This document provides an agenda and overview for "The State of Canadian Outsourcing: Update 2009" report. The summary includes: 1) The report analyzes trends in the Canadian outsourcing market and management practices between June 2007-November 2008 based on 100 new outsourcing transactions. 2) It focuses on larger transactions over $1 million across all industries for the period of 1998-2008. 3) Both quantitative and qualitative data were collected through surveys of buyers, providers and advisors, as well as public announcements and interviews.

2. Agenda
 Purpose
 Scope
 Approach and Methodology
 A. The Outsourcing Market
 B. Management Practices
 Participants

3. Purpose of The State of Canadian Outsourcing: Update 2009
The 2009 update to the Centre for Outsourcing Research &
Education’s (CORE) State of Canadian Outsourcing report
released in early 2008 provides:
 Trends in the Canadian outsourcing market and outsourcing
management practices;
 Data on new outsourcing transactions, add-ons to existing
transactions, and renewals for the 18 months between June
2007 and November 2008;
 Data on close to 100 new transactions reported in last 18
months, of which we obtained TCV data on 40 transactions with
a total TCV of $2 billion.

4. Scope of The State of Canadian Outsourcing: Update 2009
The State of Canadian Outsourcing: Update 2009:
 includes outsourcing across all industry sectors, and covers the 10-
year period 1998-2008
 focuses on the larger end of the outsourcing market (outsourcing
transactions with a total contract value in excess of $1 million)
 includes publicly reported outsourcing transactions and outsourcing
transactions reported to us through our primary data gathering
The quantitative data in this report is indicative of the size and scope of
the outsourcing market in Canada, but should not be seen as definitive.

5. Approach and Methodology
For quantitative and qualitative data in this report:
 CORE hired the research support services of Evalueserve, a Knowledge
Process Outsourcing (KPO) company, and Deloitte to design the research
questionnaires
 Evalueserve collected data based on public announcements of outsourcing
transactions and conducted direct requests for data with a web survey
from buyers, outsourcing service providers and advisors; and produced all
the data analysis, graphs and charts
 Merit Outsourcing Advisors conducted additional qualitative interviews with
leading outsourcing advisors, research organizations and service providers
and contributed to the compilation of the report

6. A. The Outsourcing Market
Types of Outsourcing
 Information Technology Outsourcing (ITO): the outsourcing
of IT and related activities
 Application Development & Maintenance (ADM): the
outsourcing of the development and maintenance of software
applications
 Business Process Outsourcing (BPO): the outsourcing of
business processes
ITO and ADM are often done in combination. BPO and ADM are also done
in combination, although less frequently.

7. Market Size

8. Market Size

9. Market Size

10. Market Activity

11. Types of Outsourcing

12. Industry Analysis

13. Buyers

14. Providers

15. Providers

16. B. Management Practices
1. Factors Influencing Decision to Outsource
 Gaining more scalability or flexibility is the the biggest influencing
factor in 2008
 Other factors in 2008 included cost reduction, access to wider skill
base, and improved customer value
 Changes in preference of various factors in 2008 included an increase
in importance of gaining more scalability or flexibility and leveraging
technological expertise, and a decrease in importance of cost
reduction and increasing shareholder value
2. Factors Affecting Vendor Selection
 Delivery of services effectively rather than lower cost.
 Other factors included access to expertise and experience/skills in
specific domains

17. Management Practices
3. Pricing Trends
 Pricing is situational to transactions
 Pricing has dropped over time, as market competition and global
delivery models drive down prices
 Typically a positive market perception of potential to control costs
through outsourcing
 An increase in use of variable/metric-driven pricing in transactions
4. Vendor Mix
 Many clients adopting multi-sourcing strategies, with more
transactions split among selected outsourcing service providers
delivering services in the less-risky, commodity-oriented services
 Increasing recognition multi-vendor strategies have increased
integration costs

18. Management Practices
5. Savings Targets
 Many organizations are not tracking or capturing ROI over the
transaction term
 Large focus in pursuit phase and in first year of service
 Declining tracking and accountability in later years
 ROI is wide ranging:
i. 10%-15% in ITO with onshore (onsite or near-shore) delivery
ii. 20%-30% in ITO with pure offshore delivery
iii. 15%-25% in ADM
iv. BPO, including the related applications, at 25%-40%
6. Offshore Delivery Acceptance
 Most advisors and service providers reported steady acceptance of
offshoring
 Even the public sector in some provinces has offshoring interest
 Financial services has broad penetration and experience, but activity
has slowed as a result of the economic downturn
 Increased acceptance of savings opportunity and quality/efficiency,
but risk/reward balance heightened

19. Management Practices
7. Emerging Industries
 Government, education, non profit, and Financial Services sectors are
key industries for vendors
 One-third estimated these sectors constituted over 20% of total client
base in 2008
 Other major industries included business services/consulting and
entertainment/media, and hospitality
8. Innovation in Outsourcing
 Organizations consider innovation vital for continuous improvement
and for building longer relationships
 Most organizations consider innovation ability to think beyond contract
 Some organizations believe innovation not achieved in outsourcing
agreements. Vendors not willing to invest outside defined scope of
services
 Most organizations consider monetary rewards a key driver in
promoting innovation in outsourcing agreement

20. Participants