, and will be accelerated further by the current economic situation, as companies seek efficiencies improvements. The emergence of cloud computing will up datacenter requirements from both enterprise and service provider customers and will, again, be stimulated by the credit crisis; in absolute size, however, it will remain a small part of the market in 2009. Ethernet will be the rising star in data services in 2009 Datacenter Providers Will Have a Good 2009 Virtualization and Cloud Computing in the Datacenter Market Source: Gartner Forrester, IDC and Industry Reporting
    44. 45. Key Emerging Technologies for 2009 <ul><li>Cloud Computing – Moving IT delivery into the cloud. The efficiency, scalability, and cost savings make cloud computing something that businesses must consider, especially with 2009 set to be another slow year for the economy. </li></ul><ul><li>Drivers/ Issues & Challenges – Cost, built-in elasticity and scalability are potential benefits. However, customers are confused about what it actually can do for them. </li></ul><ul><li>Implications for BT - Leverage partnerships with VMware software, vCloud Initiative to deliver enterprise-class cloud computing </li></ul><ul><li>Virtualisation - Virtualisation impact on the overall IT industry has been dramatic and will continue to be the most change-driving catalyst for infrastructure and operations software through 2013. </li></ul><ul><li>Drivers/ Issues & Challenges - Boosts IT productivity and expedites server setting-up, accelerates time to provision end-user PCs and upgrade cycles of desktop OS. </li></ul><ul><li>Implications for BT - Use BT as case study to demonstrate virtualisation in action </li></ul>Emerging Technologies <ul><li>Software as a Service – SaaS is forecast to have a 19.4% CAGR through 2013 for the enterprise application market, more than triple the total market CAGR. </li></ul><ul><li>Drivers/ Issues & Challenges – Lower initial TCO, upgrade and switching costs. Faster implementation. TCO could turn out to be more expensive in the long run. </li></ul><ul><li>Implications for BT - Leverage the power of its 21CN SOI platform that delivers SaaS to further reduce costs, meet business demand and to tap the growth in the market </li></ul><ul><li>Context Aware Computing - Conditions will develop in 2009 through 2012 that will lead to mainstream adoption of context-aware computing using location, presence, social computing and search-based to enhance context enriched services. </li></ul><ul><li>Drivers/ Issues & Challenges - Enhances computing user experience using and Increased set of sensor-based inputs. </li></ul><ul><li>Implications for BT - BT with significant collaboration and SI capabilities can take advantage of the growth in the technology </li></ul>Source: Analyst & Industry Reporting
    45. 46. Key Emerging Technologies for 2009 <ul><li>Green IT – Forrester forecasts very healthy growth of 60% CAGR for Green IT market, peaking at $4.8 billion in worldwide user spending in 2013. In 2009 many Green IT initiatives will be disguised as cost reduction. </li></ul><ul><li>Drivers/ Issues & Challenges – Cost efficiencies, Government stimulus packages and strengthen the brand/goodwill. </li></ul><ul><li>Implications for BT – promote BT green credentials and Market virtualization, UC and collaboration tools to meet Green IT objectives of customers. </li></ul><ul><li>Business Intelligence – BI remains the top technology priority in Gartner’s 2009 CIO survey, mirroring CIO’s focus on business process improvement. </li></ul><ul><li>Drivers/ Issues & Challenges - The events that led up to the global economic recession call for greater transparency and financial disclosure, thus regulatory reforms will drive the adoption of interactive BI tools </li></ul><ul><li>Implications for BT - Successful implementation requires secure, efficient and application aware networks to support the applications, playing to BT’s core strengths </li></ul>Emerging Technologies <ul><li>Social Computing – By 2012 more than 30% of large organisations will have deployments of social software suites available to all their employees. </li></ul><ul><li>Drivers/ Issues & Challenges – Inexpensive set of tools to support collaboration and customer relationships but difficult to calculate ROI </li></ul><ul><li>Implications for BT - Unified communications and collaboration services offered by BT can help organizations meet their social computing needs by building user-center communication applications. </li></ul><ul><li>Unified Communications - Enterprise spending on UC is displacing spending on best-of-breed stand-alone communications, in both the premises-based, and hosted services market domains. </li></ul><ul><li>Drivers/ Issues & Challenges - Improved business results, decrease process cycle time by significantly reducing human latency </li></ul><ul><li>Implications for BT - Provide interoperability and deep integration of the communications, mgt and reporting functions with product partners in order to differentiate. </li></ul>Source: Analyst & Industry Reporting
    46. 47. Disruptive Technologies <ul><li>Crowdsourcing – P roving to be a disruptive model that can displace antiquated business practices by utilizing the power of communities. </li></ul><ul><li>With the advancements in crowdsourcing, innovators need not sit in the same building or campus, and companies can move innovation activities to anywhere in the world. Thus, lot of innovation projects are expected to move to India and China in near future </li></ul><ul><li>BTGS could look at use of crowdsourcing as a tool for innovation within its business model, products and services </li></ul><ul><li>Semantic Web – Over the next decade, Web 3.0 will spawn multi-billion dollar technology markets that will drive trillion dollar global economic expansions to transform industries as well as our experience of the internet, Ovum, Jan 2009. </li></ul><ul><li>Semantic Web should benefit BTGS by enhancing the business driver for efficient and reliable networking environment </li></ul>Emerging Technologies <ul><li>User Interfaces – According to Gartner, within the next five years, information would be presented via new user interfaces such as organic light-emitting displays, digital paper and billboards, holographic and 3D imaging and smart fabric </li></ul><ul><li>By YE12, 20% of non-video Internet traffic will be data-derived from a rapidly growing number of sensor-based inputs, Gartner, Feb 2009 </li></ul><ul><li>Using its BT Balance technology it can tap the boom in the new motion sensitive user interface market. </li></ul><ul><li>Machine to Machine - The M2M market has been poised for strong growth, which has partly materialized, but not to the expected degree </li></ul><ul><li>Berg Insight estimates there were 14.1 million machines connected to mobile networks in Europe at the end of 2008, up by 34.2% from in 2007, and it expects its to rise to 58.6 million by 2013 </li></ul><ul><li>Increased adoption of M2M technology would act as a business driver for networking and system integration services. </li></ul>Source: Analyst & Industry Reporting