3Q06 TPI Index Presentation FINAL

7/31/2019 3Q06 TPI Index Presentation FINAL

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Co ri ht 2006 All Ri hts Reserved Technolo Partners International, Inc. 1

The TPI Index

A N I N F O R M E D V I E W O FT H E S T A T E O F T H EG L O B A L C O M M E R C I A LO U T S O U R C I N G M A R K E T

October 12, 2006


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Welcome

TPI Presenters

Peter Allen Partner & Managing Director, Market Development

Paul Schmidt Partner & Practice Leader, Global Service Delivery

TPI Index Format

Duncan Aitchison Partner & Managing Director, EMEA and Asia Pacific

Questions & Answers Following TPI Market Metrics and Outlook


3/24


TPI Qualifications

16th quarterly TPI IndexConference Call

Proven track record of accuracy on previous TPI Index calls

One of the better barometers of market trends

Credible commentary

Since 2000, TPI has advised on 25 percent of the TCVawarded in the broader market

Observations here are based on our contract flow

Also based on facts gathered from other reliable

sources

Propriety

For confidentiality reasons, we will avoid discussingspecific clients and active sourcing transactions

However, the data presented provide a sense of

recent trends and future outlook

For more information Detailed metrics available in TPI Index Insider

Slides are available at www.tpi.net


4/24


HeadlinesChanges in the Global Outsourcing Industry for 3Q06

17.0 17.3

13.4

84.7 81.9

55.3

26.6

3Q05 2Q06 3Q06 2004 2005 2006

Unlikely that 4Q TCV Will Push Total Award ValueBeyond 2005 Level of Nearly $82B

3Q06 Performancewas down

both Y/Y and Q/Q

Almost $22B of Incremental Scope Would Need to beAwarded in 4Q06 to Match 2005s Total Value

65.9 67.075.6

61.2

39.2

22.0

2002Incremental

Scope

2003Incremental

Scope

2004Incremental

Scope

2005Incremental

Scope

2006Incremental

Scope

8.76 9.56 9.47 9.76

2003 YTD 2004 YTD 2005 YTD 2006 YTD

Annualized Bookings Reveals a Growing Market Not One in Decline

TCV of contracts ($B)

Big Six Reverses Downward Trend as India-basedProviders Gain Share off of a Small Base

71%

6%

46%

23%

47%

20%

52%

15%

1.4% 1.1% 3.5% 4.3%

Big Six Big Five Europe India-based Providers

FY2003 FY2004 FY2005 2006 YTDBased on TCV

4Q06TCV

Neededto

AchieveFlat Y/YGrowth

TCV of contracts ($B)

Annualized Contract Value ($B)

TCV

DurationACV =

4Q06IncrementalTCV Neededto Achieve

Flat Y/YGrowth


5/24


Industrywide Contracts With TCV > $1B:Q/Q Comparison

4.3

11.810.7

8.6

5.7

7.7

4.8

10.8

9.2

5.8

3.5

0

2

4

6

8

10

12

14

16

1Q04 2Q04 3Q04 4Q04 1Q05 2Q053Q05 4Q05 1Q06 2Q06 3Q06

0

1

2

3

4

5

6

7

8

9

10

Mega-Deal TrendsWeakest Quarter for Mega-Deal TCV

Since the Second Quarter of 2002

Industrywide TCV ($B) Total Industrywide Contracts (#)

TCV($B)

# ofcontracts

TPI Pipeline: Anticipated Award Value > $1B:Q/Q Comparison

13.0

17.3

12.6 11.5 10.612.9

8.8 10.211.7

2.6 2.90

4

8

12

16

20

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06

Industrywide Contracts > $1B:YTD (Through Sept. 30) Y/Y Comparison

18.8 17.921.7

26.8

18.2 18.5

0

7

14

21

28

35

2001 YTD 2002 YTD 2003 YTD 2004 YTD 2005 YTD 2006 YTD

Industrywide TCV ($B)

8Contracts

10Contracts

13Contracts

15Contracts

10Contracts

12Contracts


# of Active Transactions Listed Above Each BarIn parentheses

(6)

(9)

(6)(5)

(7)

(7)

(5)

(6)(7)

(2)

None of theMega-Deals

awarded thisquarter weresigned by

Big SixProviders

(2)


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Industrywide Contracts With TCV > $50M:Q/Q Comparison

18.0

24.4

19.7

22.5

19.2

20.1

17.0

25.6 24.7

17.3

13.4

0

3

6

9

12

15

18

21

24

27

30

1Q042Q04 3Q044Q04 1Q052Q053Q05 4Q051Q062Q063Q06

0

20

40

60

80

100

120

140

Broader Market TrendsWeakest Quarter for TCV Since the Third Quarter of 2002


TCV($B)

# ofcontracts

Industrywide Contracts > $50M:YTD (Through Sept. 30) Y/Y Comparison

45.4 51.756.5 62.1 56.3 55.3

0

15

30

45

60

75

90

2001 YTD 2002 YTD 2003 YTD 2004 YTD 2005 YTD 2006 YTD


132Contracts

185Contracts

191Contracts

220

Contracts241

Contracts 249Contracts

YTD TCV is down 5% from the

trailing three-year average of$58.3B

YTD TCV is down 5% from the

trailing three-year average of$58.3B


7/24


Broader Market TrendsYTD, Restructurings Continue to Impact Broader Market;

Not as Many Restructurings were Signed in the Third Quarter

Total Contract Value: Industrywide ContractsWith TCV > $50M:

85% 84% 84% 89%75% 71%

15% 16% 16% 11% 25% 29%

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 YTD

Incremental Value % Restructuring Value %

# of Contracts: Industrywide Contracts

With TCV > $50M:

87%78% 85% 86% 81% 79%

13%22% 15% 14% 19% 21%

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 YTD

Incremental Volume % Restructuring Volume %

Industrywide Contracts > $50M Without Restructuring:Q/Q Comparison

Since 2004, about 89% of thetime, incumbents retain the

business

Since 2004, about 89% of thetime, incumbents retain the

business

16.7

22.4

16.3

20.2

16.113.0 11.7

20.3

16.1

11.3 11.7

0

5

10

15

20

25

30

1Q042Q04 3Q044Q04 1Q052Q053Q05 4Q051Q062Q063Q06

0

20

40

60

80

100

120


TCV($B)

# ofcontracts

3Q06 Restructuring Metrics:10% of the number of deals

12% of the TCV Awarded


8/24


Broader Market TrendsSourcing Engagements Often Need to be Renewed to Re-align

Them with Shifting Business Objectives and Market Conditions

Wholly terminated

Renewed with incumbent provider

Scope Expansion

Active, no significant restructuring

Other

29(45%)

9(14%)

10(15.5%)

4(6%)

12(19%)

Status of 2000's Large Contract Awards

64 deals valued at greater than $250M in TCV


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Broader Market Trends2006 May be Challenged to Reach 2005s TCV Level

Industrywide Contracts With TCV > $50M:Q4 Comparison

45.4 51.756.5 62.1 56.3 55.3

20.926.5 23.3

22.5 25.6 23.8

2001 2002 2003 2004 2005 2006

TCV Through 3Q 4Q TCVTCV ofcontracts

($B)

$23.8B

representsthe 5 year

4Q Avg.

Factors weighing against realizing past fourth-quarter performance

Continued decrease in average TCV

Continued decrease in contract duration

Relatively low level of mega-deal activity

Industrywide Contracts With TCV > $50M:Incremental Scope - Q4 Comparison

40.4 42.350.0 55.3

40.8 39.2

16.123.6

17.020.2

20.3 19.5

2001 2002 2003 2004 2005 2006

TCV Through 3Q 4Q TCVTCV ofcontracts

($B)

$19.5Brepresentsthe 5 year

4Q Avg.


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Broader Market TrendsAverage TCV has Steadily Declined Since 2001

Average TCV:Industrywide Contracts > $50M

Average TCV:Industrywide Contracts > $50M

150

200

250

300

350

400

2001 2002 2003 2004 2005 2006 YTD

All Contracts ITO BPO

TCV ($M)


With TCV > $50M:

32% 34% 34%

41% 41% 46%

24%33% 28%

26% 31%25%

35%27% 31% 26%

23% 24%

8% 7% 7% 7% 5% 5%

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 YTD

$50-$99M $100M-$199M $200-$999M > $1B


With TCV > $50M:

68% 69% 75%82% 77% 82%

32% 31% 25%18% 23% 19%

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005 2006 YTD

% of Single Process Contracts % of Full ITO/BPO Multi-Proc. Contracts

Since 2000, an average of 38%

of all deals fall in the$50M-$99M TCV range

Since 2000, an average of 38%

of all deals fall in the$50M-$99M TCV range


11/24 Co ri ht 2006 All Ri hts Reserved Technolo Partners International, Inc. 11

Broader Market TrendsAverage Contract Duration has Steadily Declined Since 2001

Average Contract Duration:Industrywide Contracts > $50M


5.5

6

6.5

7

7.5

2001 2002 2003 2004 2005 2006 YTD

All Contracts IT Contracts BPO Contracts

# of years



4.5

5.5

6.5

7.5

2001 2002 2003 2004 2005 2006 YTD

Restructurings Non-Restructurings

# of years

Second-generation outsourcing

relationships do not require thesame level of employee or assettransfer, or transformation of thebusiness operations, as requiredby a first-generation agreement

Second-generation outsourcing

relationships do not require thesame level of employee or assettransfer, or transformation of thebusiness operations, as requiredby a first-generation agreement


With TCV > $50M:

30% 27% 22% 26% 18%16% 12%

70% 73% 78% 74% 82% 84% 88%

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006

YTD

% of contracts with > 10-year terms % of all other contracts

The 5-year contract accounts for 32% of Contracts Signed YTD



Methods of Market AnalysisRemoving Effect of Declining Contract Durations

Provides a New Form of Market Analysis

Market Analysis Methods for Broader Market

The Annualized Contract Value (ACV) Method removes the element of the number of years

A $1B contract with a 10-year duration its ACV is $100M

A $500M contract with a 5-year duration its ACV is $100M

Using this method of analysis, the averageAnnual Contract Value (ACV) would be treated the same

Using this method of analysis, the average

Annual Contract Value (ACV) would be treated the same

Total ContractValue (TCV)

Method

AnnualizedContract Value(ACV) Method

AnnualizedRevenueAnalysis

Features the aggregateTotal Contract Value in theyear in which it is signed

Aggregates the value of allcontracts divided by theirdurations in the year inwhich they were signed

Annualized revenues arethose made available toservice providers from

contracts signed not onlythis year, but in prior years

Removes the effect of declining contract durations



32.141.7

53.163.4

45.4 51.756.5 62.1 56.3 55.3

17.4

17.721.7

20.7

20.9 26.5

23.322.5

25.6

0

20

40

60

80

100

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Broader Market TrendsMore Annualized Contract Value (ACV)

has been Signed than in Any Year since 1997

Industrywide Contracts > $50M: Traditional Total Contract Value (TCV) Method

Industrywide TCV Through September 30 ($B) Industrywide TCV for 4Q ($B)

4.06.2

7.8 8.16.5

8.0 8.89.6 9.5 9.81.5

2.8

2.7 2.6

3.0

3.83.9 2.9

4.1

0

2

4

6

8

10

12

14

16

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Industrywide Contracts > $50M: New Annualized Contract Value (ACV) Method

Industrywide Annualized Contract Value Through September 30 ($B) Industrywide Annualized Contract Value for 4Q ($B)



Broader Market TrendsLarge Deals are not Disappearing, but Declining Contract

Durations are Causing Mega-Deals to not Appear as Frequently

19 20 8 9 17 22 24 27 42 23

42

7571

87 77

103118

134

161

124

16

3940

33 35

61

64

74

61

62

12

2233 25

37

33

38

33

41

16

16

16 26 2824

27

28

31

29

24

0

100

200

300

400

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 YTD

0-$9M $10-$24M $25M-$49M $50M-$99M $100M+

Industrywide Contracts > $50M: Distribution of Number of Contracts By ACV

Examined by ACV, the number of mega-relationships(> $100M/year) fall strikingly within the same range,from 24 to 31 (since 1999)

The nine-year average of 25 is at hand thisyear with one quarter still remaining

# of contracts



Annualized RevenueAnnualized Revenue Will Decrease Slightly in 2006,

Driven by Some Contract Termination

13.8 18.023.7 29.3

37.144.8 50.7

57.1 61.965.3 69.2 68.5

0

20

40

60

80

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006e*

Annualized Revenue for Industrywide Contracts > $50M: Y/Y Comparison

Revenue ($B)

3 Yr CAGR: 2.4%5 Yr CAGR: 4.6%

Down 1.0% Y/Y

Total Contract

Value (TCV)Method

AnnualizedContract

Value (ACV)Method

Annualized

RevenueAnalysis

Scorecard: Market Analysis Methods for Broader Market

Even with astrong 4Q, totalbookings will

probably fallshort of 2005levels thesecond straightY/Y decline

Moreannualizedbooking value

is coming online up to thispoint each yearsince 2001 five straightY/Y increases

Annualizedrevenue willdecrease

slightly in2006 about1% Y/Y as aresult of somecontractterminations



BPO Market TrendsMore BPO Contracts Signed in 3Q than in any Other Quarter;

Most BPO Contracts Coming to Market are Single-Process

Industrywide BPO Contracts With TCV > $25M:Q/Q Comparison

8.210.4

4.46.1

3.75.7 5.3

8.67.0

4.2 4.5

0

4

8

12

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06

0

20

40

60

80


TCV($B)

# ofcontracts

Market Share of Industrywide BPO ContractsWith TCV > $25M: TCV of Deals

2006 YTD Industrywide BPO ContractsWith TCV > $25M: TCV of Deals

Others42%

Xchanging

3%

RR Donnelly

3%

Xansa

3%Capita

3%

Indian SP

3%

Big 5 Europe

3%

Big 635%

Hewitt

5%

63%

35%

2%

60%

34%

6%

62%

30%

8%

49% 46%

5%

Americas EMEA Asia/Pacific

Full Year 2003 Full Year 2004 Full Year 2005 2006 YTD

5.9

1.9

5.4

2.9

1.31.7

7.0

5.8

0.1

3.9

5.7

2.0

1.0

2.8

1.6

0.7

4.8

3.3

1.3 1.21.6

CRM Document

Mgmt

FSO HRO F&A Procure Multi-Proc

Full Year 2004 Full Year 2005 2006 YTD

BPO Contracts > $25M:TCV ($B) Comparison by Process

No other

ServiceProviderin OthersCategory hasmore than2.5% TCVshare



Service-Provider Data



Service Provider Market ShareBig Six Seeing Share Gains in Broader Market

Due to Strength in IT Infrastructure Market

Big Five Europe Market Share of IndustrywideContracts: TCV of Deals

Big Six Market Share of Industrywide Contracts:TCV of Deals

71%

81%

35%

46%49%

37%

47% 49%

40%

52%57%

35%

Broader Market > $50M ITO > $50M BPO > $25M


6% 7%2%

23%26%

15%20%

26%

3%

15%18%

3%

Broader Market > $50M ITO > $50M BPO > $25M


Of the 38 contracts awarded to the BigFive Europe so far in 2006, only eighthave been outside of Europe

Of the 38 contracts awarded to the Big

Five Europe so far in 2006, only eighthave been outside of Europe

Big Six is seeing share gains due toincreasing award activity in ITInfrastructure market

Big Six is seeing share gains due to

increasing award activity in ITInfrastructure market



Service Provider Market ShareIndia-based Providers Increase Market Share Off of a Small Base;Framework Agreements Enable Penetrate and Radiate Approach

India-Based Service Providers Market Shareof Industrywide Contracts: TCV of Deals

1%

12%

0%3%

1%

6%

0%3%

17%

1%

6%

26%

3%4%3.5%

4.3%

Broader Market >

$50M

ADM > $50M Infras tructure >

$50M

BPO > $25M


Multi-national service providers are

becoming more aggressive (especiallyin the ADM space) in competing forsmaller initial deals that may have longer-term upside

Asclients

mature with

sourcing globaldelivery, they tend

to reassess this strategyas the dollar value of their

spend on offshore servicesincreases significantly . . .

Companies are likely to

engage Service Providerson a limited multi-sourcedapproach

Companies are likely to restructure some oftheir spend with offshore Service Providersto more traditional multi-year, SLA-based,risk-sharing arrangements

Companies are likely to reorganizetheir internal operations to bettermanage these relationships

Schedule 1

Schedule 2

Schedule 3

Schedule 4

Schedule 5

Schedule 6

Schedule 7

Committed WorkCommitted Work

Service Orders:To pursue incrementalwork/processes

Service Orders:To pursue incrementalwork/processes

Master Service Agreement

Service Providers gain

experience and an insidetrack

Clients gain flexibility andlimited financial obligationto providers

Service Providers gain

experience and an insidetrack

Clients gain flexibility andlimited financial obligation

to providers

Schedule 8

Schedule n



TPI Pipeline & Metrics



Pipeline Changes and Forward-Looking ProjectionsAlmost $14.5B in Pipeline Value;

$10.5B up for Award in Next Three Months

Projected Award Timeline of Current Pipeline ($B) Seven different service providers

were competing for both ITO and

BPO transactions

Seven different service providers

were competing for both ITO and

BPO transactions

16.3320.72

17.05 16.97

22.64

17.3314.49

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06

TPI Active Pipeline ($B)

We are currently advising on84 active transactions

3.70

8.01

6.145.27

8.25

5.70 5.93

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06

TPI Pipeline ($B) Added: Q/Q Comparison

6.40

1.42

4.09

2.18

0.36

4Q06 1Q07 2Q07

Total Restructuring Pipeline: $6.27B

Restructuring TCV ($B)

New Incremental TCV ($B)

More than 65% of new pipelineadded is Financial-Services-related



TPI Pipeline by Service ProviderMost Service Provider Pipeline Values Decline;

CSC and Big Five Europe Post Gains in Pipeline Value

90 Active Transactions June 30, 200690 Active Transactions June 30, 2006

1

2

2

1

5

2

0

3

# ofRestruct.

0

1

2

1

4

0

1

2

# of SoleSourceDeals

6

0

5

2

5

0

3

10

# of BPODeals

0

0

2

0

2

0

0

1

# of Mega-Deals

13.2%$2.283B13.3%12India-Based SP

6.8%$1.172B7.8%7Big 5 Europe

42.8%$7.418B24.4%22IBM

11.4%$1.972B5.6%5HP

34.8%$6.027B18.9%17EDS

4.8%$0.824B6.7%6CSC

4.8%$0.824B8.9%8ACS

27.8%$4.818B18.9%17Accenture

% of TPIPipeline

Value

PipelineValue

% of TPIDeals

# ofTrans

84 Active Transactions September 30, 200684 Active Transactions September 30, 2006

0

3

6

1

5

50

1

# ofRestruct.

1

1

4

0

2

10

1

# of SoleSourceDeals

8

1

4

1

2

02

6

# of BPODeals

0

1

0

1

1

00

0

# of Mega-Deals

5.4%$0.776B14.3%12India-Based SP

15.8%$2.292B9.5%8Big 5 Europe

36.9%$5.342B26.2%22IBM

10.7%$1.550B4.8%4HP

27.8%$4.025B14.3%12EDS

13.4%$1.945B11.9%10CSC2.1%$0.302B2.4%2ACS

11.3%$1.633B14.3%12Accenture

% of TPIPipeline

Value

PipelineValue

% of TPIDeals

# ofTrans



TPIs Conclusion on Market Trends

2006 TCV Soft third quarter might make it difficult for the 2006 TCV

to meet or surpass 2005 values

Restructurings Restructurings continue to influence the Broader Market

Annualized ContractValue (ACV)

Alternative evaluation by Annualized Contract Value(ACV) reveals that the Broader Market is growing Y/Y

Market share India-based providers gained market share off of a small

base and currently possess a large share of the ADMmarket value


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3Q06 TPI Index Presentation FINAL