The ISG 2013 EMEA SIC Market Update from John Keppel

1. ISG 2013 EMEA SIC Market Update
John Keppel, Partner & President, ISG, North Europe
22nd October 2013
#ISGSIC
© 2013 Information Services Group, Inc. All Rights Reserved.
Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means,
including information storage and retrieval devices or systems, without prior written permission from Information Services Group, Inc.

2. Market Snapshot
What does the rearview tell us?
© 2013 Information Services Group, Inc. All Rights Reserved

3. A turbulent period some winners and some losers…
1
Global Outsourcing Spend ($B)
Americas
EMEA
2
Asia Pacific
Post Recession: EMEA is Up
Americas
EMEA
Asia Pacific
$88
$10
$38
$100
$11
$102
$11
$104
$11
11%
11%
$42
$47
$50
$51
43%
50%
$40
$41
$43
$41
$41
46%
39%
2008
3
$93
$11
2009
2010
2011
2012
2008
2012
Indian Service Provider
Market Share Has Doubled
Global Outsourcing Spend
Today
4 Yrs Ago
18%
7%
2008
4
$
2012
$88 B
↑18%
$
$104 B
1 and 2 Quadrant Data excludes all government and telco to telco transactions
© 2013 Information Services Group, Inc. All Rights Reserved
3

4. Q3 2013 View
What does the world look like now?
© 2013 Information Services Group, Inc. All Rights Reserved

5. Broader Market Contract Award Trends
3Q Broader Market ACV of just under $6B was up 1% Y/Y and up 65% Q/Q
and resulted in the best third quarter ever.
Year-to-date Broader Market ($B)*
1H ACV
3Q ACV
$4.4
$5.6
$5.7
$3.9
$4.1
$7.6
$9.6
$9.6
$12.0
$9.8
$11.8
07
08
09
10
11
12
$3.7
$3.5
$2.6
$2.9
$8.4
$8.2
$8.5
2004
05
06
$5.8
$8.3
2013
Year-to-date Contracting Counts
1H Counts
96
297
2004
191
115
262
129
149
295
299
364
05
06
07
08
© 2013 Information Services Group, Inc. All Rights Reserved
3Q Counts
208
228
472
505
09
10
273
255
353
604
601
485
11
12
2013
5

6. Broader Market New Scope & Restructuring Trends
New scope ACV of $3.2B was off 19% Y/Y against a tough 3Q12 compare, but up
21% Q/Q. Restructuring ACV of $2.6B was the highest quarter to date.
New Scope Year-to-date ACV ($B)*
1H ACV
Restructuring Year-to-date ACV ($B)*
1H ACV
3Q ACV
$2.6
$3.9
$2.8 $3.1
$3.1
$2.3
$3.2
$2.0
$7.4
$8.7 $7.1 $8.0
$7.4
$7.0 $6.3 $5.0 $6.1
$5.1
$2.4 $2.5
2004
05
06
07
08
09
10
11
12
2013
$1.3
$1.0
$1.4
$1.9
2004
05
New Scope Year-to-date Counts
1H Counts
75
91
249 211
2004
05
109
128
154
232
245
291
06
07
08
$0.6
$3.5
06
365
171
392
© 2013 Information Services Group, Inc. All Rights Reserved
10
$2.6
$2.6
$3.8
$3.2
11
12
2013
$1.0
$1.0
$1.8
$2.5
$1.5
$2.2
$2.2
$3.4
07
08
09
10
1H Counts
3Q Counts
205 198 238
453
454
352
21
48
09
$1.8
$0.7
Restructuring Year-to-date Counts
3Q Counts
172
3Q ACV
11
12
2013
24
51
20
63
2004
05
06
36
57
68
57
115
21
54
37
73
107
113
151 147 133
07
08
09
10
11
12
2013
6

7. Broader Market Contract Trends by Deal Size
Ten Mega-relationships were awarded in 3Q13, yet the market is being
driven increasingly by smaller contract awards.
Boarder Market Quarterly
ACV(B)* by Bands
$5-39M
$2.7 $3.1
$3.6
$40-99M
$1.7
$2.3
3Q11 4Q
$2.2
$0.8
1Q
$100M +
$2.5 $2.8 $2.9 $2.8
$1.3 $1.1 $1.4 $1.3 $1.2 $1.4
$1.7
Broader Market Quarterly
Counts by Bands
$5-39M
$3.3
246
270
$40-99M
$100M +
323
296
241
226
242
256
187
$1.9
$0.7 $0.9 $1.1
21
18
23
23
20
23
13
16
20
$1.0 $1.4 $0.7 $1.4
6
12
6
12
9
7
8
5
10
2Q 3Q12 4Q
© 2013 Information Services Group, Inc. All Rights Reserved
1Q
2Q 3Q13
3Q11 4Q
1Q
2Q 3Q12 4Q
1Q
2Q 3Q13
7

8. ITO Contract Award Trends
3Q ITO ACV of almost $4.4B was up 15% Y/Y and 100% Q/Q. ITO ACV
performance was the best third quarter ever.
ITO Year-to-date ACV ($B)*
1H ACV
3Q ACV
$1.6
$6.3
$1.9
$5.7
$2.6
$4.8
$2.4
$6.0
$3.0
$6.5
$6.8
2004
05
06
07
08
09
$2.8
ITO Year-to-date Counts
1H Counts
119
70
72
95
184 165
173
194
230
06
07
08
62
2004
05
131
320
316
09
10
© 2013 Information Services Group, Inc. All Rights Reserved
$3.9
$7.3
11
10
$3.8
$6.3
$9.2
12
YTD 3Q12
166 164 247
377 374
11
$4.4
$5.3
2013
ITO YTD Industry ACV ($B)*
3Q Counts
136
$3.2
12
298
2013
Manufacturing
Financial Services
Telecom & Media
Energy
Travel, Transport, Leisure
Healthcare & Pharma
Business Services
Retail
YTD 3Q13
$0.69
$0.67
$0.64
$0.36
$2.04
$2.58
$1.31
$1.38
8

9. BPO Contract Award Trends
3Q BPO ACV of just under $1.4B was down 29% Y/Y but up 5% Q/Q. YTD
performance slowed as BPO dropped 31% from a year ago.
BPO Year-to-date ACV ($B)*
1H ACV
$0.9
$3.6
$1.1
$2.2
06
$1.3
08
07
$1.1
$2.8
09
10
BPO YTD Counts
1H Counts
34
45
113 97
2004
05
57
54
72
122
105
134
06
07
08
72
152
189
09
10
© 2013 Information Services Group, Inc. All Rights Reserved
$3.5
$2.9
11
$1.9
$4.5
$1.4
12
2013
$3.1
BPO YTD Industry ACV ($B)*
YTD 3Q12
3Q Counts
97
$1.7
$1.2
$3.1
$1.0
$2.0
05
2004
$1.0
$2.2
3Q ACV
107
91 106
227 227
11
12
187
2013
Financial Services
Manufacturing
Telecom & Media
Energy
Travel, Transport, Leisure
Business Services
Healthcare & Pharma
Retail
YTD 3Q13
$1.18
$0.68
$1.08
$0.45
$0.37
$0.17
$0.33
$0.17
9

10. Top Service Providers Across the Globe
85% of the Top 20 ITO Provider list is unchanged from previous years. The Top 20 BPO group
has more turnover, yet 40% of Top BPO providers do repeat year-to-year.
ITO 2013 YTD
BPO 2013 YTD
► Accenture
► Infosys
► Accenture
► Fidelity
► AT&T
► Mahindra
Satyam
► Aditya Birla
Minacs
► HCL
► Nihon Unisys
► Allscripts
► Polaris Software
Labs
► Aon Hewitt
► StarTek
► Singtel Optus
► Capgemini
► Atos
► BT
► Capgemini
► CGI
► CSC
► Dell
► HCL
► HP
► IBM
► TCS
► T-Systems
► Wipro
► Xerox
► Atos
► Capita Group
► CGI
► Communisis
► CSG
► Infosys
► TCS
► Virtusa
► Wipro
► WNS
► Xchanging
► Xerox
Note: Service providers in alphabetical order; no rankings implied.
Placements based on ACV from commercial contract awards sourced from ISG Contracts Knowledgebase ®.
© 2013 Information Services Group, Inc. All Rights Reserved
10

11. EMEA Contract Award Trends
EMEA 3Q ACV of $3.5B was up 16% Y/Y and 88% Q/Q. The strongest 3Q ACV ever
was driven by nine Mega-relationships and very high contracting activity.
EMEA Year-to-date ACV ($B)*
1H ACV
3Q ACV
$2.0
$1.3
$2.1
$1.3
$1.5
$2.9
$4.1
$2.9
$3.3
2004
05
06
$5.9
07
08
44 45
128 115
2004
05
94
66
63
113
125
171
06
07
08
09
201
102
204
$3.1
$3.5
$5.6
$5.0
$5.1
$4.3
10
11
12
2013
Segment Details Like-Quarter ACV ($B)*
Prior 5 Like-Qtr Range
3Q12
3Q Counts
94
$3.2
$1.6
$4.1
YTD Counts
1H Counts
$2.0
124
111
176
$4
272
252 245
$2
Avg of 5 Prior Like-Qtrs
3Q13
$2.9
$1.8
$1.7
$0.6
$0
09
© 2013 Information Services Group, Inc. All Rights Reserved
10
11
12
2013
New Scope Restructuring
ITO
BPO
11

12. EMEA Contract Award Trends Detail
DACH, France and Southern Europe had strong quarters, up Y/Y and Q/Q. YTD,
Transportation was up 88%, while weakness persisted in FS and Manufacturing.
EMEA Sub-regions 5 Prior Like-Quarter ACV ($B)*
Prior 5 Like-Qtr Range
Avg of 5 Prior Like-Qtrs
3Q12
3Q13
EMEA Industries YTD ACV ($B)*
YTD 3Q12
YTD 3Q13
Financial Services
$1.6
$1.4
Manufacturing
$1.2
$2.3
Travel, Transport,
Leisure
$1.02
$1.0
$0.8
$0.6
$0.55
$0.38
$0.21
$0.2
$0.21
$0.31
$0.04
Nordics
DACH
Africa &
Middle
East
© 2013 Information Services Group, Inc. All Rights Reserved
France
Benelux Southern E. Europe
Europe & Russia
$1.2
Telecom & Media
Business Services
$0.0
U.K. &
Ireland
$1.2
Energy
$0.84
$0.4
$1.6
Healthcare & Pharma
Retail
$0.6
$0.5
$0.2
$0.2
12

13. The Next Generation of Sourcing
What Happens Next?
© 2013 Information Services Group, Inc. All Rights Reserved

14. This time last year we introduced the 4th Generation concept
Hang on a minute it is only 2013! What happened to 10 year cycles of
change?
1990
2000
2010
?
Dynamic
Pluralistic
Bipartisan
Monolithic
But we didn’t see
huge evidence in
2012 deal data to
really frighten us?
© 2013 Information Services Group, Inc. All Rights Reserved
14

15. Things sure got real in Q3 2013
Are we seeing the Generation 4 impact revealed in the numbers?
BEST 3Q PERFORMANCE EVER
FOR BOTH ACV AND NUMBER
STRONGEST 3Q ITO
PERFORMANCE EVER
OF CONTRACTS AWARDED
Boarder Market Quarterly
ACV(B)* by Bands
$5-39M
$40-99M
$5-39M
246
$1.9
OVER PREVIOUS HIGH WATER
MARK BUT VALUES HOLDING
Broader Market Quarterly
Counts by Bands
$100M +
$3.6
$2.7 $3.1
$2.5 $2.8 $2.9 $2.8
NEW SCOPE COUNTS UP 20%
EMEA HAS STRONGEST
3Q PERFORMANCE EVER
270
$40-99M
$100M +
323
296
241
$3.3
226
242
256
187
$1.3 $1.1 $1.4 $1.3 $1.2 $1.4 $0.7 $0.9 $1.1
21
18
23
23
20
23
13
16
20
$1.7 $2.3
6
12
6
12
9
7
8
5
10
3Q11 4Q
$0.8
1Q
$2.2 $1.7
$1.0 $1.4 $0.7 $1.4
2Q 3Q12 4Q
© 2013 Information Services Group, Inc. All Rights Reserved
1Q
2Q 3Q13
3Q11 4Q
1Q
2Q 3Q12 4Q
1Q
2Q 3Q13
15

16. The Crowded space becomes the Clouded Space!
We were just getting used to Multisourcing!
G-2000 Companies Who Source by Sourcing Strategy
2010
64.1%
2005
2000
47.5%
32.6%
18.4%
27.5%
41.9%
17.5%
25.0%
25.6%
True Multi-Source
Environment
Multi-Source where one
Service Provider wins
80% of spend
Single Source
+
© 2013 Information Services Group, Inc. All Rights Reserved
16

17. ISG’s Prediction: The Future of Sourcing
Confederation brings new players, more automation, provides room for
XaaS solutions and requires Service Integration.
Market 5 - 10 Years Ago
Last 3 Years
Strategic & Selective Sourcing
All Towers
Next 3 to 5 Years
Multi-Sourcing
Confederation
Service Integration
Tower
Function
OR

Infrastructure

ADM

Function
Tower
BPO Function(s)
Function
Function
Tower
Function
Tower
Function
Functional
Out-Tasking
EMC
SFDC
Akamai Google
VMWare Amazon
Hitachi
IBM
iPSoft Workday
Oracle
etc.
Internal Shared Services/Captives
Importance
of Labor Arbitrage
© 2013 Information Services Group, Inc. All Rights Reserved
Importance
of Software, Platforms,
Labor Automation, & Scalability
17

18. Disruptive Technologies Driving Change…..
….and shaping the CIO Agenda and CxO’s management & business
influence.
Social Media
Collaboration
Mobility
BYOD
Analytics & Big Data
Cloud
Computing & Storage
© 2013 Information Services Group, Inc. All Rights Reserved
Continued cost pressure and the
increasing importance of e-commerce
are significant influences that ISG
observes on current client sourcing
activity.
Recent buying patterns demonstrate
cost objectives are still primary, but
the focus is shifting fast in 2013
toward more business oriented
sourcing objectives with innovation
and new capabilities at the core.
The wave of necessary ERP upgrades
will change the market and facilitate
opportunities for outsourcing service
providers.
18

19. Key Long-Term Shifts in Buyer Behaviour (linked)
We shared ISG’s perspective on 1 & 2 in 2012, the interest in vertical BPO is a symptom,
these three represent a perfect storm for providers unwilling or unable to change.
1
Shift in Enterprise Decision
Maker’s Solution Requirements
IT Buyers
3
Business Need
2
Shift in Pricing Requirement to
Consumption or Outcome
Pricing Bands
Utility Pricing
Shift in BPO Enterprise Purpose
Spurring Activity
Traditional Back-office
Industry Specific
$
© 2013 Information Services Group, Inc. All Rights Reserved
19

20. These changes have implications for us all…
As our clients needs shift to take advantage of their new realities our services must also
adapt to maintain our position and relevance. For us the need was perhaps more urgent we
began our change 3 years ago.
►
►
►
►
►
►
►
►
►
© 2013 Information Services Group, Inc. All Rights Reserved
Is a market navigator for clients
Is an advisor on change enablement
Is a market research provider
Is a managed services provider in post contract
support
Has emerging technology analysts
Has a Cloud business unit
Initiates solution led procurements
Is redefining the sourcing of the future (5G)
Is partnering with key industry participants
20

21. Competition
What are the others experiencing?
© 2013 Information Services Group, Inc. All Rights Reserved

22. A Tale of Two Groups
It was good while it lasted but the world is changing fast on everyone…
Market Share Shifts 2009 - 2012
CAGR Disparity 2005 - 2012
India-heritage Providers
India-heritage
2005
ACV Awards
13%
7%
ACV
Western-heritage Providers
© 2013 Information Services Group, Inc. All Rights Reserved
12%
32%
9%
Awards
7%
2009
2012
16%
0.4%
Western-heritage
22

23. Key Long-Term Shifts in Buyer Behaviour (linked)
1
Continue Winning in the Mature
UK and US Restructuring Markets
2
India-heritage Restructuring ACV Market Share
20%
4%
2005
3
2009
$
India-heritage BPO ACV Market Share
36%
16%
$
2012 Investment
Make New Inroads into the
Global Public Sector Markets
$$$
Capitalize on BPO Growth via
Investment in Vertical Solutions
2005
4
$
2009
Increase European Market Share
via Enhanced Offshore Value Prop
India-heritage European ACV Market Share
7%
2005-08
© 2013 Information Services Group, Inc. All Rights Reserved
2012 Investment
13%
2009-12
23

24. Staying Ahead: What got you here will not get you there.
Larger providers grapple with higher overhead costs and change resistance. India-heritage
providers need new growth engines and face new economic realities. Smaller players may
make some gains, expect more consolidation.
Capturing the Expected Growth in the Mid-Market
► India-heritage Providers have proven offshoring credentials.
► Western providers have started to create dedicated mid-market organizations
Lower Cost of Switching Puts Everybody on Notice
► Equal threat to all providers, no matter their heritage.
► Incumbency advantage disappearing as transitions become less painful.
ITO Challenge
► Get familiar with the new buyers of emerging technologies, who sit outside the
CIO’s organization.
BPO Challenge
$
► Pay for outcomes, rather than for bodies/volumes is becoming the norm.
► Industry or process oriented solutions built on scalable and flexible (cloud)
infrastructure are generating interest.
© 2013 Information Services Group, Inc. All Rights Reserved
24

25. Q&A
© 2013 Information Services Group, Inc. All Rights Reserved

26. #ISGSIC
www.isg-one.com
knowledge powering results®
Information Services Group is a leading technology insights, market intelligence and advisory services company, serving more than 450 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 800 employees and operates in 21 countries.