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The ISG Outsourcing Index (formerly the TPI Index) provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.
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Hosted by:
Ashwin Shirvaikar, Citi
11 July 2013
The Global ISG Outsourcing Index
Second Quarter and First Half 2013
Market Data and Insights
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
2
Covering the state of the outsourcing industry for global, commercial contracts.*
Welcome to the 43rd Quarterly Outsourcing Index Review
Esteban Herrera Partner
John Keppel Partner & President
Dr. David Howie Partner
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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At a Glance
2Q13 2Q Y/Y 2Q Q/Q 1H13 1H Y/Y
Scorecard ACV ($B)* Change Change ACV ($B)* Change
Global Market $ 3.6 -40% -27% $ 8.5 -27%
New Scope $ 2.6 -42% 0% $ 5.2 -34%
Restructurings $ 1.0 -34% -57% $ 3.3 -13%
Mega-relationships $ 0.7 -70% -52% $ 2.0 -32%
ITO $ 2.3 -34% -26% $ 5.3 -27%
BPO $ 1.3 -48% -28% $ 3.2 -27%
Americas $ 1.2 -40% -42% $ 3.3 -29%
EMEA $ 2.0 -23% -16% $ 4.3 -15%
Asia Pacific $ 0.4 -71% -13% $ 0.9 -53%
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ACV of $3.6B this quarter was down 40% Y/Y and 27% Q/Q. Half-year performance of $8.5B in awards was down 24% from a year ago and 27% sequentially.
Quarterly Broader Market*
Half-Year Broader Market Counts
Broader Market Contract Award Trends
$3.6
$4.9 $6.0
$4.4 $5.6
208
279 267 249 243
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
ACV ($B) Counts
487 570 602 504 472 364 298 295 261 297
526
243
1,096
540 502
201312111009080706052004
1H Counts 2H Counts Avg of 5 Prior 1Hs
Half-Year Broader Market ACV ($B)*
$8.5 $11.5 $9.7 $11.9 $9.6 $9.6 $7.6 $8.5 $8.2 $8.4
$11.2
$7.4
$22.7
$15.8
$10.5
201312111009080706052004
1H ACV 2H ACV Avg of 5 Prior 1Hs
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5 8 8 9 12 6 12 6 4 4
17 13 23 20 23 23 18 21 13 23
186
258 244 222 232
274 269 245
232
326
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q11
Mega-relationships, deals with ACV awards $100M +, were down 70% Y/Y and 52% Q/Q, while the smallest band band had the largest drop in number of contracts and ACV awarded from 1Q13.
Broader Market ACV(B)* by Bands
Broader Market Contract Trends for the Largest Deals
Boarder Market Counts by Bands
$5-39M $40-99M $100M + $5-39M $40-99M $100M +
$0.7 $1.4 $1.2
$1.7 $2.2
$0.8
$2.3 $1.7
$0.9 $0.6
$1.0 $0.7 $1.4 $1.2 $1.3 $1.4 $1.1 $1.3
$0.7 $1.3
$1.9 $2.9 $2.9 $2.8 $2.5
$3.4 $3.1 $2.7 $2.8 $3.5
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q11
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New Scope was down 42% Y/Y and flat Q/Q. Restructurings were down 34% Y/Y and 57% Q/Q.
Quarterly New Scope vs. Restructuring ACV ($B)*
Half-Year Restructuring ACV ($B)*
Broader Market New Scope & Restructuring Trends
$2.6 $2.6
$4.5
$3.1
$4.7
$1.0
$2.3 $1.5 $1.3
$0.9
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
New Scope Restructuring
$3.3 $3.8 $2.6 $3.4 $2.2 $2.2 $1.5 $3.5
$1.9 $1.4
$2.6
$2.7
$2.8
201312111009080706052004
1H ACV 2H ACV Avg of 5 Prior 1Hs
Half-Year New Scope ACV ($B)*
$5.2 $7.7 $7.1 $8.6 $7.4 $7.4 $6.1 $5.0 $6.3 $7.0
$7.4 $4.9
$3.6 $2.4 $2.5
$1.6 $1.5
$2.5 $2.1 $7.6
201312111009080706052004
1H ACV 2H ACV Avg of 5 Prior 1Hs
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ITO 2Q ACV of $2.3B was down 34% Y/Y and 26% Q/Q. The number of ITO contracts awarded dropped 24% Y/Y and 27% Q/Q.
ITO Quarterly ACV ($B)*
ITO Half-Year Industry ACV ($B)*
ITO Contract Award Trends
ITO Half-Year ACV ($B)*
$5.3 $7.2 $6.2
$9.2 $6.8 $6.5 $5.7 $6.3 $6.0 $4.8
$7.5
$5.3
$14.7
$10.1
$7.2
201312111009080706052004
1H ACV 2H ACV Avg of Prior 1Hs
$1.15
$1.21
$0.30
$0.90
$0.84
$0.29
$0.46
$0.17
$- $0.5 $1.0 $1.5 $2.0
Manufacturing
Financial Services
Telecom & Media
Energy
Travel, Transport, Leisure
Business Services
Healthcare & Pharma
Retail
Avg of Prior 5 1Hs 1H13
$2.3 $3.0 $3.4 $2.7 $4.4
126
172 165 152 159
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
ACV Counts
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Emerging cloud solutions are changing service provider and client behavior, and therefore contracting scale, especially in IT services outsourcing.
Cloud Solutions’ Impact on ITO Contracting
23% 20%
9%
1%
1
3 ISG Provider Survey:
Provider Pipeline Opportunities
with Cloud Component
11% 9% 7%
1%
Percentage of ISG-Advised
Contracts with Cloud Component
Percentage of All ITO Broader
Market Contract Awards* with a Cloud Component 2
2009 2012
2013
85%
2009 2012
CRM
IT Service Mgt ADM
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The top service providers in the ITO sector based on 1H13 ACV awarded
Top ITO 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*
Atos
Capgemini*
CGI*
Dell
HCL*
IBM*
Infosys*
Nihon Unisys
Polaris Software
TCS
T-Systems*
Virtusa
Wipro
Xerox*
Accenture*
AT&T
BT
Capgemini*
CGI*
Evry
Gen-I
HCL*
HP
IBM*
Infosys*
NTT Data
Tieto
T-Systems*
Xerox*
New Scope ITO Awards in 1H13
Restructuring ITO Awards in 1H13
* Present in both New and Restructuring lists
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BPO 2Q ACV of $1.3B was down 48% Y/Y and 28% Q/Q. First-half ACV of $3.3B was off 27% Y/Y, but nearly reached the average of the five prior half years.
BPO Quarterly ACV ($B)*
BPO Half-Year Industry ACV ($B)*
BPO Contract Award Trends
BPO Half-Year ACV ($B)*
$1.3 $1.8 $2.5
$1.6 $1.2
82
107 102 97 84
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
ACV Counts
$0.44
$0.72
$0.98
$0.17
$0.14
$0.29
$0.31
$0.10
$- $0.20 $0.40 $0.60 $0.80 $1.00
Manufacturing
Financial Services
Telecom & Media
Healthcare & Pharma
Business Services
Energy
Travel, Transport, Leisure
Retail
Avg of Prior 5 1Hs 1H13
$3.2 $4.3
$3.5 $2.8 $2.8 $3.1
$2.0 $2.2 $2.2 $3.6
$3.7
$3.6
$2.2 $3.1 $2.8
$2.9 $2.1 $3.1
$2.2
$8.0
$5.8
$3.3
201312111009080706052004
1H ACV 2H ACV (B) Avg of Prior 1Hs
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Active Contract Counts
Annualized Revenue ($B)
The Broader Market, ACV > $5M, accounts for just over 90% of outstanding BPO value, leaving contracts with ACV of $2–5M with about a 10% share. However, over the last five years, BPO growth has been strong across both contract bands.
An Expanded Look: BPO Active Contracts with ACV > $2M
Share of Annualized Revenue
ACV Band 5 yrs. ago Today Period
Growth
>$2 to $5M 6% 8% 72%
> $5M 94% 92% 33%
$24.1
$32.0 $1.6
$2.7
5 Years Ago Today
ACV > $5M ACV > $2M to $5M
1,086 1,876
537
1,045
5 Years Ago Today
ACV > $5M ACV > $2M to $5MShare of
Contract Numbers
ACV Band 5 yrs. ago Today Period
Growth
>$2 to $5M 33% 36% 95%
> $5M 67% 64% 73%
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12
454 440
1,041
184 534
HRO Contact Center Industry Specific Procurement F&A
Note: Service providers in alphabetical order; no rankings implied. Placements based on ACV from commercial contract awards sourced from ISG Contracts Knowledgebase ®.
Accenture Aditya Birla Minacs Accenture Accenture Accenture
ADP Convergys Alliance Data Systems Capgemini Capgemini
Aon Hewitt ExlService Capita ExlService ExlService
Capita Genpact CSC Genpact Genpact
Ceridian IBM Dell IBM IBM
CGI SITEL First Data Infosys Infosys
Fidelity TCS FIS Procurian TCS
Futurestep TeleTech Fiserv TCS Wipro
Genpact Vertex HCL Wipro WNS
IBM Xerox TCS Xchanging Xerox
NorthgateArinso Xerox
TCS
Top Service Providers in the BPO Market: ACV > $2M
↑9.9%
↓ 2.1% ↑ 2.2% ↓ 0.2% ↓ 3.7%
12-Month Growth Rate of Active BPO Contracts
Percentage of Market Share by Provider Types
64% 58% 49% 27%
4% 18% 21% 35%
55%
32% 23% 30% 38% 45%
HRO Contact Center Industry-specific Procurement F&A
India-heritage Western-heritage Function-specific
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Americas 2Q ACV of $1.2B was down 40% Y/Y and 42% Q/Q. Half-year ACV of $3.3B was down 16% from a year ago and 19% sequentially.
Americas Quarterly ACV ($B)*
Half-Year New vs. Restructured ACV ($B)*
Americas Contract Award Trends
$1.2 $2.1 $2.0 $1.7
$2.8
70
116 104
116
82
107
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
ACV Counts
$2.4 $2.3 $2.0
$1.3
$-
$1
$2
$3
$4
$5
New Scope Restructuring
Range of 5 Prior 1Hs Avg of 5 Prior 1Hs 1H12 1H13
Half-Year ACV ($B)*
$3.3 $4.7 $3.8
$5.8 $4.3
$3.0 $3.1 $4.6 $3.7 $4.4
$3.8 $2.7
$8.5 $7.1
$4.3
201312111009080706052004
1H ACV 2H ACV Avg of Prior 1Hs
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$0.32
$0.24
$0.07
$0.01
$0.13
$0.07
$0.16
$0.11
$-
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
Canada Brazil OtherLatAm
Mexico
5 Prior Period Range 5 Prior Period Avg 1H12 1H13
$4.04
$2.86
$0
$1
$2
$3
$4
$5
$6
US
The U.S. contributed most to the Americas ACV drop. Half-year U.S. ACV of $2.9B was down 29% Y/Y. ACV for industry segment leader Manufacturing was off considerably.
Americas Contract Award Trends Detail
Americas Sub-region Half-Year ACV ($B)* Americas Half-Year Industry ACV ($B)*
$0.5
$0.9
$0.8
$0.3
$0.2
$0.1
$0.2
$0.2
$- $0.5 $1.0 $1.5
Manufacturing
Financial Services
Telecom & Media
Healthcare &Pharma
Business Services
Retail
Energy
Travel, Transport,Leisure
Avg of 5 Prior 1Hs 1H13
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EMEA ACV of almost $2B was down 23% Y/Y and 16% Q/Q. Half-year ACV of $4.2B was down 15% from a year ago and 29% sequentially.
EMEA Quarterly ACV ($B)*
Half-Year New vs. Restructured ACV ($B)*
EMEA Contract Award Trends
$1.9 $2.3 $2.5 $2.3 $2.4
109 133
115 105 105
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
ACV Counts
$3.6
$1.4
$2.4 $1.9
$-
$1
$2
$3
$4
$5
New Scope ACV Restructuring ACV
Range of 5 Prior 1Hs Avg of 5 Prior 1Hs 1H12 1H13
Half-Year ACV ($B)*
$4.2 $5.0 $5.0 $5.5 $4.1
$5.9 $3.3 $2.9 $4.1 $2.9
$6.0
$4.1
$11.0
$7.0
$5.1
201312111009080706052004
1H ACV 2H ACV Avg of Prior 5 1Hs
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DACH ACV fell 24% from the 1H12 and 58% sequentially. Manufacturing and Financial Services industries were down 38% from last year’s first-half results.
EMEA Contract Award Trends Detail
$2.13
$0.81 $0.83
$0.42 $0.30
$0.21 $0.22 $0.09
$1.58
$0.61
$1.03
$0.44
$0.16 $0.18 $0.12 $0.12
$-
$0.50
$1.00
$1.50
$2.00
$2.50
UK &Ireland
DACH Nordics Benelux France SouthernEurope
Africa &Middle
East
E. Europe& Russia
5 Prior 1H Range 5 Prior 1H Avg 1H12 1H13
EMEA Half-Year Sub-region ACV ($B)*
$0.9
$0.9
$0.8
$0.4
$0.7
$0.2
$0.1
$0.2
$- $0.5 $1.0 $1.5
Manufacturing
Financial Services
Energy
Telecom & Media
Travel, Transport,Leisure
Business Services
Retail
Healthcare &Pharma
Avg of 5 Prior 1Hs 1H13
EMEA Half-Year Industry ACV ($B)*
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AP ACV of $410M in 1Q13 was down 71% Y/Y, but only 13% Q/Q. First-half ACV of $880 M was off 53% for 1H12 and 34% from 2H12, on a very tough 2012 compare.
Asia Pacific Quarterly ACV ($B)*
Half-Year New vs. Restructured ACV ($B)*
Asia Pacific Contract Award Trends
$0.41 $0.47
$1.39
$0.35 $0.34
29 30
48
28 31
2Q131Q4Q3Q2Q121Q4Q3Q2Q111Q4Q3Q2Q10
ACV Counts
$1.77
$0.08
$0.76
$0.12 $0.0
$0.5
$1.0
$1.5
$2.0
New Scope ACV Restructuring ACV
Range of 5 Prior 1Hs Avg of 5 Prior 1Hs 1H12 1H13
Half-Year ACV ($B)*
$0.88
$1.85 $1.00 $0.67
$1.28 $0.67
$1.16 $0.97 $0.43
$1.08
$1.3
$0.7
$3.19
$1.76
$1.10
201312111009080706052004
1H ACV 2H ACV Avg of Prior 5 1Hs
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Lower large-deal activity impacted regional leaders ANZ and India, which returned ACV results down by 50% and 64% respectively from the last half of 2012.
Asia Pacific Contract Award Trends Detail
Asia Pacific Half-Year Sub-region ACV ($B)* Asia Pacific Half-Year Industry ACV ($B)*
$0.37
$0.93
$0.16 $0.18
$0.21
$0.01
$0.19 $0.17
$0.34
$0.11
$0.06 $0.02
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
ANZ India andSouth Asia
Japan ASEAN GreaterChina
South Korea
Prior 5 1H Range Prior 5 1H Avg 1H12 1H13
$0.09
$0.10
$0.12
$0.20
$0.04
$0.18
$0.01
$0.14
$- $0.3 $0.5
Telecom & Media
Financial Services
Manufacturing
Travel, Transport,Leisure
Business Services
Energy
Retail
Healthcare &Pharma
Avg of 5 Prior 1Hs 1H13
Special Topic for Second Quarter 2013
Dr. David Howie Partner
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Impact of Expected Consolidation
Why all this talk of Mergers and Acquisitions? We are hearing increased chatter around potential M&A activity as Service Providers look for new ways to grow.
We’ve Seen It Before
If history holds, 30 – 40% of the current Top-20 providers may exit the market.
50%
Five of the Top-10 Chinese domestic providers we identified just two years ago are no longer active in the market in their prior form.
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Why Acquire ?
Respond to potential U.S. visa reform Look to kick-start BPO growth, particularly for specific capability plays Manage risk through reducing the dependency on flagship clients,
particularly in Financial Services and Healthcare
Examining the Characteristic of Potential M&A Candidates ISG has a unique perspective, informed by our data and market activity, on what might make a service provider a potential target for M&A activity.
Who are the Acquisition Candidates ?
2 Years Prior to Acquisition
Year of Acquisition
We have spotted historical evidence of a correlation between negative New Scope bookings growth, and the likelihood of a firm being taken off the market.
New Logo Bookings of Acquired Providers
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Broader market ACV declines on a shortage of the largest deals
All regions experience 1H weakness in both New Scope and Large Deal ACV, yet Restructurings remain steady
Manufacturing falls across all regions, but several industry segments out-perform their prior-five-year average
ITO awards and ACV continue to struggle, while the number of BPO awards are up for the half
ISG expects an uptick in 2H13 results, led by EMEA, based on pipeline and provider insight information
1H13 BPO ACV weakness does not indicate a turn from BPO’s recent impressive gains, as activity levels remain strong
More volatile AP market makes calling a downward trend there ill-advised, especially given the stellar 2012 results, yet the downward trend bears watching
2Q13 & 1H13 ISG Outsourcing Index Summary and Outlook
summary market
outlook market
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Please contact us with your questions and comments.
Learn More
--- Media Contacts ---
► John Keppel President +44 (0)7879 432 212 [email protected]
► Alex Kozlov Director, ISG +1 617 558 3377 [email protected]
blog.isg-one.com
► Jim Baptiste Matter Communications for ISG +1 978 518 4527 [email protected]
Second Quarter and First Half 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.
2Q13 and 1H13 TCV Scorecard
*Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase®
2Q13 2Q Y/Y 2Q Q/Q 1H13 1H Y/Y
Scorecard TCV ($B)* Change Change TCV ($B)* Change
Global Market $ 18.6 -29% -12% $ 39.7 -22%
New Scope $ 13.9 -30% 30% $ 24.6 -29%
Restructurings $ 4.8 -28% -54% $ 15.1 -4%
Mega-deals $ 2.9 -54% -42% $ 7.9 0%
ITO $ 11.0 -30% -12% $ 23.4 -28%
BPO $ 7.6 -28% -11% $ 16.3 -9%
Americas $ 6.0 -40% -34% $ 15.2 -28%
EMEA $ 10.4 -10% 5% $ 20.2 -11%
Asia Pacific $ 2.2 -53% 6% $ 4.3 -37%
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