gartner - magic quadrant for sap application management service providers worldwide (23 oct 2012)

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Magic Quadrant for SAP ApplicationManagement Service Providers, WorldwidePublished: 23 October 2012

Analyst(s): Gilbert van der Heiden, Christopher Ambrose, Helen Huntley

This Magic Quadrant illustrates the current service provider landscape for 15leading companies providing SAP application services as part of multiyear-based agreements. We assess these companies against defined qualitymetrics.

Market Definition/DescriptionGartner evaluates service providers on their ability to execute and their completeness of vision inregard to worldwide SAP application management services. SAP application management servicesare defined as:

All ongoing SAP application services provided as part of a multiyear-based agreement andmanaged against defined quality metrics.

It includes:

All ongoing activities related to application development, implementation, integration,testing, maintenance and support (functional and/or technical), and help desk servicesdelivered within the scope of a multiyear application services agreement.

It excludes:

All business-process-outsourcing-related activities.

All project-related activities and assets without follow-up ongoing managementresponsibilities. These are covered by application implementation services.

All middleware and infrastructure activities and assets. These are application operationsservices.

We include SAP applications according to their primary product line:

SAP application products (SAP Applications):

SCM, ERP, CRM, BI/Analytics, Mobility

All other SAP solutions will be required to be consolidated under "Other." This also includesPLM and SRM

We further evaluate the providers against:

The capability to deliver a comprehensive set of SAP application management services (seebelow for Gartner's definition of "comprehensive") across the SAP product line

The insights across industries for SAP application management services decisions

The investments in industry-specific offerings

The insights and investments in the SAP application product line

Comprehensive in this respect means:

A distinct offering, consistent from a services component (what is included, roles andresponsibilities, service metrics and levels, terms and conditions, pricing model) and deliveryperspective across all industries for general services. These can also be specific per industrywhere applicable, in combination with a consistent internal delivery structure across allcountries where such services are provided (through best practice processes, tools, technologyand people).

A consolidated set of distinct offerings to address industry-specific demand or cross-industrydemand, where the set can be logically recognized as an integrated offering.

Gartner evaluates service providers on their ability to execute and their completeness of vision.Evaluation is informed by:

A detailed survey addressing the provider's global SAP application management capabilities,covering revenue, staffing, geographic capabilities per SAP application platform, industry andprocess assets, partnerships, joint initiatives, investments and other relevant information. Thisprovides us with numeric and qualitative data allowing us to compare providers and analyzethem against the inclusion criteria.

A detailed vendor briefing with each provider addressing the provider's capabilities in a formatchosen by them, but at least addressing the inclusion criteria. Each briefing comprised materialthat the provider had prepared for and was discussed during a telephone conference.

A detailed reference client list for each provider whereby all relevant information was providedregarding services, scope, type of engagement, included services and technologies, projectdescription, executed work and delivered benefits.

Of the 206 provided reference clients, 160 completed an online survey made up of questionsregarding the services, scope, duration, size, selection criteria, good points and challenges interms of the engagement and the provider (as well as multiple satisfaction questions), or elsethey provided verbal feedback in a 30-minute reference call.

A service provider's representation of its organization through briefings, press releases, annualreports and other publicly available information, other than what was presented during thededicated detailed briefing as described above.

Gartner clients with whom Gartner analysts have discussions throughout the year.

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For more information on Gartner's Magic Quadrant research methodology, refer to Gartner's"Resource Documents" and/or review "Magic Quadrants and MarketScopes: How GartnerEvaluates Vendors Within a Market."

Market Definition

Industries

This Magic Quadrant addresses the capabilities of the included vendors in the following 22industries:

Financial Services: Banking

Financial Services: Insurance

Financial Services: Other Financial Services

Manufacturing: Oil and Gas, Chemicals, Process and Resource

Manufacturing: Automotive

Manufacturing: Aerospace and Defense

Manufacturing: Industrial Discrete

Manufacturing: High Tech

Manufacturing: Consumer Goods

Manufacturing: Other Manufacturing

Manufacturing: Life Sciences

Healthcare (Provider)

Public Sector

Communications

Utilities and Energy

Wholesale

Retail

Services

Transportation

Agriculture, Mining, Construction

Education

Not-for-Profit

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Countries per Region

This Magic Quadrant will address worldwide capabilities of the included vendors in the followingregions:

North America (NAM): United States, Canada

Latin America (LATAM): Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador,Guatemala, Mexico, Panama, Peru, Uruguay, Venezuela

Asia/Pacific and Japan (APJ): Australia, Bangladesh, China, Hong Kong, India, Indonesia,Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan,Thailand, Vietnam

Europe, the Middle East and Africa (EMEA): Austria, Algeria, Azerbaijan, Bahrain, Belarus,Belgium, Bulgaria, Cameroon, Cote d'Ivoire, Croatia, Czech Republic, Denmark, Egypt, Finland,France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Jordan, Kazakhstan, Kenya,Kuwait, Lebanon, Libya, Lithuania, Luxembourg, Morocco, Netherlands, Nigeria, Norway,Oman, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia,South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, Ukraine, United ArabEmirates, United Kingdom, Yemen

Full-Time Equivalents per Region

This Magic Quadrant includes references to the number of full-time equivalents (FTEs) per providerfor all the SAP application services and for the SAP application management services. For the SAPapplication management services the FTEs are further split per region. The provided numbersrepresent the FTEs that are located in the respective regions and do not represent the allocatedresources to clients per region. Client revenue can be consolidated in multiple ways across regions,dependent on the provider's internal account structure. FTEs can also support multiple clients inmultiple regions, hence the only consistent factor is the registered base location for the FTEs.

Assets

This Magic Quadrant includes references to assets. Assets in this respect refer to industry specific(for example, retail solution, automotive solution), business process (for example, HR, finance),technology process (for example, ABAP [Advanced Business Application Programming] coding,SAP testing) or service specific (for example, implementation framework, operations framework)solutions, tools or processes. Assets are provider specific and represent the provider's intellectualproperty (IP) in the respective asset area.


Magic QuadrantFigure 1. Magic Quadrant for SAP Application Management Service Providers, Worldwide

Source: Gartner (October 2012)

Vendor Strengths and Cautions

Accenture

Accenture has more than 36,500 FTEs providing SAP application services worldwide, of whicharound 12,500 are involved in providing SAP application management services (with around 14% ofits resources in NAM, 10% in LATAM, 20% in EMEA and 56% in APJ). Gartner estimates thatAccenture generates approximately 70% of its SAP application services revenue from applicationimplementation services and 30% from SAP application management services. Accenture services15 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAPapplication management services are oil and gas, consumer goods, energy and utilities, mining andconstruction. It should be noted that from a revenue perspective, even the smaller markets forAccenture still generate sufficient SAP application management revenue, according to estimates, toput it in first place for 11 of the industries it services.


Strengths

Accenture offers comprehensive and mature SAP application life cycle services, with SAPapplication management services delivered from more than 50 Global Delivery centers aroundthe world. In addition, Accenture's "Solution" factories offer clients shared services, creating aone-to-many model for greater efficiency and flexibility. Size matters in this respect, allowing abalanced spread and real global coverage of all SAP services for the supported industries,including among the highest amounts of localized industry and process assets.

Accenture has a long-standing and strong relationship with SAP and currently has 14 dedicatedAccenture Innovation Centers for SAP, focused on co-innovation with SAP, and building newofferings and providing delivery to Accenture's client base. Its strong relationship with SAPstrengthens Accenture's ability to provide end-to-end SAP applications life cycle services tocustomers. This is supported by clients' appreciation for Accenture's thought leadership.

Accenture has specifically created IP to deliver ongoing SAP optimization. While not distinctfrom its competitors, it is a strength in that it is aligned at the technology (Accenture Insight forEnterprise Systems [AIES], which provides multidimensional representations of SAP systems),process (process standardization, covering evaluation and simplification for 80 enterpriseprocesses) and business impact levels (Business Optimization Seeker for SAP [BOSS] identifiesbusiness performance improvement potential).

Accenture received high customer reference scores for relationship management, industryexperience, business acumen and customer delivery, and the highest score for cultural fit. Itshould also be noted that Accenture's referenced clients represent the highest average contractvalue and longest contract relationships of the included vendors most of these clients alsoindicated that they have extended the scope of the contract over the years.

Cautions

Because many engagements are large scale, Accenture's size can make it difficult to maintaincapabilities for its clients. Its referenced clients indicate that Accenture experiences higher thananticipated attrition, especially from India-based resources. SAP training and client environmentlearning efforts for new individuals are sometimes passed on to clients, rather than absorbed byAccenture.

Even with its high number of industry and process assets, Accenture is challenged toimplement its continuous improvement approach for its existing clients as, overall, itsreferenced clients score Accenture low for innovation in comparison to the majority of theincluded vendors. References believe that Accenture could do a better job of partnering withSAP to bring software advances to bear in order to deliver services more efficiently andeffectively.

While its clients recognize they receive value for money, Accenture is generally regarded asexpensive, especially when continuous improvement is an added charge on top of current fees.While other providers also make separate charges for improvement, some Accenture clientreferences cite this as a specific nuisance.


Atos

Atos has approximately 9,500 FTEs providing SAP application services worldwide, of which around4,000 are involved in providing SAP application management services (with around 3% of itsresources in NAM, 8% in LATAM, 38% in EMEA and 53% in APJ). Atos generates approximately59% of its SAP application services revenue from application implementation services, and 41%from SAP application management services. Atos services 19 of the 22 industries included in thisMagic Quadrant. Of these, the main markets for SAP application management services aremanufacturing, public, and energy and utilities.

Strengths

Atos has done well at integrating former Atos Origin and Siemens IT Solutions (SIS) SAPcapabilities. The structure of its portfolio is based on extensive client interactions and has beenin place since 2H11. The portfolio revolves around transformational capabilities based on afoundation of operational excellence, extending technology delivery with consulting andexpanding its offshore delivery capability from a cost competitive perspective.

Atos' strategy and its organizational and delivery structure for the NAM market is based onexpanding its services portfolio to existing (large) accounts and globally structured midsizecompanies, with the majority of delivery support from India. This approach suits the size andcapabilities of Atos in NAM and allows for sustainable services in the region.

Atos' industry solutions approach is comparable to its competitors, but in the area ofenvironmental, health and safety management it has created distinct sustainability solutions forthe public, transport, and energy and utility markets.

Atos clients appreciate its qualified technical resources, good cultural alignment andcommitment to get the job done on time.

Cautions

Atos improved its internal delivery model to ensure that its consulting and technical deliverycapabilities were well integrated. However, in terms of the resulting industry solutions andassets, Atos is still clearly behind its major competitors. Both Atos Origin and SIS did not havestrong consulting capabilities compared to the competition. There is still a need for investment;a view that is supported by its clients.

While having a regional commercial approach and a global delivery approach, Atos still reliesheavily on EMEA for revenue. Although Atos has integrated the Atos Origin and SIS capabilitiesglobally, the combined capabilities still leave it challenged to compete for large deals in otherregions.

Atos has made aggressive strides in cloud with Canopy and Yunano, but both still need todeliver. In addition, Atos is investing in cloud transformation services based on Canopy and hasjust recently opened a High-Performance Analytical Appliance (Hana) and analytics center ofexcellence (COE), and signed its first SAP Hana in the cloud deal in June 2012. While these are


positive investments and initial results are also positive, they are quite late and results are stilllimited.

Clients primarily recommend Atos based on its technical capabilities, although they refer to theneed to optimize delivery mostly to further improve cost efficiency and set directions forthe future. This aligns with the overall challenge that Atos faces in that it needs to try and "talkthe business language" of its clients.

Capgemini

Capgemini has approximately 11,500 FTEs providing SAP application services worldwide, of whicharound 3,500 are involved in providing SAP application management services (with around 13% ofits resources in NAM, 9% in LATAM, 36% in EMEA and 43% in APJ). Capgemini generatesapproximately 66% of its SAP application services revenue from application implementationservices, 29% from SAP application management services and 5% from other SAP-relatedservices. Capgemini services 17 of the 22 industries included in this Magic Quadrant. Of these, themain markets for SAP application management services are consumer goods, life sciences andretail.

Strengths

Capgemini demonstrates a strong vision and good execution capabilities through certifiedindustry-specific end-to-end solutions, including licensing (OnePath solutions). Built mostly onits own IP and certified by SAP, the solution stack is transparent in terms of hosting (from on-premises to software as a service [SaaS]), the extent of services (up to business processoutsourcing [BPO]), and pricing (up to utility pricing for all services, including licenses).Capgemini has received stronger recognition than other included vendors (through SAP'sPinnacle Awards) for its solutions and services for 2012, especially in the areas of cloud, BPOand mobility.

Capgemini has been able to consolidate its position in Europe (where cost drives strongcompetition), while clearly demonstrating growth in NAM and LATAM (where the inclusion ofCPM Braxis as a strong regional SAP service provider clearly improves Capgemini'scapabilities). Capgemini addresses its growth markets with distinct approaches (like an overallIT outsourcing and technology focus on ERP and a sector-specific analytics focus for NAM).

Capgemini's clients appreciate its delivery capabilities, technical expertise, work ethic andtimeliness. They also appreciate the quality of references and peer connect options thatCapgemini provides, which underline its status as an engaged provider. This is furthersupported by clients repeatedly stating that Capgemini invests in increasing value for themduring the contract period. Although this does not automatically result in Capgeminiimplementing improvement suggestions, clients clearly appreciate the behavior itself.

Cautions

Capgemini's OnePath vision and execution have matured over the past few years and havebegun to bear fruit in 2012, but it has yet to fully integrate its approach across its entire installed


base. While clients recognize that Capgemini invests in increasing value, they also scoreCapgemini relative low compared to the competition for optimizing services, particularly ascompared to the expectations created at the beginning of the engagement or in the disconnectfrom consulting and implementation to delivery.

While expanding its global capabilities, Capgemini still has much ground to cover in LATAMwhere the CPM Braxis capabilities are mainly located in and focused on Brazil. However, inregard to all other included vendors, it has virtually no revenue streams for APJ, nor has itstrategically demonstrated any intention to expand this region as a separate SAP applicationmanagement market.

Although receiving clear recognition for its mobility solutions, Capgemini only realizes a verysmall portion of its SAP services revenue from mobility-based engagements, especially incomparison with the other Leaders in this Magic Quadrant. Capgemini also has the most dealsin the $3 million to $6 million bracket for total contract value for application managementservices, though it has the least number of deals in the $10 million and above bracket,indicating a possible challenge in competing for and winning large SAP applicationmanagement deals.

Overall, Capgemini's referenced clients indicate Capgemini needs to improve its industryexpertise and resourcing continuity. When implementing improvements, it requires additionalmanagement overhead from the client, and internally should better align service deliverycapabilities with technology capabilities.

Ciber

Ciber has approximately 1,500 FTEs providing SAP application services worldwide, of which around550 are involved in providing SAP application management services (with around 73% of itsresources in EMEA and 27% in APJ). Ciber generates approximately 57% of its SAP applicationservices revenue from application implementation services, and 43% from SAP applicationmanagement services. Ciber services six of the 22 industries covered in this Magic Quadrant. Ofthese, the main markets for SAP application management services are high tech, healthcare, andenergy and utilities.

Strengths

Ciber demonstrates a clear vision for the fundamental SAP applications maintenance business.It is a relatively small player, but is using its relative size as a strength, allowing it to focus onmultinational midmarket clients with its All-in-One solutions for SAP application services. It isfocusing on existing clients as well as clients in the growth markets of retail and professionalservices. Solutions are either based on Ciber IP (like Rapid Retail) or built on Rapid DeploymentSolutions (RDS for the utility industry or Hana). For the energy market, Ciber has created arapid deployment solution itself in strategic partnership with existing energy clients, whichallows for shorter sales and implementation cycles.

Ciber has also maximized delivery flexibility for its SAP application management services. Ciberis able to support its U.S. SAP application management clients partially through its U.S. SAP


application implementation staff, but mostly through remote delivery teams from India andChina. This is supported by its reference clients, who appreciate Ciber's work ethic and thecharacter of its staff, and indicate that they receive value for money.

Ciber's reference clients rate Ciber high for its technically skilled resources, good overall projectmanagement and the ability to work very effectively with existing teams and SAP resources.This applies specifically for smaller deals and midmarket customers.

Cautions

The downside of Ciber's relatively small size is the scale of the investments and industries it cancover. As mentioned above, Ciber only supports six industries for SAP application managementservices. It also has among the lowest amount of industry and process assets, and while takinga very focused and effective solution creation and innovation approach, it is limited in the globalrollout capabilities of solutions in terms of support.

Ciber still generates a relatively high percentage of revenue through efficiency focusedapplication management engagements, with a strong focus on technology metrics. It also reliesrelatively heavily on staff augmentation. This is reflected in the client references, which indicatethat Ciber is less effective in functional and process knowledge, and in engaging seniorleadership in areas of process improvement and change management.

Most engagements are relatively small compared to other vendors, which reflects Ciber's focus,but also reflects a concern regarding its limited capabilities to support large complexapplication management deals.

Cognizant

Gartner estimates that Cognizant has approximately 5,500 FTEs providing SAP application servicesworldwide, of which around 2,500 are involved in providing SAP application management services(with around 22% of its resources in NAM, 3% in LATAM, 6% in EMEA and 69% in APJ). Cognizantgenerates approximately 52% of its SAP application services revenue from applicationimplementation services and 48% from SAP application management services. Cognizant services17 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAPapplication management services are oil and gas, life sciences, consumer packaged goods, retail,and professional services.

Strengths

Although currently without any revenue or a clear strategy for LATAM, of the included vendors,Cognizant has demonstrated the highest relative growth in the SAP application services space,with 37% overall growth from 2010 to 2011. Even though this is only a snapshot in time,Cognizant is able to provide client references across the board from very large deals ($20million plus) to very small deals (below $100,000), indicating its capability to support small tovery large clients.

Cognizant's growth is supported by its flexibility in multiple SAP application managementpricing structures (capacity-based, ticket-based, application-based and user-based pricing


options), where it allows clients to have one or multiple pricing strategies embedded in a singledeal. Cognizant further actively promotes risk-reward-based engagements, licenses its tools,and "productizes" its industry and process IP to further provide flexibility in offerings to itsclients.

Cognizant's reference clients indicate strong satisfaction with Cognizant team members acrossmultiple dimensions: technical expertise, strong work ethic, responsiveness, motivated with theability to foster positive working relationships. They are also pleased with the quality, processesand timeliness of Cognizant's delivery, as well as the cost competitive approach for the highlevel of support received.

Cautions

To support its growth, Cognizant leverages a partnership model more than its competitors partially due to difficulties in attracting experienced SAP skills, visa challenges in Europe and alimited number of delivery centers. This potentially explains client concerns around the relativehigh levels of attrition that Cognizant demonstrates on their accounts.

Regionally, Cognizant does not have a clear strategy for LATAM, and is also limited in itsstrategy for APJ. While its growth currently allows for an opportunistic strategy, in the long terma clear road map will need to demonstrate sustainable growth or, at a minimum, retainedcompetitive parity.

With 65% of Cognizant's SAP application management revenue coming from NA, clientslooking for a strong global player in this space, with a strong global delivery footprint, may findCognizant not yet large enough to fulfill their delivery requirements. Equally, Cognizant's strongfocus on its key industries leads to a more opportunistic approach from a technologyperspective in industries other than its core ones.

Cognizant has among the fewest industry and process assets, which might explain referenceclient comments stating that Cognizant should be more proactive in bringing innovation andnew ideas to its client deals. In this respect it should be noted that while Cognizant has mademobility one of its key investment areas and is receiving good client interest, it currentlygenerates little SAP-related revenue in this area.

CSC

CSC has approximately 6,800 FTEs providing SAP application services worldwide, of which around3,700 are involved in providing SAP application management services (with around 11% of itsresources in NAM, 3% in LATAM, 32% in EMEA and 54% in APJ). Gartner estimates that CSCgenerates approximately 47% of its SAP application services revenue from applicationimplementation services, and 53% from SAP application management services. CSC services 19 ofthe 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are oil and gas, chemicals, aerospace and defense, and public.


Strengths

CSC takes an integrated approach across consulting, implementation and management.Dependent on client maturity and capabilities, CSC deploys an evolutionary service, deliveryand pricing approach. Client-based road maps are created for technology, services and pricingto match client demands at distinct moments in time. This model is globally aligned.

CSC also invests in Hana (among others, for CRM and insurance), cloud transformationservices (among others, for finance) and mobility solutions (among others, for geographicinformation systems). Its major investment focuses on SAP application management as aservice, based on RunSAP and ITIL v3.

In this Magic Quadrant, CSC demonstrates the most balanced coverage of the included SAPapplications (SCM, ERP and CRM) and areas (BI and mobile). This is supported by theextensive list of references provided and the general feedback of these referenced clients thatCSC demonstrates "wide SAP capabilities."

CSC's clients appreciate both the consulting capabilities of CSC and its engineeringbackground, which have led to strong technical skilled resources, delivered at a good price.Overall, CSC demonstrates a clear focus on the client relationship.

Cautions

CSC's core focus is to build horizontal solutions integrated with industry IP. In this process,CSC is developing select industry offerings, which effectively results in the lowest number ofindustry solution assets of all included vendors. This is supported by referenced CSC clientswho indicate the need for CSC to invest in and retain business knowledge and capabilities.

CSC is not seen as innovative with regard to optimizing the SAP portfolio. Clients indicate thatits technical skills are not seen as being supported by functional, industry or process consultingcapabilities.

While CSC's approach to SAP is clear and focused, as a company in general, CSC is in themidst of a turnaround. With a new operating model being announced in early September,organizations considering CSC must perform due diligence regarding its continued capabilitiesto deliver SAP application management services.

Deloitte

Deloitte has approximately 9,700 FTEs providing SAP application services worldwide, of whicharound 1,500 are involved in providing SAP application management services (with around 53% ofits resources in NAM, 7% in LATAM, 27% in EMEA and 13% in APJ). Deloitte generatesapproximately 90% of its SAP application services revenue from application implementationservices and 10% from SAP application management services. Deloitte services 15 of the 22industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are aerospace and defense, consumer packaged goods, healthcare, energyand utilities, and the public sector.


Strengths

Although Deloitte has strong regionally based and oriented services, for key areas like SAPservices it ensures a global commitment and invests in technology, staffing, processes andservices to that end. This translates into strong executive commitment to client delivery, whereDeloitte specifically focuses on Fortune 1000 companies and existing clients for SAPapplication management services. For example, on the technology side Deloitte acquired Ocoand bermind in order to expand its analytics and mobility capabilities, resulting in 161analytics solutions and a separate Deloitte Digital brand to address mobility in the widest sense.For cloud and on-demand services, Deloitte uses third parties to augment its own capabilities,but limits its focus to mature clients and core processes.

Deloitte has a brand to protect in the field of talent management and prides itself on being ableto attract and retain SAP skills on a global basis, supported by a low attrition rate of its IndianSAP capabilities of 14%. This is supported by Deloitte's client references who were pleasedwith Deloitte's depth of resources (which exhibit strong SAP knowledge) and vertical industryunderstanding (which offers clients the ability to solve problems and resolve issues expediently).Deloitte has also exhibited strong business process consulting skills.

Deloitte received high customer satisfaction ratings for relationship management it has astrong ability to work with client staff and a very positive work ethic; it responds to and resolvesissues in an efficient and effective manner; and it displays an overall good competency forservice delivery, as contractually promised and at a competitive price. Its clients are likely torehire and recommend Deloitte.

Cautions

Although Deloitte provided a decent split of references across the regions and clientsappreciate its global delivery capabilities, its SAP application management services revenue islargely driven by NA, which accounts for 60% of its total. Also, the majority of the referencesrepresent SAP application management deals with a value below $1 million per year and thelowest average contract duration, potentially indicating a weaker competitive position for largeand long-term SAP application management services deals.

Even with an overall low attrition rate in India, some of Deloitte's reference clients expressedconcern with Deloitte's employee retention, as they feel it is losing employees with significanttechnical depth and business skills. This is also a concern as Deloitte demonstrated a relativelylimited amount of industry and process assets.

Overall, Deloitte client references indicate the need for improved communication structures,both internally within Deloitte (in terms of knowledge transfer between the business andtechnology teams) as well as with clients (focusing on improved reporting and bettercommunication with business users).


Fujitsu

Fujitsu has approximately 2,500 FTEs providing SAP application services worldwide, of whicharound 1,050 are involved in providing SAP application management services (with around 33% ofits resources in NAM, 24% in EMEA and 43% in APJ). Fujitsu generates approximately 34% of itsSAP application services revenue from application implementation services, 28% from SAPapplication management services and 38% from other SAP-related services. Fujitsu services 18 ofthe 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are oil and gas, chemicals, discrete manufacturing, consumer goods, and thepublic sector.

Strengths

Fujitsu continues to focus on application services in general, and SAP in particular, throughstandardized methodologies and industrialized technologies that integrate both third party andFujitsu technologies under the Global Enterprise Management Services (GEMS) framework. ForSAP, GEMS is expanded with Hana and mobility transformation solutions, including Fujitsuhardware and appliances.

Fujitsu demonstrates a realistic vision with regard to increasing its SAP application servicesmarket share. It focuses on solutions for defined industries per geography (for example,healthcare for the U.K., manufacturing for Europe, real estate for Asia and logistics for NAM) incombination with its own technology IP to address the generic growth areas of Hana, mobilityand cloud.

More than most other included vendors, Fujitsu's reference clients selected Fujitsu for itstechnical expertise and cost of service, without expecting thought leadership, strongpartnerships or dependence on references. This perpetuates a clear perception of Fujitsu asproviding technical, reliable and flexible resources with a culture of, and commitment to, serviceexcellence.

Cautions

Fujitsu's group size and global coverage has led to wide industry coverage, yet the actual sizeof Fujitsu's SAP application management capabilities is relatively small in comparison to mostvendors and also in relation to its overall size. This has resulted in a spread of moreopportunistic deals rather than focused solution services. This is also represented in therelatively low amount of industry- and process-based assets that Fujitsu can deploy, as well asthe relatively high dependency on SAP ERP-related business.

Fujitsu is clearly improving with regard to its capabilities, especially on the technology side, yetit does not have the capabilities required to meet the needs of larger vendors in the Americasand, in general, is challenged when confronted with business-outcome-based engagements.This is also supported by Fujitsu's overall SAP deal size as well as concerns among clientreferences regarding industry expertise.

While viewed as a credible provider, Fujitsu's reference clients consider it to face challengeswith regards innovation and delivery as contracted, which mostly relates to a perceived


disconnect between sales and delivery. Although this could be the result of its continuedinvestment in solutions at the front end, Fujitsu should improve its internal alignment.

HCL Axon

HCL Axon has approximately 6,100 FTEs providing SAP application services worldwide, of whicharound 2,200 are involved in providing SAP application management services (with around 17% ofits resources in NAM, 5% in LATAM, 18% in EMEA and 61% in APJ). HCL Axon generatesapproximately 52% of its SAP application services revenue from application implementationservices and 48% from SAP application management services. HCL Axon services 14 of the 22industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are high tech, life sciences, and energy and utilities.

Strengths

HCL Axon continues to expand on Axon's strong SAP heritage and has been able to increasethe SAP application management revenue streams in NAM and APJ. In addition, HCL Axon hasamong the most balanced spread of revenue streams across the SAP product portfolio and agood spread of revenues across industries. This is realized through global aligned frameworks(MaSCoT for managed services, ASSeT for transitions and Prizm for portfolio optimization). Thisis combined with HCL's Unified Service Portal with a front-end dashboard and a back-end,industry-specific process repository to identify client-specific process improvements, as well asthe Business Aligned IT (BAIT) framework, so as to continuously align infrastructure andapplications to deliver desired business outcomes. Client references note that HCL continues tostrive to succeed and often goes above and beyond the SLAs to realize business value.

HCL Axon has improved its competitive position through the bundling of infrastructure,application and business process services (for example its Pre-Paid for Utilities [industry]solution), as well as maximizing factory-based development support and co-investments withclients to implement new technologies. HCL Axon offers flexibility with regard to contracts andpricing. It balances risk appropriately between the client and itself, which reference clients viewas positive, as they do not often see this with other suppliers in outsourcing contracts.

HCL Axon's reference clients also cite satisfaction with its employees who have a strong workethic, work well with client staff and go the extra mile to resolve issues.

Cautions

HCL Axon is investing in industry solutions and bundling of services. However, its industrysolutions are mainly technology related.

Although its clients indicate HCL delivers beyond expectation, at the same time they score HCLAxon relative low on innovation. This is partially due to the focus on technology-orientedsolutions instead of business solutions. This is reflected by clients that indicate the need formore on-site leadership to drive the relationship forward.


While clients generally appreciated HCL Axon employees, the consensus was that they wouldbe even stronger if they were able to demonstrate more business knowledge next to technologyexpertise when dealing with business users.

HCL Axon's transition methodology is executed successfully in general for small as well aslarge transitions, and is built on aggressive timelines to reduce the cost of such transitions. Theapproach integrates on- and off-site delivery in a seamless model. In some cases this hasn'tbeen so successful, with clients indicating that HCL needs to improve internal communicationand knowledge transfer between on- and off-shore delivery.

HP

HP has approximately 8,700 FTEs providing SAP application services worldwide, of which Gartnerestimates around 4,800 are involved in providing SAP application management services (witharound 33% of its resources in NAM, 2% in LATAM, 38% in EMEA and 27% in APJ). Gartnerestimates that HP generates approximately 55% of its SAP application services revenue fromapplication implementation services, and 45% from SAP application management services. HPservices 12 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAPapplication management services are automotive, discrete manufacturing, high tech, consumergoods and transportation.

Strengths

HP has end-to-end service capabilities and a road map for commoditizing IP-based services. Ithas positioned its capabilities around its core technology strengths and focuses on mobility,(predictive) analytics and cloud. HP has been awarded global recognition from SAP both forHana and RunSAP implementations. This is supported by HP reference clients that appreciateits technical expertise.

HP demonstrates clear SAP application management revenue streams in LATAM and APJ, nextto its stronger presence in NAM and EMEA. It supports this through a very low dependency onstaff augmentation and a good balance between technical and business-metrics-basedengagements.

HP's account and project teams demonstrate effective contract and relationship management,highlighting its focus on expanding existing large accounts. HP's relative strength lies in thepotential client base it can reach through its hardware and software businesses, besidesexisting services clients. In this approach, HP's reference clients appreciate the delivery teamsthat link effectively with client teams and an ethic focused on solving problems.

HP is one of the few providers with in-depth experience in the core technologies underlying itsofferings. Internally, it has aligned its hardware, software and services pillars in order to go-to-market with an integrated solution under the Industrialized Delivery System (IDS) banner.

Cautions

HP's SAP application management focus and road map are heavily infrastructure andtechnology driven. While this is in line with HP's full services vision, it is light on industry-


specific solutions. This is supported by HP reference clients, which perceive a lack of industryand consulting capabilities.

While HP's clients recognize they receive services at a competitive unit cost, they also indicatethat HP demonstrates resource quality inconsistencies. For some this resulted in deliveryinefficiencies that negatively impacted the overall cost of HP's services and thereby diluted thebenefits of the competitive unit cost.

HP is currently facing major reorganizations, including executive changes. However, HP's headcount reduction has not been focused on the SAP business. It is planning to grow SAP headcount and capabilities faster than the market average for the next three years. Organizationsconsidering HP must perform due diligence regarding its actual performance against thisstrategy.

IBM

IBM has approximately 26,500 FTEs providing SAP application services worldwide, of whichGartner estimates around 12,000 are involved in providing SAP application management services(with around 36% of its resources in NAM, 6% in LATAM, 26% in EMEA and 32% in APJ). Gartnerestimates that IBM generates approximately 65% of its SAP application services revenue fromapplication implementation services, and 35% from SAP application management services. Gartnerestimates that IBM services all 22 of the industries covered in this Magic Quadrant. Of these, themain markets for SAP application management services are consumer products, life sciences, andenergy and utilities.

Strengths

IBM supports the entire SAP application services life cycle. Its strategy focuses on businesstransformation and combines many industry and technology assets for implementation andmanagement services. IBM drives reusability and standardization through its Smarter ADMapproach, building on its Catapult service management framework and on its optionalEvergreen offering to include ongoing upgrades.

IBM's combined strengths in business and technical consulting are helping it move fromoffering a basic break/fix service to transforming how clients use and maximize businessbenefits from its SAP applications. Examples include redefining business-to-business andbusiness-to-consumer processes with mobile, cloud/SaaS and business process as a service,innovation-based productivity, and Smarter ADM.

IBM's contracting practices can be very flexible during the deal negotiation and structuringstage. They tend to be based on value analysis, in order to optimize the contracting model forthe client. IBM is able to support this with a competitive rate structure, especially whenleveraging offshore resources. IBM indicates that its Business Value Assessment approachallows for deal structure and delivery model adjustments based on client maturity.


IBM typically operates larger and more complex SAP environments and contracts than anumber of its competitors, leveraging its experience in managing complex projects across manygeographies.

Cautions

Despite a standardized and global delivery model, some clients indicated that IBMdemonstrates inconsistent execution across geographies. This relates to IBM's worldwidedelivery model, which integrates IBM's location-based, nearshore and offshore resources tosupport any client anywhere. Some clients indicate staffing challenges regarding visas incombination with attrition for the acquired services.

The focus on end-to-end solutions is implemented more from a technology stack perspectivethan from a business perspective, and is generally aimed at new clients rather than existingones. This is reflected in clients comments that indicate IBM needs to enhance delivery in termsof staffing mix consistency (across projects) and speed of emerging technology (for example,solutions developed for infrastructure as a service and cloud) to further drive down costs andmaximize client benefits.

IBM is evolving its model toward value creation through life cycle services capabilities anddelivery models that aim to create business value and innovation. However, the majority ofIBM's referenced clients have an efficiency focused contract, indicating a potential challenge forIBM as it aligns sales with delivery.

Infosys

Infosys has approximately 9,250 FTEs providing SAP application services worldwide, of whichGartner estimates around 4,000 are involved in providing SAP application management services(with around 45% of its resources in NAM, 3% in LATAM, 45% in EMEA and 8% in APJ). Infosysgenerates approximately 62% of its SAP application services revenue from applicationimplementation services, and 38% from SAP application management services. Infosys services 17of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are oil and gas, automotive, consumer goods, life sciences, and mining andconstruction.

Strengths

Infosys has strong service delivery capabilities, which enable it to deliver against bothfoundational break/fix and support requirements, as well as other optimization requirements.Infosys has structured its delivery capabilities primarily into industry focused teams, supportedby technology centers of excellence (more so than its Indian-heritage peers). As such, businessdemands lead solution and service development and delivery, for which Infosys has createddistinct business process and knowledge management IP.

Overall, Infosys demonstrates solid industry (Impact), implementation (i-SIF) and operations(Mantra) frameworks that it deploys for its SAP application services and brings to its clients.Around SAP application management Infosys invested in solutions to shift support toward more


self help, portal solutions, knowledge extraction and analysis to improve delivery and clientprocesses, as well as toward eliminating root-causes in a structured way to reduce the influx ofissues). The overall capabilities are supported by client references Infosys received thehighest satisfaction scores across the included vendors.

Infosys clients indicate that they receive value for money against attractive unit and total costs.Even though its coverage is limited in LATAM and APJ, the benefits apply on a global level referenced clients scored Infosys exceptionally high for its geographical capabilities, withattention to overall delivery in combination with the quality of staff especially lauded resources.

Cautions

Infosys should better communicate its overall vision for the future of SAP applicationmanagement to its existing customers. Its clients recognize they receive good quality at acompetitive price, but they indicate some challenges around vision, thought leadership andfunctional and business process capabilities. This is partially due to concerns that some clientshave relating to resource turnover and subsequent issues around timely knowledge transition.

In order to increase its competitive position in LATAM and APJ, Infosys needs to make strategicinvestments in capabilities in these regions. While Infosys scores high for its geographicaldelivery capabilities, its reference APJ clients indicate quality differences in delivery comparedto the EMEA and U.S. clients. Infosys should potentially reconsider its global strategicdirections to ensure a sustainable delivery model worldwide.

While proactive in dealing with project issues, day-to-day operations and managementoversight, Infosys needs to improve on bringing forward optimized solutions in existingaccounts. Clients recognize that they receive value for money, but the current focus is more onan efficiency-focused delivery to decrease cost.

Infosys is very rigorous in deploying its processes and frameworks from a commercialperspective, but it needs to ensure the continuation of those capabilities during delivery. As aconsequence, some issues of service delivery and fit are worked out over time, requiring aperiod of transition that could be lengthy at times.

NTT Data

Note: NTT Data has been active in acquiring IT services companies and majority stakes in ITservices companies over the past decade, and this activity continues today. Acquired companiesValue Team, Keane, Intelligroup, Cirquent and Qunie have been consolidated into NTT Data, butwere run and managed as stand-alone organizations up to 2012. In U.S., Intelligroup and Keane areamong the companies that go to market under the NTT Data brand, and have done so sinceFebruary 2012. Further, NTT Data has acquired a majority stake in itelligence, Extend Technologiesand Business Formula. itelligence will continue to operate globally under its own brand. The SAPcapabilities of all these companies have been consolidated for the purposes of this Magic Quadrant.As such, NTT Data's positioning will reflect both the combined strength of aligned and sharedcapabilities, as well as the inherent weaknesses of companies acting as independent providersthemselves. In this report the combined entities are referred to as "NTT Data." Not included is


Dimension Data, which was acquired by NTT, but is still a separate brand and a sister company toNTT Data.

NTT Data has approximately 5,500 FTEs providing SAP application services worldwide, of whicharound 1,500 are involved in providing SAP application management services (with around 17% ofits resources in NAM, 17% in EMEA and 67% in APJ). NTT Data generates approximately 57% ofits SAP application services revenue from application implementation services, 27% from SAPapplication management services and 16% from other SAP-related services. NTT Data services 21of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are automotive, discrete manufacturing, consumer goods, wholesale andprofessional services.

Strengths

The strength of NTT's many acquisitions lies in the SAP technology and services capabilitiesthat are core to companies like itelligence, Intelligroup, Cirquent and Keane. These acquisitionshave filled out SAP application management and application hosting capabilities. The combinedcapabilities also include varied investment and solution capabilities in the areas of cloud, mobileand Hana as well as creating access to a variety of industry solutions.

While not implemented across all geographies, the consolidation of capabilities follows adistinct path for branded service areas like SAP, whereby, across the regions and companies, aSAP Global One team leads the process to integrate methodologies, solutions, technology anddelivery. The strength lies in the consistent approach to providing services to existing and newclients in order to benefit from consolidation for SAP under the SAP iTran (for implementationsand transitions) and OME (operate, maintain, evolve) methodologies. It also allows NTT Data tosupport local, regional and global organizations.

NTT Data clients indicate that it provides skilled technical resources that have the right mindsetfor delivery and that offer a good fit with the clients' internal organization. The fit is realized bycombining NTT Data's shared services model (flexible staffing) and its COEs, which aremeasured through efficiency, effectiveness, risk and cost mitigation from a client perspective.

Cautions

More than any other included vendor, NTT Data depends on SAP ERP-related services. Whilecovering the complete SAP product portfolio and recognizing NTT Data for its ERP coverage,this also indicates that, relative to the other providers, NTT Data may find it difficult to competefor deals in the SCM and CRM areas, and especially in the BI area where it is clearly behind itspeers. Overall, NTT Data has among the lowest amount of industry and process assets, whichfurther impacts it competitive position.

While NTT Data indicates that it supports clients ranging from the small to the very large, theprovided references represent the lowest average deal size and average deal length among allincluded vendors.

The back-end integration and consolidation of technologies and delivery entities across theacquired companies is a complex process. Until full consolidation occurs, separate company


delivery structures will remain. This means that while the capabilities are there, the availabilityand ramp up of resources (people as well as technology) should not be expected immediately.This is also supported by the fact that reference clients referred to the acquired companiesinstead of NTT Data.

NTT Data generates more revenue through application implementation than applicationmanagement services. However, client references seem to indicate that there is a disconnect,as NTT Data scores lowest overall for assisting with change management within itsengagements and in the application of its own methodologies. It also scores low for innovationand being proactive, which is supported by statements that clients expect NTT Data to bring inmore SAP technology developments.

TCS

TCS has approximately 8,500 FTEs providing SAP application services worldwide, of which around3,750 are involved in providing SAP application management services (with around 45% of itsresources in NAM, 1% in LATAM, 35% in EMEA and 19% in APJ). TCS generates approximately54% of its SAP application services revenue from application implementation services and 46%from SAP application management services. TCS services 19 of the 22 industries covered in thisMagic Quadrant. Of these, the main markets for SAP application management services are discretemanufacturing, energy and utilities, and professional services.

Strengths

TCS continues to expand its industry solution approach across platforms, clearly makingindustry demand its primary focus. From a services perspective, this leads to a transparentsolution stack independent from the technology chosen. Consistency in the approach isrealized through rotation of staff between industry-based delivery units and technology-basedCOEs, which are jointly responsible for delivery success. These joint centers support theapplication management delivery, which is managed by the global competency center (GCC)approach, aiming to maximize the improvement of operations. This is supported by the highestreference client scores of the included vendors for service delivery quality and thoughtleadership.

TCS continues to invest in IP to support the improvement process it has among the highestamount of industry and process assets of the involved vendors. Most of this IP is aimed atminimizing application management overhead: analyzing the level of customization tools, datamigration simplification, knowledge transfer and extraction, business process repositories, andindustry-specific IP. TCS's focus for this approach is to expand the wallet share of existingclients (97% of its SAP-related services revenue is realized through existing clients), rather thanto go out and aggressively acquire new clients.

TCS achieved the highest satisfaction scores across all surveyed areas. It demonstrates astrong service delivery performance supported by qualified technical, process and functionalresources. Its clients especially mention the company's work ethic, in combination with thevalue for money they receive, and would happily expand services with TCS.


Cautions

TCS has not yet achieved scale in its SAP offerings. It generates more than 50% of its SAPapplication management revenue in five industry areas (discrete manufacturing, energy andutilities, professional services, retail, and consumer packaged goods), which is disproportionatefrom the 14 other industry areas it supports. Clients outside these industries requiring a providerwith in-depth industry capabilities need to perform proper due diligence in order to determinelong-term suitability of TCS for their SAP application management services.

While TCS demonstrates a strong application implementation capability, some of its clientsindicate the need to improve the internal hand over to application management and thecontinuation of improvements over the contract life cycle. Although TCS only has a low attritionrate of, on average, 13%, clients indicate a clear lag between the agreed improvements and theactual execution of the improvements.

Although it has staff in all regions, TCS clients indicate that there's an issue with regards theright staff being available locally to implement improvements. This signifies that the businessand technology capabilities of the COEs and industry units are not fully embedded in the localdelivery capabilities of the GCC. Furthermore, although TCS clearly aims to move its clients tobusiness-level metrics, it currently has among the lowest revenue streams based on businessmetrics across the included vendors and among the highest streams based on staffaugmentation.

Wipro

Gartner estimates that Wipro has approximately 8,750 FTEs providing SAP application servicesworldwide, of which around 3,300 are involved in providing SAP application management services(with around 39% of its resources in NAM, 3% in LATAM, 36% in EMEA and 21% in APJ). Wiprogenerates approximately 60% of its SAP application services revenue from applicationimplementation services and 40% from SAP application management services. Wipro services 17 ofthe 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP applicationmanagement services are discrete manufacturing, consumer packaged goods, and energy andutilities.

Strengths

Wipro has established a multiyear road map of services. It is based on transformational impactof technologies and market developments, and its capabilities to match the required capabilitieslocally, regionally and globally. While this is in itself logical, Wipro deploys the road map in closecooperation with long-term and strategic clients to maximize applicability. Wipro supports theprocess by extensive investments in its own infrastructure assets in its main regions (the U.S.and Europe) to enable and improve utility, cloud and hosting capabilities as well as BPO, and togain access to potential new clients. Wipro's main SAP growth engine is the APAC region (38%from 2010 to 2011), and especially Australia.

Wipro continues to expand the number of services and clients it supports through its FlexDelivery model, supported by its development factories and COEs. Its strength lies in the


inclusion of more business and transformational capabilities beyond operational support, aswell as having sufficient local staff to balance client demand with operational efficiency gainsthrough global delivery. This is also supported by the referenced client data indicating amongthe highest average contract value with good global and industry spread.

Reference clients clearly appreciate the cost competitiveness of Wipro in combination with itsglobal delivery capabilities while meeting services at agreed levels. In regard to service delivery,Wipro's clients score its employees high on work ethic.

Cautions

Wipro's growth strategy is sound for the U.S., continental Europe and the mature markets inAPJ, but it lacks clarity on the positioning for LATAM and the emerging markets in APJ. Thislack of clarity for LATAM is similar to most other included vendors.

Although Wipro is increasing its transformational and business capabilities, these are still beingbuilt up within the Flex Delivery model. Wipro's referenced clients note that Wipro delivery staff,while dedicated, in general are reactive and have limited business knowledge. Clients would liketo see Wipro improve its guidance for and support of its delivery staff, and demonstrate moreproactive behavior in increasing the value add of its services.

While already generating a large number of application implementation engagements throughan outcome-based strategy, Wipro's aim for more business-level deals on the applicationmanagement side has not yet paid off this is because it has among the lowest percentage ofbusiness-metrics-based revenue. Its provided references indicate a disconnect betweenimplementation and management deals, which suggests that clients select Wipro because ofeither implementation or maintenance considerations, but see limited benefits in movingimplementation forward into maintenance.

Wipro has a decent amount of industry and process assets it can deploy, yet its clients indicatethat Wipro needs to ensure that common processes and methodologies are followed acrosstheir staff, especially by new team members. In relation to the perceived separation betweenapplication integration and application management, and the concerns around businessknowledge, this means that assets are deployed more on a case-by-case basis than actuallybeing embedded in the core delivery structure.

Vendors Added or Dropped

We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as marketschange. As a result of these adjustments, the mix of vendors in any Magic Quadrant orMarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope oneyear and not the next does not necessarily indicate that we have changed our opinion of thatvendor. This may be a reflection of a change in the market and, therefore, changed evaluationcriteria, or a change of focus by a vendor.


Added

Not applicable, as this is a new Magic Quadrant.

Dropped

Not applicable, as this is a new Magic Quadrant.

Inclusion and Exclusion Criteria

Quantitative Criteria

A minimum of $150 million in external revenue (estimated for fiscal year 2011) per applicationsuite in Oracle and SAP application management services worldwide.

Demonstrated SAP application management services revenue derived from clients in NAM,LATAM, EMEA and/or APAC. This revenue must, at the very least, be generated by andallocated to clients in three of the four regions, with at least five separate clients per region.Such clients can be global clients with subsidiaries, or local or regional clients.

A minimum amount of allocated revenue per region, where providers need to be able todemonstrate at least three of the four regional revenue numbers below. Independent of theminimum worldwide revenue, providers must confirm that they have at least the followingpercentages of their global revenue in the respective regions:

NAM = 20%

EMEA = 20%

APJ = 10%

LATAM = 5%

A minimum of 10 reference submissions, with at least two references provided per region.

Qualitative Criteria

Overall market interest in and visibility of the provider, determined by serious consideration forselection from enterprise clients.

Gartner analysts' interactions with enterprise buyers, which reveal interest in specific SAPapplication management service providers.

Vendors are analyzed according to their breadth of capability and technical/package expertise,in combination with deep domain and process knowledge for the application management ofSAP applications as defined above.

Specifically excluded are services for SAP infrastructure support or hosting.


Explicitly excluded are services related to SaaS, BPO, or independent service provider offeredmaintenance or software support.

Evaluation Criteria

Ability to Execute

Gartner analysts evaluate vendors on the quality and efficacy of the processes, systems, methodsor procedures that enable vendor performance to be competitive, efficient and effective, and topositively impact revenue, retention and reputation. Ultimately, vendors are judged on their ability incapitalizing on their vision.

Product/Service: Core services offered by the provider that compete in/serve the SAPapplications life cycle services market. This includes current service offerings, as defined in theMarket Definition section, and expressed by growth, capacity, market penetration, skillsavailability, breadth and depth of offering.

Subcategories include:

A vendor's effective use of partnerships and alliances.

A vendor's end-to-end capabilities.

A vendor's comprehensive set of industry offerings.

A vendor's capabilities to deliver against business-outcome-based objectives and metrics.

Overall Viability: (Business Unit, Financial, Strategy, Organization): Viability includes anassessment of the overall organization's financial health, the financial and practical success ofthe business unit, and the likelihood of the individual business unit to continue to invest in theservice, continue offering the service and advancing the state of the art within the organization'sportfolio of services.

Sales Execution/Pricing: The vendor's capabilities in all pre-sales activities and the structurethat supports them. This includes deal management, pricing and negotiation, pre-sales supportand the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond and adapt to changingcompetitive forces as opportunities develop, competitors act, customer needs evolve andmarket dynamics change. This criterion also considers the provider's history of responsiveness,and the ability to quickly address changing requirements.

Customer Experience: This criterion considers the provider's:

Specific client feedback on the their experience working with SAP applications life cycleservices vendors

Demonstrated ability to deliver on key metrics that drive the overall "client experience"


Operations: The ability of the organization to meet its goals and commitments. Factors includethe quality of the organizational structure, including skills, experiences, programs, systems andother vehicles that enable the organization to operate effectively and efficiently on an ongoingbasis.


Organizational and business model.

Applied use of methodologies, industry standards and control frameworks.

Global delivery model capabilities.

Table 1. Ability to Execute Evaluation Criteria

Evaluation Criteria Weighting

Product/Service High

Overall Viability (Business Unit, Financial, Strategy, Organization) Standard

Sales Execution/Pricing Low

Market Responsiveness and Track Record High

Marketing Execution No Rating

Customer Experience High

Operations High


Completeness of Vision

Gartner analysts evaluate vendors on their ability to convincingly articulate logical statements aboutcurrent and future market direction, innovation, customer needs, and competitive forces. Ultimately,vendors are rated on their understanding of how market forces can be exploited to createopportunities for themselves and their clients.

Market Understanding: Ability of the vendor to understand buyers' needs and translate theseneeds into products and services. Vendors that show the highest degree of vision listen to andunderstand buyers' wants and needs, and can shape or enhance those wants and needs withtheir added vision.


A vendor's knowledge and articulation of key market direction and trends.

The analysis of the vendor's executive leadership (including thought leadership, continuityand operational capabilities).


Marketing Strategy: A clear SAP services marketing strategy with a differentiated set ofmessages consistently communicated throughout the internal vendor organization andexternalized through appropriate channels emphasizing differentiated positioning statements.

Sales Strategy: The strategy for selling SAP application services that uses the appropriatenetwork of direct and indirect sales, partner networking and alliance relationships that extendmarket reach to both prospects and the customer base.

Offering (Product) Strategy: A vendor's approach to product development and delivery thatemphasizes differentiation, functionality, methodology, and feature set as they map to currentand future requirements.


A vendor's strategies for partnerships and alliances

A vision for creating new and/or additional Oracle and/or SAP services business

A vendor's focus on end-to-end capabilities

Business Model: The soundness and logic of the vendor's underlying business proposition.

Vertical/Industry Strategy: The vendor's strategy to direct resources, skills, and offerings tomeet the specific needs of individual market segments, including verticals.


A vendor's strategies for partnerships and alliances

A vendor's comprehensive set of industry offerings

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise orcapital for investment, consolidation, defensive or pre-emptive purposes.

Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meetthe specific needs of geographies outside the "home" or native geography, either directly orthrough partners, channels and subsidiaries, as appropriate for that geography and market.


Table 2. Completeness of Vision Evaluation Criteria

Evaluation Criteria Weighting

Market Understanding High

Marketing Strategy Standard

Sales Strategy Standard

Offering (Product) Strategy Standard

Business Model No Rating

Vertical/Industry Strategy Standard

Innovation Standard

Geographic Strategy High


Quadrant Descriptions

Leaders

Leaders are performing well today, and are gaining traction and mind share in the market. Theyhave a clear vision of market direction and are actively building competencies to sustain theirleadership position in the market. The Leaders in this Magic Quadrant are Accenture, Capgemini,CSC and IBM.

Challengers

Challengers execute well today for the portfolio of work selected, but they have a less-defined viewof market direction. Consequently, these service providers may be the "up and comers" of thefuture, or they may not be aggressive and proactive enough in preparing for the future. TheChallengers in this Magic Quadrant are Atos, HCL Axon, HP, Infosys and TCS.

Visionaries

Visionaries articulate important market trends and direction. However, they may not be in a positionto fully deliver and consistently execute. They may need to improve their optimization of servicedelivery. The Visionaries in this Magic Quadrant are Ciber, Deloitte and Wipro.


Niche Players

Niche Players focus on a particular segment of the market such as vertical industry, client size,functional area (for example, human capital management, order management and others) or projectcomplexity. Their ability to execute is limited to those focus areas and, therefore, is assessedaccordingly. Their ability to innovate may be affected by this narrow focus. The Niche Players in thisMagic Quadrant are Cognizant, Fujitsu and NTT Data.

ContextThis Magic Quadrant addresses the worldwide SAP application management services capabilitiesof vendors that meet our criteria for inclusion.

Market OverviewGartner estimates that end-user spending on application outsourcing worldwide will be worth $40billion in 2012 (see "Forecast: IT Services, 2010-2016, 3Q12 Update"). This forecast indicatesgrowth of 0.25% for 2012, with further growth of 3.6% expected for 2013. On the other hand,Gartner's "IT Key Metrics Data 2012: Key Outsourcing Measures: Outsourcing Profiles: Multiyear"indicates that the outsourcing of application support declined from 41% in 2010 to 38% in 2011,and that only application development has seen growth, from 41% to 42% during the same period.It should be noted that in this Magic Quadrant, application development can be included inapplication management when development activities are embedded in multiyear engagements andare always followed by maintenance of the developed deliverables.

In practice, 2012 hasn't been much different from 2011 in terms of market drivers. Marketdevelopments reveal a continued cost focus. Contracts for SAP application management servicesare, on average, 4.3 years long for the included vendors (across the 160 reference clients) with anaverage yearly contract value of $1.4 million and average total contract value of $6.4 million. Driversfor end-user organizations to consider outsourcing SAP application management services includelegacy modernization through to consolidation, rationalization and optimization of a businessapplications landscape. Providers commonly tend to address this through "transformationalservices," as buyers commonly tend to use the SAP migration as a means to refresh internalprocesses and prepare for business changes. However, in many cases buyers prefer, as much aspossible, a "vanilla" implementation whereby they can redefine processes to minimizecustomizations.

In addition, buyers of SAP Applications life cycle services continue to expect, and demand,business-outcome-based services. This is clearly expanding along with the investments of SAPitself, as well as providers in industry solutions and capabilities, as they build around the next hypeof cloud, analytics and mobile. All included vendors list their investments and capabilities and allindicate their partnership with SAP in these areas. Buyers can hardly get around the technology andthe potential benefits it might offer. Nonetheless, while it is recognized that buyers often ask forindustry capabilities and the ability to meet business-outcome-based objectives, the majority still


focus on operational efficiency metrics. However, in comparison with "Magic Quadrant for SAPApplication Service Providers, Europe," worldwide there is clearly more interest in business metrics.

The core product at the epicenter of this Magic Quadrant analysis, namely SAP, is continuing itsprioritized focus on the above mentioned areas of cloud (with on-demand offerings), mobile(through its Sybase acquisition, SAP is better able to create real mobile offerings) and analytics(through its investment in Hana, to handle big data through in-memory processing in near real time).In addition, SAP has been able to extend its offerings to the midmarket through its RDS, whichtends to be adopted more by its midsize partners but less so by the large vendors who often havetheir own implementation offerings.

The following conclusions are derived from information provided regarding the included providers:

All are engaged in development initiatives with SAP, either for new products, services and/ormarkets. Some are even involved at SAP's own development centers.

All have multiple (global) partnerships with SAP and have won multiple awards over the past fewyears for services, capabilities, projects, specific client engagements or achievements. With allthe new technologies, the number of awards that can be won is rapidly expanding, which isdecreasing the actual importance of individual awards as the coverage area is declining.

The total generated revenue for SAP application services worldwide is almost $22 billion, ofwhich $8 billion is generated through SAP application management services. On average, 37%of the total SAP application services revenue is generated in NAM, 4% in LATAM, 45% in EMEAand 15% in APJ. For SAP application management, the split is 40%, 4%, 41% and 15%,respectively.

SAP services are still predominantly delivered to large enterprises, representing 86% of allrevenue streams.

As can be expected, the biggest revenue stream for SAP application services across theincluded service providers is SAP ERP, accounting for 51% of the average share of all SAPapplication platforms revenue (see the Evaluation Criteria Definitions section for what isincluded). On average, SCM represents 13%, CRM 10%, BI 17%, mobile 4% and other 5%.

In terms of industries, the overall top five industries (out of the 22 included) are consumergoods, utilities and energy, oil and gas/chemicals/process industry, public, and life sciences.The "bottom" five industries are insurance, wholesale, financial services, education and not-for-profit. It should be noted that SAP Applications services are delivered in many industries (whichwe have grouped into 22 industries) and that the individual spread per provider indicates afocus on limited industries for vertical solutions and a more opportunistic approach forhorizontal offerings. The main industries per provider are mentioned in the individual profiles.

The references given by the providers gave us good insight in their worldwide capabilities. Theclients indicated that they primarily pick providers based on service delivery capabilities in thefirst place, followed by technical expertise and then total cost of services. The least importantselection criteria were partnership with software partners (like SAP), product independence andinfluence of the sales team on the delivery team. However, the least important criteria alsoreceived low scores once providers had been selected. This indicates both a disconnect in the


provider organization between sales and delivery, as well as a disconnect in the clientorganization between the buying team and the actual service management team.

On average, the providers in this Magic Quadrant scored better for being proactive than theydid in the European Magic Quadrant, but innovation remains a challenge. Similar to theEuropean Magic Quadrant, part of this challenge lies in the fact that during the selectionprocess, the client does not rate innovation so highly, but then when it comes to execution theydo and are surprised the provider does not demonstrate innovative behavior. However, overallthere is a clear issue that is a direct consequence of provider behavior: they sell a story towhich they do not deliver.

Needless to say, the 15 providers included in this Magic Quadrant are a small fraction of the serviceproviders who provide SAP application management services. We selected these 15 based on themmeeting our inclusion criteria. As a result, many potentially capable providers are not included inthis study. For example, providers that specialize in delivery of application management primarily tothe midmarket and/or to a single geographic region and/or focus on hosting and utility services.These vendors were not included in the study either because they did not meet the minimumrevenue criteria or could not meet the minimum revenue distributions by geographic region.

Recommended ReadingSome documents may not be available as part of your current Gartner subscription.

"Magic Quadrants and MarketScopes: How Gartner Evaluates Vendors Within a Market"

"Magic Quadrant for Enterprise Application Service Providers, China"

"Magic Quadrant for Oracle Applications Service Providers, Europe"

"Magic Quadrant for SAP Application Service Providers, Europe"

"Magic Quadrant for SAP Implementation Service Providers, North America"

Evidence

The analysis included in this Magic Quadrant is based on the following sources:

All included providers completed a detailed vendor survey addressing their global SAPapplication management capabilities, covering revenue, staffing, geographic capabilities perSAP application platform, industry and process assets, partnership, joint initiatives, investmentsand other relevant information. This gave us the required numeric and qualitative data to allowus to compare providers and analyze them against the inclusion criteria.

A detailed vendor briefing with each provider addressing the provider's capabilities in a formatchosen by them, but at least addressing the inclusion criteria. Each briefing comprised materialthat the provider had prepared for and was discussed during a telephone conference.


A detailed reference client list per provider where, for each client, all relevant information wasprovided regarding services, scope, type of engagement, included services and technologies,project description, executed work and delivered benefits.

Of the 206 provided reference clients, 160 either completed an online survey made up ofquestions regarding the services, scope, duration, size, selection criteria, good points andchallenges in terms of the engagement and the provider (as well as multiple satisfactionquestions), or else they provided verbal feedback in a 30-minute reference call.

A service provider's representation of its organization through briefings, press releases, annualreports and other publicly available information, other than what was presented during thededicated detailed briefing as described above.

Gartner clients with whom Gartner analysts have discussions throughout the year.

Evaluation Criteria Definitions

Ability to Execute

Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality,feature sets, skills and so on, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.

Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includesan assessment of the overall organization's financial health, the financial and practicalsuccess of the business unit, and the likelihood that the individual business unit willcontinue investing in the product, will continue offering the product and will advancethe state of the art within the organization's portfolio of products.

Sales Execution/Pricing: The vendor's capabilities in all presales activities and thestructure that supports them. This includes deal management, pricing and negotiation,presales support, and the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond, change direction, beflexible and achieve competitive success as opportunities develop, competitors act,customer needs evolve and market dynamics change. This criterion also considers thevendor's history of responsiveness.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designedto deliver the organization's message to influence the market, promote the brand andbusiness, increase awareness of the products, and establish a positive identificationwith the product/brand and organization in the minds of buyers. This "mind share" canbe driven by a combination of publicity, promotional initiatives, thought leadership,word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enableclients to be successful with the products evaluated. Specifically, this includes the ways


customers receive technical support or account support. This can also include ancillarytools, customer support programs (and the quality thereof), availability of user groups,service-level agreements and so on.

Operations: The ability of the organization to meet its goals and commitments. Factorsinclude the quality of the organizational structure, including skills, experiences,programs, systems and other vehicles that enable the organization to operateeffectively and efficiently on an ongoing basis.

Completeness of Vision

Market Understanding: Ability of the vendor to understand buyers' wants and needsand to translate those into products and services. Vendors that show the highestdegree of vision listen and understand buyers' wants and needs, and can shape orenhance those with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistentlycommunicated throughout the organization and externalized through the website,advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling products that uses the appropriate network ofdirect and indirect sales, marketing, service, and communication affiliates that extendthe scope and depth of market reach, skills, expertise, technologies, services and thecustomer base.

Offering (Product) Strategy: The vendor's approach to product development anddelivery that emphasizes differentiation, functionality, methodology and feature sets asthey map to current and future requirements.

Business Model: The soundness and logic of the vendor's underlying businessproposition.

Vertical/Industry Strategy: The vendor's strategy to direct resources, skills andofferings to meet the specific needs of individual market segments, including verticalmarkets.

Innovation: Direct, related, complementary and synergistic layouts of resources,expertise or capital for investment, consolidation, defensive or pre-emptive purposes.

Geographic Strategy: The vendor's strategy to direct resources, skills and offerings tomeet the specific needs of geographies outside the "home" or native geography, eitherdirectly or through partners, channels and subsidiaries as appropriate for thatgeography and market.


Regional Headquarters

Corporate Headquarters56 Top Gallant RoadStamford, CT 06902-7700USA+1 203 964 0096

Japan HeadquartersGartner Japan Ltd.Atago Green Hills MORI Tower 5F2-5-1 Atago, Minato-kuTokyo 105-6205JAPAN+ 81 3 6430 1800

European HeadquartersTamesisThe GlantyEghamSurrey, TW20 9AWUNITED KINGDOM+44 1784 431611

Latin America HeadquartersGartner do BrazilAv. das Naes Unidas, 125519 andarWorld Trade Center04578-903So Paulo SPBRAZIL+55 11 3443 1509

Asia/Pacific HeadquartersGartner Australasia Pty. Ltd.Level 9, 141 Walker StreetNorth SydneyNew South Wale

gartner - magic quadrant for sap application management service providers worldwide (23 oct 2012)

Documents

sap application platform

sap solutions

application development

application operationsservices

sap product line

services component

general services

service metrics