4Q17 Global ISG Index

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Global Sourcing and As-a-Service Market Insights

Hosted by:

Joe Foresi, Cantor Fitzgerald

January 10, 2018

FOURTH QUARTER AND FULL YEAR 2017

ISG Confidential. © 2018 Information Services Group, Inc. All Rights Reserved 2GLOBAL 4Q17

Esteban HerreraPartner and Global Leader ISG Research

Covering the state of the

combined Traditional Sourcing

and As-a-Service industry for

the global commercial market.

Welcome to the 61st Quarterly ISG Index

Barry MatthewsPartner, EMEA

Stanton JonesResearch Director and Principal Analyst

Michael WittyDirector, Digital Transformation – Retail


‘‘

*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase™

At a Glance

Scorecard 4Q17 4Q Y/Y Full Year Full Year

ACV ($B)* Change ACV ($B)* Change

Global Commercial Combined Market $ 11.3 16% $ 43.3 15%

By Type Traditional Sourcing $ 6.0 8% $ 24.6 3%

As-a-Service $ 5.3 26% $ 18.7 36%

By Region Americas Combined $ 6.3 28% $ 23.1 23%

EMEA Combined $ 3.8 0% $ 15.3 3%

Asia-Pacific Combined $ 1.2 16% $ 4.9 19%

4Q17 Combined Market up 16% Y/Y; Best-ever quarterly ACV in both IaaS and SaaS;

Traditional Sourcing up 8% Y/Y

For the full year, Combined Market up 15%, double from year ago

In 2017, Americas up 23% versus 2016 with Traditional Sourcing up moderately and

As-a-Service ACV up significantly

EMEA up against 2016 with strongAs-a-Service ACV growth but with the fourth

successive yearly decline in Traditional Sourcing ACV

Asia Pacific up 19% over 2016 with As-a-Service growth slightly outpacing Traditional Sourcing


$18.3

$6.8

$3.8

$6.3

$17.2

$6.7$4.5

$9.3

$19.0

$5.5$4.6

$14.1

ITO BPO Saas IaaS

2015 2016 2017

$6.8 $7.0 $5.8 $6.9 $5.3 $6.5 $5.9 $7.4 $6.6 $5.8 $5.9 $5.5 $6.7 $5.8 $6.1 $6.0

$1.8 $2.2$2.0

$2.0$2.2

$2.2 $2.8$3.0 $3.1 $3.1 $3.4 $4.2

$4.5$4.1 $4.8 $5.3

$8.6 $9.2$7.8

$8.9$7.5

$8.7 $8.7$10.4 $9.7 $8.9 $9.3 $9.7

$11.2$9.9

$10.9 $11.3

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17

Traditional Sourcing As-a-Service

Global Commercial Sector Contracting Trends4Q17 Combined Market ACV up 16% Y/Y as business spends more on technology to drive digital transformation;

for the full year, Traditional Sourcing remains in a very tight range as As-a-Service (specifically IaaS) continues to increase.

Global Commercial Sector Full Year ACV by Type ($B)

Global Commercial Sector Quarterly ACV ($B)

$26.5 $25.1 $23.8 $24.6

$8.1 $10.1 $13.8$18.7

$34.6 $35.2 $37.6$43.3

2014 2015 2016 2017


Global Commercial Sector Full Year ACV ($B)


Americas Commercial Sector Contracting TrendsAmericas 4Q17 ACV is up 28% Y/Y with As-a-Service seeing continued growth and Traditional Sourcing surging past $3B for the second

consecutive quarter; for the full year, Combined Market is up 23% on record highs in both Traditional Sourcing and As-a-Service.

$2.4 $2.6 $2.7 $2.8$2.2

$2.9$2.4

$2.9 $2.9 $2.8 $2.4 $2.4 $2.7 $2.5$3.5 $3.1

$1.1 $1.4 $1.2 $1.2$1.3

$1.3 $1.7$1.8 $1.9 $1.8 $2.0 $2.5 $2.7 $2.5

$3.0 $3.2$3.5$4.0 $3.9 $4.0

$3.5$4.2 $4.1

$4.7 $4.8 $4.6 $4.4$4.9

$5.4 $5.0

$6.5 $6.3



Americas Commercial Sector Quarterly ACV ($B)

$7.3

$3.2$2.5

$3.5

$7.7

$2.8 $3.0

$5.3

$9.0

$2.8 $3.0

$8.3

ITO BPO SaaS IaaS

2015 2016 2017

Americas Commercial Sector Full Year ACV by Type ($B)

$10.4 $10.5 $10.4 $11.8

$4.9 $6.0 $8.3$11.3

$15.3 $16.5$18.7

$23.1

2014 2015 2016 2017


Americas Commercial Sector Full Year ACV ($B)


Our Contracts Knowledgebase™is used to determine placements

based on the annual value of commercial contracts

awarded in the past 12 months.

Traditional Sourcing MarketC3/CustomerContactChannels

CSG Systems *Ensono

HexawareLTI

LuxoftMindtree

SyntelVirtusa

As-a-Service MarketCoresite

CyrusOneCyxtera * LogMeInMulesoft

Ultimate Software *

Traditional Sourcing MarketBlack Knight Inc.

Genpact HCL

Sutherland GlobalTeleTech

Total System Services *UnisysWipro

As-a-Service MarketAdobe SystemsDigital Realty

EquinixIron Mountain

RackspaceServiceNow

Workday

Traditional Sourcing MarketAtosBT *

CapgeminiCognizant

DXC TechnologyIBM

InfosysNTT DATA

TCST-Systems/Deutsche Telekom *

As-a-Service MarketAmazon Web Services

GoogleMicrosoft

OracleSalesforce

The Building 15 The Breakthrough 15The Big 15Co. Revenues > $10 BSourcing Standouts

AMERICASCo. Revenues $1 -10 B Co. Revenues < $1 B

Providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings.

theISG15

* New to leaderboard


Asia Pacific Commercial Sector Contracting TrendsCombined Market 4Q17 ACV up 16% Y/Y on best quarter ever for As-a-Service awards and moderately good quarter for Traditional Sourcing;

for the full year, Asia Pacific ACV increases 19% on continued growth in As-a-Service ACV and best Traditional Sourcing results since 2014.

AP Commercial Sector Full Year ACV ($B)

$1.02 $1.00

$0.46

$0.74 $0.66 $0.61 $0.57 $0.54 $0.48$0.60 $0.52 $0.47

$0.35

$0.67$0.78

$0.61

$0.22 $0.27

$0.25

$0.26 $0.28 $0.28 $0.38 $0.42 $0.45$0.46 $0.52 $0.60

$0.64

$0.57$0.61

$0.64

$1.24 $1.27

$0.71

$1.00 $0.94$0.89 $0.95 $0.96 $0.93

$1.06 $1.04 $1.07 $0.99

$1.24$1.39

$1.25



AP Commercial Sector Quarterly ACV ($B)

$1.76

$0.60 $0.38$0.99

$1.45

$0.61 $0.43

$1.60$1.94

$0.48 $0.48

$1.98

ITO BPO SaaS IaaS

2015 2016 2017

AP Commercial Sector Full Year ACV by Type ($B)

$3.22$2.36 $2.07 $2.42

$0.99$1.37 $2.03

$2.46

$4.21 $3.73$4.10

$4.88

2014 2015 2016 2017






Traditional Sourcing MarketFirstsource Solutions

HexawareLuxoft

Ness TechnologiesPosco ICT

SsangYong Information & Comm.VirtusaWNS

As-a-Service MarketAtlassianKingdeeLogMeIn

Mulesoft *Veeva Systems *

XeroZoho

Traditional Sourcing MarketAmdocs *

Harman InternationalHCL

Samsung SDSSingTel Optus

SK C&C Co.Sutherland Global

Tech MahindraTelstraUnisysWipro

As-a-Service MarketAdobe Systems

EquinixIron Mountain

PTC

Traditional Sourcing MarketAccenture

Atos *Cognizant

DXC TechnologyIBM

InfosysNokia *

TCS

As-a-Service MarketAlibaba

Amazon Web ServicesGoogle

MicrosoftOracle

SalesforceSAP


Asia PacificCo. Revenues $1 -10 B Co. Revenues < $1 B


theISG15



EMEA Commercial Sector Contracting Trends4Q17 Combined Market in EMEA is up 27% Q/Q and flat Y/Y; for the full year, ACV results rise slightly

compared to 2016 with As-a-Service highs offsetting declines in Traditional Sourcing.

EMEA Commercial Sector Full Year ACV ($B)

$3.4 $3.4

$2.7

$3.4

$2.5$3.0 $2.8

$4.0

$3.2

$2.4$3.0

$2.7

$3.6

$2.7

$1.8$2.4

$0.5 $0.6

$0.6$0.5

$0.6$0.6 $0.8

$0.7

$0.7

$0.8$0.9 $1.1

$1.2

$1.0

$1.2

$1.4

$3.9 $4.0

$3.3$3.9

$3.1$3.6 $3.6

$4.7

$3.9

$3.2

$3.9 $3.8

$4.8

$3.7

$3.0

$3.8



EMEA Commercial Sector Quarterly ACV ($B)

$9.3

$3.0 $1.0$1.8

$8.1

$3.3 $1.1$2.4

$8.1

$2.3$1.1

$3.8

ITO BPO SaaS IaaS

2015 2016 2017

EMEA Commercial Sector Full Year ACV by Type ($B)

$12.9 $12.2 $11.3 $10.4

$2.1 $2.8 $3.5 $4.9

$15.0 $15.0 $14.8 $15.3

2014 2015 2016 2017






Traditional Sourcing MarketAdare Group

Avaloq *Coor Service Management

Firstsource SolutionsGFT Technologies *

HexawareIbykusKMDLTI *

LuxoftNNIT A/SVirtusa

As-a-Service MarketInterxionLogMeIn

OVH

Traditional Sourcing MarketCapita

CarillionDiebold Nixdorf

Emcor *EVRYHCL

InterserveSopra Steria

Tech MahindraTieto

UnisysWipro

As-a-Service MarketAdobe Systems

EquinixUnited Internet

Traditional Sourcing MarketAccenture

AT&T *AtosBT

CapgeminiCognizant

DXC TechnologyIBM

InfosysTCS

T-Systems

As-a-Service MarketAmazon Web Services

GoogleMicrosoft

Oracle


EMEACo. Revenues $1 -10 B Co. Revenues < $1 B


theISG15



$1.9 $2.1 $2.1$1.1 $1.2 $1.1

$2.8 $2.5 $2.7

$5.8 $5.8$7.1

$2.0 $1.6 $1.6

$4.6 $4.3 $4.2

$1.2 $1.1 $0.8

$2.6$3.5

$2.7 $3.1$1.8 $2.3

$2.2

$3.3$4.1

$0.6 $0.8 $1.2

$0.4 $0.6$0.9

$1.7$2.3

$3.3

$0.9$1.1 $1.4

$1.4 $1.8$2.6

$0.8 $1.0 $1.4

$1.1

$1.6$2.1 $0.9

$1.1

$1.6

$4.1

$5.4

$6.2

$1.7$2.0

$2.3

$3.2 $3.1$3.6

$7.5$8.1

$10.4

$2.9 $2.7 $3.0

$6.0 $6.1$6.8

$2.0 $2.2 $2.2

$3.7

$5.1$4.8

$4.0

$2.9

$3.9

2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017


Global Commercial Sector Industry Award TrendsFinancial Services leads among several industry verticals (along with Business Services, Healthcare and Transportation)

that generated ACV growth in both Traditional Sourcing and As-a-Service segments.

Global Commercial Industries Full Year ACV ($B)

Financial Services

Healthcare & Pharma

BusinessServices

Energy Telecom & MediaRetailConsumer Packaged Goods

Travel, Transport & Leisure

Manufacturing

GLOBAL 4Q17

Michael WittyDirector, Digital Transformation – Retail

Retail Industry: Trends

4Q17 Index Inside Track from


Retail Industry Embraces Automation, Robotics & Cloud to Be Truly DigitalRetail industry has been an early adopter of emerging technologies primarily due to digital-savvy customers driving change.

• Optimization of supply chain• Increasing share in online retail

• Boosting customer data

Historically, retail industry under margin pressure

Profit Margin

Stagnant

Top 15 Retailers in the last 5 Years

However, retailers are responding by

Integrated omni-channel presence, personalized in-store

experience, robots, intelligent online order handling,

real-time product tracking in supply-chain

Embracing cloud for flexible cost structure & collaboration across global locations

Using robots to go in-store for customer support and in distribution points to move product

Improving logistics time & cost in e-commerce by offering nearby pick up options


Key Retail Observations

Omni-Channel for Seamless Experience

Integrated channels in “bricks, clicks, rings, knocks” enhancing user experience of “offering whatever, wherever, whenever they want.

Increased IT Outsourcing

Retail companies have been looking to outsource their IT needs to be agile to changing consumer needs, to reduce IT costs, scalability and gain innovation capabilities.

Personalization & Engagement

Retailers are creating a more personalized consumer engagement model via advanced analytics and BI tools.

With the evolving needs from consumers, retailers are aligning themselves by optimizing their supply chains.

Efficient Supply Chains and Automated Warehouses Blockchain

As consumers and retailers opt for omni-channel solutions, they will require insights into product and purchase lifecycle developments.

Industry TrendsUser Experience - UX

Retailers are re-aligning their Digital Strategy with the touchpoints of the customer journey. Emerging technologies are being piloted, but have yet to be adopted in large scale.

Emerging Technology Trends

Robotics

The retail market is expected to make increased use of Robots for activities such as; customer interactions in the local language and personalized engagements.

Augmented Reality & Wearables

A/R and Wearables allow consumers to unlock exclusive content and track individual health data, to promote healthcare and lifestyle products based on user behavior.

GLOBAL 4Q17

Intelligent Automation Software Market

Stanton JonesResearch Director

and Principal Analyst

4Q17 Index Inside Track from


Intelligent Automation Taxonomy

Cognitive TechnologiesRobotic Technologies Autonomic Technologies

Executes actions as

if it were a human, based

on pre-configured

instructions.

Analyzes unstructured input

(e.g., voice, text) and answers

questions, provides

recommendations and/or

makes decisions.

Analyzes semi-structured

input (events, tickets)

and orchestrates

entire processes

or environments.

Example Firms


RPA – A Growth Story

Positives

100% + 2018 Projected Growth

Opportunity to sell

to new clients and to expand

with existing clients is significant

Desire to replace BPO

with Automation will

continue to expand

What could slow growth?”

After initial fast start, growth will eventually slow to 60%+ over the next

3–5 years

Some companies getting stalled on implementations

Sales and marketing costs are likely

to be high to accommodate hyper-growth

as deal sizes are already smaller in

RPA JourneyMarket LeadersIn RPA Software

Annual licensing between $75K and $100K

Project high growth

in coming years


RPA Vendors Will Attempt to Move Up the Enterprise Value Chain


Full Year 2017 ISG Index - Global Summary and Outlook

● Combined Market saw double-digit Y/Y growth for the quarter led by the Americas and Asia-Pacific

● For 2017, As-a-Service segment continued to surge ahead with Public Cloud leading the market;

SaaS and Traditional Sourcing segments still showed slow but positive growth

● Financial Services grew both its Traditional Sourcing and As-a-Service profile; other industries such

as Business Services, Travel and Healthcare also featured similar gains

● Changes in U.S. tax laws should free up money to be invested in projects and digital transformation,

ensuring that both IaaS and SaaS will flourish

● Expect to see As-a-Service growth of 20%+ in 2018 with 4% growth in Traditional Sourcing

Summary

Outlook


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4Q17


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Learn More

Esteban HerreraPartner, Global Leader

ISG Research+1 972 730 1749

[email protected]

Paul ReynoldsPartner, Chief Research Officer

ISG Momentum+1 508 488 6361

[email protected]

Steven HallPresident, ISG EMEA

and Partner, ISG Digital Services+1 303 748 6599

[email protected]

Will ThoretzAmericas Media Contact

+1 203 517 3119 [email protected]

Denise Colgan EMEA and AP Media Contact

+44 1737 [email protected]

GLOBAL 4Q16

GLOBAL 4Q17

Appendix: Score Card for TCVFOURTH QUARTER 2017


4Q 2017 TCV ScorecardThe ISG Index has moved to ACV as the primary measure of the Broader Market.

We will continue to provide a high-level TCV view of the market via a Scorecard analysis.

*Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase™

Scorecard4Q17 4Q Y/Y Full Year Y/Y

TCV ($B)* Change TCV ($B)* Change

Global Commercial Combined Market $ 31.1 30% $ 116.8 12%

By Type Traditional Sourcing $ 23.4 33% $ 88.9 9%

As-a-Service $ 7.7 21% $ 27.9 23%

ITO $ 16.0 38% $ 64.3 13%

BPO $ 7.4 22% $ 24.6 1%

IaaS $ 4.0 30% $ 14.1 51%

SaaS $ 3.7 12% $ 13.8 3%

By Region Americas Commercial $ 15.0 46% $ 55.6 17%

EMEA Commercial $ 12.7 16% $ 47.8 8%

Asia Pacific Commercial $ 3.5 24% $ 13.4 12%

ISG Confidential. © 2018 Information Services Group, Inc. All Rights Reserved.

Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic

or mechanical means, including information storage and retrieval devices or systems, without prior written

permission from Information Services Group, Inc.isg-one.com

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