Pressing Issues Facing Services Providers and Q3 2018 Global Services Update

Live Tweeting #MarketVista
®
®
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Q3 2018 Market Vista™ Update, and Key Implications
of the Pressing Issues of the Global Services Market
August 29, 2018

Proprietary & Confidential. © 2018, Everest Global, Inc. 2®
Introductions
Moderator
Salil Dani
Vice President, Global Sourcing
salil.dani@everestgrp.com
Alan Wolfe
Senior Vice President
alan.wolfe@everestgrp.com
Michel Janssen
Chief Research Guru
michel.janssen@everestgrp.com
Prashray Kala
Practice Director, Global Sourcing
prashray.kala@everestgrp.com
®

Context setting
Focus of this webinar
 Present key global services developments in H1 2018
 Key implications of the pressing issues of the global services market
Sources for today’s webinar
 Summary from a 150+
page report
 Fact-based research
on global services
 Perspectives from
enterprises, GICs,
and service providers
+
IT and Business
Services research
Location Optimization
GIC Research
®
™

Discussion points for today
Key market developments
in H1 2018
Focus topic | Key
Implications of the
Pressing Issues of the
Global Services Market
 Outsourcing transactions
 GICs
 Locations
 Service Providers
Q&A

A) Mostly outsource to traditional service providers
B) Mostly outsource to niche service providers
C) Mostly retain in-house support by global delivery centers
D) Balanced mix – both outsourced and in-house delivery
Poll question: What is your firm’s / client’s predominant
sourcing strategy for next-generation digital skills?

Increase in incremental global services demand across both in-house
delivery and outsourcing
58
70 69
76
97
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
846
774 759
715
857
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
New outsourcing deals announced
Number
New GIC setups
Number
52%
49%50%
45%
36%
67%
44%
54%
30%
40%
1. Deals including component of digital services (e.g., IoT, Cloud, Social Media, Mobility, Analytics, Big Data, Cybersecurity, Blockchain, and Automation)
2. New GIC setups in offshore / nearshore delivery locations; excludes new GIC setups in onshore locations
Share of deals with digital services1 Share of new GICs supporting digital services1
Steady increase in share of digital services in new outsourcing deals and GIC setups

Increased outsourcing activity in BFSI and Healthcare verticals;
sluggish demand by Government clients
13% 13% 15% 18%
6% 7%
7%
8%5%
7%
8%
8%
26%
27%
24% 17%
6%
6% 7%
8%
8%
8%
9%
9%
9%
10%
11%
13%
27%
21% 17% 19%
2015 Qty. Avg. 2016 Qty. Avg. 2017 Qty. Avg. H1 2018 Qty. Avg
BFSI
Retail & CPG
Healthcare
Manufacturing
Cyclical commodities
Government
Others1
Technology & communication
405 369378 429100% =
New outsourcing deals announced by sectors
Percentage
1 Includes audit & consulting, legal, architecture & real estate, agriculture, chemicals, mining & metals, pulp & paper, hospitality & tourism, passenger, and freight &
distribution. This also includes transactions where the buyer’s identity/industry was not disclosed
H1 2018 vs. 2017
ACV Trends

DIY approach intensifying in IT services
28%
42%
2017 H1 2018
Share of new GICs supporting IT services delivery
Percentage
Key drivers
Offshoring of complex work,
scale challenges at onshore
Challenges with service
provider performance
Increased adoption of
Agile/DevOps
Enterprise focus on end-to-end
ownership in internal delivery

Steady increase in location activity but setups continue to be
concentrated in top-10 offshore/nearshore locations
New offshore/nearshore delivery center set-ups
Number of centers
130 129 133
140
153
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
Significant increase in location activity across GICs and mid-sized / niche service providers
70%
62% 66%
30%
38% 34%
2016 2017 H1 2018
Top-10 offshore/
nearshore
countries
Share of top-10 countries in offshore/ nearshore
delivery center set-ups
Percentage
273 153259

Singapore, Lithuania, and Portugal are the biggest gainers in the
ranking index of top locations for center set-ups
129 133130
15% 16%
26% 22% 21%
25%
30%
24%
19% 25%
32%
30%
32%
24%
31%
21%
18%
15%
24%
16%
8% 5% 2%
11% 8%
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
140 153
Rest of Asia
Nearshore Europe
Latin America
Middle East and Africa
India
100% =
New offshore/nearshore center setups by region
Percentage
Leading locations in H1 2018
 Costa Rica, Mexico
City, Guadalajara
 Vilnius, Lisbon,
Dublin, Budapest
 Singapore, Manila,
Shanghai
 Bangalore, Chennai,
Nagpur

Recent large-scale acquisitions are changing the service
provider landscape – high focus on acquiring digital
capabilities
 US$2.43 billion acquisition, to
be completed by 2018 year-end
 Key benefits to Concentrix
– Strengthen digital capabilities
– Adding new clients and
complement delivery footprint
 US$3.4 billion acquisition, to be
completed by 2018 year-end
 Key benefits to Atos
– Geographic expansion in
North America
– Strengthen capabilities in
banking and digital skills
(cloud, IoT, social media,
mobile, analytics, automation)
 US$1 billion acquisition, to be
completed by Q3 2018
 Key benefits to Teleperformance
– Augment capabilities in
solution design, digital
integration, and operational
excellence
– Complement delivery
presence in high-growth
markets of Asia

Discussion points for today
in H1 2018
Focus topic | Key
Implications of the
Q&A

Poll question: What are your sentiments about business
revenue for the remainder of 2018?
(Select the one that most applies)
 A) Scared to discuss it w/ my boss b/c it’s not looking good
 B) Worried about my revenue targets
 C) Expect business growth from new business / client groups
 D) Cautiously optimistic
 E) We are going to hit it out of the park

Respondents’ sentiments about the remainder of 2018
Year-end bonuses should be good…revenue sentiment is looking
increasingly positive…
30%
are neutralare optimistic
56%
2018
are pessimistic
14%

Tier-2 service provider participants are especially optimistic about
2018…and even more optimistic about 2019
TIER 1 TIER 2
8-10% growth Expectation for 2018* 11-13%
51%
Respondents feeling like 2019
will be even better*
61%
* These are August 2018 sentiment numbers and not published corporate projections

Advanced automation -
AI, Cognitive
Automation - RPA
Big Data analytics
Cloud solutions
Internet of
Things (IoT)
UX/CX design
Blockchain
Cybersecurity
Mobility
2.50
3.00
3.50
4.00
4.50
5.00
5.50
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Tier 1 Tier 2
Not all digital investments are hot…with some mismatches in
client perception of investment and value creation
* Proportion of responses ranked among top 3
Mismatch? High value but
lower supplier investment.
Opportunity?
No man’s land
Everybody wants to play
here…for good reason
Service providers’ digital/next-generation capabilities priorities
for the next 6-12 months*
Service providers’
clients’ experience
in achieving
benefits
(1- 7 scale,
with 1 being low)

Losing sleep over these…
As the industry moves focus toward digital solutions, the top
challenges evolve
Slowdown in clients’
decision-making
Talent/skills
shortage
Adapting to new
business models
Pricing
pressures
41% 40% 38% 32%
19% 8%…but not for these
Limited capital
for investment
Regulations in
key markets
?

Talent is one of the top issues for service providers and enterprises
alike…and it comes down to availability of next-generation of skills
Most important talent issue for service providers
?
72% 4%9%10% 5%
Shortage of
next-generation
skills
Regulations impacting
global mobility
of workforce
Change
management
Limited supply of
entry-level
resources
Reduced capital
and technology
investment

Traditional buying centers are no longer the fastest growing buying
centers – time to rethink your sales strategy?
* Proportion of responses when ranked among top 3
Current Largest Buying Center
FastestGrowingBudgetCenter
Chief Information
Officer (CIO)
Chief Operating
Officer (COO)
Chief Financial
Officer (CFO)
Operations Head(s) of
Business Unit(s)
Technology Head(s) of
Business Unit(s)
Chief Digital Officer (CDO)
Chief Executive Officer
(CEO)
Shared Services /
GBS / GICs
Chief Procurement Officer
(CPO) / Strategic Sourcing
Chief Marketing
Officer (CMO)
HR Head
Strategy Head
0%
10%
20%
30%
40%
50%
60%
0% 10% 20% 30% 40% 50% 60%
Increasing deal influence
against current spend
Significant roles with
declining deal influence
Significant role gaining
more deal influence

Reduce client cost
Execute more quickly
Winning value propositions are focused on faster, cheaper and with
the right talent
59%
56%
57%
Moving resourcing onshore
13%
Avoiding capital cost
27%
…and other value propositions
that are not getting traction
Provide in-demand skills

Final takeaways
Industry optimism is high…and rising
Enterprise automation in all forms is RED HOT
Pricing pressure and adapting to new business
models are keeping service providers up at
night….capital investment and government
noise/regulation are NOT
Talent is a key theme in terms of both the client value
proposition AND the service providers’ ability to have
the right skills to deliver
The Chief Digital Officer is the hot buying center, with
the Chief Marketing Officer and Chief Strategy Officer
also gaining traction

Presentation topics
in H1 2018
Focus topic | Key
Implications of the
Q&A

Have a question?
 Attendees will receive an email with instructions for downloading today’s presentation
 For questions or to learn more about how Everest Group can assist your organization, contact us
 To ask a specific follow-up question, please contact the individual directly at the email ID below:
– Alan Wolfe, alan.wolfe@everestgrp.com
– Michel Janssen, michel.janssen@everestgrp.com
– Salil Dani, salil.dani@everestgrp.com
– Prashray Kala, prashray.kala@everestgrp.com
To ask a question during the Q&A session
 Click the question mark (Q&A) button located on right
side of your screen. This opens Q&A
 Be sure to keep the default set to “send to All Panelists”
 Type your question in the box at the bottom of the Q&A
box and click the send button

Check out our blog for the latest perspectives on global
services
www.sherpasinblueshirts.comExperts in the global services terrain

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