1q13 isg outsourcing index
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Joe Foresi, Janney
11 April 2013
The Global ISG Outsourcing Index
First Quarter 2013
Market Data and Insights
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*Contracts with ACV ≥ $5M
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Covering the state of the outsourcing industry for global, commercial contracts.*
Welcome to the 42st Quarterly Outsourcing Index Review
Esteban Herrera Partner
John Keppel President & Chief Marketing Officer
Dr. David Howie Partner
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*Contracts with ACV ≥ $5M
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At A Glance
“ “
BROADER MARKET SAGGED IN 1Q13, BOTH Y/Y AND Q/Q
MEGA-RELATIONSHIPS WERE UP OVER 50% Y/Y, BUT SMALL AWARDS SHOWED CONSIDERABLE WEAKNESS
BPO MAINTAINED RECENT STRENGTH, WITH ACTIVITY UP Q/Q, BUT ITO RESULTS FELL SIGNIFICANTLY Y/Y
MATURE MARKETS IN AMERICAS AND EMEA DECLINED SHARPLY Y/Y
HEALTHY INCREASE IN ASIA PACIFIC PERFORMANCE, WITH POSITIVE RESULTS IN AUSTRALIA-NEW ZEALAND
1Q13 1Q Y/Y 1Q Q/Q 1Q13 1Q Y/Y 1Q Q/Q
Scorecard ACV ($B)* Change Change Counts Change Change
Global Market $ 3.9 -27% -24% 223 -24% -16%
New Scope $ 2.1 -31% -37% 166 -22% -9%
Restructurings $ 1.8 -22% 1% 57 -28% -30%
Mega-relationships $ 1.2 54% 4% 7 -13% -79%
ITO $ 2.4 -35% -28% 127 -34% -30%
BPO $ 1.5 -10% -18% 96 -3% 16%
Americas $ 1.6 -39% -15% 90 -38% -16%
EMEA $ 1.9 -20% -30% 105 -15% -17%
Asia Pacific $ 0.4 8% -23% 28 22% -7%
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ACV of almost $4B was down 27% Y/Y and 24% Q/Q. However, the trailing 12-month ACV was on par with the pervious 12 month period, tempering results.
Broader Market ACV ($B)*
New Scope vs. Restructuring ACV(B)*
Broader Market Contract Award Trends
$3.9
$5.2 $5.4 $5.7 $5.4 $6.5 $5.6
$4.4
$5.4 $5.7
$4.5
$5.6 $6.2
Avg of Prior 1Qs $5.7
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
Broader Market Counts
$2.1
$3.4 $3.1
$4.0
$1.8 $1.8 $2.3
$1.4
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
New Scope Restructuring
223 264
292
349
259
Avg of Prior 1Qs 300
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
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Mega-relationships, deals with ACV awards 100M+, were up 54% Y/Y and 4% Q/Q. Mid to small sized awards dipped , but the trailing 12-month compare was stable.
Mega-relationships in 8 Quarter Increments New Scope vs. Restructuring Counts
Broader Market Contract Trends for the Largest Deals
ACV(B)* by Bands
$2.4
$4.0 $3.8 $3.6 $4.6 $4.1 $3.9 $3.5
$4.8
$0.3 $0.9 $1.1 $0.8 $1.1 $0.8 $1.0 $0.5
$1.0
$1.2 $1.2 $1.5 $2.1
$0.8
$2.3 $1.7
$0.9 $0.6
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
$5 - 49M $50-99M $100M +
31
37
48
31
22
13
2Q11 - 1Q13
2Q09 - 1Q11
2Q07 - 1Q09
New Scope Restructuring
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ITO ACV of almost $2.5B was down 35% Y/Y and 27% Q/Q. Virtually every industry dropped with the exception of Energy, driven by large deal activity.
ITO Annual ACV ($B)* ITO Industry ACV ($B)*
ITO Contract Award Trends
ITO Counts
$2.4 $3.3 $3.6 $3.2 $3.7
$4.6 $3.9
$2.8 $3.5
$4.8
$3.2 $4.3 $4.7
Avg of Prior 1Qs $4.0
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
127
193 223
155
Avg of Prior 1Qs 190
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
$1.02
$0.76
$0.43
$0.43
$0.37
$0.26
$0.23
$0.15
$0.54
$0.59
$0.27
$0.57
$0.09
$0.13
$0.14
$0.04
Manufacturing
Financial Services
Travel, Transport,Leisure
Energy
Telecom & Media
Business Services
Healthcare &Pharma
Retail
Prior 5 Like-Qtr Avg 1Q13
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BPO ACV of 1.5B was down 12% Y/Y and 21% Q/Q, yet Telecom and Travel & Transportation industries significantly outperformed their historical averages.
BPO Annual ACV ($B)* BPO Industry ACV ($B)*
BPO Contract Award Trends
$1.5 $1.9 $1.8
$2.5
$1.7 $1.9 $1.7 $1.6 $1.9
$0.9 $1.2 $1.2 $1.5
Avg of Prior 1Qs $1.7
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
$0.42
$0.35
$0.31
$0.14
$0.14
$0.12
$0.09
$0.05
$0.21
$0.29
$0.54
$0.10
$0.13
$0.08
$0.14
$0.06
Manufacturing
Financial Services
Telecom & Media
Business Services
Healthcare &Pharma
Energy
Travel, Transport,Leisure
Retail
Prior 5 Like-Qtr Avg 1Q13
BPO Counts
96
83
99
126
104
Avg of Prior 1Qs 110
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
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Americas ACV of $1.6B was down 39% Y/Y and 15% Q/Q. Americas BPO is up 17% Y/Y and 50% Q/Q, outperforming the ITO sector for the first time.
Americas ACV ($B)*
Americas New vs. Restructuring ACV(B)*
Americas Contract Award Trends
$1.6 $1.9 $1.8 $1.9 $2.6 $2.3 $2.0 $1.8 $2.0
$1.1 $2.0
$2.8 $2.9
Avg of Prior 1Qs $2.5
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
$0.84
$1.19
$1.05
$1.39
$0.73 $0.67
$1.54
$0.62
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
New Scope Restructuring
Americas Counts by ACV Bands
$0.7
$1.2 $1.2 $1.2
$1.8
$1.3 $1.1
$1.1 $1.1
$0.9
$0.6 $0.6 $0.6 $0.8
$0.9 $0.8
$0.7 $0.9
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
ITO ACV BPO ACV
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$2.31
$1.35
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
US
The U.S .contributed most to the drop in the Americas ACV, down 43% Y/Y and 24% Q/Q. Mexico continues to enjoy large-deal activity, keeping the ACV numbers high.
Americas Contract Award Trends Detail
Americas Sub-region ACV ($B)*
$0.66
$0.37
$0.27
$0.25
$0.31
$0.13
$0.11
$0.11
$0.21
$0.35
$0.54
$0.11
$0.19
$0.02
$0.07
$0.09
Manufacturing
Financial Services
Telecom & Media
Business Services
Healthcare &Pharma
Retail
Energy
Travel, Transport,Leisure
Prior 5 Like-Qtr Avg 1Q13
Americas Industry ACV ($B)*
$0.24
$0.01
$0.03
$0.00
$0.09
$0.03
$0.01
$0.10
$-
$0.05
$0.10
$0.15
$0.20
$0.25
Canada Brazil OtherLatAm
Mexico
Prior 5 Like-Qtr Range Prior 5 Like-Qtr Avg 1Q12 1Q13
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EMEA ACV of almost $2B was down 20% Y/Y and 30% Q/Q. Restructuring ACV was up 12% Y/Y and 29% Q/Q in EMEA.
EMEA ACV ($B)*
EMEA New vs. Restructuring ACV(B)*
EMEA Contract Award Trends
$1.9 $2.7 $2.9
$2.4 $2.4
$3.7 $3.1
$2.3 $2.7
$3.5
$2.0 $2.4
$3.0
Avg of Prior 1Qs $2.7
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
EMEA Counts by ACV Bands
$0.94
$1.88 $1.63
$2.06
$0.97 $0.87 $0.75 $0.69
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
New Scope Restructuring
$1.4 $1.6
$2.0
$1.4 $1.6
$2.9 $2.5
$1.5
$2.0
$0.5
$1.2 $0.8 $1.0 $0.8 $0.8 $0.7 $0.8 $0.7
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
ITO ACV BPO ACV
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EMEA market leaders UK and DACH had weak 1Q13 results. However, Nordics and Benelux, a bit off their like-quarter averages, had significant growth from 4Q12.
EMEA Contract Award Trends Detail
EMEA Sub-region ACV ($B)*
$0.67
$0.64
$0.42
$0.35
$0.30
$0.12
$0.07
$0.06
0.46
0.48
0.42
0.22
0.08
0.11
0.08
0.08
Manufacturing
Financial Services
Energy
Travel, Transport,Leisure
Telecom & Media
Business Services
Retail
Healthcare &Pharma
Prior 5 Like-Qtr Avg 1Q13
EMEA Industry ACV ($B)*
$0.90
$0.39 $0.41 $0.36
$0.04
$0.11 $0.10 $0.07
$0.63
$0.27
$0.43 $0.37
$0.04 $0.03 $0.06
$0.08
$-
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
UK &Ireland
DACH Nordics Benelux France SouthernEurope
Africa &Middle
East
E. Europe& Russia
Prior 5 Like-Qtr Range Prior 5 Like-Qtr Avg 1Q12 1Q13
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Asia Pacific ACV of almost $450M was up 8% Y/Y but down 23% Q/Q. However, the trailing 12-month ACV is up over 80% from the prior 12 month period.
Asia Pacific ACV ($B)*
AP New vs. Restructuring ACV(B)*
Asia Pacific Contract Award Trends
$0.44 $0.58 $0.72
$1.41
$0.41 $0.52 $0.46 $0.35 $0.65
$1.07
$0.48 $0.34 $0.33
Avg of Prior 1Qs $0.5
1Q134Q3Q2Q1Q124Q3Q2Q1Q114Q3Q2Q1Q10
$0.36 $0.34
$1.32
$0.41
$0.56
$0.08 $0.24 $0.00 $0.09
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
New Scope Restructuring
AP Counts by ACV Bands
$0.31
$0.47 $0.38
$0.56
$0.30 $0.43
$0.27 $0.29
$0.43
$0.13 $0.11 $0.34
$0.86
$0.11 $0.09 $0.19 $0.06
$0.22
1Q134Q3Q2Q1Q124Q3Q2Q1Q11
ITO ACV BPO ACV
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Australia-New Zealand and Japan posted positive results due to several large awards. Energy and Travel & Transport were up over historical averages.
Asia Pacific Contract Award Trends Detail
$0.10
$0.06
$0.14
$0.03
$0.07
$0.00
$0.15
$0.08
$0.18
$0.01 $0.02 $0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
ANZ India andSouth Asia
Japan ASEAN GreaterChina
South Korea
Prior 5 Like-Qtr Range Prior 5 Like-Qtr Avg 1Q12 1Q13
Asia Pacific Sub-region ACV ($B)*
$0.11
$0.11
$0.09
$0.05
$0.02
$0.02
$0.01
$0.001
$0.01
$0.09
$0.06
$0.10
$0.17
$0.01
$0.01
$0.00
Telecom & Media
Manufacturing
Financial Services
Travel, Transport,Leisure
Energy
Business Services
Retail
Healthcare &Pharma
Prior 5 Like-Qtr Avg 1Q13
AP Industry ACV ($B)*
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The top service providers in each sector based on 1Q13 or TTM ACV awarded
Top Service Providers Across the Globe
Note: Service providers in alphabetical order; no rankings implied. Placements based on ACV from commercial contract awards sourced from ISG Contracts Knowledgebase ®.
Accenture
AT&T
Atos
BT
Capgemini
CGI
CSC
Dell
HCL
HP
IBM
Infosys
ISS Global A/S
Jones Lang LaSalle Mahindra Satyam
MITIE
T-Systems
TCS
Wipro
Xerox
Trailing 12 Months Global Top 20
Accenture
AT&T
Capgemini
CGI
Dell
Evry
Fidelity
Genpact
HCL
HP
IBM
Infosys
Nihon Unisys
StarTek
TCS
Tieto
Virtusa
Wipro
Xchanging
Xerox
1Q13 Global Top 20
Special Topic for First Quarter 2013
Esteban Herrera Partner
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Western-heritage Providers
Leading Providers Experience Shift in Market Share
13%
12%
ACV
Awards
Awards
ACV
Market Share Shifts 2009 - 2012
India-heritage Providers
9%
7%
CAGR Disparity 2005 - 2012
India-heritage
32%
16%
7% 0.4%
Western-heritage
2005 2009 2012
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3 Make New Inroads into the Global Public Sector Markets
13%
Opportunities and Challenges for Short-term Growth
Continue Winning in the Mature UK and US Restructuring Markets
4%
20%
2005 2009 2012
Increase European Market Share via Enhanced Offshore Value Prop
India-heritage Restructuring ACV
Market Share
1
7%
2005-08 2009-12
Capitalize on BPO Growth via Investment in Vertical Solutions
India-heritage European
ACV Market Share
India-heritage BPO ACV
Market Share
16%
36%
2005 2009 2012
$ $
4
2
$ $ $ $
Investment Investment
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Long-term, the best defense may be a good offense, a challenge for western providers with high overhead. India-heritage providers need long-term growth engines to stay on trajectory.
Staying Ahead: What got you here will not get you there.
Capturing the Expected Growth in the Mid-Market India-heritage Providers have proven offshoring credentials Western providers have started to create dedicated mid-market organizations
Lower Cost of Switching Puts Everybody on Notice Equal threat to all providers, no matter their heritage Incumbency advantage disappearing as transitions become less painful
ITO Challenge Get familiar with the new buyers of emerging technologies, who sit outside the CIO’s organization.
BPO Challenge Pay for performance, rather than for bodies, is becoming the norm. Pricing based on labor mark-up is becoming less attractive.
$
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Market continues to struggle to regain traction with soft spots in ACV smaller deal space and in New Scope
ITO performance is weak and BPO remains the bright spot
Trailing 12 months is encouraging and the Large Deal market was strong
Americas Manufacturing was weak and also had a low number of ITO contracts. BPO gains rise above ITO in the region.
EMEA New Scope activity fell unexpectedly but restructurings rose. Financial Services was off and BPO ACV fell but contract awards remained strong
Asia Pacific held steady, with ACV and activity increasing Y/Y, and positive results in Australia-New Zealand.
Keep expectations in check for 2Q13 with softness in the overall market
Positive signs point to a healthier outlook for the full year
Strength in BPO
Positivity in the emerging markets in the last 12 months
Impact of timing on deal flow should eventually rebound
1Q13 ISG Outsourcing Index Summary and Outlook
summary market
outlook market
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Please contact us with your questions and comments.
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First Quarter 2013
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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.
1Q13 TCV Scorecard
*Contracts with TCV ≥ $25M
1Q13 1Q Y/Y 1Q Q/Q Counts Change Change
189 -21% -19%
141 -18% -17%
48 -26% -26%
3 200% 50%
104 -34% -33%
85 5% 9%
77 -31% -21%
87 -19% -21%
25 32% -7%
1Q13 1Q Y/Y 1Q Q/Q
Scorecard TCV ($B)* Change Change
Global Market $ 18.6 -20% -23%
New Scope $ 9.8 -30% -42%
Restructurings $ 8.8 -4% 18%
Mega-deals $ 5.0 213% 111%
ITO $ 10.8 -33% -28%
BPO $ 7.8 8% -16%
Americas $ 7.9 -25% -7%
EMEA $ 8.7 -21% -32%
Asia Pacific $ 2.1 11% -33%
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