EMEA ISG Outsourcing Index Q3/2014

Hosted by:

James Goodman

Barclays Capital

16 October 2014

The EMEA ISG Outsourcing Index

Third Quarter 2014

Market Data and Insights

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*Contracts with ACV ≥ €4M from the ISG Contracts Knowledgebase®

2

Covering the state of the outsourcing industry for global and EMEA commercial

contracts.*

Welcome to the 48th Quarterly Outsourcing Index Review

Dr. David HowiePartner

Bernd SchaeferPartner

John KeppelPartner & President

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3

At a Glance

AS ISG PREDICTED, LIGHTER CONTRACTING ACTIVITY

DROVE GLOBAL BROADER MARKET ACV DOWN Y/Y

ITO AND BPO BOTH DECLINED BY DOUBLE DIGITS;

YTD, ITO REMAINS IN POSITIVE TERRITORY WHILE BPO CONTINUES TO PRODUCE UNEVEN RESULTS

EMEA PERFORMANCE WEAKER WITH DACH AND NORDICS SLIDING;

YTD, ACV SHOULD SURPASS 2013 WITH STRENGTH IN FRANCE AND SOUTHERN EUROPE

AMERICAS RESULTS TREND UPWARD Y/Y,

LARGE-DEAL ACTIVITY IN CANADA AND BRAZIL OFFSET FLAT U.S. PERFORMANCE

ASIA PACIFIC'S QUARTERLY PACE SLOWED BY ABSENCE OF LARGE DEALS

Scorecard 3Q14 3Q Y/Y 3Q Q/Q YTD YTD Y/Y

ACV (€B)* Change Change ACV (€B)* Change

Global Market € 3.7 -21% -28% € 13.7 13%

New Scope € 2.4 -10% -27% € 8.7 22%

Restructurings € 1.3 -36% -31% € 5.0 0%

Mega-relationships € 1.0 2% -21% € 3.8 23%

ITO € 2.7 -23% -31% € 10.4 22%

BPO € 1.0 -17% -18% € 3.3 -9%

Americas € 1.5 11% -17% € 4.9 18%

EMEA € 1.9 -36% -26% € 7.0 3%

Asia Pacific € 0.3 -27% -64% € 1.8 59%

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Global Broader Market Quarterly ACV is down 21% Y/Y on slower contracting

activity. YTD, ACV is still at the second-highest level ever, up 13% against 2013.

Year-to-date Broader Market (€B)*

Year-to-date Contracting Counts

Global Market Contract Award Trends

660 511

631 631 528 518

408 343 332 329

239 352

252 295 235 221

227 163 141 142

-

250

500

750

1,000

201413121110090807062005

1H Counts 3Q Counts

€ 10.0€ 7.4

€ 10.0€ 8.1€ 10.0€ 8.2€ 8.8€ 7.0€ 7.1€ 7.4

€ 3.7€ 4.7

€ 4.5€ 4.9

€ 3.5€ 3.4€ 3.6

€ 2.5€ 2.3€ 3.1

€ 3.7

€ 4.3€ 5.7€ 4.5€ 5.7€ 3.9

€ 4.9€ 3.6€ 4.4

201413121110090807062005

€ 0

€ 5

€ 10

€ 15

€ 20

1H ACV 3Q ACV 4Q ACV

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Both ITO and BPO quarterly ACV down Y/Y. Year-to-date, ITO ACV stands at all-time

high while BPO ACV has trended lower, down 9% from 2013.

BPO Year-to-date ACV (€B)*

Global ITO and BPO Contract Award Trends

ITO Year-to-date ACV (€B)*

BPO Year-to-date CountsITO Year-to-date Counts

484

327 396 400 336

364 271 228 202 224

173

248 161 185

139 146

140 108

81 92

-

100

200

300

400

500

600

700

201413121110090807062005

1H Counts 3Q Counts

176 184 235 231 192

154 137 115 130 105

66 104

91 110 96

75 87 55 60

50

-

100

200

300

400

201413121110090807062005

1H Counts 3Q Counts

€ 7.7

€ 5.0€ 6.2€ 5.4

€ 7.6€ 5.9€ 6.3

€ 5.0€ 5.3€ 5.4

€ 2.7

€ 3.5€ 2.9

€ 3.5

€ 2.5

€ 2.5€ 2.5

€ 1.7€ 1.4€ 2.2

201413121110090807062005

€ 0

€ 2

€ 4

€ 6

€ 8

€ 10

€ 121H ACV 3Q ACV

€ 2.3€ 2.4€ 3.7

€ 2.8€ 2.4€ 2.3€ 2.6€ 1.9€ 1.9€ 2.0

€ 1.0€ 1.2

€ 1.6

€ 1.3€ 1.0€ 0.9

€ 1.1€ 0.8€ 0.8€ 0.9

201413121110090807062005

€ 0

€ 2

€ 4

€ 6

1H ACV 3Q ACV

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EMEA quarterly ACV is down 36% Y/Y as the number of awards drop markedly.

Year-to-date, ACV is up slightly at 3% on the strength in ITO.

EMEA Year-to-date ACV (€B)*

EMEA YTD New vs. Restructuring ACV (€B)*

EMEA Contract Award Trends

EMEA Year-to-date Counts

316 257 275 298

225 237 198 159 140 173

115 176 110

144

110 106 116

77 76 66

-

100

200

300

400

500

201413121110090807062005

1H Counts 3Q Counts

€ 5.1€ 3.9€ 4.4€ 4.3€ 4.8

€ 3.7€ 5.8

€ 3.3€ 2.7€ 4.0

€ 1.9€ 2.9€ 2.4€ 2.9€ 1.6

€ 1.4

€ 2.0

€ 1.4€ 1.2

€ 1.4

€ 2.1€ 2.3€ 3.4

€ 2.8€ 3.3

€ 1.8

€ 2.0€ 1.9

€ 2.2

201413121110090807062005

€ 0

€ 2

€ 4

€ 6

€ 8

€ 10

€ 12


€ 4.3

€ 2.7

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

€ 4.5

€ 5.0

New Scope Restructuring

Range of Prior 4 YTDs Avg of Prior 4 YTDs

YTD 3Q13 YTD 3Q14

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€ 2.2

€ 1.2€ 1.1

€ 0.3

€ 1.1

€ 0.7

€ 0.3€ 0.2

€-

€0.5

€1.0

€1.5

€2.0

€2.5

€3.0

€3.5

U.K. &

Ireland

DACH Nordics Benelux France Southern

Europe

Africa &

Middle

East

E. Europe

& Russia


YTD 3Q13 YTD 3Q14

France and Southern Europe help support year-to-date gains in EMEA while the

more mature markets of the U.K., DACH and the Nordics pull back from 2013.

EMEA Contract Award Trends Detail

EMEA Sub-regions Year-to-date ACV (€B)* EMEA Industries YTD ACV (€B)*

€ 1.3

€ 1.5

€ 1.2

€ 1.2

€ 0.8

€ 0.4

€ 0.2

€ 0.3

€ 0.2

€ - € 0.5 € 1.0 € 1.5 € 2.0

Financial Services

Manufacturing

Travel, Transport &

Leisure

Energy

Telecom & Media

Business Services

Retail

Consumer Products

& Goods

Healthcare &

Pharma

Avg of Prior 4 YTDs YTD 3Q14

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ITO contract numbers in EMEA hit an all-time high year-to-date, while ACV reached

its second highest level ever, despite a slowdown in the third quarter

EMEA ITO Year-to-date ACV (€B)*

EMEA ITO YTD New vs. Restructuring ACV *

EMEA ITO Contract Award Trends

EMEA ITO Year-to-date Counts

243 166 187 214

165 187 156 122

87 129

95

124 78 103

77 82

78

51 42

49

201413121110090807062005

1H Counts 3Q Counts

€ 3.5

€ 2.4

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0



YTD 3Q13 YTD 3Q14

€ 4.2€ 2.8€ 2.7€ 3.1

€ 4.1€ 3.1

€ 4.6€ 2.7€ 1.8

€ 3.3

€ 1.7€ 2.4€ 1.7

€ 2.4€ 1.2€ 1.2

€ 1.5

€ 1.0€ 0.7

€ 1.2

€ 1.6€ 1.4

€ 2.7€ 2.5€ 2.5

€ 1.5

€ 1.1€ 1.5

€ 1.5

201413121110090807062005

€ 0

€ 2

€ 4

€ 6

€ 8

€ 10


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Year to date, BPO ACV and counts fell more than a third, driven by a lack of

contracting activity by the Financial Services sector

EMEA BPO Year-to-date ACV (€B)*

EMEA BPO YTD New vs. Restructuring ACV*

EMEA BPO Contract Award Trends

EMEA BPO Year-to-date Counts

€ 0.9

€ 0.2€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0



YTD 3Q13 YTD 3Q14

€ 0.9€ 1.1€ 1.7

€ 1.2€ 0.8€ 0.6

€ 1.2€ 0.6€ 0.8€ 0.7

€ 0.2€ 0.6

€ 0.7

€ 0.5

€ 0.4€ 0.2

€ 0.5

€ 0.4€ 0.5

€ 0.2

€ 0.4

€ 0.9

€ 0.7

€ 0.3€ 0.8

€ 0.3€ 0.9€ 0.4

€ 0.7

201413121110090807062005

€ 0.0

€ 1.0

€ 2.0

€ 3.0

€ 4.0


73 91 88

84 60

50 42 37 53 44

20

52 32 41

33 24 38

26

34

17

201413121110090807062005

1H Counts 3Q Counts

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Co. Revenues < €2 BCo. Revenues €2 -10 B

ISG Sourcing Market Standouts in EMEA

Large multinationals and providers with strong local “home market” profiles head

up both the Big 10 and Building 10 tiers.

SOURCING

STANDOUTS BY COMPANY SIZE

Co. Revenues > €10B

Capita

Carillion1

Cognizant1

EVRY

HCL1

Infosys1

Mitie Group

Orange Business Services

Tech Mahindra

Tieto

Accenture1

Atos1

BT1

Capgemini1

CSC

Fujitsu

HP

IBM1

TCS1

T-Systems

HH Global

iGATE

Innovation Group

Kelway

MAYKOR

NGA Human Resources

NNIT A/S

Quindell

Sitel

The Building 10Sourcing Standouts

The Breakthrough 10Sourcing Standouts

The Big 10Sourcing Standouts

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€ 3.1

€ 1.8

€ 2.9

€ 2.0

€ 0

€ 1

€ 2

€ 3

€ 4

€ 5

New Scope Restructuring ITO BPO


YTD 3Q13 YTD 3Q14

Americas quarterly ACV was up 11% Y/Y even as the number of contract awards fell

back. Year-to-date, ACV is up 18% from 2013 with New Scope ACV growing 30%.

Americas Year-to-date ACV (€B)*

Americas YTD Segment Details ACV (€B)*

Americas Contract Award Trends

Americas Year-to-date Counts

265 195

278 259 239

219 168 142 149 130

97 137

104 119 101

83 84

61 49 57

-

100

200

300

400

500

201413121110090807062005

1H Counts 3Q Counts

€ 3.4€ 2.8€ 4.0

€ 3.0€ 4.5

€ 3.4€ 2.5€ 2.8

€ 3.7€ 3.0

€ 1.5€ 1.4

€ 1.5

€ 1.6

€ 1.6

€ 1.5

€ 1.1€ 0.7

€ 0.9€ 1.5

€ 1.2

€ 1.5€ 1.9

€ 0.9€ 1.9

€ 1.4€ 2.2€ 1.4€ 1.6

201413121110090807062005

€ 0

€ 2

€ 4

€ 6

€ 8


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€ 0.33

€ 0.21

€ 0.02€ 0.05

€ 0.00

€ 0.05

€ 0.10

€ 0.15

€ 0.20

€ 0.25

€ 0.30

€ 0.35

€ 0.40

€ 0.45

Canada Brazil Mexico Other LatAm


YTD 3Q13 YTD 3Q14

€ 4.31

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

€ 4.5

€ 5.0

€ 5.5

€ 6.0

U.S.

Year-to-date, U.S. ACV has risen 17% against 2013. Both Canada and Brazil ACV

have advanced as a result of some larger contract awards.

Americas Contract Award Trends Detail

Americas Sub-regions Year-to-date ACV (€B)*

€ 0.9

€ 1.7

€ 0.7

€ 0.7

€ 0.5

€ 0.4

€ 0.4

€ 0.7

€ 0.2

€ 0.0 € 1.0 € 2.0

Manufacturing

Financial Services

Telecom & Media

Healthcare & Pharma

Business Services

Retail

Consumer Products &

Goods

Energy

Travel, Transport &

Leisure


Americas Industry YTD ACV (€B)*

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ISG Sourcing Market Standouts in the Americas

Americas-based providers head up the Big 10 Sourcing Standouts. Providers with

substantial offshore profiles lead in both the Building and Breakthrough tiers.



CBRE Group

CGI

Cognizant1

CompuCom

Genpact

HCL1

Infosys1

Tech Mahindra

Teleperformance

Wipro

Accenture1

BT

Capgemini1

CSC1

Dell

IBM1

ISS

RR Donnelley

TCS1

Xerox1

Allscripts Healthcare Solutions

EXL

Garda World

iGATE1

KPIT Technologies

Minacs

Neoris

NIIT

Sitel

Syntel

SOURCING




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€ 1.3

€ 0.5

€ 1.7

€ 0.1€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

New Scope Restructuring ITO BPO


YTD 3Q13 YTD 3Q14

Asia Pacific quarterly ACV is down 27% Y/Y on the absence of large contract

awards. Year-to-date ACV is up almost 60% on substantial contracting activity.

Asia Pacific Year-to-date ACV (€B)*

Asia Pacific YTD Segment Details ACV (€B)*

Asia Pacific Contract Award Trends

Asia Pacific Year-to-date Counts

79 59

78 74 64

62 42 42 43

26

27 39

38 32

24 32

27 25 16 19

-

20

40

60

80

100

120

140

201413121110090807062005

1H Counts 3Q Counts

€ 1.5

€ 0.7

€ 1.6

€ 0.8€ 0.6€ 1.1

€ 0.6€ 0.9€ 0.8

€ 0.4

€ 0.3

€ 0.4

€ 0.6

€ 0.4€ 0.4

€ 0.5

€ 0.5€ 0.4

€ 0.2

€ 0.3

€ 0.4

€ 0.5

€ 0.4€ 0.8

€ 0.5

€ 0.7€ 0.7

€ 0.3€ 0.6

201413121110090807062005

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0


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YTD Asia Pacific ACV gains are the result of stepped up activity in ANZ and large

awards in Japan. China and India bounce back from weaker 2013 results.

Asia Pacific Contract Award Trends Detail

Asia Pacific Sub-regions Year-to-date ACV (€B)*Asia Pacific Industries

YTD ACV (€B)*

€ 0.39

€ 0.27

€ 0.51

€ 0.22

€ 0.14

€ 0.04

€ 0.06

€ 0.12

€ 0.03

€ - € 0.2 € 0.4 € 0.6

Telecom & Media

Financial Services

Manufacturing

Travel, Transport &

Leisure

Energy

Business Services

Healthcare &

Pharma

Consumer Products

& Goods

Retail


€ 0.48

€ 0.37

€ 0.49

€ 0.25

€ 0.17

€ 0.01€ -

€ 0.2

€ 0.4

€ 0.6

€ 0.8

€ 1.0

€ 1.2

ANZ India and

South Asia

Japan Greater

China

Southeast

Asia

South Korea


YTD 3Q13 YTD 3Q14

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ISG Sourcing Market Standouts in Asia Pacific

Japanese providers join large multinationals in the Big 10 Sourcing Standouts list.

Australian and India-based providers contribute greatly to the two smaller tiers.

SOURCING



Cognizant1

HCL

Infosys1

Orange Business Services

Singtel Optus

Tech Mahindra

UGL Limited

Unisys

Wipro1

Accenture1

AT&T

Capgemini

CSC1

Fujitsu1

Hitachi

IBM1

NTT

TCS1

Telstra1

Aegis

ChinaSoft1

Hollysys Automation

Itron

Kratos Defense & Security

NGA Human Resources

Pactera

Ramco

Redknee Solutions

SITA




Special Topic for 3Q14

ISG MOMENTUM® METHODOLOGY FOR

SOURCING OPPORTUNITIES ASSESSMENT

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Historic vs. Potential Industry Characterization

Historical Activity Frames an Industry

$0

$1

$2

$3

2014

YTD

'13'12'112010

Chemicals Oil & Gas Ops Utilities

Energy Industry ACV (€B)*

But more information is needed to Characterize the Industry PotentialMomentum® Vertical Reports gauge a market’s maturity and momentum

Amount of industry business

available but not yet captured

by service providers

vs UFARMINGHUNTINGAmount of industry growth that

can be cultivated from outsourcing

relationships in place

Utilities Historical Frameexhibits consistency — over €1B in

ACV for past five years — within

Energy, a consistent performer on

pace for a record high 2014 ACV

11

Utilities PotentialISG’s 2014 Momentum Vertical Report

rates Utilities as Medium Hunting and High Farming

22

WHY?

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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

19

Industry Challenges

local hiring

requirements, heavy

regulation and M&A

activity impact

service

standardization and

flexibility

Medium Hunting: Recent Growth Is Highest of 27 Verticals

$1,395 $1,612

$1,746 $1,695 $1,613

$1,824

$2,006

$3,078

$3,411 $3,340

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US

$ M

illio

ns

Growth: 5% 16% 8% -3% -5% 13% 10% 53% 11% -2%

Utilities Market Spend (ACV)

18.5 % compound

annual growth rate

for outsourcing

spending by Utilities

clients is highest

among the 27

verticals

Momentum tracks

11

22

2014 Vertical Industry Report

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Innovative solutions

abound due to

deregulation, smart

grid technologies, and

ongoing service

efficiency needs

High Farming: Low Per-company ACV Leaves Room for Growth

2013 Utilities

Average Market Spend

€66.8 €99.8

Utilities

Market Average

50 58

Outsourcing

Not Outsourcing

108 Companies

2013 Utilities

Market Composition46% Penetration Rate

is in line with 47%

G2000 average

11

Below Average Spend

compared to G2000 in

2013

22

33


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Who’s Winning the Utilities Contracts?

The utilities client base is served by a competitive set of service providers. Industry

specific BPO solutions and ITO cloud integration are key areas of focus.

18%

16%

14%

12%

12%

12%

12%

10%

10%

6%

6%

6%

6%

6%

6%

6%

Capgemini

TCS

Accenture

IBM

HP

Atos

CGI

CSC

Wipro

Fujitsu

Xerox

HCL

Aon Hewitt

TSystems

Cognizant

Carillion

Utilities Clients Focus on Solutions High BPO adoption focusing on industry-

specific solutions at a much higher rate than

the global average

► ITO services outsourced slightly below

the G2000 average

► Utilities maturing strategy around cloud

services increases demand for

integration with traditional IT

Infrastructure.

� Cloud services seen as a foundational

element for next-generation IT

infrastructures

� Cloud strategies needed in all

technology elements of a proposal

2013 Service Provider Penetration

in Momentum’s Utilities Vertical

n = 50 Companies


T-Systems

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� As ISG forecast, Broader Market ACV lagged Y/Y on lower contract counts

� Weakness across both the ITO and BPO markets, although ITO will likely

surpass 2013’s results but BPO continues to yield patchy results

� All regions are ahead of 2013’s pace

� Americas ACV was up Y/Y as large awards in Canada and Brazil supported

growth in the region

� EMEA 3Q slipped as its key geographic markets pulled back; YTD sourcing

activity continues to spread geographically in the continent, especially in

France and Southern Europe

� Asia Pacific slowed from record 1H14 as large awards were absent; YTD

Australia rebounded and Japan becomes noteworthy

� Expect a pickup in activity in 4Q14 as we have noticed a buildup of

transaction activity likely to be awarded in next few quarters

� Expect 2014 ACV to exceed 2013 by double digits, although tepid 3Q14

performance may suppress comparisons against more robust periods like

the years 2010-12

3Q14 ISG Outsourcing Index Summary and Outlook

summarymarket

outlookmarket

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Please contact us with your questions and comments.

Learn More

Paul ReynoldsChief Research Officer

+1 508 625 2194

[email protected]

ISG insights serving providers and market analysts

www.isg-one.comDr. David Howie

Partner

+44 7789 771 665

[email protected]

Denise Colgan

EMEA and AP Media Contact

+44 1737 371523

[email protected]

Bhakti Gajjar

Cohn & Wolfe for ISG

+44 (0) 20 7331 5363

[email protected]

Third Quarter 2014

APPENDIX: SCORE CARD FOR TCV

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The ISG Outsourcing Index has moved to ACV as the primary measure of the

Broader Market. In transition, we will continue to provide a high-level TCV view of

the market via a Scorecard analysis.

3Q14 TCV Scorecard

*Contracts with TCV ≥ €25M from the ISG Contracts Knowledgebase®

Scorecard 3Q14 3Q Y/Y 3Q Q/Q YTD YTD

TCV (€B)* Change Change TCV (€B)* Change

Global Market € 18.2 -9% -17% € 61.1 15%

New Scope € 12.6 1% -14% € 40.9 23%

Restructurings € 5.6 -26% -24% € 20.2 1%

Mega-deals € 3.9 20% -30% € 12.1 26%

ITO € 13.1 -12% -21% € 45.1 27%

BPO € 5.0 -2% -6% € 16.0 -11%

Americas € 8.3 66% 15% € 22.1 32%

EMEA € 8.7 -35% -24% € 30.9 -1%

Asia Pacific € 1.2 -26% -64% € 8.1 54%

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EMEA ISG Outsourcing Index Q3/2014

Leadership & Management

Transcript of EMEA ISG Outsourcing Index Q3/2014