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The TBR Professional Services research team recorded a webinar on Tuesday, April 30, 2013, recapping vendor performance reported in TBR’s 4Q12 PSBQ IT Services Vendor Benchmark. These slides are from that webinar. Senior Analyst Ramunas Svarcas and Analyst Bryan Belanger shared their perspectives on the results and provided additional insight into vendor performance and the future of the IT services market. Questions for discussion included: • How is the C&SI market currently performing? Who are the leaders and laggards? • What C&SI services will see the greatest long-term demand? • How are vendors positioning their resource models to drive C&SI growth? For more information visit www.tbri.com Follow us on twitter @TBRInc
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TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
The Inflection Point of Consulting and Systems Integration: Insights from TBR’s 4Q12 IT Services Vendor Benchmark
Technology Business Research Quarterly Webinar Series
April 30, 2013
TBR
2 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: Webinar Presenters
Bryan BelangerAnalyst, Professional Services [email protected] @bbelangerTBR
Ramunas SvarcasSenior Analyst and Engagement Manager,Professional Services [email protected]@rjsTBR
TBR
3 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
• The Professional Services Practices continually covers 35 vendors, publishing quarterly and semiannual reports. • 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 are better understanding revenue opportunities through our reports and their personal relationships with TBR.
PSBQ 4Q12 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
TBR
4 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: Key Trends
Professional Services Vendor Trends for 4Q12
Portfolio: As the industry reaches its inflection point, pent-up demand will release for C&SI services that support emerging technology adoption.
People: Traditional offshore-centric vendors are accelerating onshore hiring to address this pent-up C&SI demand.
Performance: Buyers are trimming consulting and systems integration (C&SI) budgets in the near term to minimize costs and preserve margins.
The C&SI industry is nearing an inflection point, at which near-term cost takeout needs give way to emerging technology implementations
TBR
5 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: Key Trends
Professional Services Vendor Trends for 4Q12
Portfolio: As the industry reaches its inflection point, pent-up demand will release for C&SI services that support emerging technology adoption.
People: Traditional offshore-centric vendors are accelerating onshore hiring to address this pent-up C&SI demand.
Performance: Buyers are trimming consulting and systems integration (C&SI) budgets in the near term to minimize costs and preserve margins.
The C&SI industry is nearing an inflection point, at which near-term cost takeout needs give way to emerging technology implementations
TBR
6 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
C&SI revenue is contracting as vendors focus on BPO and AO services that offer near-term cost reduction: • Total trailing 12-month C&SI revenues contracted 2.5% year-to-
year in 4Q12 for the 30 vendors covered in the benchmark. • C&SI revenue growth decelerated for the fifth consecutive
quarter in 4Q12. Long-term growth leaders will offer portfolios capable of addressing demand for near-term cost takeout and long-term emerging technology adoption.
Professional Services Vendor Trends for 4Q12 — Performance
PSBQ 4Q12 Research Highlights and Outlook: Performance
C&SI revenue will contract in 2Q13 as IT services spending remains focused on outsourcing projects that support operational efficiency goals
TBR
7 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Average trailing 12-month C&SI revenue growth trailed all other service lines in 1Q13 as buyers in the U.S. and Europe continue to extend decision cycles for long-term transformational projects to cope with macroeconomic uncertainty.
PSBQ 4Q12 Research Highlights and Outlook: Performance
Soft spending for transformational C&SI projects due to uncertainty overshadows demand drivers in the space
11.6%
0.6%
10.5% 10.6%
16.1%
5.9%
8.5%
2.6%
$3,290 $3,312
$1,253
$1,386 $1,435 $1,519
$2,736
$2,806
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
4Q11 4Q12 4Q11 4Q12 4Q11 4Q12 4Q11 4Q12
C&SI BPO AO ITO
YTY
Gro
wth
Reve
nue
in $
mill
ions
TTM LOB REVENUE AND TTM LOB REVENUE GROWTH TBR
SOURCE: TBR
TBR
8 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
India-centric vendors drive C&SI expansion by investing in onshore talent, and analytics, cloud and mobility solutions, while technology-centric vendors’ growth benefits from small revenue bases and niche solutions expertise.
PSBQ 4Q12 Research Highlights and Outlook: Performance
New market entrants, including a mix of India-centric vendors and technology firms, outpace MNC peers in C&SI revenue growth
Growth driven by acquisition
TBR
9 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
$35 $37 $38 $44 $47
$169 $173 $171 $181
$192
0%
10%
20%
30%
40%
50%
60%
$-
$50
$100
$150
$200
$250
$300
1Q12 2Q12 3Q12 4Q12 1Q13 Est.Advanced Services Advisory ServicesAdvisory Services YTY Growth Advanced Services YTY GrowthPSP Average TTM C&SI YTY Growth
Cisco Services will deepen its technology expertise and expand emerging market and channel investments to sustain leading C&SI growth
PSBQ 4Q12 Research Highlights and Outlook: Performance
Cisco Services C&SI Segment Revenue, Growth, and Overall Benchmark Average C&SI Growth
SOURCE: TBR RESEARCH
Segm
ent R
even
ue (I
n $
Mill
ions
)
Year-to-year Revenue Grow
th
High-value, differentiated
technology expertise
Small revenue base relative to
MNC peers
Emerging market
infrastructure opportunity
Tap new markets through channel partners
TBR
10 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: Key Trends
Professional Services Vendor Trends for 4Q12
Portfolio: As the industry reaches its inflection point, pent-up demand will release for C&SI services that support emerging technology adoption.
People: Traditional offshore-centric vendors are accelerating onshore hiring to address this pent-up C&SI demand.
Performance: Buyers are trimming consulting and systems integration (C&SI) budgets in the near term to minimize costs and preserve margins.
The C&SI industry is nearing an inflection point, at which near-term cost takeout needs give way to emerging technology implementations
TBR
11 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Demand for C&SI projects related to analytics, mobility and cloud continues to grow, but such projects remain small in scope and offer limited contribution to revenue.
As discretionary budgets fully recover and enterprises become “buried” under increasingly complex IT ecosystems, demand will grow for vendors that can provide end-to-end C&SI services supporting analytics-, cloud- and mobility-fueled IT transformation.
Professional Services Vendor Trends for 4Q12 — Portfolio
PSBQ 4Q12 Research Highlights and Outlook: Portfolio
As market conditions improve, clients will seek third-party support to generate business value from long-term IT transformation projects
TBR
12 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Analytics and other emerging technology adoption offers a long-term C&SI growth opportunity for vendors that are investing in services capability.
SOURCE: TBR
PSBQ 4Q12 Research Highlights and Outlook: Industry Change
Vendors investing ahead of demand for emerging technology C&SI services benefit as clients aggressively deploy discretionary budgets on large-scale projects supporting IT transformation.
At the inflection point, small POC projects in areas such as analytics will give way to bundled, high-revenue transformation engagements
Reve
nue
Gro
wth
/Por
tfol
io
Inve
stm
ent A
ctivi
ty
Current Market Scenario
Future Market Scenario
Low
High
Inflection Point
Vendor Investment ActivityC&SI Revenue Growth
TBR
13 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
C&SI growth will accelerate when customer demand for emerging technology-enabled transformation aligns with vendors’ portfolio capabilities.
PSBQ 4Q12 Research Highlights and Outlook: Portfolio
Vendors’ investments in emerging technology C&SI solutions will align with demand, fueling rapid industry revenue expansion
Inflection
Point
Legacy C&SI Market Drivers
Future C&SI Market Drivers
Customer Demand
Vendor Investment
Cost-drivenFunctionality-focusedISV partnerships are keyConsolidation, optimization,
efficiencyLow-cost leverageT&M pricing
Business value IT transformation
Vertically drivenEmerging technologiesGlobal deliveryScalable IP assetsOutcome-based pricing
TBR
14 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
IBM invests in vertical-specific, emerging technology-enabled C&SI solutions to fuel long-term GBS growth and profitability
PSBQ 4Q12 Research Highlights and Outlook: Portfolio
• IBM GBS and IBM Research collaborate to create IP such as Advanced Analytics for Asset Performance Optimization
• Continued traction with Smarter Planet portfolio
• Customer-centric and front-office transformation agendas
• Leveraging partners to commercialize Watson into healthcare-specific analytics solutions
• Unveiled MobileFirst• Acquired Star Analytics• Continues to invest in end-
to-end cloud and social business technology and C&SI capability
Emerging Technologies
Vertical-specific
Solutions
Scalable IP Assets
Business Value Focus
IBM GBS C&SI Investment Strategy and Recent Initiatives
TBR
15 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: Key Trends
Professional Services Vendor Trends for 4Q12
Portfolio: As the industry reaches its inflection point, pent-up demand will release for C&SI services that support emerging technology adoption.
People: Traditional offshore-centric vendors are accelerating onshore hiring to address this pent-up C&SI demand.
Performance: Buyers are trimming consulting and systems integration (C&SI) budgets in the near term to minimize costs and preserve margins.
The C&SI industry is nearing an inflection point, at which near-term cost takeout needs give way to emerging technology implementations
TBR
16 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Vendors realize the growth and profit potential of the C&SI inflection point and are optimizing global resource deployments to ensure competitiveness. • Software and hardware vendors are building global C&SI
practices to wrap services around technology offerings. • MNCs are investing in technology-specific CoEs and opening local
delivery centers in emerging regions. • India-centric vendors are aggressively building an on-site
presence through M&As and targeted hiring.
Professional Services Vendor Trends for 4Q12 — People
PSBQ 4Q12 Research Highlights and Outlook: People
Vendors across the IT services spectrum will optimize resource footprints to ensure competitiveness for C&SI deals in the long term
TBR
17 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: People
India-centric vendors will accelerate onshore recruitment in mature regions to compete for C&SI-led strategic IT transformation deals
Change 4Q11 to 4Q12
Total Headcount Attrition Utilization
Operating Margin
Direction 4Q12
Total #
% Low-cost
Onshore
#Total Ons
horeLow- cost Total Ons
horeLow- cost
Expected Marg
in
Actual
Margin
Actual (%)
SIs with Support
& Maint.
Dell Svcs 13.6%
HP Svcs 10.0%
IBM GS 18.5%
T-Systems 2.4%
SIs
Accenture 14.5%
Atos 3.2%
Capgemini 7.1%
CSC 5.6%
Xerox Svcs 11.2%
India-centric
Vendors
Cognizant 18.3%
HCLT 19.8%
Infosys 25.7%
TCS 27.3%
Wipro ITS 20.8%
Based on Metrics, Expected Profit Change =
Profit Results and Correlating Changes in Headcount Metrics
Key: 4Q11 vs. 4Q12 Improvement Deterioration No change SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE SPRING 2013
All five India-centric vendors covered in TBR’s 4Q12 Global Delivery Market Landscape Study registered year-to-year onshore headcount growth.
India-centric vendors will continue to add on-site staff, particularly in C&SI, to counter visa regulations and compete more favorably for consulting-led deals.
TBR
18 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
37,430 38,710 40,270 42,200 44,380
218,890 217,280
214,040
212,210 210,350
-10%
-5%
0%
5%
10%
15%
20%
25%
0
50,000
100,000
150,000
200,000
250,000
300,000
4Q11 1Q12 2Q12 3Q12 4Q12
Total other GDML onshore C&SI headcount India-centric vendor onshore headcountIndia-centric vendor onshore headcount YTY growth Total other GDML onshore C&SI headcount YTY growth
India-centric vendors will utilize acquisitions and delivery center openings to expand their local market C&SI bases in the U.S. and Europe during 2013.
PSBQ 4Q12 Research Highlights and Outlook: People
Despite their small revenue bases, India-centric vendors are aggressively adding on-site C&SI resources relative to MNC peers
India-centric Vendor Onshore C&SI Headcount and Growth versus Industry Peers
Ons
hore
C&
SI H
eadc
ount
Year-to-year Headcount G
rowth (%
)
SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE SPRING 2013
TBR
19 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
TCS, Infosys and Wipro ITS accelerated onshore C&SI recruitment in 4Q12, as onshore C&SI headcount grew for all 5 India-centric providers
PSBQ 4Q12 Research Highlights and Outlook: Industry Change
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
4Q11 4Q12 4Q11 4Q12 4Q11 4Q12 4Q11 4Q12 4Q11 4Q12
Cognizant HCLT Infosys TCS Wipro
TCS is countering visa restrictions and positioning for long-term C&SI growth by developing new centers and recruiting laterals in the U.S. and Europe.
India-centric Vendor Onshore C&SI Headcount and Growth
Ons
hore
C&
SI H
eadc
ount
Year-to-year Headcount G
rowth (%
)
SOURCE: TBR GLOBAL DELIVERY MARKET LANDSCAPE SPRING 2013
Opened TCS Solutions Center in Minnesota, recruiting laterals with mobility and analytics expertise
TBR
20 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSBQ 4Q12 Research Highlights and Outlook: Key Trends
As enterprises continue to adopt big data, cloud and mobility solutions, and technology shifts from the IT function to business lines and the CxO level, demand will grow for advisory and implementation services providers that can help translate technology capability and bid data outputs into strategic initiatives that create business value.
Translating new technology into business value will require C&SI support, and vendors are repositioning C&SI capabilities to address this demand
C&SI OPPORTUNITY
TBR
21 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
PSP Research Current Topics 1Q13 Report Key Themes• Vendor Reports:o Accenture o Atoso Capgeminio Cognizanto CSCo Dell Serviceso Fujitsuo HP Serviceso IBM Global
Serviceso Infosyso TCSo Wipro ITS
• Benchmarks: Management Consulting, HITS, Public Sector, Software Alliance
What priority markets are vendors targeting for healthcare IT services growth, and how are they investing in portfolio and delivery capabilities to address these markets?
What are the key delivery differentiators separating the delivery models of industry leaders and laggards? What markets hold priority for global delivery expansion? What dominant strategies are vendors using to invest in these markets?
How are leading IT services providers building Software as a Service (SaaS) portfolios? What differentiates leaders and laggards in the space? How does SaaS fit into vendors’ overall cloud services strategies?
Vertical Growth
Strategy: Healthcare
Vendor Global Delivery Strategy
Software as a Service
PSBQ 4Q12 Research Highlights and Outlook: 1Q13 Key Topics
Vendors will optimize delivery models to manage margins while investing in high-growth verticals and service lines to drive revenue growth in 2013
TBR
22 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
Questions?
PSBQ 4Q12 Research Highlights and 2013 Outlook
TBR
23 TBR Quarterly Webinar Series | 4.30.13 | www.tbri.com | ©2013 Technology Business Research Inc.
For further information, please contact:
Lindy Hanson James McIlroyDirector, Professional Services Practice Vice President, [email protected] [email protected]
Bryan BelangerAnalyst, Professional Services [email protected] @bbelangerTBR
Ramunas SvarcasSenior Analyst and Engagement Manager, Professional Services [email protected]@rjsTBR
Twitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannel
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
About TBR
Technology Business Research (TBR) is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, networking equipment, wireless, portal and professional services vendors.
Serving a global clientele, TBR provides timely and accurate market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.
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