2q17 emea isg index
TRANSCRIPT
ISG Confidential. © 2017 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
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EMEA Sourcing and As-a-Service Market Insights
Hosted by: John King, Bank of America, Merrill Lynch
17 July 2017
SECOND QUARTER AND FIRST HALF 2017
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 2EMEA 2Q17
Covering the state of the
combined traditional
sourcing and as-a-service
industry for the EMEA
commercial market.
Welcome to the 59th Quarterly EMEA ISG Index
Barry Matthews Partner, UK
Stanton JonesResearch Director and Principal Analyst
Friedrich LoeerPartner, DACH
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 3EMEA 2Q17
*Contracts with ACV ≥ €4M from the ISG Contracts Knowledgebase™
At a GlanceGlobal As-a-Service Approaching Parity
with Traditional Sourcing
As-as-Service now 41% of global market and growing
2Q17 combined ACV reaches €7.5 billion, up 9%, fueled by As-a-Service growth of 32%
Americas ACV edges up as strong growth in As-a-Service offsets
drop in traditional sourcing
EMEA and Asia Pacific both turn in double-digit ACV growth
‘‘Scorecard 2Q17 2Q Y/Y 1H17 1H Y/Y
ACV (€B)* Change ACV (€B)* Change
Global Commercial Combined Market € 7.5 9% € 15.8 10%
By Type Traditional Sourcing € 4.4 -3% € 9.3 -2%
As-a-Service € 3.1 32% € 6.5 36%
By Region Americas Commercial € 3.6 2% € 7.6 6%
EMEA Commercial € 2.8 13% € 6.3 13%
AP Commercial € 1.1 24% € 2.0 20%
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 4EMEA 2Q17
Global Commercial Sector Contracting Trends2Q17 Combined Market ACV up 9% Y/Y on strength in As-a-service; second-highest ever quarterly number of awards in Traditional Sourcing;
YTD, Combined Market ACV up 10% with As-a-Service increasing 36%, offsetting 2% decline in Traditional Sourcing.
Global Commercial Sector Quarterly ACV (€B)
Global Commercial Sector Half-Year ACV (€B) Global Commercial Sector Half-Year ACV by Type (€B)
€ 4.4 € 5.0
€ 4.3 € 4.6 € 4.5 € 5.1 € 5.9
€ 4.7 € 5.2 € 4.2
€ 5.5 € 4.7
€ 5.6 € 5.3
€ 3.1 € 3.4
€ 3.2 € 2.6 € 2.3 € 2.5
€ 2.3 € 2.2 € 1.7
€ 1.6 € 1.5
€ 1.5 € 1.4 € 1.4
€ 7.5 € 8.4
€ 7.5 € 7.2 € 6.8 € 7.6
€ 8.2 € 6.9 € 6.9
€ 5.8 € 7.0
€ 6.2 € 7.0 € 6.7
2Q171Q4Q3Q2Q161Q4Q3Q2Q151Q4Q3Q2Q141Q14
Traditional Sourcing As-a-Service
€ 9.4 € 8.9 € 9.6 € 10.5 € 9.4 € 10.1 € 10.9
€ 6.5 € 5.8 € 4.8 $5.5 € 3.2 € 3.1 € 2.8
€ 15.9 € 14.7 € 14.4 € 15.0 € 12.6 € 13.2 € 13.7
1H172H161H162H151H152H141H14
Tranditional Sourcing As-a-Service
€ 7.5
€ 1.9
€ 1.6
€ 4.9
€ 0
€ 2
€ 4
€ 6
€ 8
€ 10
ITO BPO SaaS IaaS
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 5EMEA 2Q17
EMEA Commercial Sector Contracting TrendsCombined Market in EMEA rises 13% Y/Y with As-a-Service increase of 40% Y/Y;
Traditional Sourcing’s 5% growth Y/Y is boosted by a surge in ITO activity.
EMEA Commercial Sector Quarterly ACV (€B)
EMEA Commercial Sector Half-Year ACV (€B) EMEA Commercial Sector Half-Year ACV by Type (€B)
Traditional Sourcing As-a-Service
€ 2.0 € 2.6
€ 2.1 € 2.4
€ 1.9 € 2.5
€ 3.2
€ 2.3 € 2.4 € 1.9
€ 2.7 € 2.2
€ 2.7 € 2.7 € 0.8 € 0.9
€ 0.9 € 0.6 € 0.6
€ 0.6 € 0.6
€ 0.6 € 0.4 € 0.4
€ 0.4 € 0.4
€ 0.4 € 0.4 € 2.8
€ 3.5 € 3.0 € 3.0
€ 2.5
€ 3.1 € 3.8
€ 2.9 € 2.8 € 2.3
€ 3.1 € 2.6
€ 3.1 € 3.1
2Q171Q4Q3Q2Q161Q4Q3Q2Q151Q4Q3Q2Q141Q14
Traditional Sourcing As-a-Service
€ 4.6 € 4.6 € 4.4 € 5.4
€ 4.4 € 4.9
€ 5.4 € 1.7 € 1.5 € 1.2
€ 1.1 € 0.9
€ 0.9 € 0.8
€ 6.3 € 6.1 € 5.6 € 6.5
€ 5.3 € 5.8 € 6.2
1H172H161H162H151H152H141H14
Traditional Sourcing As-a-Service
€ 3.5
€ 1.1 € 0.4
€ 1.3
€ 0
€ 1
€ 2
€ 3
€ 4
€ 5
ITO BPO SaaS IaaS
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 6EMEA 2Q17
EMEA Commercial Sector Industry Award TrendsYTD, most major sectors generate ACV growth in Traditional Sourcing and As-a-Service;
Manufacturing and Retail are the exceptions.
Traditional
Sourcing
TTM ACV (€B)
EMEA
Commercial
Industries
As-a-Service
TTM ACV (€B)
EMEA
Commercial
Industries
€ 1.47
€ 0.61
€ 0.77
€ 0.48
€ 0.61
€ 0.18
€ 0.11
€ 0.19 € 0.17
€ 0.0
€ 0.5
€ 1.0
€ 1.5
€ 2.0
Financial Services Manufacturing Energy Travel, Transport &Leisure
Telecom & Media Business Services Retail Consumer PackagedGoods
Healthcare &Pharma
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
€ 0.31€ 0.27
€ 0.10€ 0.17 € 0.18
€ 0.29
€ 0.15 € 0.13 € 0.15
€ 0.0
€ 0.1
€ 0.2
€ 0.3
€ 0.4
€ 0.5
€ 0.6
Financial Services Manufacturing Energy Travel, Transport &Leisure
Telecom & Media Business Services Retail Consumer PackagedGoods
Healthcare &Pharma
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 7EMEA 2Q17
EMEA Sub-Regions - Traditional Sourcing Only UK first-half ACV is the strongest in five years, and France ACV reaches a three-year high
DACH is down modestly while ACV in the Nordics plunges compared to the strong start to 2016
€ 1.01
€ 0.48€ 0.40
€ 0.23
€ 0.0
€ 0.2
€ 0.4
€ 0.6
€ 0.8
€ 1.0
€ 1.2
DACH Nordics France Southern Europe
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
€ 2.06
€ 0.0
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
U.K. & Ireland
EMEA Commercial Sector Sub Regions - Quarterly ACV (€B) – Traditional Sourcing Only
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 8EMEA 2Q17
Our Contracts Knowledgebase™is used to determine placements
based on the annual value of commercial contracts
awarded in the past 12 months.
Traditional Sourcing MarketAtento
DATAGROUP SEEPAM SystemsGrupo EULEN
Firstsource SolutionsHexaware
LuxoftMAYKORNNIT A/SSIA S.p.A.
VirtusaPolarisWebhelp
WNS
As-a-Service MarketInterxion
iomart Group
Traditional Sourcing MarketCapita
CarillionEmcor Group
EVRY A/SHCL
InterserveOrange Business Services
Sopra Steria Group SATech Mahindra
TietoWipro
As-a-Service MarketAdobe Systems
EquinixIron MountainSalesforce.com
Traditional Sourcing MarketAccenture
AtosBT
CapgeminiCognizant
DXC TechnologyIBM
InfosysTCS
T-Systems/Deutsche Telekom
As-a-Service MarketAmazon Web Services
GoogleMicrosoft
OracleSAP
The Building 15 The Breakthrough 15The Big 15Co. Revenues > $10 BSourcing Standouts
EMEACo. Revenues $1 -10 B Co. Revenues < $1 B
Providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings.
theISG15
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 9EMEA 2Q17
Americas Commercial Sector Contracting TrendsCommercial Market ACV is up 2% Y/Y; As-a-Service markets’ 27% increase is unable to offset the
13% Y/Y drop in Traditional Sourcing due to lack of large contract awards.
Americas Commercial Sector Quarterly ACV (€B)
Americas Commercial Sector Half-Year ACV (€B) Americas Commercial Sector Half-Year ACV by Type (€B)
€ 3.9 € 3.6 € 4.3 € 4.3 € 4.1 € 4.3 € 3.9
€ 3.7 € 3.3 € 2.8 € 2.6 € 1.9 € 1.8 € 1.7
€ 7.6 € 6.9 € 7.1 € 6.9
€ 6.0 € 6.1 € 5.6
1H172H161H162H151H152H141H14
Traditional Sourcing As-a-Service
€ 1.8 € 2.1
€ 1.8 € 1.8 € 2.1 € 2.2 € 2.3
€ 2.0 € 2.3
€ 1.8 € 2.2 € 2.1 € 2.1
€ 1.8
€ 1.8 € 1.9
€ 1.8 € 1.5 € 1.4 € 1.5 € 1.4
€ 1.3 € 1.0 € 0.9
€ 0.9 € 0.9 € 0.8 € 0.8
€ 3.6 € 4.0
€ 3.6 € 3.3 € 3.5 € 3.6 € 3.7
€ 3.2 € 3.3
€ 2.7 € 3.1 € 3.0 € 2.9
€ 2.6
2Q171Q4Q3Q2Q161Q4Q3Q2Q151Q4Q3Q2Q141Q14
Traditional Sourcing As-a-Service
€ 3.2
€ 0.7 € 1.1
€ 2.6
€ 0.5
€ 1.5
€ 2.5
€ 3.5
ITO BPO SaaS IaaS
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 10EMEA 2Q17
Americas Commercial Sector Industry Award TrendsTelecom, Healthcare and CPG mar good performance of Financial Services and smaller industries;
all industries in As-a-Service register double-digit growth.
Traditional Sourcing
TTM ACV (€B)
Americas Commercial Industries
As-a-ServiceTTM ACV (€B)
Americas Commercial Industries
€ 0.64€ 0.47
€ 0.33
€ 0.82
€ 0.41€ 0.28 € 0.27
€ 0.16 € 0.22
€ 0.0
€ 0.2
€ 0.4
€ 0.6
€ 0.8
€ 1.0
€ 1.2
€ 1.4
Financial Services Manufacturing Healthcare &Pharma
Business Services Telecom & Media Travel, Transport &Leisure
Retail Energy Consumer PackagedGoods
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
€ 1.02€ 0.92
€ 0.46 € 0.45
€ 0.15
€ 0.36€ 0.21 € 0.24
€ 0.12$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
Financial Services Manufacturing Healthcare &Pharma
Business Services Telecom & Media Travel, Transport &Leisure
Retail Energy Consumer PackagedGoods
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 11EMEA 2Q17
Asia Pacific Commercial Sector Contracting TrendsCombined Market ACV up 24% Y/Y; Traditional Sourcing ACV sees its
best quarter since 2014 and sets all-time high in contract count.
AP Commercial Sector Quarterly ACV (€B)
AP Commercial Sector Half-Year ACV (€B) AP Commercial Sector Half-Year ACV by Type (€B)
€ 0.9€ 0.8€ 0.9€ 0.9€ 0.9€ 1.0
€ 1.6 € 1.1€ 1.0€ 0.8€ 0.7€ 0.5€ 0.4
€ 0.4
€ 2.0€ 1.7€ 1.6€ 1.5€ 1.4€ 1.4
€ 2.0
1H172H161H162H151H152H141H14
Traditional Sourcing As-a-Service
€ 0.6
€ 0.3€ 0.3€ 0.4€ 0.5€ 0.4€ 0.4€ 0.4€ 0.5€ 0.4
€ 0.6€ 0.4
€ 0.8€ 0.8€ 0.5
€ 0.6€ 0.5€ 0.4€ 0.4€ 0.4€ 0.3€ 0.3€ 0.2€ 0.2
€ 0.2€ 0.2
€ 0.2€ 0.2
€ 1.1
€ 0.9€ 0.9€ 0.9€ 0.9€ 0.8€ 0.8€ 0.8€ 0.7€ 0.7
€ 0.8
€ 0.6
€ 1.0€ 1.0
2Q171Q4Q3Q2Q161Q4Q3Q2Q151Q4Q3Q2Q141Q14
Traditional Sourcing As-a-Service
€ 0.70
€ 0.15€ 0.17
€ 0.95
$0.0
$0.5
$1.0
$1.5
$2.0
ITO BPO SaaS IaaS
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 12EMEA 2Q17
Asia Pacific Commercial Sector Industry Award TrendsStrong ITO and IaaS drive growth in the larger verticals of Financial Services and Energy;
drop in Traditional Sourcing impacts Telecom and Manufacturing.
Traditional Sourcing
TTM ACV (€B)
Asia Pacific Commercial Industries
As-a-ServiceTTM ACV (€B)
Asia Pacific Commercial Industries
€ 0.17
€ 0.11
€ 0.18
€ 0.09
€ 0.15
€ 0.05 € 0.05€ 0.02
€ 0.00
€ 0.00
€ 0.05
€ 0.10
€ 0.15
€ 0.20
€ 0.25
€ 0.30
Manufacturing Telecom & Media Financial Services Travel, Transport &Leisure
Energy Business Services Consumer PackagedGoods
Retail Healthcare &Pharma
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
€ 0.16€ 0.11
€ 0.18
€ 0.09€ 0.05
€ 0.30
€ 0.07 € 0.08 € 0.08
€ 0.0
€ 0.1
€ 0.2
€ 0.3
€ 0.4
€ 0.5
€ 0.6
Manufacturing Telecom & Media Financial Services Travel, Transport &Leisure
Energy Business Services Consumer PackagedGoods
Retail Healthcare &Pharma
Range of 3 Prior 1Hs Avg of 3 Prior 1Hs 1H16 1H17
EMEA 2Q17
The Next Wave of Digitization and Automation
Stanton JonesResearch Director and Principal Analyst
2Q17 Index Inside Track from
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 14EMEA 2Q17
Automation Effect is Kicking In
Provider are Employing Big LeversDigitization Impacts Providers
▪ Revenue growth slowing▪ Average revenue per employee down▪ Net income percentage declining
AutomationStaff Needs toSkill-up
Buyers Demand Increased Productivity and Cost Avoidance
2X
1ISG surveyed 500+ global business and IT leaders
Double investments in Automation and AI over next 2 years on mission-critical business processes1
May reduce demand for outsourcing/offshoring
With an Automation Solution,Productivity Soars Over 2 Years2
2Click here for ISG Automation Index
TraditionalAutomation5-10%
24-80%
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 15EMEA 2Q17
Build or Partner?Services providers need automation capabilities.
Do they build it, find a partner or do both?
Business Process Automation Capability
▪ Replicate every human action
▪ RPA Technology Partnerships with vendors like Blue Prism, Automation Anywhere and UI Path
Move from operating model where people follow a tech supported process, to one where technology follows a process supported by people.
IT Ops Automation Capability
▪ Replicate service desk agents, DBAs and systems administrators.
▪ Autonomics Technology Partnerships with vendors like IPSoft, Arago, and Ayehu.
Cognitive Automation Capability
▪ Natural Language Processing vendors like Artificial Solutions and Celaton
▪ Cognitive agents like Nuance and Cognicor
▪ Image Recognition vendors like Abbyy and Anyline.
A wholistic automation competency is critical to the long-term success of every provider.
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 16EMEA 2Q17
2Q and 1H 2017 ISG Index - Global Summary and Outlook
● Y/Y, 2Q Commercial EMEA and Asia Pacific growth in double-digits, with marginal Americas growth
● YTD, IaaS grows by mid-double digits across all regions, while ITO had moderate gains in both EMEA and
Asia Pacific.
● Several industries are driving YTD growth including Financial Services and smaller verticals of
Transportation and CPG; Energy produces positive results after several soft years.
● Looking ahead, we continue to see double-digit growth in As-a-Service in the Americas and Asia Pacific. We expect Infrastructure-as-a-Service will continue to outpace Software-as-a-Service. We forecast growth of 24% and 12%, respectively, in those markets. Firms such as AWS and Microsoft will continue to invest in new economies. We expect Traditional Sourcing will remain flat through the end of the year.
● In EMEA, we forecast Infrastructure-as-a-Service and Software-as-a-Service to remain fairly flat. And we expect to see mid-single-digit growth in Traditional Outsourcing for the year, based on current deal flow in the market that should support a strong second half in Europe.
Summary
Outlook
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Learn More
Paul ReynoldsPartner, Chief Research Officer
ISG Momentum+1 508 625 2194
Barry Matthews Partner
+44 7881 954 [email protected]
Tara BenhamCohn & Wolfe for ISG+44 (0) 20 7331 5395
Denise Colgan EMEA and AP Media Contact
+44 1737 [email protected]
Bill McNeePartner
ISG Insights+1 203 820 8987
GLOBAL 4Q16
EMEA 2Q17
Appendix: Score Card for TCVSECOND QUARTER AND HALF YEAR 2017
ISG Confidential. © 2017 Information Services Group, Inc. All Rights Reserved 19EMEA 2Q17
2Q and 1H 2017 TCV ScorecardThe ISG Index has moved to ACV as the primary measure of the Broader Market.
We will continue to provide a high-level TCV view of the market via a Scorecard analysis.
*Contracts with TCV ≥ €20M from the ISG Contracts Knowledgebase™
Scorecard2Q17 2Q Y/Y 1H17 Y/Y
TCV (€B)* Change TCV (€B)* Change
Global Commercial Combined Market € 18.6 -10% € 41.0 1%
By Type Outsourcing € 13.8 -18% € 31.3 -3%
As-a-Service € 4.7 24% € 9.7 17%
ITO € 11.2 -14% € 23.7 6%
BPO € 2.7 -31% € 7.6 -24%
IaaS € 2.2 43% € 4.8 62%
SaaS € 2.5 10% € 4.9 -9%
By Region Americas Commercial € 7.6 -22% € 16.8 -6%
EMEA Commercial € 8.1 -7% € 19.7 11%
Asia Pacific Commercial € 2.9 31% € 4.5 -10%
ISG Confidential. © 2017 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.isg-one.com
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