what is happening to consulting & si? is it going away? - insights from tbr's it services...

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What is happening to Consulting & SI? Is it going away? — Insights from TBR’s IT Services Vendor Benchmark

Technology Business Research Quarterly Webinar Series

Oct. 15, 2013

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2 TBR Quarterly Webinar Series | 10.15.13 | www.tbri.com | ©2013 Technology Business Research Inc.

PSBQ 2Q13 Research Highlights and Outlook: Webinar Presenters

Ramunas SvarcasSenior Analyst and Engagement Manager,Professional Services [email protected]@rjsTBR

Elitsa BakalovaAnalyst,Professional Services [email protected]@ElitsaBakalova

Stephanie ArtigliereAnalyst,Professional Services [email protected]@StephanieA715

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• The Professional Services Practice publishes quarterly and semiannual reports, continually covering 33 vendors.• Of those vendors, 30 are included in our IT Services

Vendor Benchmark.o TBR reports are unique due to their deep, holistic

analysis of leading vendor businesses.o Financial modeling and TBR insights help customers

build a better understanding of vendor business models.

o TBR reports and webinars are designed to be responsive to client timelines, to be clear and concise, and to provide insights across multiple layers of an organization.

o TBR’s strategic assessment provides an impartial reality check on how vendors are performing in regard to their strategic objectives and the overall market.

Clients are gaining advantages and better understanding revenue opportunities through our reports and their personal relationships with TBR.

PSBQ 2Q13 Research Highlights and Outlook: Webinar Overview

TBR’s IT Services Vendor Benchmark delivers unique insight and value through in-depth analysis in a concise, consumable format

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PSBQ 2Q13 Research Highlights and Outlook: Key Trends

Professional Services Vendor Trends for 2Q13

Portfolio: By 2014 clients will expect services around emerging technologies to yield results, driving an expansion of consulting & SI revenues.

People: Consulting is shifting from fly-in-with-advice to invest, build and share risks and rewards with clients at a local and regional level.

Performance: While consulting and systems integration (C&SI) budgets are still tight, vendors invest in offerings and resources to drive growth.

C&SI vendors are preparing for growth as near-term cost takeout is gradually giving way to emerging technology implementations

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Average trailing 12-month C&SI revenue growth trailed all other service lines in 2Q12 and in 2Q13 as vendors continued to face hesitant consulting spending due to restricted IT budgets and pricing pressures across the developed countries in the Americas, EMEA and APAC.

PSBQ 2Q13 Research Highlights and Outlook: Performance

Demand for transformational and industry-specific C&SI projects remains soft, hindering overall 2Q13 C&SI revenue growth

Note: Dots indicate YTY growth and arrows indicate directional change relative to the year-ago quarter (green accelerating or red decelerating growth).

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C&SI revenue decelerated year-to-year in 2Q13 as vendors invested in BPO, and AO technology-enabled and vertical-specific solutions to enhance services value, help clients reduce costs and support operational efficiency.

Professional Services Vendor Trends for 2Q13 — Performance


C&SI revenue will resurge in 2H13 as IT services spending on emerging technology implementations gradually accumulates revenue streams

Inflection Point

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India-centric vendors recruit and acquire onshore, industry-oriented consulting resources to boost their value proposition among North American and European clients, and win end-to-end transformational projects. These firms find success with a combination of domain experts and low-cost outsourcing resources.


C&SI leaders, such as India-centric firms, find success with delivery models that combine industry-specific onshore and low-cost resources

Growth driven by acquisition

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Accenture will strengthen its technology and industry expertise, and build presence in underpenetrated areas to maintain its leading C&SI position


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To offset decelerating C&SI growth, vendors aimed to secure larger tranformational engagements by investing in IP-based solutions and industry-specific consulting services tailored to the adoption of emerging technologies such as cloud, analytics and mobility.

While vendors scale up emerging technologies offerings, clients will appreciate and grow accustomed to what cloud, analytics and mobility can deliver. By 2014, clients will expect those services to yield results, driving an expansion of consulting & SI revenues.

Professional Services Vendor Trends for 2Q13 — Portfolio

PSBQ 2Q13 Research Highlights and Outlook: Portfolio

Vendors ramp up emerging technologies in concert with clients’ maturing needs and expectations to drive business value from IT projects

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Technology adoption offers a long-term C&SI growth opportunity for vendors investing in services capabilities around cloud, analytics and mobility.

SOURCE: TBR


Vendors investing ahead of demand for emerging technology C&SI services benefit as clients aggressively deploy discretionary budgets on large-scale projects that support IT transformation.

After the inflection point, small projects give way to bundled, high-revenue transformation and technology implementation engagements

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Current Market Scenario

Future Market Scenario

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Inflection Point

Vendor Investment ActivityC&SI Revenue Growth

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The trend in IP development and decoupling of headcount growth from C&SI revenue growth are materializing for only a few vendors

• To generate revenue from less labor-intensive activities, HCLT leverages IP-based tools and accelerators while Cognizant uses IP-based tools and frameworks as well as industry-specific, “ready-to-deploy” performance management solutions.

• Xerox increases C&SI revenue per employee through workforce restructuring in the U.S. coupled with productivity tools and merging consulting with document outsourcing services.

Vendors that succeed use a combination of an IP portfolio and internal initiatives that focus on project efficiencies and employee empowerment.

SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE (GDML) FALL 2013


2Q12 TTM Revenue per Employee 2Q12 TTM Revenue per Employee 2Q12 TTM Revenue per Employee Positive Growth

2Q13 TTM Revenue per Employee 2Q13 TTM Revenue per Employee 2Q13 TTM Revenue per Employee Negative Growth

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•Offers C&SI for vertical-specific platforms, such as the Digital Publishing Platform for retailers

TCS will leverage investments in cloud consulting, acquisitions and onshore consultants to sustain double-digit C&SI revenue growth


TCS C&SI Investment Strategy and Recent Initiatives

• Invests in IP assets, particularly aimed at specific verticals such as banking, financial services and insurance as well as technology adoption such as cloud

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C&SI headcount continues to outpace revenue growth, which will help vendors generate growth and profit potential from the C&SI inflection point.•Software and hardware vendors are building global C&SI practices and opening local offices in emerging regions to wrap services around technology offerings. •Vendors are investing in technology-specific and industry-specific Centers of Excellence and Innovation Centers to support global and local market expansion. •India-centric vendors continue to build their onshore presence through acquisitions and hiring.

Professional Services Vendor Trends for 2Q13 — People

PSBQ 2Q13 Research Highlights and Outlook: People

Vendors optimize their C&SI resources to successfully compete for C&SI deals in the long term

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C&SI headcount growth decelerated; however, it continues to outpace revenue growth as vendors anticipate rebounding demand

Note: C&SI headcount and revenue for 14 IT services vendors including Accenture, Atos, Capgemini, Cognizant, Dell Services, CSC, HCLT, HP Services, IBM GS, Infosys, TCS, T-Systems, Wipro ITS and Xerox

Vendors increase consulting force in low-cost locations to cater to clients’ regional demands, deliver quicker and to scale, and increase pricing flexibility.


Inflection


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Onshore recruits in developed economies will help India-centric vendors compete for C&SI-led strategic IT transformation deals

Profit Results and Correlating Changes in Headcount Metrics


The two SI groups rationalize onshore headcounts and increase low-cost staff to improve their cost structures and pricing flexibility.

India-centric vendors add onshore staff, particularly in C&SI, to overcome visa challenges in the U.S. and Europe, have proximity to clients and compete for consulting-led deals.

Key: 2Q12 vs. 2Q13 Improvement Deterioration No change

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India-centric vendors invest in acquisitions, hiring and delivery centers to expand their local market C&SI bases and client proximity in the U.S. and Europe.


India-centric vendors continue to add onshore C&SI resources to expand their smaller revenue and headcount bases compared to MNCs

INDIA-CENTRIC VENDOR ONSHORE C&SI HEADCOUNT AND GROWTH VERSUS INDUSTRY PEERS

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Note: C&SI headcount and revenue for 14 IT services vendors including Accenture, Atos, Capgemini, Cognizant, Dell Services, CSC, HCLT, HP Services, IBM GS, Infosys, TCS, T-Systems, Wipro ITS and Xerox

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While onshore C&SI headcount increased for all 5 India-centric vendors,Infosys and Wipro ITS accelerated onshore C&SI recruitment in 2Q13


M&As support Infosys’ investments in local consulting resources and delivery centers in the U.S. and Europe, allowing the firm to pursue deals with Fortune 500 and Global 2000 clients.

INDIA-CENTRIC VENDOR ONSHORE C&SI HEADCOUNT AND GROWTH

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SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE (GDML) SPRING 2013

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Note: Dots indicate YTY growth and arrows indicate directional change relative to the year-ago quarter (green accelerating or red decelerating growth).

Infosys acquired Switzerland- based management consulting firm Lodestone.

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To succeed, vendors will leverage C&SI capabilities to convert technologies and analytics outputs into client business value

• 2012 was about building capabilities — through acquisitions, alliances and innovations — in technology trends such as cloud, digital, mobility and analytics. • In 2013 vendors continue acquiring and partnering for technology-centric services

to bring scale to their offerings. Clients are shifting from learning about emerging technologies to understanding exactly how those technologies disrupt business models, creating opportunities for C&SI vendors.

Building Capabilities Increasing Value

C&SI OPPORTUNITY

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PSP Research Current Topics 3Q13 Report Key Themes• Select Vendor Reports:o Accenture o Atoso Capgeminio Cisco Serviceso Cognizanto CSCo Dell Serviceso Fujitsuo HP Serviceso IBM Global Serviceso Infosyso TCSo T-Systemso Wipro ITSo Xerox

• Benchmarks: Management Consulting, Healthcare IT Services, Public Sector, Global Delivery Market Landscape, Managed Private & Professional Services Cloud

What emerging technologies are offered in the retail space? What is the prevailing motivation behind customer purchase of professional services (cost takeout or transformation)?

How is the firm acquiring IP (R&D, M&A, alliances/JV, Customer Engagement)? Is the IP being developed targeting specific niche areas, industry verticals or specific LOBs?

How are digital offerings distinguished from mobility and social consulting services? Are analytics, including big data, paired with digital or offered separately? Which industries are firms targeting for digital offerings?

Vertical Growth Strategy: Retail

IP Development

Digital

PSBQ 2Q13 Research Highlights and Outlook: 3Q13 Key Topics

Leading vendors will build IP to drive cost reduction and improve employee utilization while investing in specific verticals and technologies

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Questions?

PSBQ 2Q13 Research Highlights and 2013 Outlook

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For further information, please contact:Lindy Hanson James McIlroyDirector, Professional Services Practice Vice President, [email protected] [email protected]

Elitsa BakalovaAnalyst, Professional Services [email protected] @ElitsaBakalova

Ramunas SvarcasSenior Analyst and Engagement Manager, Professional Services [email protected]@rjsTBR

Twitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannel

Stephanie ArtigliereAnalyst, Professional Services [email protected] @StephanieA715

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TECHNOLOGY BUSINESS RESEARCH, INC.

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