1st Quarter 2012, EMEA TPI Index

The TPI EMEA Index

Hosted by:

Marc Geall,

Deutsche Bank Software and IT

Services Team

First Quarter 2012

April 16, 2012

EMEA Outsourcing Market Data and Insights

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Information

Services Group, Inc.

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ISG-one.com

*Contracts with TCV > €20M

Partner & President

North Europe, ISG

Covering the state of the outsourcing industry for global, commercial contracts

with total contract value greater than €20 million.

Welcome to the 37th Quarterly Outsourcing Index Call

Duncan Aitchison

2

Partner & Managing Director,

ISG Germany

Bernd Schaefer

John KeppelPartner & President Research

& Managed Services

and Chief Marketing Officer,

ISG

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“

3

At A Glance

“

GLOBAL BROADER MARKET AWARDS AND TCV DROPPED

ON THE HEELS OF RECORD 2011 RESULTS

RESTRUCTURINGS NOTABLY ↑ Y/Y, WHILE

NEW SCOPE TCV CONTINUES TO DECLINE

EMEA TCV DECLINES ON DEARTH OF LARGE DEALS

AMERICAS TCV ↑ Q/Q

STRONG RESULTS INCLUDE THE LONE 1Q11 MEGA DEAL

Score Card

1Q12 TCV

(€B)

Q/Q

Change

1Q Y/Y

Change

1Q12

Counts

Q/Q

Change

1Q Y/Y

Change

Global Market € 14.9 -35% -22% 184 -18% -31%

Mega Deals € 1.2 -83% -93% 1 -80% -67%

New Scope € 8.5 -45% -46% 137 -23% -35%

Restructurings € 6.4 -13% 82% 47 2% -18%

ITO € 10.0 -37% -20% 120 -22% -29%

BPO € 4.9 -30% -20% 64 -11% -34%

EMEA € 6.9 -53% -32% 79 -23% -37%

Asia Pacific € 1.4 -33% -36% 18 flat -55%

Americas € 6.6 8% -3% 87 -16% -14%

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€ 13.8

€ 23.2 € 22.5

2 Prior

Qtrs Avg

€ 22.8

2Q061Q064Q05

€ 17.4 € 22.5 € 25.3

2 Prior

Qtrs Avg

€ 23.9

2Q101Q104Q09

€ 14.9 € 22.9 € 21.7

€ 15.7 € 19.2 € 19.8

€ 14.7 € 17.4 € 22.5

1Q12 4Q 3Q 2Q 1Q11 4Q 3Q 2Q 1Q10

4

1Q12 TCV declined a substantial 35% Q/Q and 22% Y/Y, not unusual after a strong

third and fourth quarter 2011.

Global Broader Market Contract Award Trends

Quarterly TCV (€B)* Comparison

↓40%↓27%

The TCV Hangover Effect - Previous Quarterly Precedence

↓35%

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€ 6.9

€ 14.6

€ 10.1 € 9.8

€ 7.3

1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09

5

1Q12 TCV was down 53% Q/Q and 32% Y/Y. The ‘hangover’ effect and,

potentially, Eurozone financial concerns impacted results.

EMEA Contract Award Trends


€ 25.4

€ 26.1

€ 30.8

€ 25.0

€ 31.3

2Q11-1Q12

2Q10-1Q11

2Q09-1Q10

2Q08-1Q09

2Q07-1Q08

New Scope TCV

Quarterly TCV (€B)* ComparisonNew Scope vs. Restructuring TTM TCV (€B)* Comparison

€ 17.0

€ 9.5

€ 7.0

€ 9.7

€ 3.8

Restructuring TCV

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€ 2.5

€ 1.3 € 1.0

€ 1.4

€ 0.2 € 0.2 € 0.1 € 0.1 € -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

€ 4.5

€ 5.0

UK &

Ireland

Scandinavia Benelux DACH France Southern

Europe

Africa &

Middle East

E. Europe &

Russia

Prior 5 Period Range Average 1Q11 1Q12

6

With the exception of a steady performance in DACH, and some activity in E.

Europe, EMEA sub-regions were down from their Prior Five-Like-Quarter averages.

EMEA Country Details in Contract Award Trends

Sub-Regional Like-Quarter TCV (€B)* Comparison

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€ 6.2 € 5.8

€ 1.8 € 2.5 € 4.7

€ 0.8 € 0.9

€ 3.6 € 4.7

€ 1.2 € 1.6

0

4

112

3

1122

1

0

2

1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09

TCV (B) Counts

7

Only one was signed in 1Q, an ITO mega deal in the Americas valued at €0.8B.

EMEA 1Q12 Mega Relationship counts were the 3rd highest in three years.

EMEA Mega Deals & Relationships Trends

Mega Deal TCV (€B)* Comparison

€ 0.4 € 1.1 € 1.0

€ 0.6 € 0.3

€ 1.4

€ 0.3 € 0.7 € 0.9 € 1.1

€ 0.2 € 0.1 € 0.3

4

8

332

6

234

9

113

1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09

ACV (B) Counts

75% of 1Q Mega

Relationships are

Restructurings

Mega Relationship ACV (€B)* Comparison

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€ 12.9

€ 7.6

€ 6.1

€ 9.0

€ 2.9

Restructuring TCV

€ 4.2

€ 10.1

€ 6.7

€ 8.6

€ 5.8

1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09

8

EMEA ITO experienced Q/Q decreases of 38% in counts and 58% in TCV. The lack

of large deals meant that 1Q12 was the weakest ITO quarter for TCV since 3Q06.

EMEA ITO Contract Award Trends

Top ITO Providers

by TTM TCV

Note: Service providers in alphabetical order; no rankings implied.

Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.

TTM New Scope vs. Restructuring TCV (€B)*

New Scope

Accenture

Atos

BT

Capgemini

Capita

CSC

Dimension

Data

Fujitsu

HCL

HP

IBM

Infosys

TCS

T-Systems

Wipro

Restructuring

Atos

BT

Capgemini

CSC

HCL

Hexaware

HP

IBM

Infosys

T-Systems


€ 16.9

€ 19.8

€ 25.2

€ 16.9

€ 20.1

2Q11-1Q12

2Q10-1Q11

2Q09-1Q10

2Q08-1Q09

2Q07-1Q08

New Scope TCV

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€ 2.6

€ 4.5

€ 3.5

€ 1.1 € 1.6

1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09

9

BPO saw a Q/Q increase of 26% in counts but a decrease of 42% in TCV. Against

two 4Q11 Mega Deals, the TCV compare is tough.

EMEA BPO Contract Award Trends


Top BPO Providers

by TTM TCV

TCS

Accenture

Capgemini

Capita

Carillion plc

Convergys

HCL

HP

Infosys

Johnson Controls

Logica

Sabre

Sodexho

Xchanging

Xerox

TTM New Scope vs. Restructuring TCV (€B)*

Note: Service providers in alphabetical order; no rankings implied.

Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.

€ 4.1

€ 4.0

€ 3.3

€ 3.4

€ 1.9

Restructuring TCV

€ 8.5

€ 9.4

€ 6.8

€ 6.5

€ 6.3

2Q11-1Q12

2Q10-1Q11

2Q09-1Q10

2Q08-1Q09

2Q07-1Q08

New Scope TCV

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€ 0.7

€ 2.2

€ 0.4 € 0.5

€ 2.5

€ 0.4 € 0.2

€ 0.0 € -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

€ 4.5

€ 5.0 Prior 5 Period Range Average 1Q11 1Q12

10

With the exception of a record high 1Q in Manufacturing, all EMEA industry sectors

performed under their Prior Five-Like-Quarter TCV averages.

EMEA Industry Details in Contract Award Trends

Industry Like-Quarter TCV (€B)* Comparison

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€ 1.4

€ 2.1 € 2.2

€ 1.1 € 1.3

1Q124Q3Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09

11

AP contracting counts were flat Q/Q. However, TCV was down by one-third both

Q/Q and Y/Y, ending up well below the recent first-quarter average.

Asia Pacific Contract Award Trends


New Scope vs. Restructuring TTM TCV (€B)* Comparison

€ 4.5

€ 7.0

€ 7.2

€ 7.9

€ 6.1

2Q11-1Q12

2Q10-1Q11

2Q09-1Q10

2Q08-1Q09

2Q07-1Q08

New Scope TCV

€ 2.1

€ 2.0

€ 2.5

€ 1.0

€ 1.2

Restructuring TCV

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€ 6.6 € 6.2 € 6.8

€ 11.7

€ 7.5

1Q124Q3Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09

12

Americas TCV rose 8% Q/Q, making it one of the three highest quarters since the

beginning of 2010. Americas posted the only 1Q12 Mega Deal.

Americas Contract Award Trends


New Scope vs. Restructuring TTM TCV (€B)* Comparison

€ 9.6

€ 7.7

€ 12.4

€ 6.9

€ 6.2

Restructuring TCV

€ 16.6

€ 18.8

€ 21.2

€ 20.2

€ 19.2

2Q11-1Q12

2Q10-1Q11

2Q09-1Q10

2Q08-1Q09

2Q07-1Q08

New Scope TCV

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310

570690

13

Contract expirations are occurring at a faster rate as the result of dramatically

increased transaction counts and declining average contract durations.

Anticipating Increased Global Restructuring Volume

5

6933

377

20112002

Average Duration

Contract Awards

Record Levels of Expiring Contracts

Trends Impacting Restructuring Volumes

2012e2007

↑ 20% Y/Y

2011

↑ 250%

↓ 1 Yr.

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14

Contract renegotiations can be driven by either the client or the service provider,

but the leverage is, more often than not, with the Client.

Motivations Behind Pre-emptive Renegotiation Efforts

Client Motivations Provider Motivations

Increase Scope or Service Levels

Reduce Price for Existing Scope

Add Emerging Services

� Chance for Sole Sourced Renewal

� Retain Full Scope

� Introduce New Services

Restructuring creates the opportunity for Best-of-Breed providers to win

new clients looking for targeted solutions

�

�

�

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37%

32%

18%

13%

Americas Heritage Niche Providers India Heritage Major European

15

Applying the 80/80 rule: 80% of the time a deal is renegotiated with the

incumbent provider, and they typically retain about 80% of the scope.

Who will win these restructurings?

2012 Restructuring

by Provider Share of ACV

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16

� Global Broader Market ↓1Q12 loses momentum aGer two

quarters of impressive growth

� Restructuring TCV ↑ Y/Y, not enough to make up for New

Scope declines

� Shortfall in previously robust EMEA TCV had the greatest

impact on the global market

� EMEA ITO values at their lowest since 2Q06; BPO TCV ↓

while contract numbers ↑ Q/Q

� Look for a soft first half 2012 and a reviving second half

� Restructuring 2H12 activity may lead an upswing in the

overall market

1Q12 TPI Index Summary and Outlook

summarymarket

outlookmarket

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Learn More

17

Please contact us with your questions and comments.

--- Media Contacts ---

► John Keppel ► Duncan Aitchison

www.considerthesourceblog.com

Partner & President Research &

Managed Services and Chief

Marketing Officer

+44 (0)7879 432 212

[email protected]

Partner & President

North Europe, ISG

+44 (0)1628 21702

[email protected]

► Paul Reynolds

Chief Research Officer,

ISG Momentum

+1 508 625 2194

[email protected]

► Denise Colgan

Marketing Director, EMEA, ISG

+44 1737 371523

[email protected]

► Louise Fernley

Cohn & Wolfe for ISG

+44 207 331 5365

[email protected]

www.isg-one.com

1st Quarter 2012, EMEA TPI Index

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