Fourth Quarter and Full-Year 2014 ISG Outsourcing Index

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Group, Inc. All Rights Reserved

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

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Hosted by:

S.K.Prasad Borra, Rishi Jhunjhunwala and James Schneider

Goldman Sachs

15 January 2015

The Global ISG Outsourcing Index

Fourth Quarter and Full-Year 2014

Market Data and Insights



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

Welcome to the 4th Quarter & Full-Year Outsourcing Index Review

Esteban Herrera Partner

John Keppel Partner & President

Dr. David Howie Partner




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At a Glance

2014 Y/Y 2014 Y/Y

ACV ($B)* Change Counts Change

$ 23.1 16% 1,218 4%

$ 14.0 16% 810 1%

$ 9.1 16% 408 9%

$ 6.2 53% 33 22%

$ 17.3 19% 880 3%

$ 5.8 8% 338 -7%

$ 8.2 22% 484 8%

$ 11.9 7% 588 -1%

$ 3.0 45% 146 11%

Scorecard 4Q14 4Q Y/Y 4Q Q/Q

ACV ($B)* Change Change

Global Market $ 5.8 27% 25%

New Scope $ 3.1 1% 5%

Restructurings $ 2.7 77% 58%

Mega-relationships $ 1.6 354% 46%

ITO $ 4.1 13% 19%

BPO $ 1.7 80% 41%

Americas $ 2.1 43% 8%

EMEA $ 3.1 19% 34%

Asia Pacific $ 0.6 21% 49%



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Broader Market 4Q14 ACV posts solid results, up 27% Y/Y with heightened activity in Restructurings. In 2014, ACV is up by double digits as we forecast on earlier calls.

4Q and Full-Year Broader Market ACV ($B)*

Global Market Size

Broader Market Contract Award Trends

$17.3 $15.3 $18.3 $16.5 $17.2 $14.6 $15.9 $12.1 $12.4 $13.5

$5.8 $4.6

$5.4 $7.2 $5.7 $7.3 $5.0

$6.2 $4.6 $5.6

$23.1 $19.9

$23.6 $23.7 $22.9 $21.9 $20.9 $18.3 $17.0

$19.1

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1Q to 3Q ACV 4Q ACV Full-Year ACV

$110

$84

6,262

3,062

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Commercial Sector Outsourcing Market Size ($B)Active Contracts

4Q and Full-Year Broader Market Contract Counts

900 875 896 953 812 757 672 533 523 521

318 300 287 325 265 306

222 181 204 180

1,218 1,175 1,183 1,278

1,077 1,063 894

714 727 701

201413121110090807062005

1Q to 3Q Counts 4Q Counts



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4Q14 ACV up 43% Y/Y with growth supported by increasing Restructuring activity. In 2014, ACV is up 22% with moderate gains in ITO and strong advances in BPO.

Americas 4Q and Full-Year Counts

Americas Contract Award Trends

363 336 387 385 367 313 282 224 239 230

121 112 113 137

86 119

94 82 81 74

484 448

500 522 453 432

376 306 320 304

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Americas 4Q and Full-Year ACV ($B)*

$6.1 $5.2 $7.0 $5.9

$7.9 $6.2 $4.8 $4.6

$6.3 $6.0

$2.1 $1.5

$1.9 $2.3

$1.1 $2.3

$1.9 $2.8 $1.8 $2.1

$8.2 $6.7

$8.9 $8.2 $9.0 $8.5

$6.7 $7.4 $8.1 $8.1

201413121110090807062005

1Q to 3Q ACV 4Q ACV

Americas Market Size Americas Full-Year Segment Details ACV ($B)*

$4.9

$3.3

$5.1

$3.1

$0

$1

$2

$3

$4

$5

$6

$7

New Scope Restructuring ITO BPO

Range of Prior 3 Years Avg of Prior 3 Years

2013 2014

$40 $44

2,558

1,453

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Commercial Sector Outsourcing Market Size ($B)

Active Contracts



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$2.1

$1.1 $1.0 $0.9 $0.6

$0.9 $0.9

$0.5 $0.2

$-

$0.5

$1.0

$1.5

$2.0

$2.5

FinancialServices

Manufacturing Telecom& Media

Healthcare& Pharma

ConsumerProducts & Goods

BusinessServices

Energy Retail TravelTransport

Leisure

Range of Prior 3 Years Avg of Prior 3 Years 2013 2014

For 2014, U.S. Market up 17% over a weaker 2013 with Canada and Brazil posting gains. Both Financial Services and Energy produce much stronger annual results.

Americas Sub-regions Full-Year ACV ($B)*

Americas Industry Full-Year ACV ($B)*

Americas Contract Award Trends Detail

$0.72

$0.42

$0.05 $0.09 $0.0

$0.2

$0.4

$0.6

$0.8

Canada Brazil Mexico Other LatAm


$6.95

$-

$2

$4

$6

$8

$10

U.S.



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Co. Revenues < $2 B Co. Revenues $2 -10 B

ISG Sourcing Market Standouts in the Americas Americas-based providers make up half of the Big 10 Sourcing Standouts. Providers with substantial offshore profiles lead in both the Building and Breakthrough tiers.

Placements based on ACV 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

Aon Hewitt

CB Richard Ellis CGI

Cognizant

CompuCom

Genpact

HCL

Infosys

Teleperformance

Wipro

Accenture

Atos BT

Capgemini

CSC

Dell

IBM

RR Donnelley

TCS

Xerox

APAC Customer Service

EXL GardaWorld

IGATE

KPIT

Minacs

Sitel

Sonda

Syntel

TeleTech

The Big 10

Sourcing Standouts

Co. Revenues > $10B

SOURCING STANDOUTS GROUPED BY COMPANY SIZE



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4Q14 ACV up 19% Y/Y with growth supported by large contract awards. In 2014, ACV up modestly at 7% with increasing activity in the IT Infrastructure space.

EMEA 4Q and Full-Year Counts

EMEA Contract Award Trends

430 433 385 443 335

346 315 237 217 240

158 162 137

159

138 142 91

77 96 85

588 595 522

602

473 488 406

314 313 325

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EMEA 4Q and Full-Year ACV ($B)*

$8.8 $8.6 $8.5 $9.0 $8.0 $6.5 $9.7

$5.9 $4.8 $6.7

$3.1 $2.6 $2.8 $4.3

$3.5 $4.1

$2.2

$2.5 $2.4 $2.8

$11.9 $11.2 $11.3 $13.3

$11.5 $10.6 $11.9

$8.4 $7.2 $9.5

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1Q to 3Q ACV 4Q ACV

EMEA Market Size EMEA Full-Year Segment Details ACV ($B)*

$7.1

$4.8

$9.6

$2.3

$0

$2

$4

$6

$8

$10

$12



2013 2014

$56

$32

2,900

1,286

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Active Contracts



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$2.8

$2.2 $2.1 $1.9

$1.2

$0.5 $0.5 $0.4 $0.3 $-

$1

$2

$3

$4

FinancialServices

Manufacturing Energy TravelTransport

Leisure

Telecom& Media

BusinessServices


Retail Healthcare& Pharma


France and U.K. geographies post gains against 2013 results while Energy and Manufacturing markets results are strong, both up 29% for the year.

EMEA Sub-regions Full-Year ACV ($B)*

EMEA Industry Full-Year ACV ($B)*

EMEA Contract Award Trends Detail

$4.2

$2.2 $1.6

$0.6

$1.6 $1.0

$0.4 $0.3 $0

$1

$2

$3

$4

$5

$6

U.K. & Ireland DACH Nordics Benelux France SouthernEurope

Africa & MiddleEast

E. Europe &Russia




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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.


Co. Revenues > $10B


Capita

Carillion

Cognizant

EVRY

HCL

Infosys

MITIE Orange Business Services

Tech Mahindra

Tieto

Accenture

Atos

BT

Capgemini

CSC

Fujitsu

HP IBM

TCS

T-Systems

Endava

HH Global

Innovation Group

Kelway

Kuehne & Nagel

MAYKOR

Mindtree NextiraOne

NNIT A/S

Xchanging

The Building 10

Sourcing Standouts

The Breakthrough 10

Sourcing Standouts

The Big 10

Sourcing Standouts



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ACV up 21% Y/Y as contracting counts soared, up nearly 50%. In 2014, ACV rises significantly, mostly on ITO activity.

Asia Pacific 4Q and Full-Year Counts

Asia Pacific Contract Award Trends

107 106 124 125 110 98

75 72 67 51

39 26 37 29 41

45

37 22 27

21

146 132

161 154 151 143

112 94 94

72

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Asia Pacific 4Q and Full-Year ACV ($B)*

$2.4 $1.5

$2.7

$1.6 $1.4 $2.0

$1.5 $1.6 $1.3 $0.8

$0.6

$0.5

$0.7

$0.6 $1.0

$0.8

$0.9 $0.9

$0.4 $0.8

$3.0

$2.0

$3.4

$2.2 $2.4 $2.8

$2.4 $2.5

$1.7 $1.6

201413121110090807062005

1Q to 3Q ACV 4Q ACV

Asia Pacific Market Size Asia Pacific Full-Year Segment Details ACV ($B)*

$1.9

$1.1

$2.7

$0.3 $0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5



2013 2014

$13.9

$7.8

804

323

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Active Contracts



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Annually, most geographies in Asia Pacific exceed 2013’s performance with strength in ANZ, India and Japan. Telecom and Manufacturing post major comebacks.

Asia Pacific Sub-regions Full-Year ACV ($B)*

Asia Pacific Industry Full-Year ACV ($B)*

Asia Pacific Contract Award Trends Detail

$0.93 $0.73 $0.66

$0.37 $0.25

$0.02 $0.0

$0.5

$1.0

$1.5

$2.0

ANZ India and South Asia Japan Greater China Southeast Asia South Korea


$0.66 $0.63 $0.73

$0.41

$0.18 $0.07 $0.08

$0.16 $0.05 $-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

FinancialServices

Telecom& Media

Manufacturing TravelTransport

Leisure

Energy BusinessServices

Healthcare& Pharma


Retail




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ISG Sourcing Market Standouts in Asia Pacific Several Japanese providers join the large multinationals in the Big 10 Sourcing Standouts list. Australian and India-based providers contribute greatly to the two smaller tiers.


Co. Revenues > $10B


Cognizant

HCL

Infosys

Orange Business Services

Singtel Optus

Tech Mahindra

Transfield Services United Group Services

Unisys

Wipro

Accenture

BT

CSC

Fujitsu

Hitachi

HP

IBM Ricoh

TCS

Telstra

ChinaSoft

Hollysys Automation

Itron

Kratos Defense & Security

NGA Human Resources

Pactera

Ramco Redknee Solutions

SITA

WNS

The Building 10

Sourcing Standouts

The Breakthrough 10

Sourcing Standouts

The Big 10

Sourcing Standouts



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Special Topic for Fourth Quarter and Full-Year 2014

CLOUD ADOPTION FORCES INFLECTION POINT IN MARKET

John Keppel Partner & President



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Indian-heritage+Niche Providers Hard charging

Growth Tower-based ITO

The Sourcing Industry Is at an Inflection Point

Expect Restructurings in Next 2 Years

Almost Half Infrastructure Related

Competitive Bids

Western-heritage Providers Traditional Leaders Tower-based ITO

Scale Cloud Providers Cloud Multisourcing; Workloads Go to Best Cloud Option

Providers must reinvent to succeed Shed outdated business models and adopt radically different strategies

IaaS Gets Real



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Get the focus right. … There is plenty of new space to play in.

Bought by smaller

competitors

Must Move Fast and Invest

CATCH THE DIGITIZATION WAVE Driven by the Internet of Things

Realign to Market Opportunities

Focus on

Applications &

Testing $

Government support

Consolidation

THE LEADER BOARD WILL CHANGE Bought out, bailed out or bow out



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4Q Broader Market ACV up on increases in activity and large awards

All regions saw significant 4Q Y/Y growth

ACV up double digits for the full year; both New and Restructured scope up

Mature sourcing markets provide significant growth in Asia Pacific, moderate gains in the Americas and a slight increase in EMEA

ITO ACV saw 19% growth for 2014;BPO gains uneven against very weak 2013

Manufacturing and Energy post impressive annual growth

Expect a healthy industry going forward

Comparisons for 1H15 will be challenging against 1H14 as 1Q and 2Q 2014 were $6B quarters – difficult to match

Sourcing industry sits at an inflection point with not only long-standing Western-heritage providers facing off against Indian-heritage providers, but now cloud-based providers join the fray

4Q and Full-Year ISG Outsourcing Index Summary and Outlook

summary market

outlook market



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Please contact us with your questions and comments.

Learn More

Paul Reynolds Chief Research Officer

+1 508 625 2194 [email protected]

ISG insights serving providers and market analysts

www.isg-one.com John Keppel

Partner and President +44 (0)7879 432 212

[email protected]

Will Thoretz Americas Media Contact

+1 203 517 3119 [email protected]

Denise Colgan EMEA and AP Media Contact

+44 1737 371523 [email protected]

http://www.isg-one.com/

http://www.isg-one.com/connect/



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Fourth Quarter and Full-Year 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.

Fourth Quarter and Full-Year TCV Scorecard

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

Scorecard 4Q14 4Q Y/Y 4Q Q/Q 2014 2014

TCV ($B)* Change Change TCV ($B)* Change

Global Market $ 27.5 37% 20% $ 104.6 20%

New Scope $ 13.7 -6% -12% $ 64.9 14%

Restructurings $ 13.8 151% 87% $ 39.7 30%

Mega-deals $ 9.3 243% 89% $ 24.3 66%

ITO $ 19.3 38% 16% $ 76.1 29%

BPO $ 8.2 34% 31% $ 28.5 0%

Americas $ 9.6 76% -6% $ 37.2 40%

EMEA $ 15.0 18% 39% $ 54.0 4%

Asia Pacific $ 2.9 45% 49% $ 13.4 48%



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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 850 employees and operates in 21 countries.

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www.isg-one.com

http://www.isg-one.com/

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Fourth Quarter and Full-Year 2014 ISG Outsourcing Index

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