Today’s webinar is brought to you byOutsourcing CenterToday’s webinar                                                Upcom...
Q&ATo ask a question during the Q&A session  Click th  Cli k the question mark (Q&A) button located on the floating tool b...
Introductions                Eric Simonson                Managing Principal, Research                Everest Group       ...
Key Market Developments in Q1-2010: Quarterly Market VistaBriefing       gWebinarMay 13, 2010
Context settingWhat is this webinar about?                       Key findings from the Q1 2010 Market Vista report providi...
What is Market Vista?                   Overall sourcing market                                                     Suppli...
ContentsKey market developments in Q1-2010  Market overview  Location risks and opportunities  Supplier landscapeSpecial t...
The global sourcing market continued growth from Q4-2009 with increased outsourcing activity and healthycaptive activityIn...
North America’s share of transaction activityexpanded to 45% in Q1 2010                                                   ...
Transaction volumes within the North Americanfinancial services industry grew significantlyBFSI transactions by buyer geog...
New captive announcements and expansion ofexisting captives continued, with Asia accounting forthe majority of activity   ...
From a geography perspective, Asia continued its leadover Latin America and Eastern Europe                                ...
Locations | Risk and opportunity dashboard                                                                                ...
A   Locations | Risk and opportunity analysis    With buoyancy in the Indian economy suppliers significantly increased    ...
Supplier developments | OverviewHighlights of financial performance in Q4 2009Top three and bottom three suppliers in term...
Location development was also similar to previousquarter; however the activity in onshore locationsstepped up from the las...
ContentsKey market developments in Q1-2010  Market overview  Location risks and opportunities  Supplier landscapeSpecial t...
Offshore Locations: Plans and PerceptionsSurvey overview                                           Respondent distribution...
75% of buyers expect to grow global sourcing; 68% oflarge adopters expect to add more than 500 FTEs                       ...
For smaller adopters, India is a core driver of growth;Philippines, Mexico and Brazil are other countriesExpected         ...
For large adopters, India and Philippines are coregrowth drivers; Mexico and China are other countriesconsideredExpected  ...
While India is a key growth area, companies growing in India are frequently expanding to other countries as well Key count...
Q&A  Attendees will receive an email with a link to download today’s webinar presentation. To access a  recorded audio ver...
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Key Market Developments in Q1-2010: Market Vista Report Briefing

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Everest Group research analysts will highlight the findings of
the Q1-2010 Market Vista report, providing an overview of key trends in the outsourcing and offshoring market including transaction trends, captive-related developments, location dynamics and supplier trends.

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Key Market Developments in Q1-2010: Market Vista Report Briefing

  1. 1. Today’s webinar is brought to you byOutsourcing CenterToday’s webinar Upcoming webinarsKey Market Developments in Q1-2010: Market Vista The Case for Open SourceReport Briefing Date and time:Synopsis: Tuesday, May 18, 2010Everest research analysts will highlight the findings of 10:00 a.m. CDT / 11:00 a.m. EDTthe Q1-2010 Market Vista report, providing an overviewof key trends in the outsourcing and offshoring market Presented by:including transaction trends, captive-related Peter Bendor-Samuel – CEO, Everest Groupdevelopments, location dynamics and supplier trends. Flavio Grynszpan, CEO, Brazil Outsourcing Djalma Petit – Market Director, Softex Glaucia Chiliato – Manager Brazil IT Project, Softex Paulo Maciel – President & CEO, International SystAbout Outsourcing CenterOutsourcing Center is the world’s most prominent internet portal for authoritative information on outsourcing. TheCenter sCenter’s mission is to build the industry by helping people understand how to create value through outsourcing. Weserve the outsourcing community through: Trusted and objective third-party perspective Database of over 81,000 opt-in subscribers Relevant media including editorials, research, whitepapers, and the annual Outsourcing Excellence AwardsFor more information, contact Peter Bowes at pbowes@everestgrp.com. 1
  2. 2. Q&ATo ask a question during the Q&A session Click th Cli k the question mark (Q&A) button located on the floating tool bar in the bottom right of your ti k b tt l t d th fl ti t l b i th b tt i ht f screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2
  3. 3. Introductions Eric Simonson Managing Principal, Research Everest Group E tG esimonson@everestgrp.com Anand Ramesh Research Director, Global Sourcing Everest Group aramesh@everestgrp.com 3
  4. 4. Key Market Developments in Q1-2010: Quarterly Market VistaBriefing gWebinarMay 13, 2010
  5. 5. Context settingWhat is this webinar about? Key findings from the Q1 2010 Market Vista report providing a Q1 2010 market view on key developments in the quarter trends Discussion on key transaction and captive trends, location dynamics, supplier developments, and implications for stakeholders in the global sourcing industry Key findings from Everest’s “Offshore Locations Survey: Offshore Perceptions and Plans” locations survey Expansion p p plans and trends among leading buyers of offshore g g y services 5 Proprietary & Confidential. © 2010, Everest Global, Inc.
  6. 6. What is Market Vista? Overall sourcing market Supplier landscape Detailed analysis of trends by Updates on supplier industry vertical and geography market share, Report of transaction volume, capabilities, and size, and momentum performance Perspective on events with Supplier profiles, significant industry impact (e.g., including data on: M&A) Transactions Implications of regulatory Location footprint changes M&A activity Location data and dynamics Processes and models Data on market activity in Process-level trends key offshore geographies Captive set ups, Political divestures, and overall Macroeconomic trends Promotion incentives Fact based Fact-based insights on Trends in wage inflation, adoption of emerging attrition, and arbitrage pricing models Data and perspectives on new opportunity areas Supplier Location Breaking Location Insights AnalystQuarterly Report Primer capability database viewpoint e-newsletter consultation profiles 6 Proprietary & Confidential. © 2010, Everest Global, Inc.
  7. 7. ContentsKey market developments in Q1-2010 Market overview Location risks and opportunities Supplier landscapeSpecial topic Key findings from Everest’s Offshore Locations Survey 7 Proprietary & Confidential. © 2010, Everest Global, Inc.
  8. 8. The global sourcing market continued growth from Q4-2009 with increased outsourcing activity and healthycaptive activityIndex of outsourcing transactions1 Index of offshore captive health1Number Number Captive announcements2 = Actual + Planned Captive divestures = Actual + Planned 423 444 40 418 35 24 18 20 11 16 3 17 5 9 2 2 1 1 2 1 3 Q1 2009 Q4 2009 Q1 2010 Q1 2009 Q4 2009 Q1 2010 1 Includes only data that has been publicly disclosed 2 Announcements include both new set-ups and expansion of existing captive operationsSource: Everest Research Institute Transaction Intelligence Database 8 Proprietary & Confidential. © 2010, Everest Global, Inc.
  9. 9. North America’s share of transaction activityexpanded to 45% in Q1 2010 ITO AND BPO TRANSACTIONSOutsourcing transactions by buyer geography1Number of transactions 100% = 423 418 444 Others3 2% 4% 1% 13% ROW2 20% 20% 1% Japan p 1% 1% 25% Rest of Europe 28% 27% 15% UK 13% 13% 45% North America 36% 35% Q1 2009 Q4 2009 Q1 2010 1 Buyer geography i th b B h is the buyer l location or th signing region associated with th t ti the i i i i t d ith the transaction ti 2 Rest of World includes Asia-Pacific, Middle East, Africa, and Latin America 3 Includes transactions where the signing region of the transaction was not publicly disclosedSource: Everest Research Institute Transaction Intelligence Database 9 Proprietary & Confidential. © 2010, Everest Global, Inc.
  10. 10. Transaction volumes within the North Americanfinancial services industry grew significantlyBFSI transactions by buyer geography1 ITO AND BPO TRANSACTIONSNumber of transactions 100% = 70 69 73 Others3 1% 3% 4% 20% 16% ROW2 36% 1% Japan 3% 14% 19% 10% Rest of Europe 26% 17% UK 13% 55% 38% North America 24% Q1 2009 Q4 2009 Q1 2010 1 Buyer geography i th b B h is the buyer l location or th signing region associated with th t ti the i i i i t d ith the transaction ti 2 Includes Asia-Pacific, Middle East, Africa, and Latin America 3 Includes transactions where the buyer geography was not publicly disclosedSource: Everest Research Institute Transaction Intelligence Database 10 Proprietary & Confidential. © 2010, Everest Global, Inc.
  11. 11. New captive announcements and expansion ofexisting captives continued, with Asia accounting forthe majority of activity East Asia: 11 new captive announcements Manulife plans to set up its first BPO center in Europe: Chengdu, China 6 new captive announcements Inventec plans to expand its R&D center in Microsoft opened its innovation center in Taoyuan (Taiwan) Hradec Kralove (Czech Republic) Qualcomm plans to set up a technology R&D McKinsey & Company opened a KPO center in center in South Korea Wroclaw (Poland) CyberSource plans to open a new R&D center in Belfast (Northern Ireland) Middle East: 6 new captive announcements Latin America: Huawei opened its first R&D 1 new captive center in Istanbul (Turkey) announcement Mellanox opened its R&D center India: GE plans to build an in Tel-Chai (Israel) 11 new captive announcements R&D facility in Brazil & ac ty a Microsoft p a s to se up a c oso plans o set Nokia Siemens Networks opened its center in the Middle East expanded development center in Bangalore Plans to invest US$500 million in its R&D center in Bangalore NDS plans to invest US$150 million in its R&D center in Bangalore 1 Indicate announcements related to new captives and expansion Note: All references to captives include only offshore captivesSource: Everest Research Institute analysis 11 Proprietary & Confidential. © 2010, Everest Global, Inc.
  12. 12. From a geography perspective, Asia continued its leadover Latin America and Eastern Europe Q1 2009 Q1 2010 2009 Quarterly averageMarket activity across g g p y geographies Market activity across Tier-1 and Tier-2 locations yNumber of service delivery centers set up Number of service delivery centers set up 29 24 20 18 17 15 14 12 9 8 8 7 6 5 3 1 Asia Europe and Africa Latin America Tier 1 Tier 2 1 The Africa region saw two delivery centers established in the first quarter of 2010Source: Everest Research Institute analysis 12 Proprietary & Confidential. © 2010, Everest Global, Inc.
  13. 13. Locations | Risk and opportunity dashboard Legend Significant risk factor requiring attention Potential near-term risk; may need monitoring Positive change since last assessment C Interest among Indian D suppliers for setting up Morocco emerging as delivery centers in the U.S. a credible location for offshore IT services A Significant hiring in India by suppliers with direct impact on wage inflation and attrition B Earthquake in Chile highlighted the need for robust business continuity planningSource: Everest Research Institute analysis 13 Proprietary & Confidential. © 2010, Everest Global, Inc.
  14. 14. A Locations | Risk and opportunity analysis With buoyancy in the Indian economy suppliers significantly increased hiring, impacting wage inflation and attrition Hiring trends for TWITCH1 companies Net addition of employees in (QoQ) Net Net Companies exceeded addition in addition in their hiring projections Supplier Q3 ‘09 Q4 ’09 for Q3 2009 Tech 1,033 3,897 50,000-60,000 32,235 Mahindra Wipro -630 4,893 18,647 Infosys 1,548 4,226 6,478 TCS 300 7,667 Q2 09 Q1 09 -1,880 Q3 09 Q4 09 2010 Cognizant 4,000 10,300 HCL 227 1,252 Economic recovery in India accompanied by rising demand for IT/ BPO services resulted in accelerated hiring among suppliers In Q4 2009 alone, TWITCH companies increased their headcount by 30,000 over Q3 2009. p y Infosys, TCS, and Cognizant expect to add 50,000-60,000 jobs over the next 12 months. Global majors such as Capgemini, IBM, and CSC also plan to add 50,000 to its workforce during this period 1 Denotes Tech Mahindra Wipro Infosys TCS, Cognizant, and HCL – six major Indian suppliers Mahindra, Wipro, Infosys, TCS Cognizant Note: Annual reports of suppliers only provided actual hiring figures to Q4 2009. Figures for 2010 are estimated based on announcements made by Infosys, TCS, and Cognizant only Sources: Everest Research Institute analysis; Supplier websites 14 Proprietary & Confidential. © 2010, Everest Global, Inc.
  15. 15. Supplier developments | OverviewHighlights of financial performance in Q4 2009Top three and bottom three suppliers in terms of sequential financial growthBy sequential growth in revenues By sequential growth in operating margins1(Q4 2009 vs. Q3 2009) (Q4 2009 vs. Q3 2009)Percentage Basis points (bps) EXL 22.9% Convergys 1,320 Atos Origin 10.1% Highest growth in Q4 2009 EXL 990 Capgemini 8.8% Accenture 570 1.9% Total Market Vista Index Suppliers 132-10.6% Convergys -210 Tech Mahindra -3.6% ACS Least growth in Q4 2009 -150 HCL Technologies -3.1% HP ES -50 CognizantTop events in Q1 2010 Top suppliers by number ofTop outsourcing transactions by deal value transactions announced Significant M&A deals SNCF-IBM: US$2.4 billion (6 years) IBM: 30 deals Capgemini-IBX: The acquisition will help Capgemini United Technologies-CSC: US$1 5 billion (9 US$1.5 Atos Origin: 22 deals deliver an end-to-end solution for managing global years) CSC: 12 deals sourcing strategies Personal Accounts Delivery Authority-TCS: Infosys: 10 deals Genpact-Symphony: The acquisition will provide US$904 million (10 years) Genpact expertise in data integration, modeling, Ministry of Defence-HP ES: US$890 million and consulting (6 years) IBM-Initiate Systems: The acquisition strengthens Qwest Communications-IBM: US$800 IBMs ability to help clients use information across million (5 years) multiple systems to improve services 1 Normalized operating margins; excludes ACS, Dell Services, and Capgemini, as information is not availableSources: Company disclosures; websites; press releases; Everest estimates 15 Proprietary & Confidential. © 2010, Everest Global, Inc.
  16. 16. Location development was also similar to previousquarter; however the activity in onshore locationsstepped up from the last quarterNumber of new centers opened by supplier categoryNumber of new centers1 21 20 Offshore- Overall, the locations activity was similar to Q4 centric 9 6 suppliers While offshore locations continued to remain attractive destinations, the suppliers have also started to increase their focus on onshore locations. Nine of the 20 location announcements were focused on onshore locations Similar to Q4, activity was the highest for IBM, which opened a t t l of six centers d total f i t Traditional 14 12 global Suppliers including Dell Services, EXL, Genpact, IBM, suppliers and Infosys also announced plans to set up new centers in subsequent quarters Q4 2009 Q1 2010 1 Includes new facilities opened in existing locations, and excludes planned centers locations Note: The high-activity group includes suppliers with at least three new centers; the moderate-activity group includes suppliers with one or two new centers; the no-activity group includes suppliers with no centers announced in the quarterSources: Company websites; press releases 16 Proprietary & Confidential. © 2010, Everest Global, Inc.
  17. 17. ContentsKey market developments in Q1-2010 Market overview Location risks and opportunities Supplier landscapeSpecial topic Key findings from Everest’s Offshore Locations Survey 17 Proprietary & Confidential. © 2010, Everest Global, Inc.
  18. 18. Offshore Locations: Plans and PerceptionsSurvey overview Respondent distribution Percent of total Everest conducted the survey over January-February 2010 t understand th J F b to d t d the 100% = 366 current state and future direction of global sourcing plans for companies Focus of today’s Others discussion The survey targeted stakeholders across y g the industry including buyers of services, 13% Buyers suppliers of services, investors and 25% industry promotion agencies Captives 11% The survey focused on understanding What is the current global sourcing footprint and how might this change (scale, locations)? In what countries do companies plan to grow? 51% How do companies perceive the Third-party suppliers relative attractiveness of countries and what do they view as key risks? 18 Proprietary & Confidential. © 2010, Everest Global, Inc.
  19. 19. 75% of buyers expect to grow global sourcing; 68% oflarge adopters expect to add more than 500 FTEs Dominant shareExpected Current volume of offshore workchange innext 2 years1 <1,000 FTEs >1,000 FTEs Decrease 11% 7% None 16% 11% 0-499 66% 7% 500-1,499 3% 50% , , 1,500-4,999 3% 18% >5,000 0% 7%Sample: 90 buyers of global sourcing services (excludes third-party suppliers, captives and other respondents) 1 Number of FTESource: Everest survey “Offshore Locations Plans and Perceptions” 19 Proprietary & Confidential. © 2010, Everest Global, Inc.
  20. 20. For smaller adopters, India is a core driver of growth;Philippines, Mexico and Brazil are other countriesExpected Current volume ofchange in offshore work Key countries of growthnext 2 years1 <1,000 FTE Percentage of respondents Decrease 7 India 66% None 10 Philippines 39% 0-499 41 500-1,499 2 Brazil 20% , , 1,500-4,999 2 Mexico 19% >5,000 0Sample: 90 buyers of global sourcing services (excludes third-party suppliers, captives and other respondents) 1 Number of FTESource: Everest survey “Offshore Locations Plans and Perceptions” (January-February 2010) 20 Proprietary & Confidential. © 2010, Everest Global, Inc.
  21. 21. For large adopters, India and Philippines are coregrowth drivers; Mexico and China are other countriesconsideredExpected Current volume ofchange in offshore work Key countries of growthnext 2 years1 >1,000 FTE Percentage of respondents Decrease 2 India 76% None 3 Philippines 55% 0-499 2 500-1,499 14 Mexico 35% , , 1,500-4,999 5 China 35% >5,000 2Sample: 90 buyers of global sourcing services (excludes third-party suppliers, captives and other respondents) 1 Number of FTESource: Everest survey “Offshore Locations Plans and Perceptions” (January-February 2010) 21 Proprietary & Confidential. © 2010, Everest Global, Inc.
  22. 22. While India is a key growth area, companies growing in India are frequently expanding to other countries as well Key countries of growth for buyers planning to expand in India Percentage of respondents 52% 46%Enter viacaptive orthird-party 32% 29% 28%Expandexistingpresence Philippines China Brazil Malaysia MexicoSample: 49 buyers of global sourcing services (excludes third-party suppliers, captives and other respondents)Source: Everest survey “Offshore Locations Plans and Perceptions” (January-February 2010) 22 Proprietary & Confidential. © 2010, Everest Global, Inc.
  23. 23. Q&A Attendees will receive an email with a link to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Mark Williamson (mark.williamson@everestgrp.com) ( k illi @ t ) For advice and assistance in outsourcing and offshoring, please contact Everest: Eric Simonson, esimonson@everestgrp.com Anand Ramesh, aramesh@everestgrp.com , @ gp For background information on Everest, please visit: www.everestresearchinstitute.com www.everestgrp.com Thank you for attending todayTo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 23

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