HfS Webinar Slides - Digital Market Index · 2020. 7. 27. · Global BPO and IT Services Compound...

Proprietary│Page1©2017HfSResearch

WebinarDigitalMarketIndex- MarketSize,ForecastandKeyHappenings

JamieSnowdonChiefDataOfficer,[email protected]

PhilFershtChiefExecutiveOfficer&[email protected]

December2017

OllieO’[email protected]


Agenda• Theemergenceofdigital

• ThefinancialhealthoftheITServicesindustry

• Howandwhyprovidersareembracingdigital

• Isthedeclineinheadcountlevellingoff?

• Wrap-upandquestions


Today’sSpeakers

Ollie O’DonoghueSenior Research AnalystHfS [email protected]

Jamie SnowdonChief Data OfficerHfS [email protected]

Phil FershtCEO and Chief AnalystHfS [email protected]


HfS– TheEvolution

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Boston– November2018

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It’sallaboutdatanow…

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Driving out costs through process automation

Building relationships with external ecosystem and industry partners to drive innovation and growth

Micro targeting customers / hyper personalization and customization of products to customer requirements

Combating the threat of potentially disruptive digital competitors

Making more predictive decisions based on rapidly accessible real-time data across the organization

The shift toward digital/online/virtual experiences and away from physical/face-face engagements

Rank 1 Rank 2 Source: HfS Research, November, 2017Sample: Enterprise Buyers = 460

Whichofthefollowingbusinessdriverswillhaveamajorimpactonyourbusiness?Rank(ShowingTop2)

Source: HfS Research “Real Time Enterprise 2017” Sample: Enterprise Buyers = 460

Data explosion, digital disruption and increasing consumerism are the three main challenges that enterprise face in today’s business environment


Canyouestimatetheproportionofstructuredvunstructureddatainyourorganization?

Unstructureddataplaguesenterprises

0% 9%

40%

29%

20%

2%

0% / 100% 10% / 90% 25% / 75% 50% / 50% 75% / 25% 100% / 0%

Only22%oforganizationshavemore

thanhalftheirdatastructured

Source: HfS Research, November, 2017Sample: Enterprise Buyers = 460


Two-thirdsofenterprisesnowview“Digital”asdrivingnewrevenuestreamsandcustomerexperiences Whichofthefollowingstatementsmostcloselyresemblesyourcurrent

organizationalleadership’sviewonyour'DigitalTransformation'strategy?

1%

13%

20%

32%

35%

Wedon'thaveavisionfordigitaltransformation

“It’saboutCREATINGNEWREVENUESTREAMS”

“It’saboutALIGNING/HARMONIZINGBUSINESSOPERATIONStocustomerneeds”

“It’saboutCREATINGNEWCUSTOMEREXPERIENCES”

“It’saboutINVESTINGIN"NEWIT"

a) “It’s about INVESTING IN "NEW IT" (e.g., get technologies deployed like mobile platform, a cloud platform, infrastructure, etc.)

b) “It’s about CREATING NEW CUSTOMER EXPERIENCES” (e.g., having the coolest use of innovative new technologies like social, mobile, interactive, etc.)

c) “It’s about CREATING NEW REVENUE STREAMS” (e.g., commercial leverage of digital channels, such as mobile, interactive tech, social media, etc.)

d) “It’s about ALIGNING / HARMONIZING BUSINESS OPERATIONS to customer needs” (i.e., all organizational touchpoints, processes, systems and technologies are driven by the customer experience strategy, from front office to back office)

e) “We don’t have a digital vision”Source:HfSResearch,“JourneytotheOneOffice,November2017”

Sample:n=395EnterpriseBuyers


Digitaldisruptionisrampant:29%havealreadyseentheirtop2competitorschangeinjustpastthreeyears

Doyoubelievethatthey(yourcompetitors)willbethesamein2020?

Source:HfSResearch,“JourneytotheOneOffice 2017”Sample:n=395EnterpriseBuyers

Areyourtop2competitorsthesamenowasin2014?

No

29%

Yes71%

No

37%

Yes63%


Enterprisesseemoreopportunitiesthanthreats


Howmuchdamage(revenueloss,customerchurn,highercustomeracquisitioncosts,lowermargins)aredigitallynativecompetitorsinflictingonyourbusiness?

7% 15%

20%

35%

22%

8% 15%

31% 29%

16%

Existential damage Significant damage Some damage Limited damage No damage

In the next 2-3 years Now

DamageDeclines

Only22%fearnotabledamagetotheirbusinessinthenext2-3years

Majorityofenterprisesaredeerinheadlightswaitingtogetflattenedbydigitally-savvycompetitors

Source:HfSResearch,“JourneytotheOneOffice,November2017”Sample:n=395EnterpriseBuyers


Howsignificantlyisyourfirm’scultureholdingbackprogresswhenitcomestomakingrealinvestmentsindigitalbusinessmodels?

Organizationalcultureholdsbackhalfofenterprisesinachievingprogresswithdigitalbusinessmodels

15% 15%

21%

35%

14%

Promotesandfostersdigital

Doesnotholdback Neutral Somewhatsignificantly

Highlysignificantly


Recognition of organizational challenges helps to conquer the challenges. 51% of the highest performing enterprises see their cultures as holding them back in the digital transformation journey


Howwouldyoubestdescribeyourcurrentprimaryserviceproviderinrelationtoyourdigitaltransformationjourney?

“TraditionalOutsourcing”isacommodity.Partnershipsarethenewnormforservices



Jamie SnowdonJamie Snowdon has primary responsibility for overseeing the development of HfS’ Quarterly Market Index, in addition to managing and developing the firm’s data-centric products and services. He works across the HfS analyst teams to define evolving services markets and create market size estimates and forecasts. He also manages HfS’ quantitative survey and benchmark data.

Jamie has over seventeen years experience in the IT and Business Services industry. In that time he has worked in a variety of roles including sales, marketing, consulting and as an industry analyst. Jamie’s analyst career has largely been spent conducting data analysis including market size/forecast models, quantitative/qualitative survey analysis and competitive analysis.

Prior to HfS, Jamie worked for UK-based analyst firm Nelson-Hall as a Research Director, conducting vendor and market analysis within the IT and Business Services community. Prior to Nelson-Hall, Jamie spent seven years at IDC, where he was the European consulting director for IDC’s services group, managing all of their bespoke research. Jamie specialised in delivering custom market forecast models and forecasting tools tailored to his client’s individual needs. In addition, Jamie ran IDC’s European outsourcing research, covering both IT and business process outsourcing. Jamie has wide industry knowledge covering IT consulting, enterprise applications, IT & business process outsourcing, desktop & network services, equipment maintenance, and business continuity.

Earlier in his analyst career, Jamie spent four and a half years at the IT services research specialist INPUT in a mixture ofmarketing and analysis roles. He left as the UK operations manager having spent two years as a customer services industry analyst. Jamie completed his graduate training at one of the UK’s leading electronic and IT distribution companies.

Jamie’s passion is learning; he holds university degrees in general science (computing), law and has a post graduate diploma in legal practice. He lives in Twickenham, London, with his wife and two daughters. His other loves include cycling, reading trashysci-fi, cool technology, and the perfect pint.


Ollie O’DonoghueOllie O’Donoghue is Research Director, IT Services.

With over five years experience in the IT services industry – as both a practitioner and a research analyst –Ollie understands the impact IT services have in the modern business environment.

Before joining HfS, Ollie was the Head of Research and an Industry Analyst for an ITSM Practice committed to providing IT Service and Support Organisations with the resources to deliver greater business value. There he developed a comprehensive research portfolio for the industry. He has researched and presented on a multitude of topics including automation, innovative support models, and real-time analytics. In 2017, Ollie was named second on a list of IT and ITSM experts to watch.

Before becoming an analyst, Ollie worked as an IT service professional in a large public sector organization. It was here that Ollie’s passion for the industry developed.

He graduated from the University of Kent with a Bachelor’s in History. He is also a certified Service Desk Manager with higher mastery. Among his eclectic collection of professional certifications, he has four advanced diplomas in ornamental aquatic fish care. He claims these landed him his first IT job as a member of the interview panel was an avid fishkeeper.

In his spare time, Ollie reads up on History, Geography, and Economics and spends an unfortunate amount of time playing strategy games on his computer. Ollie is partial to wheat beer and, in the right circumstances, Irish whiskey.


IT Services is coming out of the financial wilderness

Prospects for IT Services providers are improving as the market recovers


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Q12010

Q22010

Q32010

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AverageWeightedaverage

AverageQuarterlyGrowthfor75oftheLeadingITandBusinessProcessServiceProviderstoQ32017

Source:HfSanalysisofindividualcompanyfinancials(adjustedforacquisitionsoverhalftherevenueoforiginalcompany)Thegraphshowstheaverageandweightedaveragerevenuegrowthofthesetrackedproviders,whichrepresent75ofthelargest IT andbusinessservicecompanies.


GlobalBPOandITServicesMarket2017

Source: HfS Research 2017 -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

F&ABPO

HRO

CustomerCareBPO

IndustrySpecificBPO

ApplicationDevelopment&Management

ProfessionalServices

OtherITServices

ITInfrastructureManagement

IT Services Markets:Declining Demand for Infrastructure Management Services Impacted Overall IT Services Market Growth Rates

BPO Markets: F&A BPO Continues to Grow at a faster rate

Growth Expected 2017


Global BPO and IT Services Compound Annual Growth, 2016-2021

Source: HfS Research 2017

IT Services Markets

BPO Markets

-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

F&ABPO

HRO

CustomerCareBPO

IndustrySpecificBPO

ApplicationDevelopment&Management

ProfessionalServices

OtherITServices

ITInfrastructureManagement


Q32017ProviderPerformanceOverview- ZoomOut


Q32017ProviderPerformanceOverview


Digital Investments fan the flames of IT’s recovery

Providers are spending their way out by shoring up digital offerings


KeyActivitiesfortheQuarter

n Significantdeals(July,August,September,October)⎼ BT: USGeneralServicesAdministration(15-Year,

$2,500M,InfrastructureOutsourcing)⎼ Accenture: Towergate(7-Year,$50M,Cloud);

Unilever(5-Year,$50M,Digital)⎼ Atos:UKMinistryofDefense(5-Year,$500M,

InfrastructureOutsourcing)⎼ Leidos :USDepartmentofVeteransAffairs (5-

Year,$6,800M,HRO);USDepartmentofHomelandSecurity(5-Year,$684M,Multi-ITO)

⎼ IBM:USArmy(3-Year,$135M,Cloud);UKDepartmentforEnvironment,Food&RuralAffairs(2-Year,$135M,Multi-ITO)

⎼ CGI:USDepartmentofState(5-Year,$900M,BPO)⎼ Indra:SubwayStations-Thessaloniki(5-Year,

$500M,Multi-ITO)

There were a number of significant events impacting theIT and business services market for the quarter

M&AandMajorcontractsn M&AActivity

⎻ DXC:Tribridge,Logicalis SMC⎻ SopraSteria:Galitt⎻ IBM:Cloudigo,Vivant⎻ Accenture:Altima,IBBConsulting,VERAX,WireStone,

ConcreteSolutions,PhaseOne,SearchTechnologies,BrandLearning,LabAnswer,Clearhead,Interpid,SolutionsIQ

⎻ CGI: SummaTechnologies,Affecto⎻ Capgemini:LyonsConsultingGroup⎻ Genpact:TandemSeven⎻ HPE: CloudTechnologyPartner⎻ Cognizant: Zone⎻ Deloitte:JKVine⎻ Teradata: StackIQ⎻ Atos:BreakawayGroup,PursuitHealthcareAdvisors,

HealthcareProviderConsulting⎻ Wipro:Cooper⎻ Tieto:Avega


Others include CGI, Conduent, EXL, HCL Tech, Infosys, Mindtree, NTT Data, Tech Mahindra, Syntel, TCS, Tieto, Unisys

MarketingADM

IndustryFocused

Horizontalor

Functional-Focused

Primary Drivers of Jan to Oct 2017 M&A Activities

Primary Drivers of Jan to Oct 2017 M&A Activities(based on # of acquisitions)

Jan to Oct 2017 M&A Activities by Suppliers(based on # of acquisitions)

4

1

1

2

2

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3

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26

Others

Xerox->Conduent

DXC(HP+CSC)

DXC.Technology

WNS

CGI

HPEnterprise

Wipro

Genpact

Cognizant

IBMGS

Atos

Capgemini

Accenture

M&AActivityYTD(toOctober2017)


Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

arvato: Ramyam Intelligence Lab (Ramyam)Accenture: AltitudeAccenture: Solid-serVisionAtos: ESMHP Enterprise : Cloud CruiserWipro: InfoServerWNS: Denali Sourcing ServicesXerox -> Conduent: Conduent

Accenture: SinnerSchrader AGAccenture: EndgameAccenture: InvestTechCapgemini: TcubeGenpact: FiservHP Enterprise : Niara, Inc.IBM GS: Agile 3

Accenture: Davies ConsultingAccenture: First AnnapolisAccenture: Focus GroupAccenture: OCTO TechAccenture: Seabury GroupCA Technologies: VeracodeCapgemini: IteliosCognizant: Brilliant ServiceGenpact: Rage FrameworksTechMahindra: CJS Solutions GroupWNS: HealthhelpZensar: Keystone Logic

Accenture: ArismoreAccenture: GenfourAccenture: iDefense Security Intelligence Services Accenture: KuntsmaanAccenture: SinnerSchraderCapgemini: CiberDXC (HP+ CSC): DXCHCL Tech: Urban Fulfillment ServicesInfosys: Skytree

Accenture: MediaHiveAccenture: Monkeys & MaudGenpact: BrightClaimHappiest Minds: Cupola TechnologyIBM GS: XCC

Accenture: LabAnswerAccenture: Phase OneAccenture: Solutions IQAtento: Interfile Cognizant: TMG HealthInfor: BirstWipro: Drivestream

Accenture: ClearheadAccenture: IntrepidDXC.Technology: TribridgeMastech Digital, Inc. : InfoTrellis IncTeradata: StackIQ

Accenture: Brand LearningAccenture: Search TechnologiesCapgemini: Lyons Consulting GroupCGI: Affecto PlcCGI: Summa Technologies, Inc.Sopra Steria: Galitt

Clearlink, a SYKES company: PortentGenpact: TandemSevenHP Enterprise : Cloud Technology Partners (CTP)IBM GS: CloudigoZalaris ASA: ROC

Accenture: AltimaAccenture: IBB ConsultingAdesso AG: MedgineeringADP: Global Cash CardAtos: Breakaway Group (A Conduent Company)Atos: Healthcare Provider Consulting (A ConduentCompany)Atos: Pursuit Healthcare AdvisorsBooz Allen Hamilton: MorphickCognizant: ZoneCSRA: Praxis EngineeringDeloitte: JKVineDXC.Technology: Logicalis SMCFirst Data Corporation: BluePay

M&AActivity2017YTD(ToOctober2017)

IBM GS: VivantSerco: BTP Systems LLC (‘BTP’)Tieto: AvegaWipro: Cooper


DigitalM&AActivity2017YTD(ToOctober2017)

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Accenture: AltitudeAccenture: Solid-serVisionArvato: Ramyam Intelligence LabHP Enterprise : Cloud CruiserAtos: ESM

Accenture: SinnerSchrader AGAccenture: EndgameAccenture: InvestTechHP Enterprise : Niara, Inc.IBM GS: Agile 3

Accenture: Davies ConsultingAccenture: First AnnapolisAccenture: Focus GroupAccenture: OCTO TechAccenture: Seabury GroupCapgemini: IteliosCognizant: Brilliant ServiceGenpact: Rage Frameworks

Accenture: ArismoreAccenture: GenfourAccenture: iDefense Security Intelligence Services Accenture: KuntsmaanAccenture: SinnerSchraderInfosys: Skytree

Accenture: MediaHiveAccenture: Monkeys & MaudGenpact: BrightClaimHappiest Minds: Cupola TechnologyIBM GS: XCC

Accenture: LabAnswerAccenture: Phase OneAccenture: Solutions IQInfor: BirstWipro: Drivestream

Accenture: ClearheadDXC.Technology: TribridgeMastech Digital, Inc.: InfoTrellis IncTeradata: StackIQ

Accenture: Brand LearningAccenture: Search TechnologiesCapgemini: Lyons Consulting GroupCGI: Affecto PlcCGI: Summa Technologies, Inc.Sopra Steria: Galitt

Clearlink, a SYKES company: PortentGenpact: TandemSevenHP Enterprise : Cloud Technology Partners (CTP)IBM GS: Cloudigo

Accenture: AltimaAccenture: IBB ConsultingAtos: Breakaway Group (A Conduent Company)Atos: Healthcare Provider Consulting (A ConduentCompany)

Atos: Pursuit Healthcare AdvisorsBooz Allen Hamilton: MorphickCognizant: NetcentricCognizant: ZoneDXC.Technology: Logicalis SMCIBM GS: VivantTieto: AvegaWipro: Cooper


Serviceproviders'contributiontothedigitaldeals.Also,somelatestdigitalrevenuehighlightsofkeyserviceproviders

11% 10%

8% 8%

4% 4% 4%

0%

5%

10%

IBM HCL Wipro TCS Accenture Atos Infosys

Serviceproviderscontributionsbypercentageinthelastoneyear

5,100

4,575 1,943 934 496 256

44% 50%

65%

20% 24% 9% 12%

30% 31%

0% 10% 20% 30% 40% 50% 60% 70%

-

2,000

4,000

6,000

8,000

IBM Accenture Atos TCS Wipro Infosys

DigitalRevenueQ32017($M) Revenue%ofDigital YoYDigitalGrowth%

Digitalrevenues(Q32017)ofsomekeyserviceproviders

*Atos digital revenues includes – Infra & Data Management, Bigdata & Cybersecurity and Worldline (Mobility)


Crashing headcount begins to slowNumbers are still dropping, but not as steeply as at the

start of the year


Howdoesperheadrevenuestackupagainstgrowthintheservicesindustry?


Headcount:WITCHVendorsvs.Pure-PlayBPOVendorsH

eadc

ount

-2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%

0

200000

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1000000

1200000

Q32016 Q42016 Q12017 Q22017 Q32017

WITCHVendorsEmployees

PurePlayBPOVendors(Conduent,EXL,WNS,Genpact)Employees

WITCHVendorsQoQGrowth%

PurePlayBPOVendors(Conduent,EXL,WNS,Genpact)QoQGrowth%


RevenuePerHead($K):WITCHVendorsvs.Pure-PlayBPOVendorsR

even

ue p

er h

ead

($K)

-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

0.02.04.06.08.010.012.014.016.0

Q32016 Q42016 Q12017 Q22017 Q32017

WITCHVendorsRevenue(USDK)peremployeeRevenueperhead$K

PurePlayBPOVendors(Conduent,EXL,WNS,Genpact)Revenue(USDK)peremployeeRevenueperhead$K

WITCHVendorsRevenue(USDK)peremployeeGrowth%

PurePlayBPOVendors(Conduent,EXL,WNS,Genpact)Revenue(USDK)peremployeeGrowth%


TotalImpactofAutomationandAIonIT/BPOServicesWorkersacrosstheGlobalServicesIndustry,2015- 2022

HighSkilled

MediumSkilled

LowSkilled01234

5

6

7

8

9

10

20152016

20172018

20192020

20212022

ServicesW

orkers(M

illions)HighSkilled MediumSkilled LowSkilled


Wrap-up and questions


Wrap-up

n TheITServicesmarketiscomingoutofthefinancialwildernessandwhilesomeareas– particularlyinfrastructuremanagement– arestillinsteepdeclineasas-a-servicetakeshold,overallrevenuesareboostedbypushesinapplicationservicesandconsulting.

n Digitalishelpingshoreupproviderperformance,contributingsignificantamountsofnewengagementstoprovideraccounts.Franticmergerandacquisitionactivitylikelytocontinueasprovidersshoreupdigitalofferingsandspendtheirwayoutofthered.

n Headcountreductionsareslowingdown,withmanyproviderssqueezingmorerevenueoutofheadcount- whilereductionshaveslowed,there’snothingtosuggestwe’reoutofthewoodsyetasmanyproviderslooktobeconsolidatingreadyforthenextassetsqueeze.

HfS Webinar Slides - Digital Market Index · 2020. 7. 27. · Global BPO and IT Services Compound...

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