2Q16 Global ISG Index
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The ISG Index™ provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.
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2Q16 Global ISG Index
- 1. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 1 Hosted by: Moshe Katri, Williams Trading 14 July 2016 The ISG Index™ Second Quarter and First Half 2016 Global Combined Outsourcing and As-a-Service Market Insights
- 2. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 2 Covering the state of the combined sourcing and as-a-service industry for global, commercial contracts Welcome to the 55th Quarterly ISG Index™ Review Esteban Herrera Partner John Keppel Partner & President
- 3. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 3 New! Growing As-a-Service Market Featured in the ISG Index As-a-Service as a % of Combined ACVNEW! As-a-ServiceACV ($B) by Type 36% 30% 24% 19% 20% 2Q161Q4Q3Q2Q151Q4Q3Q2Q141Q 2Q16 As-a-Service % of the Combined Market up 16 pts over 1Q14 % Combined Market ACV = Outsourcing ACV + As-a-Service ACV (IaaS and SaaS) $1.0$1.0$0.9$0.9$0.9$0.9$0.8$0.8$0.7$0.7 $1.8$1.6 $1.5$1.4 $1.1$1.0$0.9$0.8$0.9$1.0 $2.8$2.6 $2.4$2.3 $2.0$1.9$1.7$1.6$1.6$1.7 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Global SaaS 2Q16 As-a-Service ACV had a growth rate of 45% from it’s 2015 like-quarter compare
- 4. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 4 At a Glance 2Q ACV OF $7.9B DRIVEN BY RECORD AS-A-SERVICE GROWTH; HALF-YEAR ACV OF $16.6B UP 10% Y/Y AMERICAS 2Q ACV OF $4.2B UP 7%, ECLIPSING EMEA FOR FIRST TIME SINCE 2013; HALF-YEAR AMERICAS ACV OF $8.7B UP NEARLY 20% EMEA 2Q ACV FALLS 18% Y/Y; WEAKNESS DUE TO FEWER LARGE AND RESTRUCTURING AWARDS; TENTATIVE AS-A-SERVICE GROWTH CAN'T BOOST COMBINED RESULTS ASIA PACIFIC 2Q ACV UP 13% Y/Y, DRIVEN BY 50%+ GAINS IN IAAS; TRADITIONAL MARKET FLAT, REMAINING IN A TIGHT RANGE Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® Scorecard 2Q16 2Q Y/Y 2Q Q/Q 1H16 1H Y/Y ACV ($B)* Change Change ACV (B)* Change Global Combined Market $ 7.9 -2% -9% $ 16.6 10% By Type Outsourcing $ 5.1 -17% -16% $ 11.1 -1% As-a-Service $ 2.8 45% 7% $ 5.5 44% By Service ITO $ 3.6 -24% -14% $ 7.9 -4% BPO $ 1.5 4% -21% $ 3.3 6% IaaS $ 1.8 70% 9% $ 3.4 69% SaaS $ 1.0 16% 4% $ 2.0 14% By Region Americas $ 4.2 7% -4% $ 8.7 19% EMEA $ 2.7 -18% -22% $ 6.1 0% Asia Pacific $ 1.0 13% 18% $ 1.8 7%
- 5. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 5 2Q16 Combined Market ACV down 2% Y/Y on New Scope weakness; YTD, Combined Market ACV up 10% with As-a-Service increasing 44% and traditional sourcing flat. Global Combined Quarterly ACV ($B) Global Combined Half-Year ACV ($B) Global Combined Market Contracting Trends Global Combined Half-Year ACV by Type ($B) Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® $5.1 $6.1 $6.9 $5.5 $6.1 $5.1 $6.8 $5.8 $6.9$6.6 $2.8 $2.6 $2.4 $2.3 $2.0 $1.9 $1.7 $1.6 $1.6$1.7 $7.9 $8.7 $9.3 $7.7$8.1 $7.0 $8.6 $7.4 $8.5$8.3 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Outsourcing ACV As-a-Service ACV $11.2$12.4$11.3$12.6$13.5 $5.4$4.7 $3.8 $3.3$3.3 $16.6$17.1 $15.1$15.9$16.8 1H162H151H152H141H14 Outsourcing As-a- Service $7.9 $3.3 $2.0 $3.4 $0 $2 $4 $6 $8 $10 $12 ITO BPO SaaS IaaS Range of Prior 4 Halves Avg of Prior 4 Halves 2H15 1H16
- 6. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 6 2Q16 Combined Market ACV up 7% Y/Y on surging As-a-Service activity; YTD, Americas shows promise with 6% sourcing growth and 48% As-a-Service ACV growth. Americas Combined Quarterly ACV ($B) Americas Combined Half-Year ACV ($B) Americas Combined Market Contracting Trends $2.5 $2.8$2.6 $2.3 $2.8 $2.2 $2.7$2.6$2.6 $2.1 $1.7 $1.7$1.5 $1.4 $1.2 $1.1 $1.1$1.0$1.0 $1.0 $4.2 $4.5 $4.1 $3.7$4.0 $3.3 $3.8$3.6$3.5 $3.1 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Outsourcing ACV As-a-Service ACV Americas Combined Half-Year ACV by Type ($B) $4.0 $1.3 $1.4 $2.0 $0.5 $1.5 $2.5 $3.5 $4.5 ITO BPO SaaS IaaS Range of Prior 5 Halves Avg of Prior 5 Halves 2H15 1H16 Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® $5.3$4.9$5.0$5.3$4.7 $3.4 $2.9$2.3$2.0 $2.0 $8.7 $7.8 $7.3$7.3 $6.7 1H162H151H152H141H14 Outsourcing As-a-Service
- 7. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 7 Outsourcing Market Luxoft Minacs Mindtree Mphasis SITEL Sutherland Global Synacor Syntel VirtusaPolaris As-a-Service Market Workday Co. Revenues < $2 B Outsourcing Market CGI Dell Genpact HCL Infosys Wipro As-a-Service Market Adobe Systems Equinix Rackspace Salesforce.com Co. Revenues $2 -10 B Outsourcing Market Accenture Capgemini Cognizant HPE IBM TCS As-a-Service Market Amazon Web Services Google Oracle SAP ISG Combined Market Standouts in the Americas Well-established IaaS and SaaS firms enter the Big 10 leader board; moderate turnover in the medium- and small-size firms. Placements based on the annual value of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings The Building 10 Sourcing Standouts The Breakthrough 10 Sourcing Standouts The Big 10 Sourcing Standouts Co. Revenues > $10 B SOURCING STANDOUTS GROUPED BY COMPANY SIZE
- 8. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 8 While ACV in traditional sourcing market is flat, number of contracts sets record high each year; YTD ACV activity led by Financial Services and Healthcare. Americas - Half-Year Contract Counts - Traditional Outsourcing Only Americas - Half-Year ACV ($B) by Industry - Traditional Outsourcing Only Americas Traditional Outsourcing Award Trends 391383318 221291266272231192164 305 297 278227259200219 196 150 391 688 615 499518525 472450 388 314 201615141312111009082007 1H Counts 2H Counts $1.27 $0.84 $0.79 $0.54 $0.58 $0.28 $0.27 $0.37 $0.31 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 Financial Services Manufacturing Healthcare & Pharma Business Services Telecom & Media Energy Travel, Transport & Leisure Retail Consumer Packaged Goods Range of Prior 5 Halves Avg of Prior 5 Halves 2H15 1H16 Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
- 9. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 9 2Q16 Combined Market ACV up 13% Y/Y while traditional sourcing stays flat for the sixth quarter; YTD, IaaS ACV responsible for positive market trajectory. Asia Pacific Combined Quarterly ACV ($B) AP Combined Half-Year ACV ($B) Asia Pacific Combined Market Contracting Trends Asia Pacific Combined Half-Year ACV by Type ($B) Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® $0.6 $0.4$0.5$0.5$0.6$0.6 $0.7 $0.5 $1.0$1.1 $0.4 $0.4$0.3$0.3$0.3$0.3 $0.3 $0.2 $0.3 $0.3 $1.0 $0.8$0.9$0.9$0.9$0.8 $1.0 $0.7 $1.3 $1.3 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Outsourcing ACV As-a-Service ACV $0.6 $0.4 $0.2 $0.6 $0.0 $0.5 $1.0 $1.5 $2.0 ITO BPO SaaS IaaS Range of Prior 4 Halves Avg of Prior 4 Halves 2H15 1H16 $1.0$1.0$1.1$1.2 $2.1 $0.8$0.7$0.5$0.5 $0.5 $1.8$1.7$1.7$1.7 $2.6 1H162H151H152H141H14 Outsourcing As-a-Service
- 10. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 10 Outsourcing Market Aegis Ajilon ASG ChinaSoft Hollysys Automation Interactive Pty Minacs Neusoft Sutherland Global As-a-Service Market Xero Co. Revenues < $2 B Outsourcing Market Avaya HCL Indra Sistemas Infosys Unisys Wipro As-a-Service Market Adobe Systems Equinix Rackspace Salesforce.com Co. Revenues $2 -10 B Outsourcing Market Capgemini Cognizant Fujitsu HPE IBM Sodexho TCS As-a-Service Market Amazon Web Services China Telecom KT Corp. ISG Combined Market Standouts in Asia Pacific Turnover of 30%-40% in the leader board across all Service Provider segments with prominent As-a-Service firms making the Top 10 in large-firm category. Placements based on the annual value of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings The Building 10 Sourcing Standouts The Breakthrough 10 Sourcing Standouts The Big 10 Sourcing Standouts Co. Revenues > $10 B SOURCING STANDOUTS GROUPED BY COMPANY SIZE
- 11. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 11 YTD, contracting activity remains muted; ACV half-year gains come from Manufacturing and Telecom while most other Industry groups struggle. Asia Pacific - Half-Year Contract Counts - Traditional Outsourcing Only Asia Pacific - Half-Year ACV ($B) by Industry - Traditional Outsourcing Only Asia Pacific Traditional Outsourcing Award Trends 67819169888471685045 7881 74 81698082 70 48 67 159 172 143 169 153151150 120 93 201615141312111009082007 1H Counts 2H Counts Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
- 12. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 12 2Q16 Combined Market down 18% Y/Y; As-a-Service growth unable to compensate for 28% shortfall in traditional sourcing; YTD, EMEA flat, with of larger market awards and sluggish Restructuring activity. EMEA Combined Quarterly ACV ($B) EMEA Combined Half-Year ACV ($B) EMEA Combined Market Contracting Trends EMEA Combined Half-Year ACV by Type ($B) Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® $4.8 $6.4 $5.2 $6.1$6.8 $1.3 $1.1 $0.9 $0.8 $0.8 $6.1 $7.5 $6.1 $6.9 $7.5 1H162H151H152H141H14 Outsurcing As-a-Service $3.29 $1.52 $0.47 $0.80 $- $1 $2 $3 $4 $5 $6 ITO BPO SaaS IaaS Range of Prior 4 Halves Avg of Prior 4 Halves 2H15 1H16 $2.0 $2.8 $3.8 $2.6$2.8 $2.4 $3.4 $2.7 $3.4$3.4 $0.7 $0.6 $0.6 $0.5$0.5 $0.5 $0.4 $0.4 $0.4$0.4 $2.7 $3.4 $4.3 $3.2$3.3 $2.8 $3.8 $3.1 $3.7$3.8 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Outsourcing ACV As-a-Service ACV
- 13. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 13 Outsourcing Market FleetCor Frontica Business Solutions GFI Informatique ISON Group Luxoft Mindtree NNIT Transcom VirtusaPolaris WNS Co. Revenues < $2 B Outsourcing Market HCL Capita CGI Genpact Infosys Jones Lang LaSalle Serco Wipro As-a-Service Market Adobe Systems Equinix Co. Revenues $2 -10 B Outsourcing Market Accenture Atos BT Capgemini Cognizant HPE IBM TCS T-Systems As-a-Service Market Amazon Web Services ISG Combined Market Standouts in EMEA Very little leader board turnover across the region, except for a few As-a-Service firms and a couple of traditional sourcing providers in the high-growth category. Placements based on the annual value of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings The Building 10 Sourcing Standouts The Breakthrough 10 Sourcing Standouts The Big 10 Sourcing Standouts Co. Revenues > $10 B SOURCING STANDOUTS GROUPED BY COMPANY SIZE
- 14. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 14 YTD, number of contracts flat despite strength in DACH and Nordic markets; U.K. pulls back; Manufacturing and Retail support ACV growth with remaining verticals experiencing YTD shortfalls. EMEA - Half-Year Contract Counts - Traditional Outsourcing Only EMEA - Half-Year ACV ($B) by Industry - Traditional Outsourcing Only EMEA Traditional Outsourcing Award Trends 294294334266305305243244202166 308315 356270320 258252 221 166 294 602 649622 575 625 501496 423 332 201615141312111009082007 1H Counts 2H Counts $1.31 $0.97 $0.60 $0.54 $0.47 $0.22 $0.19 $0.17 $0.35 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 Financial Services Manufacturing Energy Travel, Transport & Leisure Telecom & Media Business Services Healthcare & Pharma Consumer Packaged Goods Retail Range of Prior 4 Halves Avg of Prior 4 Halves 2H15 1H16 Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
- 15. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 15 Discussion Topic Second Quarter 2016 DEFINING THE AS-A-SERVICE MARKET VALUE John Keppel Partner & President
- 16. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 16 Market Size in Perspective As-a-Service vs.Traditional Outsourcing Market Size billions Growing As-a-Service Market Now Featured in ISG Index Defining the As-a-Service Market 550+ $100M+ Co Revs 17% with < $100M Co Revs 83% with Across Functional Domains leading SaaS Providers The ISG SaaS Market Basket The ISG IaaS Market Basket Nearly 30 leading IaaS Providers carrier cloud firms co-location firms public cloud infra providers IaaS $24 SaaS $51 Outsourcing $114 Combined Market 40% $189
- 17. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 17 Comparing Global Outsourcing and As-a-Service ACV ($B) Comparing the As-a-Service and Outsourcing Markets The Global SaaS and IaaS markets are trending upward with Infrastructure building at a more pronounced rate; Americas leads in As-a-Service growth. Regional As-a-Service ACV ($B) 36% 30% 24% 19%20% 2Q161Q4Q3Q2Q151Q4Q3Q2Q141Q $5.1 $6.1 $6.9 $5.5 $6.1 $5.1 $6.8 $5.8 $6.9$6.6 $2.8$2.6$2.4$2.3$2.0$1.9$1.7$1.6$1.6$1.7 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Outsourcing ACV Global As-a-Service Americas $1.8 EMEA $0.7 AP $0.4 2Q162Q152Q14 $0.0 $0.3 $0.5 $0.8 $1.0 $1.3 $1.5 $1.8 $2.0 As-a-Service as a % of Combined ACV As-a-ServiceACV ($B) by Type $1.0$1.0$0.9$0.9$0.9$0.9$0.8$0.8$0.7$0.7 $1.8$1.6 $1.5$1.4 $1.1$1.0$0.9$0.8$0.9$1.0 $2.8$2.6 $2.4$2.3 $2.0$1.9$1.7$1.6$1.6$1.7 2Q161Q164Q153Q152Q151Q154Q143Q142Q141Q14 Global SaaS Global IaaS
- 18. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 18 Combined Market dips slightly Y/Y in 2Q16; outsourcing market endures a rougher than expected stretch in 2Q and falls by double digits YTD, Combined Market rises 10%, driven by As-a-Service segment, specifically high-growth area of IaaS; outsourcing segment comes in basically flat Americas shows promising YTD growth with nearly 50% growth in As-a- Service and a 6% growth in outsourcing segment EMEA edges down YTD with weakness in outsourcing, most notably a shortfall in large-contract activity and Restructuring awards Asia Pacific is on an upswing at the half year point, due to growth in the as-a-service segment that counteracted stagnant traditional sourcing activity The As-a-Service space is growing at a fast pace and likely will continue that trajectory Outsourcing markets pull back in 2Q and come in at lower levels than initially projected. Even though sourcing demand is increasing, 2nd half results will face a difficult compare; outsourcing ACV may come in slightly lower than in 2015 Factoring in As-a-Service contract flow into the Combined Market, ACV likely will finish 2016 with high single-digit growth 2Q/1H 2016 ISG Index™ - Global Summary and Outlook summary market outlook market
- 19. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 19 Ask a Question Click the "Listen by phone“ button. The phone number and passcode will appear, and the web streaming to your computer will be automatically muted. 1 2 3 After you dial in, the operator will ask your name and company. Now press * 1 to be added to the queue. Your Webcast Screen I want to ask a question &
- 20. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 20 Please contact us with your questions and comments. Learn More Paul Reynolds Partner & Chief Research Officer, ISG Momentum +1 508 625 2194 paul.reynolds@isg-one.com www.isg-one.com John Keppel Partner and President +44 (0)7879 432 212 john.keppel@isg-one.com Will Thoretz Americas Media Contact +1 203 517 3119 will.thoretz@isg-one.com Denise Colgan EMEA and AP Media Contact +44 1737 371523 denise.colgan@isg-one.com Bill McNee CEO Saugatuck Technologies, an ISG Business +1 203 820 8987 bill.mcnee@saugatucktechnology.com
- 21. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 21 Second Quarter and First Half 2016 APPENDIX: SCORE CARD FOR TCV
- 22. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 22 The ISG Outsourcing Index has moved to ACV as the primary measure of the Broader Market. We will continue to provide a high-level TCV view of the market via a Scorecard analysis. 2Q and 1H 2016 TCV Scorecard – Outsourcing Market *Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase® Scorecard 2Q16 2Q Y/Y 2Q Q/Q 1H16 Y/Y TCV ($B)* Change Change TCV ($B)* Change Global Market $ 19.7 -2% 2% $ 38.9 -8% New Scope $ 11.7 -17% -13% $ 25.1 -17% Restructurings $ 8.0 32% 38% $ 13.8 15% Mega-deals $ 0.0 0% -100% $ 3.6 -26% ITO $ 14.7 1% 24% $ 26.4 -14% BPO $ 5.0 -10% -33% $ 12.5 10% Americas $ 8.9 15% 30% $ 15.8 5% EMEA $ 8.7 -13% -9% $ 18.3 -17% Asia Pacific $ 2.1 -12% -26% $ 4.9 -3%
- 23. © 2016 Information Services Group, Inc. All Rights Reserved isg-one.com 23 www.isg-one.com Information Services Group is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 1,000 employees and operates in 21 countries. imagine your future™ RESEARCH | CONSULTING | MANAGED SERVICES let’s connect...