2nd Quarter 2012, EMEA TPI Index

The TPI EMEA Index

Hosted by:

Marc Geall,

Deutsche Bank Software and IT

Services Team

Second Quarter/First Half 2012

Monday 16th July 2012

EMEA Outsourcing Market Data and Insights

© 2012

Information

Services Group, Inc.

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*Contracts with TCV > €20M

2

Partner & President

North Europe, ISG

Covering the state of the outsourcing industry for global, commercial contracts.

Duncan Aitchison

Welcome to the 39th Quarterly Outsourcing Index Call

Partner & Managing Director,

ISG Germany

Bernd Schaefer

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3

At A Glance

“

“

GLOBAL BROADER MARKET TCV UP Y/Y & Q/Q

MEGA DEAL STRENGTH HELPED OFFSET WEAKER 2Q ACTIVITY

GLOBALLY, BPO HAD SOLID GAINS Y/Y AND Q/Q

EMEA COOLS AS ASIA-PACIFIC RETURNS AN IMPRESSIVE QUARTER AND HALF

YEAR PERFORMANCE

YEAR TO DATE, STRONG MEGA DEAL AND ASIA-PACIFIC RESULTS WERE NOT

ENOUGH TO OFFSET BROADER MARKET DECLINE

Score Card 2Q12 TCV

(€B)*

2Q Y/Y

Change

2Q Q/Q

Change

1H12

TCV (€B)*

1H Y/Y

Change

Global Market 17.1€ 7% 7% 33.1€ -8%

Mega Deals 5.0€ 180% 320% 6.2€ 23%

New Scope 12.4€ 9% 34% 21.6€ -22%

Restructurings 4.7€ 1% -31% 11.5€ 39%

ITO 10.4€ 6% -5% 21.4€ -6%

BPO 6.7€ 7% 32% 11.7€ -13%

EMEA 6.7€ -21% -11% 14.2€ -24%

Asia Pacific 3.8€ 181% 162% 5.2€ 44%

Americas 6.60€ 6% -6% 13.7€ flat

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2Q12 TCV was up 7% Q/Q and Y/Y. Year to date, the TCV was down 8%.

Quarterly TCV (€B)*

Half-year TCV (€B)*

Global Broader Market Contract Award Trends

€ 17.1€ 16.0€ 16.0€ 17.7€ 17.6

€ 21.2€ 18.13

2Q121Q4Q3Q2Q111Q4Q3Q2Q101Q4Q3Q2Q091Q4Q3Q2Q08

TCV Avg of 4 Prior 2Qs

€ 33.1€ 36.1€ 40.9€ 34.0€ 39.2€ 32.5

€ 45.8€ 35.1€ 42.3€ 34.3€ 36.3

€ 36.6

201220112010200920082007

1H TCV 2H TCV Avg of 5 Prior 1Hs

Half-year Counts by TCV Bands

277

404

286291231

366

308327

250

20121110092008

€20-79M TCV Band

1H 2H

96111124115116

11399130111

20121110092008

€80M+ TCV Band

1H 2H

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5

EMEA TCV was down 21% Y/Y and 11% Q/Q. Year to date, TCV was down by 24%.

Quarterly EMEA TCV (€B)*

Half-year EMEA TCV (€B)*

EMEA Contract Award Trends

€ 6.7€ 7.5€ 8.5

€ 7.2€ 6.7

€ 13.0 €8.8



€ 14.2€ 18.8€ 17.6€ 14.2

€ 23.9€ 15.6

€ 27.8

€ 18.6€ 21.8

€ 14.9

€ 16.4 $18.0

20121110090807


Half-year EMEA Counts by TCV Bands

108

171

105125

90

158

148157

102

20121110092008

€20-79M TCV Band

1H 2H

4554504562

59526151

20121110092008

€80M+ TCV Band

1H 2H

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6

The increase in the number of Mega-relationships in 2012, was not enough to make

up for the drop in Mega-deal numbers and TCV.

EMEA Mega-deal & Mega-relationship Trends

€ 0.6 € 0.4 € 1.1 € 1.0

€ 0.5 € 0.3

€ 1.4

€ 0.3 € 0.7 € 1.0 € 1.1

€ 0.2 € 0.1

54

33

9

1

2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09

ACV Counts

Quarterly EMEA Mega-relationship ACV (€B)*

Quarterly EMEA Mega-deal TCV (€B)*

55% of Mega

Relationships in the

last 5 quarters were

Restructurings

€ 1.0

€ 6.2 € 5.8

€ 1.8 € 2.5 € 4.7

€ 0.8 € 0.9

€ 4.5 € 4.7

€ 1.2 10

4

1

2

3

11

3

2

1

0

2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09

TCV Counts

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7

Both New Scope and Restructurings dropped Q/Q. Year to date, New Scope TCV fell

32% as Restructurings rose 5%.

Quarterly EMEA New Scope vs. Restructuring TCV (€B)*

Half-year EMEA Restructuring TCV (€B)*

EMEA New Scope & Restructuring Trends

€ 4.7 € 5.2 € 5.7 € 5.5 € 5.5

€ 9.8

€ 2.0 € 2.4 € 2.7 € 1.7 € 1.2 € 1.2


New Scope Restructured

Half-year EMEA New Scope TCV (€B)*

€ 4.4 € 4.2 € 5.8 € 2.7 € 3.9 € 2.5

€ 12.2 € 6.5

€ 2.4

€ 5.0 € 2.5

€ 3.8

201220112010200920082007


€ 9.9 € 14.6 € 11.8 € 11.5

€ 20.1 € 13.1

€ 15.5 € 12.1

€ 19.5 € 9.9

€ 13.9 € 14.2

201220112010200920082007


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8

While all countries fell behind their first quarter values, only Scandinavia, France

and Southern Europe reached their five year average.

EMEA Country Details in Contract Award Trends

€ 5.69

€ 2.12

€ 3.08

€ 1.26

€ 0.37€ 0.91 € 0.68 € 0.13

€ 0

€ 2

€ 4

€ 6

€ 8

€ 10

€ 12

UK & Ireland DACH Scandinavia Benelux Africa &

Middle East

France Southern

Europe

E. Europe &

Russia

Prior 5 Period Range Average 1H11 1H12

Like-half EMEA TCV (€B)* by Country

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9

70

118

7097

67

105

110

119

71

20122011201020092008

€20-79M TCV Band 1H 2H

EMEA ITO TCV dropped 26% in the first half of 2012 as the number of ITO contracts

signed in the region declines across all TCV bands.

Half-year EMEA ITO TCV (€B)*

Top 10 EMEA ITO Providers

by 1H12 TCV

EMEA ITO Contract Award Trends

€ 9.1€ 12.3€ 15.1€ 11.3€ 17.7

€ 12.7

€ 20.8€ 15.2€ 17.6

€ 11.1

€ 8.7 € 13.8

201220112010200920082007


Half-year EMEA ITO Counts by TCV Bands

Accenture

BT

CSC

Fujitsu

HCL

HP

IBM

Infosys

TCS

T-Systems

Note: Service providers in alphabetical order; no

rankings implied. Placements based on ISG

contracts database.3137423645

47384636

20122011201020092008

€80M+ TCV Band1H 2H

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Although BPO contract numbers dropped in the first half of 2012, BPO TCV remains

ahead of its five year average.

Half-year EMEA BPO TCV (€B)*

Top 10 EMEA BPO Providers

by 1H12 TCV

EMEA BPO Contract Award Trends

Half-year EMEA BPO Counts by TCV Bands

HCL

HP

Infosys

Johnson Controls

Logica

Mahindra Satyam

Mitie

Serco

Sodexo

Xchanging

Note: Service providers in alphabetical order; no

rankings implied. Placements based on ISG

contracts database.

€ 5.1 € 6.6

€ 2.6 € 2.9 € 6.2

€ 3.0

€ 6.9

€ 3.4€ 4.2

€ 3.8€ 7.7 € 4.2

201220112010200920082007


38

53

352823

53

3838

31

20122011201020092008

€20-79M TCV Band 1H 2H

14178917

121415

15

20122011201020092008

€80M+ TCV Band1H 2H

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11

Only Financial Services and Travel, Transport & Leisure sectors finished ahead of last

year’s first-half totals.

EMEA Industry Details in Contract Award Trends

€ 4.9

€ 3.8

€ 1.3 € 1.4 € 1.5

€ 0.6 € 0.1

€ 0.8

€ -

€ 1

€ 2

€ 3

€ 4

€ 5

€ 6

€ 7

€ 8

€ 9 Prior 5 Period Range Average 1H11 1H12

Like-Half EMEA TCV (€B)* by Industry

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12

UK Public Sector continues to dominate EMEA Public sector contracting.

Year-to-date 2012 TCV (€ B)*

Public Sector Analysis for EMEA

€ 11.4

91%

€ 1.1

9%

UK Public Sector

Other EMEA Public Sector

Years 2007 – 2011 TCV (€ B)*

€ 94.4

81%

€ 22.1

19%

UK Public Sector

Other EMEA Public Sector

UK Public Sector Share of the EMEA Public Sector Market

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13

The Public Sector expands to two-thirds of the UK market as the Commercial

outsourcing market shrinks.

Year-to-date 2012 TCV (€ B)*

Public vs Commercial Sector Analysis for the UK

€ 11.4

67%

€ 5.7

33%

UK Public Sector

UK Commercial Sector

Years 2007 – 2011 TCV (€ B)*

€ 94.4

58%

€ 69.5

42%

UK Public Sector

UK Commercial Sector

UK Public Sector vs. Commercial Sector Market Share

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The Top 5 Service Providers List, based on TCV awarded in the first half of 2012, for

contracts over € 20 million in total value, shown in alphabetical order.

Public Sector Top 5 Service Providers

Note: Service providers in alphabetical order; no rankings implied

Placements based on UK Public Sector contract awards sourced from ISG contracts database

Top 5UK Public Sector

Top 5Other EMEA Public Sector

Capita Accenture

Carillion Atkins

CSC BT

HP KPN

Logica Tieto

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15

Asia-Pacific TCV was up significantly Q/Q and Y/Y with most TCV awards in Financial

Services and Telecom. Year to date, TCV was up 44%.

Quarterly Asia-Pacific TCV (€B)*

Half-year Asia-Pacific TCV (€B)*

Asia-Pacific Contract Award Trends

€ 3.8

€ 1.4 € 1.3 € 1.1

€ 3.7

€ 1.4

€ 1.9


TCV (B) Avg of 4 Prior 2Qs

€ 5.2€ 3.6

€ 2.2

€ 5.1€ 2.8

€ 4.6

€ 3.9€ 5.7

€ 5.3

€ 6.4€ 4.6

€ 3.7

201220112010200920082007


Half-year Asia-Pacific Counts by TCV Bands

Includes a

€1 B Mega

Deal in India

4353

402825

3636

4142

20121110092008

€20-79M TCV Band

1H 2H

161381911

911

1813

20121110092008

€80M+ TCV Band

1H 2H

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16

Americas TCV was up 6% Y/Y but down 6% Q/Q. Mega-deals accounted for a

substantial share of 2Q12 TCV. Year to date, TCV was flat.

Quarterly Americas TCV (€B)*

Half-year Americas TCV (€B)*

Americas Contract Award Trends

€ 6.6€ 7.06€ 6.26

€ 9.30

€ 7.15€ 6.82

€ 7.4



€ 13.7 € 13.7 € 21.0

€ 14.8 € 12.5 € 12.3

€ 14.1

€ 10.8 € 15.2

€ 13.0 € 15.4 € 14.8

201220112010200920082007


Half-year Americas Counts by TCV Bands

Includes €3B of Mega

Deal activity, with €1.8

out of Brazil in

Financial Services

126

180141138

116

172

124129106

20121110092008

€20-79M TCV Band

1H 2H

3544665143

59526151

20121110092008

€80M+ TCV Band

1H 2H

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6.35 6.486.14 6.10 6.07 5.95 5.88 5.72 5.48 5.31 5.10 4.98 5.05 4.85

6.4

6.0

5.5

5.1

1999 00 01 02 03 04 05 06 07 08 09 10 2011 1H12

Avg Duration Duration Plateau

Declines in duration may appear small, but even a slight decline can have large

impact on TCV levels.

Duration Trend Impact on the Global Market

Average Contract Durations Over Time

What if all 1H12 contracts* had 1999 average durations of 6.4?

€ 33 B

€ 46 B

1H12 Actual TCV

Hypothetical 1H12 TCV with 1999-2000 Durations

38%

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18

Durations decreased across a range of contract types.

Does the 1H12 duration dip signal the start of a step down?

32%46%

22%

34%

51%

15%

Durations

< 5 Years

Durations

5 - 6.9 Years

Durations

7+ Years

2009 1H122009 1H122009 1H12

Distribution of Contracts*

Moves Towards Lower Durations

Average Durations Fall

for All Contract Sizes*

5.5

5.3 5.3

4.8

2009 2010 2011 1H12

5.0

4.74.8

4.5

2009 2010 2011 1H12

BPO Duration Trends* Restructuring Duration Trends*

4.9

6.6

4.8

6.1

4.9

6.2

4.6

6.0

TCV < €160M TCV > €160M

2009 1H1220112010 2009 1H1220112010

10%

12%

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19

Factors Influencing Downward Trend in Contract Durations

Stepped Up Market Competition

Amidst increased provider competition, companies

– particularly New Sourcing Adopters – push for

shorter contract commitments, leveraging the

providers’ desire to seal the deal.

Outsourcing Savvy Clients and Providers

Solution improvements enable more efficient and effective

delivery of innovations, making the best solutions at the best

prices available via more frequent contract negotiations.

Disposability of Cloud Solutions

Service Providers note that contracts with Cloud in scope are shorter

in duration than Managed Services deals.

5.14.4

2009 1H12

↓14%

Average Duration for

New Adopters

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20

� Global Broader Market TCV up 7% Y/Y – strengthened by Mega

Deals and increased activity in Asia-Pacific

� EMEA TCV and contract numbers dropped both Q/Q and Y/Y

� EMEA BPO flat Q/Q, while global values gain traction

� Year to date, Global TCV was down 8% impacted by weak

EMEA results and fewer contract awards

� Anticipate a soft 3Q against a tough Y/Y compare

� 4Q TCV may pick up because of larger deals in the pipeline

� Unprecedented levels of TCV in 2H12 are required for the

market to meet the record-high 2011 TCV result

2Q12 TPI Index Summary and Outlook

summarymarket

outlookmarket

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21

Learn More� Please contact us with your questions and comments.

--- Media Contacts ---

► John Keppel ► Duncan Aitchison

www.considerthesourceblog.com

Partner & President Research &

Managed Services and Chief

Marketing Officer

+44 (0)7879 432 212

[email protected]

Partner & President

North Europe, ISG

+44 (0)1628 21702

[email protected]

► Denise Colgan

Marketing Director, EMEA, ISG

+44 1737 371523

[email protected]

► Louise Fernley

Cohn & Wolfe for ISG

+44 207 331 5365

[email protected]

www.isg-one.com

2nd Quarter 2012, EMEA TPI Index

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