4q14 emea isg outsourcing index

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Group, Inc. All Rights Reserved

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*Contracts with ACV ≥ €4M from the ISG Contracts Knowledgebase®

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Hosted by: James Goodman Barclays Capital

19 January 2015

The EMEA 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 EMEA commercial contracts.*

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

Bernd Schaefer Partner

John Keppel Partner & President

Dr. David Howie Partner




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At a Glance

4Q GLOBAL MARKET ACV IS UP 27% Y/Y, SUPPORTED BY A SIGNIFICANT INCREASE IN MEGA-RELATIONSHIP AWARDS

ALL REGIONS EXPERIENCE SIGNIFICANT 4Q DOUBLE-DIGIT GROWTH

AS WE FORECAST, 2014 ACV IS UP 16% WITH STRONG ITO GROWTH AND UNEVEN RESULTS IN BPO

EMEA IS UP 7% IN 2014 WITH DACH, UK AND FRANCE CONTRIBUTING TO GROWTH

AMERICAS HAS SOLID GAINS, UP 22% WITH STRENGTH IN FINANCIAL SERVICES AND BOTH ITO AND BPO

ASIA PACIFIC IS UP 45% OVER 2013 ON STRENGTH OF THE LARGEST MARKETS, ALTHOUGH ACV DID TAIL OFF IN THE SECOND HALF

Scorecard 4Q14 4Q Y/Y 4Q Q/Q ACV (€B)* Change Change

Global Market € 4.7 27% 25% New Scope € 2.5 1% 5% Restructurings € 2.2 77% 58% Mega-relationships € 1.3 354% 46% ITO € 3.3 13% 19% BPO € 1.4 80% 41% Americas € 1.7 43% 8% EMEA € 2.5 19% 34% Asia Pacific € 0.5 21% 49%

2014 Y/Y 2014 Y/Y ACV (€B)* Change Counts Change

€ 18.5 16% 1,218 4% € 11.2 16% 810 1% € 7.3 16% 408 9% € 4.9 53% 33 22% € 13.8 19% 880 3% € 4.7 8% 338 -7% € 6.6 22% 484 8% € 9.5 7% 588 -1% € 2.4 45% 146 11%



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Global 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

Global Market Contract Award Trends

€88

€67

6,262

3,062

201413121110090807062005

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

€ 13.8 € 12.3 € 14.6 € 13.2 € 13.8 € 11.7 € 12.7 € 9.6 € 9.9 € 10.8

€ 4.7 € 3.7

€ 4.3 € 5.7 € 4.5 € 5.8 € 4.0 € 5.0 € 3.7 € 4.5

€ 18.5 € 15.9

€ 18.9 € 18.9 € 18.3 € 17.5 € 16.7 € 14.6 € 13.6 € 15.3

201413121110090807062005

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



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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

201413121110090807062005


EMEA 4Q and Full-Year ACV (€B)*

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

€45

€26

2,900

1,286

201413121110090807062005


€ 7.0 € 6.8 € 6.8 € 7.2 € 6.4 € 5.1 € 7.7

€ 4.7 € 3.9 € 5.4

€ 2.5 € 2.1 € 2.3 € 3.4

€ 2.8 € 3.3

€ 1.8

€ 2.0 € 1.9

€ 2.2

€ 9.5 € 8.9 € 9.1 € 10.6

€ 9.2 € 8.4

€ 9.5

€ 6.7 € 5.8

€ 7.6

201413121110090807062005

1Q to 3Q ACV 4Q ACV

€ 5.7

€ 3.8

€ 7.7

€ 1.8

€ 0

€ 2

€ 4

€ 6

€ 8

€ 10

New Scope Restructuring ITO BPO

Range of Prior 3 Years Avg of Prior 3 Years2013 2014



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€ 2.2 € 1.8 € 1.7 € 1.5

€ 1.0 € 0.4 € 0.4 € 0.3 € 0.2 € -

€ 0.5 € 1.0 € 1.5 € 2.0 € 2.5 € 3.0 € 3.5

FinancialServices

Manufacturing Energy TravelTransport

Leisure

Telecom& Media

BusinessServices

ConsumerProducts & Goods

Retail Healthcare& Pharma

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

€ 3.4

€ 1.7 € 1.3

€ 0.5 € 1.2

€ 0.8 € 0.3 € 0.3 € 0

€ 1

€ 2

€ 3

€ 4

€ 5

U.K. & Ireland DACH Nordics Benelux France SouthernEurope

Africa & MiddleEast

E. Europe &Russia


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

EMEA Sub-regions Full-Year ACV (€B)*

EMEA Industry Full-Year ACV (€B)*

EMEA Contract Award Trends Detail



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

ISG Sourcing Market Standouts in EMEA Large multinationals and providers with strong “home market” profiles lead both the Big 10 and Building 10 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

Co. Revenues > €10B

SOURCING STANDOUTS GROUPED BY COMPANY SIZE

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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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

201413121110090807062005


Americas 4Q and Full-Year ACV (€B)*

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

€32 €35

2,558

1,453

201413121110090807062005


€ 4.9 € 4.2 € 5.6 € 4.7 € 6.3 € 5.0 € 3.8 € 3.6 € 5.0 € 4.8

€ 1.7 € 1.2

€ 1.5 € 1.9 € 0.9 € 1.9

€ 1.5 €2.3 € 1.4 € 1.6

€ 6.6 € 5.4

€ 7.1 € 6.5 € 7.2 € 6.8 € 5.3 € 5.9 € 6.5 € 6.5

201413121110090807062005

1Q to 3Q ACV 4Q ACV

€ 3.9

€2.7

€ 4.1

€ 2.5

€ 0

€ 1

€ 2

€ 3

€ 4

€ 5

€ 6





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€ 0.58

€ 0.34

€ 0.04 € 0.08 € 0.0

€ 0.2

€ 0.4

€ 0.6

€ 0.8

Canada Brazil Mexico Other LatAm


€ 5.6

€ -

€ 2

€ 4

€ 6

€ 8

U.S.

€ 1.7

€ 0.9 € 0.8 € 0.7 € 0.4

€ 0.7 € 0.8 € 0.4 € 0.3

€ -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

FinancialServices

Manufacturing Telecom& Media

Healthcare& Pharma


BusinessServices

Energy Retail TravelTransport

Leisure


In 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



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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.




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






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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

201413121110090807062005


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

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

€11.1

€6.2

804

323

201413121110090807062005


€ 1.9 € 1.2

€ 2.2 € 1.3 € 1.1

€ 1.6 € 1.2 € 1.3 € 1.0 € 0.6

€ 0.5

€ 0.4

€ 0.5

€ 0.5 € 0.8 € 0.6

€ 0.7 € 0.7

€ 0.3 € 0.6

€ 2.4

€ 1.6

€ 2.7

€ 1.8 € 1.9 € 2.3

€ 1.9 € 2.0

€ 1.3 € 1.3

201413121110090807062005

1Q to 3Q ACV 4Q ACV

€ 1.5

€ 0.9

€ 2.1

€ 0.3 € 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5





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€ 0.74 € 0.58 € 0.53

€ 0.30 € 0.20

€ 0.01 € 0.0 € 0.2 € 0.4 € 0.6 € 0.8 € 1.0 € 1.2 € 1.4

ANZ India and SouthAsia

Japan Greater China Southeast Asia South Korea


€ 0.52 € 0.50 € 0.58

€ 0.33

€ 0.15 € 0.06 € 0.06 € 0.12

€ 0.04 € -

€ 0.2

€ 0.4

€ 0.6

€ 0.8

€ 1.0

FinancialServices

Telecom& Media

Manufacturing TravelTransport

Leisure

Energy BusinessServices

Healthcare& Pharma


Retail


In 2014 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



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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.




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






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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 ~€5 Billion 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 Partner

+1 508 625 2194 [email protected]

ISG insights serving providers and market analysts

www.isg-one.com Dr. David Howie

Partner +44 7789 771 665

[email protected]

Denise Colgan EMEA and AP Media Contact

+44 1737 371523 [email protected]

Rob Arnott Cohn & Wolfe for ISG +44 (0) 20 7331 5363

[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 ≥ €20 M from the ISG Contracts Knowledgebase®

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

TCV (€B)* Change Change TCV (€B)* Change

Global Market € 22.0 37% 20% € 83.7 20%

New Scope € 11.0 -6% -12% € 51.9 14%

Restructurings € 11.0 151% 87% € 31.8 30%

Mega-deals € 7.4 243% 89% € 19.5 66%

ITO € 15.5 38% 16% € 60.9 29%

BPO € 6.5 34% 31% € 22.8 0%

Americas € 7.7 76% -6% € 29.8 40%

EMEA € 12.0 18% 39% € 43.2 4%

Asia Pacific € 2.3 45% 49% € 10.7 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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