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© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 1
Global IT-BPOoutsourcingdeals analysisAnnual analysis for 2016
KPMG.com
February 2017
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 2
About global IT-BPO outsourcing deals analysisKPMG’s Shared Services and Outsourcing Advisory (SSOA) practice publishes a quarterly analysis on
Information Technology and Business Process Outsourcing (IT-BPO) contracts signed across industries
and geographies, with a Total Contract Value (TCV) of USD5 million and above per deal.
Methodology and limitations of the study:
The analysis and findings presented in this report are based on select third party deals database
including, publicly available outsourcing data as identified throughout this presentation. It does not include
contract information gathered from KPMG member firms business engagements.
The count and value of the deals may vary notably in reality and is only indicative of market movements
and trends in the IT-BPO space. Readers are requested to use their discretion while assessing the global
IT-BPO market accordingly.
For more information on this market research, please get in touch with Kartik Ramakrishnan
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 3
ForewordAt the dawn of 2017, an analysis of the achievements and challenges of 2016 could help us plan a better
future.
The SSOA practice is pleased to bring to you the year-end 2016 edition of the KPMG Global IT-BPO
Outsourcing Deals Analysis.
The current edition looks at IT-BPO outsourcing contracts signed in the last three years, from 2014 to
2016, and identifies the major trends influencing the market, across geographies. This report also
includes the regular analysis feature for the latest quarter Q4-2016 (October – December).
In 2016, the number of deals signed globally in the IT-BPO space were 1077 with a total contract value
(TCV) of USD115 billion. Of the three years (2014 - 16) analyzed in this report, the year 2015 is the
strongest year for outsourcing. Both 2014 and 2016 had similar deal activity.
With a shift in focus on cost cutting to value addition, client and service providers are laying importance
on value-added services and innovation.
Hope you will find this market trends study on the IT-BPO deals useful. Happy reading!
Table of contentsSection 1: Global deals: An overview
Section 2: Deal analysis: 2016
Section 3: Deals by geography
Section 4: 4Q16 deal analysis
Section 5: IT-BPO outsourcing outlook
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 5
Section 1Global deals: An overview
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 6
A summaryIn 2016, 951 ITO contracts worth USD102.4 billion and 81 BPO contracts worth USD8.7 billion were
signed, worldwide
IT Bundled Services and SCM contributed approximately USD63.2 billion and USD3.6 billion respectively
and were the largest procured services globally within ITO and BPO services, respectively
Globally 45 IT-BPO bundled deals were signed in 2016 with aggregate contract value worth USD3.9 billion
In terms of value, approximately 64.7 percent of deals originated from the United States, followed by the
United Kingdom at 9.2 percent. Australia and France were two other key outsourcing markets
Government and Defense sectors were the top consumers of IT-BPO services contributing to 55 percent
and 13 percent in terms of value of outsourcing deals signed in 2016. Telecom sector was the next big
contributor in terms of deal value
Average annualized contract value in 2016 was USD21.3 million as compared to USD43.5 million in 2015
showing a decrease of 51 percent between the two years.
The average deal tenure increased to 4 years 7 months in 2016 from 4 years 1 month in 2015
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 7
SnapshotQuarterly deal movements
Quarterly movements of global IT-BPO deals*
• 2016 witnessed a drop in deal activity as compared to 2015. There was a decrease of 28 percent in total contract value but a 21 percent increase in total number of deals in 2016 as compared to 2015
• Deal activity in 4Q16 was almost similar to 3Q16, though there was a 15 percent decrease in number of deals
• The average contract value also increased by 27 percent in 4Q16 as compared to 3Q16
*The term deals is interchangeably used with contracts throughout the analysis unless otherwise specified. Deals analyzed are global sourcing contracts of size USD5 million and above only.
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
25.229.1
39.8
26.421.8
75.9
38.8
22.8
39.9 41.3
16.3 17.6
270
316
324
245
192
334
253
112
228
340
275234
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
Value (USD billion) No. of deals
Total deal value
USD120.4 billion
Number of deals
1,144
Total deal value
USD159.1 billion
32%
Number of deals
891
-22%
Deal value
4Q16
4Q15
23%
No. of deals
4Q15
4Q16
109%Total deal value
USD115.0 billion
Number of deals
107721%
-28%
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 8
Y-o-Y comparison Annualized Contract Value (ACV)
Annualized* contract value comparison 2014-16
• Total annualized contract value in 2016 decreased by 41 percent as compared to 2015. The average annualized contract value also decreased by 51 percent during the same period
• The average contract tenure increased by 6 months to 4 years 7 months in 2016 as compared to 2015
41%
decrease
26,796
38,723
22,936
- 10,000 20,000 30,000 40,000 50,000
2014
2015
2016
Total Annualized Contract Value (USD million)
45%
increase
Average annualized contract value (USD million)
Average tenure per contract
Note: All values in USD million unless otherwise specified
Minimum annualized
contract value
Maximum annualized
contract value
51% decrease
5,271.4
1,211.4
0.78
0.40
4 years 1 month
43.5
23.4
2015
2014
1,532.40.36
2016
21.3
4 years 7 months
4 years 4 months
* Annualized contract value = ( Total value of a contract / Tenure in months ) x 12
Contract value for contracts having tenure less than 1 year is considered as annualized value for the analysis. Graph is not
to scale and only represents the division across different parameters
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the
IDC contract database
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 9
SectorTotal Contract Value Total Number of Contracts Average Contract Value
2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016
Automotive & Aerospace
Banking & Financial Services
Defense
Energy & Utilities
Government
Insurance
Manufacturing
Pharma & Healthcare
Publishing, Media &
Entertainment
Retail
Telecom
Travel & Logistics
Others*
Y-o-Y comparisonDeals analysis by sector
Trends in deal movement from 2013 to 2016
• In 2016, Government and Publishing, Media and Entertainment sectors have shown an increase in total contract value of more than 25 percent as compared to 2015. Most other sectors have had a decrease of more than 25 percent in total contract value during the same period
• Defense, Automotive and Aerospace, Energy and Utilities, Publishing, Media and Entertainment and Telecom sectors have shown a decrease in total number of contracts in 2016. All other sectors have increased the number of contracts signed in the year as compared to 2015
*Others: Construction, Consumer and Recreational Services, Education, Professional services, Securities and investment services, Social services, Trade unions, Technology, WholesaleSource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
183% 86% -85% -39% 50% -14% 365% 24% -82%
25% -18% -39% -21% -45% 98% 58% 48% -69%
-53% 192% -82% -49% 17% -39% -8% 150% -70%
21% -46% -55% -24% -24% -18% 60% -29% -45%
-15% -58% 394% -11% -55% 103% -5% -8% 143%
-6% 173% -60% -19% 5% 9% 16% 161% -63%
42% 5% -27% 11% -33% 29% 27% 57% -43%
15% -8% -4% 35% -26% 45% -15% 24% -34%
-63% -52% 67% -35% -13% -23% -43% -44% 117%
-46% 197% -29% -15% 0% 46% -36% 197% -51%
28% -18% -26% 2% -23% -9% 26% 6% -18%
65% -4% -49% -14% -16% 2% 91% 15% -50%
10% 62% -45% -13% 10% 82% 27% 47% -70%
Decrease >=25% Decrease <25% Increase <25% Increase >=25%No change
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 10
Y-o-Y comparisonDeals analysis by category
• Both BPO deals and Bundled deals have experienced continuous decrease over the last two years in terms of both, numbers and total contact value
• Whilst ITO deals showed over 25 percent increase in total number of deals, their total contract value has decreased in 2016 over 2015, thus decreasing the average contract value over the period
• While total number of deals with a tenure of less than one year has decreased by more than 25 percent in 2016 over 2015, total number of deals with a tenure of more than one year has increased by more than 25 percent during the period
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
Decrease >=25% Decrease <25% Increase <25% Increase >=25%No change
Trends in deal movement from 2013 to 2016
Deal TypeTotal Contract Value Total Number of Contracts Average Contract Value
2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016
ITO
BPO
Bundled
Less than USD100 mn
Between USD100- 500 mn
More than USD500 mn
Less than 1 year
Between 1 to 5 years
More than 5 years
-22% 57% -25% -17% -19% 32% -6% 94% -43%
17% -37% -41% -23% -40% -29% 52% 4% -18%
-27% -19% -52% -57% -15% -20% 67% -4% -40%
-25% -20% 5% -25% -23% 27% 0% 4% -17%
-23% -4% -13% -11% -22% -2% -13% 22% -11%
-3% 103% -43% -20% -5% 39% 21% 113% -59%
-27% -13% -46% 15% -28% -48% -36% 21% 3%
-1% 6% -32% -24% -19% 26% 31% 31% -46%
-32% 71% -23% -27% -28% 34% -6% 137% -43%
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 11
Section 2Deals analysis: 2016
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 12
Deal valueIT-BPO deals* signed in 2016 (Total contract value: USD115 billion)
• ITO deals continue to dominate the outsourcing space with a contribution of 89 percent to the total deal value signed in 2016
• AMERICAS continue to be the major outsourcing region contributing 67 percent of the total deal value signed in 2016. EMA and ASPAC contribute 23 percent and 10 percent respectively
• Fixed price contracting model showed dominance, contributing over 67 percent of the deal value in 2016, followed by Hybrid model with contribution of 28 percent of total deal value
ITO102.4
BPO8.7
Bundled3.9
AMERICAS76.7
EMA26.8
ASPAC11.5
Less than USD 100 mn
20.7
Between USD 100- 500 mn, 42.3
More than USD 500 mn, 52.0
Less than 1 year1.1
Between 1 to 5 years, 48.9
More than 5 years, 65.0
Fixed price76.8
Hybrid32.1
Services Region Contract value Tenure Pricing
Time & Material,5.3
Total
contract
value
USD115
billion
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
#
* Deals analyzed are USD5 million and above only, throughout the analysis. Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
# Hybrid pricing includes a combination of various pricing mechanisms
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
Others, 0.5
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 13
Number of dealsIT-BPO deals* signed in 2016 (Total number of contracts: 1077)
• ITO deals and BPO deals contribute to 88 percent and 8 percent respectively in terms of number of deals signed in 2016
• Clients preferred mid tenure deals that cover the span of one to five years, which contributed to 75 percent of the total number of deals signed in 2016
• 77 percent of the deals, in terms of number of deals signed in 2016, were of value less than USD100 million. 5 percent of total number deals signed in the year were of value more than USD500 million
* Deals analyzed are USD5 million and above only, throughout the analysis. Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
# Hybrid pricing includes a combination of various pricing mechanisms
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
ITO951
BPO81
Bundled45
AMERICAS504
EMA456
ASPAC117
Less than USD 100 mn, 826
Between USD 100- 500 mn
198
More than USD 500 mn53
Less than 1 year44
Between 1 to 5 years, 806
More than 5 years, 227
Fixed price791
Hybrid137
125
Others, 24
Services Region Contract value Tenure Pricing
Total
contracts
1077
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
#
Time & Material
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 14
IT-BPO deals across sectors by value and numbers Sector analysis
Sector-wise break-up of deals in 2016
• The Government and Defense sector lead deal activity, contributing to 39 percent and 20 percent in terms of value of outsourcing deals signed in 4Q16
• Telecom sector is the next big contributor in terms of deal value, with a contribution of 12 percent to the total deal value of deals signed in 4Q16
2.6
0.7
0.1 0.4 0.9
0.1 0.2 0.1 0.2
1.1 0.7
6.9
26.0
1.0 0.2
0.8 1.0
1.3 0.8
0.5 0.1 0.5
4.9
1.4
2.1
26.9
1.0 0.6 0.2 0.5
1.1
0.2
1.4
0.1 0.2
3.9
0.6
2.8
3.5
1.4
0.4 0.1 0.2
1.0
0.3 0.1 0.2 0.4
2.1
1.1
3.5
6.9
Banking
and
Financial
Services
Insurance Automotive
and
Aerospace
Travel and
Logistics
Manufacturing Energy and
Utilities
Pharma and
Healthcare
Publishing,
Media and
Entertainment
Retail Telecom Others * Defense Government
Q1-2016 Q2-2016 Q3-2016 Q4-2016
48
18
67
4
1
10
67
2
7
3
13
10
6
8
15
9
18
7 9
2
11
27
7 7
14
24
3640
2
18
8
6
21
26
11 10
4
26
42
36
Deal valu
e (
US
D b
illio
n)
4
22
25
* Others: Construction, Consumer and Recreational Services, Education, Professional services, Securities and investment services, Social services, Trade unions, Technology,
Wholesale
Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
No. of contracts
TCV : USD115 billion
No. of contracts: 1077 116
70
49
59
4
54
82
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 15
Section 3Deals by geography
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 16
IT-BPO deals across geographies: Y-o-Y comparisonGeography analysis
Geography-wise break-up of deals*
• AMERICAS continue to be the major outsourcing region contributing 67 percent of the total deal value in 2016
• AMERICAS experienced a drop of 21 percent in total contract value as compared to 2015. The decrease in total contract value for EMA and ASPAC were 41 percent and 30 percent respectively during the same period
64.9
97.5
76.7
649
453
504
2014 2015 2016
8.0
16.5 11.5
97 122 117
2014 2015 2016
47.5 45.1
26.8
398
316
456
2014 2015 2016
* Deals originating from the geography
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
EMA
AMERICAS
ASPAC
Total contract value (USD billion) No. of contracts
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 17
AMERICAS
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 18
Geography analysis- IT-BPO deals in AMERICAS: Value and number of deals
Geography-wise break-up of deals*
• Total deal value of AMERICAS has decreased by
21 percent in 2016 as compared to 2015
• While quarters 1Q16 and 2Q16 were strong,
quarters 3Q16 and 4Q16 were weak, which
lowered the total deal value generated from the
region
• IT outsourcing made 92 percent of the total
contract value of 2016
• In terms of volume of deals signed, 2016
displayed similar quarterly movement as previous
years
• 2Q16 had the largest number of ITO deals
signed in the last three years
4.8
15.1 11.6
7.3 4.1
59.4
22.7
2.3
28.6 30.5
4.6 6.6 0.4
1.1
16.9
0.9 1.0
2.7
1.6
0.1
0.5 0.1
0.3 3.2
0.2
1.2
2.9
2.6 2.0
1.2
0.4
0.0
0.0 0.1
2.0 0.2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
ITO BPO Bundled
89
169
108 95
72
147
109
29
95
202
93
63
6
26
93
21
5
53
82
5 4 3
14
6
11
10 15 22
4 1 1 2
3 16
4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
ITO BPO Bundled* Deals originating from the geographySource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 19
Geography analysis- IT-BPO deals in AMERICAS
Sector-wise break-up of deals*
2.3
0.2 0.2 0.4
2.9
1.8
0.3 0.4 0.2
2.6
0.9
28.1 24.5
1.4
0.4 0.1 0.1
1.8 1.7
0.2 0.2 0.3
2.3
0.9
80.5
7.6
0.7 0.6 0.1 0.5
1.7
0.5
1.6
0.2 0.4 0.4
1.2
13.7
55.2
* Others: Consumer and recreational services, Construction, Education, Professional services, Securities and investment services, Technology, Wholesale
Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
Banking
and
Financial
Services
Insurance Automotive
and
Aerospace
Travel and
Logistics
Manufacturing Energy and
Utilities
Pharma
and
Healthcare
Publishing,
Media and
Entertainment
Retail Telecom Others* Defense Government
35
140
14
13
29
13
4
20
9
4
9
13
225222
29
62
16
37
16
8 6
17
36
29
14
7
4
9
22 18
6
9
11
15
24
259
55
201
No. of deals
All figures in USD billion
2014 2015 2016
• Government and Defense sectors of AMERICAS remain the strongest users of outsourcing in 2016 with total contribution of 90 percent to deal value
• Government, and Pharma and Healthcare sectors displayed multifold increase in the deal value in 2016 over 2015. Defense and Telecom sectors displayed significant decrease of over 80 percent in the deal value in 2016 over 2015
Deal valu
e (
US
D b
illio
n)
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 20
Geography analysis- IT-BPO deals country comparison: AMERICAS
Top five countries by TCV (USD million) in 2016
1. USA
2. Canada
3. Brazil5. Chile
4. Mexico
24
1
13
15
24
391
3
2
21
* Deals originating from the geography
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC
contract database
No. of deals
ITOBPO Bundled
4,022 2,266
68,097
--
1,467
16 -
289
-
45
175
--
149
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 21
EMA
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 22
Geography analysis- IT-BPO deals in EMA: Value and number of deals
Geography-wise break-up of deals*
• Total deal value of EMA has decreased by 41
percent in 2016 as compared to 2015
• After a strong 4Q15, TCV has been continuously
decreasing in EMA over each quarter of 2016
• ITO contributed 78 percent, BPO – 5 percent,
and Bundled – 16 percent of the total contract
value in 2016
• In EMA, though 2016 showcases lower TCV, it
had greater number of deals signed as compared
to 2015
• Also, though the quarters 3Q16 and 4Q16 had
the lowest total deal values, the number of deals
signed in the quarters were amongst the highest,
in the last three years
* Deals originating from the geography
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on
the IDC contract database
15.3
8.4
3.6
13.1
9.6
5.1 4.8
13.0
7.0 5.8
4.5 3.8
1.4
1.1
0.9
0.9
0.8
4.8 2.8
1.0
2.4
0.6
0.6 0.7
0.7
0.0
1.7
0.2
0.2 0.5
0.3
2.2
0.6
0.3
0.1 0.4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
ITO BPO Bundled
121
64
77 83
62
72 67
47
86
73
114111
10 15
4 6 4
18 14
8
16 16
10 11
1
2
12
3
12
3 6 3 9 5
23
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
ITO BPO Bundled
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 23
Geography analysis- IT-BPO deals in EMA
Sector-wise break-up of deals*
8.3
1.5
4.0
3.3 2.5
4.0
1.6
0.2 0.4
12.7
3.2
0.04
5.9
7.6
3.5
7.7
3.5 3.6
0.2
1.9
0.1 1.4
5.0 5.6
0.9
4.1 4.9
1.2 1.1 1.3 1.5 0.9 0.5 0.3 0.9
4.8
1.9
0.8
6.8
* Others: Consumer and recreational services, Construction, Education, Professional services, Securities and investment services, Technology, Wholesale
Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
Banking
and
Financial
Services
Insurance Automotive
and
Aerospace
Travel and
Logistics
Manufacturing Energy and
Utilities
Pharma
and
Healthcare
Publishing,
Media and
Entertainment
Retail Telecom Others* Defense Government
No. of deals
All figures in USD billion
2014 2015 2016
• Government, Telecom and Banking sectors continue to be the dominant consumers of IT-BPO services in the EMA region, with total contribution of 61 percent to the total deal value in 2016
• Automotive and Aerospace, and Banking sectors displayed a significant decrease of 86 percent and 36 percent in total deal value in 2016 over 2015
Deal valu
e (
US
D b
illio
n)
21
6
17
68
1312
22
29
13
46
15
38
16
10
26
3732
15
9 10
61
40
102
26
13
17
2426
8
11
4
14
4752
3
71
2
104
90
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 24
Geography analysis- IT-BPO deals country comparison: EMA
Top five countries by TCV (USD million) in 2016
* Deals originating from the geography
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC
contract database
1. United
Kingdom
3. Netherlands
2. France
5. Germany
4. Norway
No. of deals
ITOBPO Bundled
2,750
674
7,098
309
2,883
91
357
1,803
45 21
2,073
112
147
1,098
32
11143
3
52
1
1
21
11
10
24
1
3
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ASPAC
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Geography analysis- IT-BPO deals in ASPAC: Value and number of deals
Geography-wise break-up of deals*
• Total deal value of ASPAC has decreased by 30
percent in 2016 as compared to 2015
• The outsourcing market in ASPAC has shown a
positive trend by maintaining its contribution at
10 percent in 2016 after a strong 2015
• 97 percent of the deals signed by volume in the
ASPAC region in the year 2016 are ITO deals
• Both the BPO market and the bundled deals
market have been stagnant in terms of number of
deals signed in ASPAC
* Deals originating from the geography
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on
the IDC contract database
2.2 2.1 1.9 1.3
4.1
2.2
5.3
3.6
0.5
3.7 3.9
2.9
0.01 - 0.10
0.01
-
0.0
0.0
-
0.27
0.0 -
-0.08 - 0.22
0.07
0.02
0.0
0.8
0.42
-
- 0.2
-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
ITO BPO Bundled
23
29
12
19
14
35
46
21
14
36 36
28
1 -6
1 - 1 1-
1 1 - -2
-
2 2 1 1 1 1 -- 1
-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
ITO BPO Bundled
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 27
Geography analysis- IT-BPO deals in ASPAC
Sector-wise break-up of deals*
1,128
- 28
304 172 53
432
- 6
4,437
241
648 542 536
723
-196
480
1,245
57 - 171
8,820
458
2,693
1,098
326
48 43 176
1,116
19 50 - 37
6,831
724 770
1,359
* Others: Consumer and recreational services, Construction, Education, Professional services, Securities and investment services, Technology, Wholesale
Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
Banking
and
Financial
Services
Insurance Automotive
and
Aerospace
Travel and
Logistics
Manufacturing Energy and
Utilities
Pharma
and
Healthcare
Publishing,
Media and
Entertainment
Retail Telecom Others* Defense Government
No. of deals
All figures in USD million
2014 2015 2016
• Telecom was the top outsourcing sector in the ASPAC region for 2016, with contribution of 59 percent of the TCV. Government and Manufacturing sectors were other major outsourcing sectors contributing 12 percent and 10 percent of total deal value in 2016
• While the Manufacturing sector grew by 133 percent in terms of TCV in 2016, Energy and Utilities, and Defense sectors declined by 98 percent and 71 percent respectively
Deal valu
e (
US
D m
illio
n)
9
2
89
13
0
43
30
1612
16
0
2
8
4
2
4
0
1
30
89
13
6
3
0
9
4
12
3
0
3
36
9
10
27
20
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 28
Geography analysis- IT-BPO deals country comparison: ASPAC
Top five countries by TCV (USD million) in 2016
* Deals originating from the geography
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC
contract database
2. India
1. Australia
3. China
5. Indonesia
4. Japan
2
No. of deals
ITOBPO Bundled
292
169
3,609
- -
2,953
- -
2,367
- -
1,115
- -
259
9
26
5
10
43
2
1
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Section 44Q16 deal analysis
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Deal valueIT-BPO deals* signed in 4Q16 (Total contract value: USD17.6 billion)
• ITO deals continue to dominate the outsourcing space with a contribution of 75 percent to the total deal value signed in 4Q16
• AMERICAS continue to be the major outsourcing region contributing 56 percent of the total deal value signed in 4Q16. EMA and ASPAC contribute 28 percent and 16 percent respectively
• Mid tenure deals spanning across one to five years contributed to 52 percent of the total deal value, followed by long tenure deals of length more than five years, which contributed 45 percent to total deal value of deals signed in 4Q16
ITO13.2
BPO3.9
Bundled0.6
AMERICAS9.9
EMA4.9
ASPAC2.9
Less than USD 100 mn
4.5
Between USD 100- 500 mn, 4.6
More than USD 500 mn, 8.5
Less than 1 year0.5
Between 1 to 5 years, 9.2
More than 5 years, 7.9
Fixed price15.2
Hybrid1.9
0.6
Services Region Contract value Tenure Pricing
Time & Material
Total
contract
value
USD17.6
billion
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
#
* Deals analyzed are USD5 million and above only, throughout the analysis. Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
# Hybrid pricing includes a combination of various pricing mechanisms
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
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Number of dealsIT-BPO deals* signed in 4Q16 (Total number of contracts: 234)
• ITO deals and BPO deals contribute to 86 percent and 11 percent respectively in terms of number of deals signed in 4Q16
• 86 percent of the deals, in terms of number of deals signed in 4Q16, were of value less than USD100 million. Four percent of the deals signed in 4Q16, were of value more than USD500 million
• Fixed price contracting model showed dominance, contributing over 88 percent of the total number of deals signed in 4Q16. Hybrid model and Time and material model, each made 6 percent of total number of deals signed in 4Q16
* Deals analyzed are USD5 million and above only, throughout the analysis. Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off
# Hybrid pricing includes a combination of various pricing mechanisms
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
ITO202
BPO25
Bundled7
AMERICAS81
EMA125
ASPAC28
Less than USD 100 mn, 202
Between USD 100- 500 mn
22
More than USD500 mn10
Less than 1 year8
Between 1 to 5 years, 199
More than 5 years, 27
Fixed price205
Hybrid13
15
Others, 1
Services Region Contract value Tenure Pricing
Total
contracts
234
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
#
Time & Material
© 2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 32
Services segmentationAnalysis of ITO deals 4Q16
• ICT Services contributed to 31 percent of all ITO deals in terms of value and 20 percent in terms of number of deals signed during 4Q16. ADM contributed to 22 percent of all ITO deals in terms of value and 39 percent in terms of number of deals signed in the quarter
• SMAC and IT Bundled services are other key contributors to the ITO deals in 4Q16
Note: Size of bubble indicates percentage share of the total number of ITO dealsSI – System Integration, Other IT services – Software testing, IT Education and Training
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
Number of deals
Tota
l V
alu
e o
f contr
acts
(U
SD
bill
ion)
Value of contracts (USD billion)
Note: All values in USD billion. Scale of graph is just representative to illustrate the division across different parameters. Figures may not add up to 100 percent due to rounding off. Refer L.H.S.
figure for legend
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
2.9
0.0
4.2
2.1
0.040.9
0.1
1.3
1.5
0.2
13.2
ADM ERP Total
ITO
ICT IT
Bundled
IT
Infra.
IT
Products
SMACSIIT
Conslt.
Other IT
Services
ADM39%
ERP1%
ICT Services20%
IT Bundled services
11%
IT Consulting1%
IT Infrastructure4%
IT Products2%
Other IT Services, 1%
SI7%
SMAC12%
0
1
1
2
2
3
3
4
4
5
5
0 10 20 30 40 50 60 70 80 90
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Services segmentationAnalysis of BPO deals 4Q16
• SCM deals contributed to the most deal activity amongst BPO deals – 78 percent of all BPO deals in terms of value and 28 percent in terms of number of deals during 4Q16
• KPO and BPO Bundled services are other key contributors to BPO deals in 4Q16
Note: Size of bubble indicates percentage share of the total number of BPO deals
Other BPO services – Data management, etc.
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the
IDC contract database
BPO Bundled services
16%
Content Management
4%
CRM8%
F&A8%
HRO4%
KPO28%
Other BPO Services
4%
SCM28%
0
100
200
300
400
500
600
0 1 2 3 4 5 6 7 8
Tota
l V
alu
e o
f C
ontr
acts
(U
SD
mill
ion)
Number of deals
327 43 36 61 63
134187
2,999
3,851
BPO
Bundled
Services
CRM Total
BPO
Value of contracts (USD million)
SCM
Note: All values in USD million. Scale of graph is just representative to illustrate the division across
different parameters. Figures may not add up to 100 percent due to rounding off. Refer L.H.S. figure
for legend
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and
analysis based on the IDC contract database
KPO
3,500
Content
MngtF&A HRO
Other
BPO
Services
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Section 5IT-BPO outsourcingoutlook
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Global outsourcing industry Outlook• The continued development of process automation and technologies have presented further
opportunities for GBS. This has driven the rise in data and analytical services being embedded in GBS organizations
• Buyers seem cautious about models that include outcome-based pricing while hybrid and fixed pricing models are preferred, contributing to more than 95 percent of the deal value over the last three years. The same trend is most likely to continue in 2017
• Organizations are moving from a traditional silo-based and transactional outsourcing services, to more of a holistic end-to-end approach through bundled deals
• With increasing importance being placed on customer experience, clients are opting for outsourcing not just for cost reduction, but also to avail the value-added services provided by the service providers
• The finance function is more actively engaged in process automation than is the HR function and organizations overall are more active with basic process automation, following by enhanced process automation and cognitive automation
• A reduction in dominance of AMERICAS is observed in the global buyer market for outsourcing services although it continues to be the major outsourcing region contributing 67 percent of the total deal value in 2016. EMA is gaining momentum gradually with ASPAC fast catching up
• Telecom sector is continuously featuring amongst the top contributors to the outsourcing industry for the last three quarters. It is mostly leveraging ICT and SMAC services from service providers and is expected to continue so.
Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database
KPMG Global Insights Pulse, 3Q16, October 2016
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KPMG Shared Services and Outsourcing Advisory (SSOA) research
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Global IT-BPO Outsourcing Deals Analysis: http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/KPMG-Deal-Tracker/Pages/Default.aspx
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Glossary (1/2)
Terms Definition
ACV Annualized Contract Value = ( total value of a contract/tenure in months ) x 12
AMERICAS North America and South America
ASPAC Asia and Oceania
BPO Business Process Outsourcing
EMA Europe, Middle East and Africa
ITO Information Technology Outsourcing
TCV Total Contract Value
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Glossary (2/2)Terms Definition
ITO Services
ADM Application Development and Maintenance
ERP Enterprise Resource Planning implementation and support services
ICT ServicesInformation and Communication Technology services (e.g. contact center technology, telecommunication,
and related services)
IT Bundled Services Any combination of two or more IT services mentioned above
IT Consulting Information Technology Consulting services
IT InfrastructureIT hardware deployment (e.g. data center outsourcing, network management, hardware deploy and support,
hosting services, etc.)
IT Products Software products typically developed and branded by IT companies and sold as own Intellectual Property
Other IT ServicesTypically services that do not fall in other buckets (e.g. Software testing, IT helpdesk support services, Cyber
security)
SMAC Social, Mobile, Analytics and Cloud services (i.e. Social Media, Mobility, Analytics and Cloud computing)
System Integration IT system integration services (application or enterprise system integration services)
BPO Services
BPO Bundled Services Any combination of two or more BPO services mentioned above
Content Management Data management services (e.g. document management, print management, etc.)
CRM Customer Relationship Management solutions and services
F&A Finance and Accounting services
HRO Human Resource Outsourcing services
KPO Knowledge Process Outsourcing services
Other BPO Services Typically services that do not fall in other buckets (e.g. Industry specific processes, Facilities Management)
SCM Supply Chain Management services (including procurement, logistics, etc.)
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KPMG contacts
Stan Lepeak
Director – Global Research,
Management Consulting
KPMG in the US
+1 203 458 0677
Arun Nair
Partner – Advisory Services
KPMG in India
+91 80 3065 4913
Jehil Thakkar
Partner – Advisory Services
KPMG in India
+91 22 3090 1670
Viral Thakker
Partner – Advisory Services
KPMG in India
+91 22 3090 1730
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Thank you
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International. This document is meant for e-communications only.
Kartik Ramakrishnan KPMG in IndiaT: +91 80 3065 4440E: [email protected]
Analysts (KPMG in India): Esther JaydeviSwati Kumari
Analyst team contacts: