Fourth Quarter and Full-Year 2014 ISG Outsourcing Index
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Transcript of Fourth Quarter and Full-Year 2014 ISG Outsourcing Index
© 2015 Information Services
Group, Inc. All Rights Reserved
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
1
Hosted by:
S.K.Prasad Borra, Rishi Jhunjhunwala and James Schneider
Goldman Sachs
15 January 2015
The Global ISG Outsourcing Index
Fourth Quarter and Full-Year 2014
Market Data and Insights
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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Covering the state of the outsourcing industry for global, commercial contracts.*
Welcome to the 4th Quarter & Full-Year Outsourcing Index Review
Esteban Herrera Partner
John Keppel Partner & President
Dr. David Howie Partner
*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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At a Glance
2014 Y/Y 2014 Y/Y
ACV ($B)* Change Counts Change
$ 23.1 16% 1,218 4%
$ 14.0 16% 810 1%
$ 9.1 16% 408 9%
$ 6.2 53% 33 22%
$ 17.3 19% 880 3%
$ 5.8 8% 338 -7%
$ 8.2 22% 484 8%
$ 11.9 7% 588 -1%
$ 3.0 45% 146 11%
Scorecard 4Q14 4Q Y/Y 4Q Q/Q
ACV ($B)* Change Change
Global Market $ 5.8 27% 25%
New Scope $ 3.1 1% 5%
Restructurings $ 2.7 77% 58%
Mega-relationships $ 1.6 354% 46%
ITO $ 4.1 13% 19%
BPO $ 1.7 80% 41%
Americas $ 2.1 43% 8%
EMEA $ 3.1 19% 34%
Asia Pacific $ 0.6 21% 49%
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Broader Market 4Q14 ACV posts solid results, up 27% Y/Y with heightened activity in Restructurings. In 2014, ACV is up by double digits as we forecast on earlier calls.
4Q and Full-Year Broader Market ACV ($B)*
Global Market Size
Broader Market Contract Award Trends
$17.3 $15.3 $18.3 $16.5 $17.2 $14.6 $15.9 $12.1 $12.4 $13.5
$5.8 $4.6
$5.4 $7.2 $5.7 $7.3 $5.0
$6.2 $4.6 $5.6
$23.1 $19.9
$23.6 $23.7 $22.9 $21.9 $20.9 $18.3 $17.0
$19.1
201413121110090807062005
1Q to 3Q ACV 4Q ACV Full-Year ACV
$110
$84
6,262
3,062
201413121110090807062005
Commercial Sector Outsourcing Market Size ($B)Active Contracts
4Q and Full-Year Broader Market Contract Counts
900 875 896 953 812 757 672 533 523 521
318 300 287 325 265 306
222 181 204 180
1,218 1,175 1,183 1,278
1,077 1,063 894
714 727 701
201413121110090807062005
1Q to 3Q Counts 4Q Counts
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4Q14 ACV up 43% Y/Y with growth supported by increasing Restructuring activity. In 2014, ACV is up 22% with moderate gains in ITO and strong advances in BPO.
Americas 4Q and Full-Year Counts
Americas Contract Award Trends
363 336 387 385 367 313 282 224 239 230
121 112 113 137
86 119
94 82 81 74
484 448
500 522 453 432
376 306 320 304
201413121110090807062005
1Q to 3Q Counts 4Q Counts
Americas 4Q and Full-Year ACV ($B)*
$6.1 $5.2 $7.0 $5.9
$7.9 $6.2 $4.8 $4.6
$6.3 $6.0
$2.1 $1.5
$1.9 $2.3
$1.1 $2.3
$1.9 $2.8 $1.8 $2.1
$8.2 $6.7
$8.9 $8.2 $9.0 $8.5
$6.7 $7.4 $8.1 $8.1
201413121110090807062005
1Q to 3Q ACV 4Q ACV
Americas Market Size Americas Full-Year Segment Details ACV ($B)*
$4.9
$3.3
$5.1
$3.1
$0
$1
$2
$3
$4
$5
$6
$7
New Scope Restructuring ITO BPO
Range of Prior 3 Years Avg of Prior 3 Years
2013 2014
$40 $44
2,558
1,453
201413121110090807062005
Commercial Sector Outsourcing Market Size ($B)
Active Contracts
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$2.1
$1.1 $1.0 $0.9 $0.6
$0.9 $0.9
$0.5 $0.2
$-
$0.5
$1.0
$1.5
$2.0
$2.5
FinancialServices
Manufacturing Telecom& Media
Healthcare& Pharma
ConsumerProducts & Goods
BusinessServices
Energy Retail TravelTransport
Leisure
Range of Prior 3 Years Avg of Prior 3 Years 2013 2014
For 2014, U.S. Market up 17% over a weaker 2013 with Canada and Brazil posting gains. Both Financial Services and Energy produce much stronger annual results.
Americas Sub-regions Full-Year ACV ($B)*
Americas Industry Full-Year ACV ($B)*
Americas Contract Award Trends Detail
$0.72
$0.42
$0.05 $0.09 $0.0
$0.2
$0.4
$0.6
$0.8
Canada Brazil Mexico Other LatAm
Range of Prior 3 Years Avg of Prior 3 Years 2013 2014
$6.95
$-
$2
$4
$6
$8
$10
U.S.
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Co. Revenues < $2 B Co. Revenues $2 -10 B
ISG Sourcing Market Standouts in the Americas Americas-based providers make up half of the Big 10 Sourcing Standouts. Providers with substantial offshore profiles lead in both the Building and Breakthrough tiers.
Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings
The Building 10
Sourcing Standouts
The Breakthrough 10
Sourcing Standouts
Aon Hewitt
CB Richard Ellis CGI
Cognizant
CompuCom
Genpact
HCL
Infosys
Teleperformance
Wipro
Accenture
Atos BT
Capgemini
CSC
Dell
IBM
RR Donnelley
TCS
Xerox
APAC Customer Service
EXL GardaWorld
IGATE
KPIT
Minacs
Sitel
Sonda
Syntel
TeleTech
The Big 10
Sourcing Standouts
Co. Revenues > $10B
SOURCING STANDOUTS GROUPED BY COMPANY SIZE
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4Q14 ACV up 19% Y/Y with growth supported by large contract awards. In 2014, ACV up modestly at 7% with increasing activity in the IT Infrastructure space.
EMEA 4Q and Full-Year Counts
EMEA Contract Award Trends
430 433 385 443 335
346 315 237 217 240
158 162 137
159
138 142 91
77 96 85
588 595 522
602
473 488 406
314 313 325
201413121110090807062005
1Q to 3Q Counts 4Q Counts
EMEA 4Q and Full-Year ACV ($B)*
$8.8 $8.6 $8.5 $9.0 $8.0 $6.5 $9.7
$5.9 $4.8 $6.7
$3.1 $2.6 $2.8 $4.3
$3.5 $4.1
$2.2
$2.5 $2.4 $2.8
$11.9 $11.2 $11.3 $13.3
$11.5 $10.6 $11.9
$8.4 $7.2 $9.5
201413121110090807062005
1Q to 3Q ACV 4Q ACV
EMEA Market Size EMEA Full-Year Segment Details ACV ($B)*
$7.1
$4.8
$9.6
$2.3
$0
$2
$4
$6
$8
$10
$12
New Scope Restructuring ITO BPO
Range of Prior 3 Years Avg of Prior 3 Years
2013 2014
$56
$32
2,900
1,286
201413121110090807062005
Commercial Sector Outsourcing Market Size ($B)
Active Contracts
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$2.8
$2.2 $2.1 $1.9
$1.2
$0.5 $0.5 $0.4 $0.3 $-
$1
$2
$3
$4
FinancialServices
Manufacturing Energy TravelTransport
Leisure
Telecom& Media
BusinessServices
ConsumerProducts & Goods
Retail Healthcare& Pharma
Range of Prior 3 Years Avg of Prior 3 Years 2013 2014
France and U.K. geographies post gains against 2013 results while Energy and Manufacturing markets results are strong, both up 29% for the year.
EMEA Sub-regions Full-Year ACV ($B)*
EMEA Industry Full-Year ACV ($B)*
EMEA Contract Award Trends Detail
$4.2
$2.2 $1.6
$0.6
$1.6 $1.0
$0.4 $0.3 $0
$1
$2
$3
$4
$5
$6
U.K. & Ireland DACH Nordics Benelux France SouthernEurope
Africa & MiddleEast
E. Europe &Russia
Range of Prior 3 Years Avg of Prior 3 Years 2013 2014
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Co. Revenues < $2 B Co. Revenues $2 -10 B
ISG Sourcing Market Standouts in EMEA Large multinationals and providers with strong local “home market” profiles head up both the Big 10 and Building 10 tiers.
Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings
Co. Revenues > $10B
SOURCING STANDOUTS GROUPED BY COMPANY SIZE
Capita
Carillion
Cognizant
EVRY
HCL
Infosys
MITIE Orange Business Services
Tech Mahindra
Tieto
Accenture
Atos
BT
Capgemini
CSC
Fujitsu
HP IBM
TCS
T-Systems
Endava
HH Global
Innovation Group
Kelway
Kuehne & Nagel
MAYKOR
Mindtree NextiraOne
NNIT A/S
Xchanging
The Building 10
Sourcing Standouts
The Breakthrough 10
Sourcing Standouts
The Big 10
Sourcing Standouts
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ACV up 21% Y/Y as contracting counts soared, up nearly 50%. In 2014, ACV rises significantly, mostly on ITO activity.
Asia Pacific 4Q and Full-Year Counts
Asia Pacific Contract Award Trends
107 106 124 125 110 98
75 72 67 51
39 26 37 29 41
45
37 22 27
21
146 132
161 154 151 143
112 94 94
72
201413121110090807062005
1Q to 3Q Counts 4Q Counts
Asia Pacific 4Q and Full-Year ACV ($B)*
$2.4 $1.5
$2.7
$1.6 $1.4 $2.0
$1.5 $1.6 $1.3 $0.8
$0.6
$0.5
$0.7
$0.6 $1.0
$0.8
$0.9 $0.9
$0.4 $0.8
$3.0
$2.0
$3.4
$2.2 $2.4 $2.8
$2.4 $2.5
$1.7 $1.6
201413121110090807062005
1Q to 3Q ACV 4Q ACV
Asia Pacific Market Size Asia Pacific Full-Year Segment Details ACV ($B)*
$1.9
$1.1
$2.7
$0.3 $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
New Scope Restructuring ITO BPO
Range of Prior 3 Years Avg of Prior 3 Years
2013 2014
$13.9
$7.8
804
323
201413121110090807062005
Commercial Sector Outsourcing Market Size ($B)
Active Contracts
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Annually, most geographies in Asia Pacific exceed 2013’s performance with strength in ANZ, India and Japan. Telecom and Manufacturing post major comebacks.
Asia Pacific Sub-regions Full-Year ACV ($B)*
Asia Pacific Industry Full-Year ACV ($B)*
Asia Pacific Contract Award Trends Detail
$0.93 $0.73 $0.66
$0.37 $0.25
$0.02 $0.0
$0.5
$1.0
$1.5
$2.0
ANZ India and South Asia Japan Greater China Southeast Asia South Korea
Range of Prior 3 Years Avg of Prior 3 Years 2013 2014
$0.66 $0.63 $0.73
$0.41
$0.18 $0.07 $0.08
$0.16 $0.05 $-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
FinancialServices
Telecom& Media
Manufacturing TravelTransport
Leisure
Energy BusinessServices
Healthcare& Pharma
ConsumerProducts & Goods
Retail
Range of Prior 3 Years Avg of Prior 3 Years 2013 2014
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Co. Revenues < $2 B Co. Revenues $2 -10 B
ISG Sourcing Market Standouts in Asia Pacific Several Japanese providers join the large multinationals in the Big 10 Sourcing Standouts list. Australian and India-based providers contribute greatly to the two smaller tiers.
Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings
Co. Revenues > $10B
SOURCING STANDOUTS GROUPED BY COMPANY SIZE
Cognizant
HCL
Infosys
Orange Business Services
Singtel Optus
Tech Mahindra
Transfield Services United Group Services
Unisys
Wipro
Accenture
BT
CSC
Fujitsu
Hitachi
HP
IBM Ricoh
TCS
Telstra
ChinaSoft
Hollysys Automation
Itron
Kratos Defense & Security
NGA Human Resources
Pactera
Ramco Redknee Solutions
SITA
WNS
The Building 10
Sourcing Standouts
The Breakthrough 10
Sourcing Standouts
The Big 10
Sourcing Standouts
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Special Topic for Fourth Quarter and Full-Year 2014
CLOUD ADOPTION FORCES INFLECTION POINT IN MARKET
John Keppel Partner & President
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Indian-heritage+Niche Providers Hard charging
Growth Tower-based ITO
The Sourcing Industry Is at an Inflection Point
Expect Restructurings in Next 2 Years
Almost Half Infrastructure Related
Competitive Bids
Western-heritage Providers Traditional Leaders Tower-based ITO
Scale Cloud Providers Cloud Multisourcing; Workloads Go to Best Cloud Option
Providers must reinvent to succeed Shed outdated business models and adopt radically different strategies
IaaS Gets Real
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Get the focus right. … There is plenty of new space to play in.
Bought by smaller
competitors
Must Move Fast and Invest
CATCH THE DIGITIZATION WAVE Driven by the Internet of Things
Realign to Market Opportunities
Focus on
Applications &
Testing $
Government support
Consolidation
THE LEADER BOARD WILL CHANGE Bought out, bailed out or bow out
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4Q Broader Market ACV up on increases in activity and large awards
All regions saw significant 4Q Y/Y growth
ACV up double digits for the full year; both New and Restructured scope up
Mature sourcing markets provide significant growth in Asia Pacific, moderate gains in the Americas and a slight increase in EMEA
ITO ACV saw 19% growth for 2014;BPO gains uneven against very weak 2013
Manufacturing and Energy post impressive annual growth
Expect a healthy industry going forward
Comparisons for 1H15 will be challenging against 1H14 as 1Q and 2Q 2014 were $6B quarters – difficult to match
Sourcing industry sits at an inflection point with not only long-standing Western-heritage providers facing off against Indian-heritage providers, but now cloud-based providers join the fray
4Q and Full-Year ISG Outsourcing Index Summary and Outlook
summary market
outlook market
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Please contact us with your questions and comments.
Learn More
Paul Reynolds Chief Research Officer
+1 508 625 2194 [email protected]
ISG insights serving providers and market analysts
www.isg-one.com John Keppel
Partner and President +44 (0)7879 432 212
Will Thoretz Americas Media Contact
+1 203 517 3119 [email protected]
Denise Colgan EMEA and AP Media Contact
+44 1737 371523 [email protected]
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Fourth Quarter and Full-Year 2014
APPENDIX: SCORE CARD FOR TCV
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The ISG Outsourcing Index has moved to ACV as the primary measure of the Broader Market. In transition, we will continue to provide a high-level TCV view of the market via a Scorecard analysis.
Fourth Quarter and Full-Year TCV Scorecard
*Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase®
Scorecard 4Q14 4Q Y/Y 4Q Q/Q 2014 2014
TCV ($B)* Change Change TCV ($B)* Change
Global Market $ 27.5 37% 20% $ 104.6 20%
New Scope $ 13.7 -6% -12% $ 64.9 14%
Restructurings $ 13.8 151% 87% $ 39.7 30%
Mega-deals $ 9.3 243% 89% $ 24.3 66%
ITO $ 19.3 38% 16% $ 76.1 29%
BPO $ 8.2 34% 31% $ 28.5 0%
Americas $ 9.6 76% -6% $ 37.2 40%
EMEA $ 15.0 18% 39% $ 54.0 4%
Asia Pacific $ 2.9 45% 49% $ 13.4 48%
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