2q15 isg outsourcing index
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Hosted by: Joe Foresi,
Janney Capital Markets
16 July 2015
The ISG Outsourcing Index™
Second Quarter and First Half 2015
Global Market Data and Insights
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Covering the state of the outsourcing industry for global, commercial contracts.*
Welcome to the 51th Quarterly ISG Outsourcing Index™ Review
Esteban Herrera Partner
John Keppel Partner & President
Stanton Jones Director & Emerging Technology Analyst
*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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At a Glance NUMBER OF AWARDS SET RECORDS DURING THE QUARTER
ACROSS A VARIETY OF BROADER MARKET AREAS
AN ABSENCE OF LARGE AWARDS HOLDS BACK 1H ACV ACROSS THE BROADER MARKET
AMERICAS ACV UP BOTH Y/Y AND Q/Q WITH STRENGTH FROM U.S. MARKET AND SMALLER-INDUSTRY VERTICALS
EMEA ACV DOWN Y/Y BUT UP Q/Q WITH STEPPED-UP ACTIVITY IN THE U.K., FINANCIAL SERVICES AND ENERGY VERTICALS
ASIA PACIFIC ACV DOWN Y/Y BUT UP Q/Q ON THE STRENGTH OF APPLICATION OUTSOURCING AND INDIAN MARKETS
Scorecard 2Q15 2Q Y/Y 2Q Q/Q ACV ($B)* Change Change
Global Market $ 6.2 -7% 24% New Scope $ 3.8 -11% 18% Restructurings $ 2.4 -1% 33% Mega-relationships $ 0.4 -75% -65% ITO $ 4.8 -8% 43% BPO $ 1.4 -6% -15% Americas $ 2.8 11% 29% EMEA $ 2.8 -12% 23% Asia Pacific $ 0.6 -39% 8%
1H15 1H Y/Y ACV (B)* Change
$ 11.2 -14% $ 7.0 -16% $ 4.2 -11% $ 1.6 -55% $ 8.1 -19% $ 3.1 4% $ 4.9 9% $ 5.2 -21% $ 1.1 -42%
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2Q15 Broader Market ACV is up 24% Q/Q and down 7% Y/Y. The number of 2Q awards set a record high. 1H15 ACV is down 14% from 1H14 in a smaller-deal market.
Broader Market Quarterly ACV ($B)* and Counts
Half-Year Broader Market Counts
Broader Market Contract Award Trends
Half-Year Broader Market ACV ($B)*
$11.2 $13.0
$10.0
$13.6 $10.8
$13.3 $10.9 $11.4
$9.1 $9.4
$12.3
$11.1
$11.6 $13.9 $10.5 $12.1 $10.1
$9.6 $8.1
$25.3
$21.0
$25.2 $24.7 $23.8 $23.0 $21.5 $18.7 $17.6
201514131211100908072006
1H ACV 2H ACV
754 702 541
677 657 579 542
438 375 372
676 687 570 648
530 547 484
363 369
1,378 1,228 1,247 1,305
1,109 1,089 922
738 741
201514131211100908072006
1H Counts 2H Counts
$6.2 $5.0
$6.7 $5.6
$6.7 $6.3 $4.8
$6.3 $4.0
451
303 388
288 363 339 311
376
231
2Q151Q154Q143Q142Q141Q144Q133Q132Q13
ACV Counts
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$2.6 $2.3
$3.3
$1.6
$0.5
$1.5
$2.5
$3.5
$4.5
New Scope Restructuring ITO BPO
Range of Prior 4 Halves Avg of Prior 4 Halves1H14 1H15
2Q15 Americas ACV is up 29% Q/Q and 11% Y/Y with a record-high award count. 1H15 New Scope increases over 1H14 by 2% in ACV and 32% in contract counts.
Americas Half-Year ACV ($B)*
Americas Contract Award Trends
Americas Quarterly ACV ($B)* and Counts
Americas Half-Year Segment ACV ($B)* Americas Half-Year Counts
$2.8 $2.1
$2.6 $2.5 $2.5 $2.0
$1.6 $1.9 $1.1
236
144 159 126
171
124 121 150
78
2Q151Q154Q143Q142Q141Q144Q133Q132Q13
ACV Counts
$4.9 $4.5 $3.8 $5.2
$4.0 $6.0
$4.4 $3.4 $3.6
$4.9
$5.1
$3.5 $4.0 $4.5 $3.2 $4.6
$3.4 $3.8 $3.6
$9.6 $7.3
$9.2 $8.4 $9.2 $9.0 $6.9 $7.5
$8.6
201514131211100908072006
1H ACV 2H ACV
380 295 211 290 267 270 231 190 162 179
285 271
226 261 196 214 195
150 149
380
580 482 516 528
466 445 385
312 328
201514131211100908072006
1H Counts 2H Counts
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$0.34
$0.16
$0.02 $0.11
$0.00$0.10$0.20$0.30$0.40$0.50$0.60
Canada Brazil Mexico Other LatAm
Range of Prior 4 Halves Avg of Prior 4 Halves 1H14 1H15
$0.83 $0.72
$0.54 $0.70
$0.40 $0.41 $0.42 $0.43 $0.40
$- $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4
FinancialServices
Manufacturing Telecom& Media
Healthcare& Pharma
Energy BusinessServices
ConsumerProducts & Goods
TravelTransport
Leisure
Retail
Range of Prior 4 Halves Avg of Prior 4 Halves 1H14 1H15
2Q15 ACV increases due to strength in the U.S. Traditionally smaller verticals such as Transportation, Retailing and Healthcare help support market growth.
Americas Sub-regions Half-Year ACV ($B)*
Americas Industry Half-Year ACV ($B)*
Americas Contract Award Trends Detail
$4.2
$- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5
1U.S.
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Co. Revenues < $2 B Co. Revenues $2 -10 B
ISG Sourcing Market Standouts in the Americas Cognizant moves into the Big 10 category. BPOs and service providers with substantial offshore profiles lead in the Building tier. The Breakthrough 10 experiences a 40% turnover.
1New to group as of the current quarter 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
The Building 10 Sourcing Standouts
The Breakthrough 10 Sourcing Standouts
The Big 10 Sourcing Standouts
Co. Revenues > $10B
SOURCING STANDOUTS GROUPED BY COMPANY SIZE
Accenture Atos BT
Capgemini Cognizant1
Dell HP1
IBM TCS
Xerox
Aon Hewitt CGI
CompuCom Convergys1
Genpact HCL
Infosys Tech Mahindra1
Teleperformance Wipro
APAC Customer Services Firstsource Solutions
ICF International IGATE Luxoft
Minacs1 Mindtree1
Syntel UST Global1
Virtusa1
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Asia Pacific 2Q15 ACV is up 8% Q/Q but down 39% Y/Y. Almost 70% of the IT ACV awarded in the second quarter is in Applications.
Asia Pacific Half-Year ACV ($B)*
Asia Pacific Contract Award Trends
Asia Pacific Quarterly ACV ($B)* and Counts
Asia Pacific Half-Year Segment ACV ($B)* Asia Pacific Half-Year Counts
$0.92
$0.22
$0.88
$0.26 $0.0
$0.5
$1.0
$1.5
$2.0
New Scope Restructuring ITO BPO
Range of Prior 4 Halves Avg of Prior 4 Halves1H14 1H15
$0.59 $0.55 $0.73
$0.46
$0.98 $1.00
$0.54 $0.50 $0.54
46
35
47
32 39
46
28
43 34
2Q151Q154Q143Q142Q141Q144Q133Q132Q13
ACV Counts
$1.1
$2.0
$1.1
$1.9
$1.1 $0.8
$1.6
$0.8 $1.2
$1.1
$1.2
$1.0
$1.7
$1.2 $1.6
$1.5 $1.7 $1.3
$0.6
$3.2
$2.1
$3.5
$2.3 $2.4
$3.1 $2.6 $2.6
$1.7
201514131211100908072006
1H ACV 2H ACV
81 85 68
87 85 71 67
49 47 50
79 71
81 69 79 80
70 48 45
164 139
168 154 150 147
119 95 95
201514131211100908072006
1H Counts 2H Counts
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$0.23
$0.45
$0.19 $0.11 $0.15
$0.02 $0.0
$0.1
$0.2
$0.3
$0.4
$0.5
$0.6
ANZ India and South Asia Japan Greater China Southeast Asia South Korea
Range of Prior 4 Halves Avg of Prior 4 Halves 1H14 1H15
$0.25 $0.22 $0.29
$0.16 $0.08 $0.06
$0.01 $0.02 $0.06 $-
$0.1 $0.2 $0.3 $0.4 $0.5 $0.6 $0.7
FinancialServices
Manufacturing Telecom& Media
TravelTransport
Leisure
Energy ConsumerProducts & Goods
Healthcare& Pharma
BusinessServices
Retail
Range of Prior 4 Halves Avg of Prior 4 Halves 1H14 1H15
India steps up its contracting pace. However, ANZ remains sluggish, holding back overall regional results. Financial Services, Manufacturing and Telecom results lag.
Asia Pacific Sub-regions Half-Year ACV ($B)*
Asia Pacific Industry Half-Year ACV ($B)*
Asia Pacific Contract Award Trends Detail
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Co. Revenues < $2 B Co. Revenues $2 -10 B
ISG Sourcing Market Standouts in Asia Pacific Several Japanese providers, along with Cognizant, join the large multinationals in Big 10 Sourcing Standouts list. Australian and India-based providers contribute greatly to middle tier, while smaller segment sees 30% turnover from last quarter.
1New to group as of the current quarter 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
The Building 10 Sourcing Standouts
The Breakthrough 10 Sourcing Standouts
The Big 10 Sourcing Standouts
Accenture BT
Cognizant1
CSC1 Fujitsu Hitachi
HP IBM
Ricoh
TCS
Genpact1 HCL
Infosys NEC
Optus1 Tech Mahindra
Transfield Services Unisys
United Group Services Wipro
Aegis ChinaSoft
Hollysys Automation Minacs1
NGA Human Resources SITA
TeleTech1 UST Global1
Vertex WNS
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$3.5
$1.7
$4.0
$1.2
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
New Scope Restructuring ITO BPO
Range of Prior 4 Halves Avg of Prior 4 Halves1H14 1H15
EMEA ACV in 2Q15 is up 23% Q/Q yet down 12% Y/Y. 1H Restructuring and New Scope awards fall in nearly equal magnitudes, dropping more than 20%.
EMEA Half-Year ACV ($B)*
EMEA Contract Award Trends
EMEA Quarterly ACV ($B)* and Counts
EMEA Half-Year Segment ACV ($B)* EMEA Half-Year Counts
$2.8 $2.3
$3.4 $2.7
$3.2 $3.3 $2.6
$3.9
$2.3
169
124
182
130 153
169 162 183
119
2Q151Q154Q143Q142Q141Q144Q133Q132Q13
ACV Counts
293 322 262 300 305 238 244 199 166 143
312 345 263 318 255 253
219 165 175
634 607 563 623
493 497 418
331 318
201514131211100908072006
1H Counts 2H Counts
$5.2 $6.5
$5.0 $6.5 $5.7 $6.4
$4.9
$7.1
$4.2 $3.5
$6.1 $6.5
$6.0 $8.3
$5.7 $6.1
$5.0
$4.5 $3.9
$12.6 $11.5 $12.5
$13.9 $12.1
$10.9 $12.1
$8.6 $7.3
201514131211100908072006
1H ACV 2H ACV
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$1.62
$0.65 $0.90 $0.81
$0.57 $0.14 $0.15 $0.13 $0.17 $-
$0.5 $1.0 $1.5 $2.0 $2.5 $3.0
FinancialServices
Manufacturing Energy TravelTransport
Leisure
Telecom& Media
BusinessServices
ConsumerProducts & Goods
Healthcare& Pharma
Retail
Range of Prior 4 Halves Avg of Prior 4 Halves 1H14 1H15
$2.20
$1.07
$0.37 $0.46 $0.26 $0.33 $0.26 $0.20
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
U.K. & Ireland DACH Nordics Benelux France SouthernEurope
Africa & MiddleEast
E. Europe &Russia
Range of Prior 4 Halves Avg of Prior 4 Halves 1H14 1H15
U.K. market sees increased activity, and 1H results turn positive. Financial Services and Energy verticals show 1H growth but lag behind historical half-year results.
EMEA Sub-regions Half-Year ACV ($B)*
EMEA Industry Half-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 local “home market” profiles head up each of the company size segments. Each tier sees 20% turnover from last quarter.
1New to group as of the current quarter 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
The Building 10 Sourcing Standouts
The Breakthrough 10 Sourcing Standouts
The Big 10 Sourcing Standouts
Accenture Atos BT
Capgemini Cognizant1
Fujitsu HP
IBM TCS
Vodafone1
Capita Carillion1
CGI Computacenter1
HCL Infosys MITIE Serco Tieto Wipro
HH Global IGATE
InnerWorkings Kuehne & Nagel
Luxoft MAYKOR Mindtree Transcom1
WNS1
Xchanging
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Special Topic for Second Quarter 2015
CLOUD-BASED TRANSFORMATION – AS-A-SERVICE CREATES OPPORTUNITIES & CHALLENGES
Stanton Jones Director & Emerging Technology Analyst
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Provider Currency
Standard Support
Tiers
Supplier Weighted MSA
Cloud Adoption Defined
All-Inclusive Unit Price Elastic
Operational Expense
Capital Expense
Limited Commitment
Long-term Commitment
Asset/FTE Based RUs
Consumption Based RUs
Line Item
Pricing IT Absorbs
Costs Buyer
Currency
Custom Support
Tiers
Provisioned for Maximum
Demand
Buyer Weighted
MSA Labor Based
Consumer Charge-backs
AS-A-SERVICE CHARACTERISTICS
Traditional Service Characteristics
Automated
ADOPTION APPROACH CHANGED DRAMATICALLY about 18 months ago
EVOLVE CURRENT DELIVERY MODEL to create a more cloud-like experience RE-ENGINEER FINANCIALS MODELS so traditional services take on a cloud look and feel COST REDUCTION is primary motivator
FOCUS IS ON TRANSFORMATION using public cloud CLIENTS EMBRACE THE STRATEGIC BENEFITS OF SHARING infrastructure and software AGILITY is primary motivator
ISG-Advised DEALS WITH A CLOUD COMPONENT DOUBLED since 2012
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Emerging Solutions for Transformational Renewals
Design, Source and Provision a Complete Solution Centralizes Business Management and Analytics Multi-sourced Provider Management Unified Self-service Storefront
Public Cloud IaaS
Private Cloud IaaS
Managed Services
Existing Data
Center Cloud Brokerage
Platform
Public Cloud SaaS
Expected in Renewal TCV
over next 3 Years
Traditional Providers Tower-centric solutions Dedicated data centers Traditional service
characteristics
Next Generation Providers Application-centric solutions Shared data centers As-a-service characteristics
Sales & Marketing
R&D
Operations Finance
HR
Cloud Service Broker
Internal IT or Managed Services Provider
is as
Technology Supply
Enterprise LOBs
buyers mix and match providers
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2Q15 Broader Market sets a record for number of contract awards as the busiest quarter ever.
Structural industry change towards smaller deal values as first-half ACV matches pre-Recession levels, but with double the number of awards.
The Americas logs strong, consistent quarter and half; smaller-sized verticals compensate for weak Financial Services sector.
EMEA and AP post sequential ACV gains but lag Y/Y against tough compares.
Expect near double digit Y/Y growth in 3Q in 2015 as European markets and smaller G-2000 companies step up contracting pace.
Long term, transformative work in industry will take priority over focus on cost savings; new spend will be on revenue generation initiatives.
Providers that adapt rapidly to cloud platforms and digitization will flourish; those focused on driving competitors from yesterday’s business will not.
2Q15 ISG Outsourcing Index™ - Global Summary and Outlook
summary market
outlook market
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Please contact us with your questions and comments. Learn More
Paul Reynolds Chief Research Officer
+1 508 625 2194 paul.reynolds@isg-one.com
ISG insights serving providers and market analysts
www.isg-one.com John Keppel
Partner and President +44 (0)7879 432 212
john.keppel@isg-one.com
Will Thoretz Americas Media Contact
+1 203 517 3119 will.thoretz@isg-one.com
Denise Colgan EMEA and AP Media Contact
+44 1737 371523 denise.colgan@isg-one.com
Stanton Jones Director & Emerging Technology Analyst
+1 281 795 2636 stanton.jones@isg-one.com
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Second Quarter and First Half 2015 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. We will continue to provide a high-level TCV view of the market via a Scorecard analysis.
Second Quarter and First Half 2015 TCV Scorecard
*Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase®
Scorecard 2Q15 2Q Y/Y 2Q Q/Q 1H15 Y/Y
TCV ($B)* Change Change TCV ($B)* Change
Global Market $ 19.6 -28% -9% $ 41.2 -24%
New Scope $ 13.7 -24% -13% $ 29.5 -17%
Restructurings $ 5.9 -36% 2% $ 11.7 -38%
Mega-deals $ 0.0 -100% -100% $ 4.8 -53%
ITO $ 14.2 -32% -11% $ 30.2 -25%
BPO $ 5.4 -16% -2% $ 11.0 -21%
Americas $ 7.2 -21% 4% $ 14.2 -19%
EMEA $ 10.0 -27% -16% $ 22.0 -21%
Asia Pacific $ 2.4 -45% -9% $ 5.0 -44%
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