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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. The global outsourcing market is constantly evolving. Keep pace with the change and capitalize on the latest trends with the ISG Outsourcing Index.
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Joseph Foresi Janney Capital Markets
10 April 2014
The Global ISG Outsourcing Index
First Quarter 2014
Market Data and Insights
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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Covering the state of the outsourcing industry for global, commercial contracts.*
Welcome to the 46th Quarterly Outsourcing Index Review
Esteban Herrera Partner
John Keppel Partner & President
Dr. David Howie Partner
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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At a Glance BROADER MARKET ACV UP Y/Y
WITH 10 MEGA-RELATIONSHIPS SUPPORTING MARKET GROWTH
ITO ACV UP, DRIVEN BY NEW SCOPE ACV
BPO ACV DECLINED Y/Y ON INCONSISTENT CONTRACT ACTIVITY
AMERICAS ACV IMPROVES MARKEDLY OVER THE PRIOR THREE QUARTERS
EMEA ACV UP MODERATELY Y/Y WITH CONTRACTING ACTIVITY REMAINING HIGH FOR NEW SCOPE AND ITO AWARDS
ASIA PACIFIC ACV UP SIGNIFICANTLY Y/Y AS SEVERAL MAJOR MARKETS, ANZ, INDIA AND SE ASIA, REBOUND FROM A DIFFICULT 2013
Scorecard 1Q14 1Q Y/Y 1Q Q/Q 1Q14 1Q Y/Y 1Q Q/Q
ACV ($B)* Change Change Counts Change Change
Global Market $ 5.7 14% 24% 321 11% 6%
New Scope $ 3.6 41% 23% 211 8% 3%
Restructurings $ 2.1 -15% 24% 110 20% 11%
Mega-Relationships $ 1.6 18% 229% 10 25% 233%
ITO $ 4.3 29% 16% 229 21% 1%
BPO $ 1.4 -16% 53% 92 -7% 19%
Americas $ 1.9 -16% 32% 113 -7% 0%
EMEA $ 2.9 29% 10% 165 21% 1%
Asia Pacific $ 0.9 89% 69% 43 43% 59%
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Broader Market ACV is up Y/Y with increases in both volume and size of awards supporting growth. The award count in the trailing 12 months is at an all-time high.
Broader Market ACV ($B)* and Counts
Broader Market Trailing 12 Months
Broader Market Contract Award Trends
$5.7 $4.6
$5.7
$3.6
$5.0 $5.2 $5.6 $6.2 $6.0
321 303 349
210
288 274 252 285
328
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
$19.7 $22.0 $23.3 $21.2 $22.6
1,183 1,099 1,173 1,094 1,009
2Q13 - 1Q142Q12 - 2Q132Q11 - 1Q122Q10 - 1Q112Q09 - 1Q10
ACV Counts
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10 3 9 6 8 7 9 12 7
22 18 20 16 14 22 19 23 24
289 282 320
188
266 245 224
250 297
178 164
187
113
147 135
105
148
172
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
$1.6 $1.4 $1.0
$1.2 $0.7
$1.5
$1.8 $2.0 $2.4
$1.1 $0.9
$1.1
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
The 10 awards this quarter in the largest ACV band are one of the best results in two years. Counts in lowest ACV band ($5M-$9M) are up 20% from a year ago.
Broader Market Contract Trends by Deal Size
Comparing Broader Market Contracting Awards ($B)* Grouping in ACV Contract Size Bands
ACV($B)* Contract Counts
$10-39M $40-99M $100M+ $5-9M
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New Scope ACV is up in 1Q14 on increasing contract activity. In the last 12 months, the number of Restructuring awards is up 24% over the prior 12-month period.
New Scope ACV ($B)* Trailing 12 Months
New Scope and Restructuring Contract Award Trends
New Scope ACV ($B)* Counts
Restructuring ACV ($B)* Trailing 12 Months Restructuring ACV ($B)* and Counts
$12.5 $14.3 $14.2 $15.3 $16.3
809 797 888 836 791
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
$7.2 $7.7 $9.1
$5.9 $6.3
374
302 285 258
218
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
$3.6 $3.0 $3.2
$2.7 $2.6
$3.5 $3.7 $4.5
$3.5
211 204 235
159
196 188 193 220
240
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
$2.1 $1.7
$2.5
$0.9
$2.4
$1.7 $1.8 $1.7
$2.5
110 99
114
51
92 86
59 65
88
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
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ITO ACV is up 29% Y/Y on substantial New Scope ACV. In the last 12 months, the number of contracts is up 15% over the prior 12-month period.
ITO Trailing 12 Months
ITO Contract Award Trends
ITO ACV ($B)* and Contract Counts
$4.3 $3.7 $4.3 $2.3
$3.4 $3.4 $3.7 $3.5 $4.1
229 226 245
127
189 194 162 173
209
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
ITO Domain Details ACV ($B)*
$1.30
$0.56
$0.70
$1.76
$0.0 $0.5 $1.0 $1.5 $2.0
ADM
Network Services
ADM + Infrastructure
Infrastructure
Avg of 8 Prior Qtrs 1Q14
ITO New vs. Restructuring ACV ($B)*
$14.6 $13.9 $16.3 $15.9 $16.7
827 718 744 701 668
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
$2.33
$1.37
$2.81
$1.50
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
New Scope Restructuring
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
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BPO ACV and number of awards are up Q/Q, 53% and 19% respectively, yet the trailing 12 months compares show a significant decline over the prior like period.
BPO Trailing 12 Months
BPO Contract Award Trends
BPO ACV ($B)* and Contract Counts
BPO Domain Details ACV ($B)*
$0.27
$0.14
$0.17
$0.01
$0.02
$0.35
$0.26
$0.08
$0.08
$0.03
$0.0 $0.1 $0.2 $0.3 $0.4 $0.5
Multi-Process
Contact Centers
F&A
Procurement
HRO
Facilities Mgmt
Industry-Specific
R&D/KPO
Document Mgmt
Supply Chain Mgmt
Avg of 8 Prior Qtrs 1Q14
BPO New vs. Restructuring ACV ($B)*
$0.62
$0.30
$0.84 $0.57
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
New Scope Restructuring
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
$1.4
$0.9
$1.4 $1.3 $1.7 $1.8 $1.9
$2.7
$1.9
92 77
104
83 99
80 90
112 119
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
$5.1
$8.1 $7.0
$5.4 $6.0
356 381 429
393 341
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
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Accenture Atos
Capgemini Cognizant
HCL IBM
Infosys TCS
Wipro Xerox
Minacs Aon Hewitt
Atento Capita
CB Richard Ellis Garda World
Genpact Interserve ISS Global Xchanging
BT Carillion
CSC Dell
EVRY HP
iGATE Orange
Tech Mahindra T-Systems
ITO Only
The leading providers in both ITO and BPO have remained fairly consistent in recent years.
Top 20 Commercial Providers by Scope - Trailing 12 Months
Note: Service providers in alphabetical order; no rankings implied. Placements based on ACV of commercial contract awards sourced from ISG Contracts Knowledgebase ®.
BPO Only
Leaders in both ITO and BPO
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Americas ACV, while down Y/Y, is at its highest point in four quarters. The trailing 12 months ACV is down 24%, yet the number of awards is down only slightly.
Americas Trailing 12 Months
Americas Contract Award Trends
$6.2 $8.2 $8.9
$7.9 $9.1
433 450
538
439 445
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
Americas Quarterly ACV ($B)* and Counts
$1.9 $1.4
$1.7 $1.1
$2.3 $1.9 $1.9 $2.1
$2.9
113 113 137
70
122 111 106 111
167
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
Americas ITO vs. BPO ACV ($B)*
$1.10
$0.34
$1.01 $0.90
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
ITO BPO
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
Americas New vs. Restructuring ACV ($B)*
$0.90 $0.54
$0.92 $0.99
$0.0
$0.5
$1.0
$1.5
$2.0
New Scope Restructuring
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
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$0.13
$0.04 $0.01 $0.02
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
Canada Brazil OtherLatAm
Mexico
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
U.S. results rebounded in 1Q14 and were up over the eight-quarter average. Financial Services ACV is up substantially, driven by large contract awards.
Americas Contract Award Trends Detail
Americas Sub-regions ACV ($B)*
$0.45
$0.64
$0.12
$0.14
$0.09
$0.21
$0.08
$0.17
$- $0.2 $0.4 $0.6 $0.8
Manufacturing
Financial Services
Telecom & Media
Energy
Travel, Transport,Leisure
Business Services
Healthcare & Pharma
Retail
Avg of 8 Prior Qtrs 1Q14
Americas Industries ACV ($B)*
$1.71
$-
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
U.S.
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EMEA ACV was up 29% Y/Y on continued high contracting activity, up 21% Y/Y. The positive quarterly results are driven by New Scope awards and ITO strength.
EMEA Trailing 12 Months
EMEA Contract Award Trends
EMEA Quarterly ACV ($B)* and Counts
EMEA ITO vs. BPO ACV ($B)* EMEA New vs. Restructuring ACV ($B)*
$1.56
$1.11
$2.23
$0.71
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
New Scope Restructuring
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
$2.15
$0.51
$2.49
$0.46
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
ITO BPO
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
$2.9 $2.7
$3.5
$2.0 $2.3 $2.8 $2.9 $2.7 $2.6
165 163 174
109
136 132 108
125 135
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
$11.1 $10.7 $12.4
$10.8 $11.1
611
501 522 521 438
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
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The U.K. and Nordics built on their consistent performances. French ACV is up significantly due to large contract awards.
$1.28
$0.33
$0.42
$0.15 $0.06
$0.63
$0.05 $0.04
$-
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
U.K. &Ireland
DACH Nordics Benelux SouthernEurope
France Africa &Middle
East
E. Europe& Russia
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
EMEA Contract Award Trends Detail
EMEA Sub-regions ACV ($B)* EMEA Industries ACV ($B)*
$0.41
$0.53
$0.56
$0.19
$0.79
$0.27
$0.08
$0.10
$- $0.2 $0.4 $0.6 $0.8 $1.0
Manufacturing
Financial Services
Telecom & Media
Energy
Travel, Transport,Leisure
Business Services
Healthcare & Pharma
Retail
Avg of 8 Prior Qtrs 1Q14
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Asia Pacific ACV was up significantly Y/Y on the highest contracting activity in two years. The ACV of the largest AP ITO awards were up significantly Y/Y and Q/Q.
Asia Pacific Trailing 12 Months
Asia Pacific Contract Award Trends
$2.4
$3.1
$1.9 $2.5 $2.5
139 148
113 134 126
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
ACV Counts
Asia Pacific Quarterly ACV ($B)* and Counts
$0.9
$0.5 $0.5 $0.5 $0.5 $0.6 $0.8
$1.4
$0.5
43
27
38 31 30 31
38
49
26
1Q144Q3Q2Q1Q134Q3Q2Q1Q12
ACV Counts
Asia Pacific ITO vs. BPO ACV ($B)*
$0.45
$0.07
$0.81
$0.06 $0.0
$0.2
$0.4
$0.6
$0.8
$1.0
ITO BPO
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
Asia Pacific New vs. Restructuring ACV ($B)*
$0.50
$0.02
$0.50 $0.37
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
New Scope Restructuring
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
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$0.23
$0.31
$0.12
$0.05
$0.15
$0.01
$-
$0.1
$0.2
$0.3
$0.4
$0.5
$0.6
$0.7
$0.8
$0.9
$1.0
India andSouth Asia
ANZ GreaterChina
Japan South EastAsia
South Korea
Range of Prior 8 Qtrs Avg of 8 Prior Qtrs 4Q13 1Q14
Several of Asia Pacific’s major markets, ANZ, India and SE Asia, rebounded from 4Q13. 1Q14 ACV awards in Telecom and Manufacturing are up significantly.
Asia Pacific Contract Award Trends Detail
Asia Pacific Sub-regions ACV ($B)* Asia Pacific Industries ACV ($B)*
$0.28
$0.12
$0.27
$0.01
$0.17
$0.00
$0.01
$0.01
$- $0.1 $0.2 $0.3
Manufacturing
Financial Services
Telecom & Media
Energy
Travel, Transport,Leisure
Business Services
Healthcare & Pharma
Retail
Avg of 8 Prior Qtrs 1Q14
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Asia Pacific EMEA Americas
Half of the Top 20 Providers in each region lead across all three major markets.
Top 20 Commercial Providers by Region - Trailing 12 Months
Note: Service providers in alphabetical order; no rankings implied. Placements based on ACV of commercial contract awards sourced from ISG Contracts Knowledgebase ®.
Global
Multi-Region
Single Region
Accenture Accenture Accenture
Capgemini Capgemini Capgemini
Cognizant Cognizant Cognizant
CSC CSC CSC
HCL HCL HCL
HP HP HP
IBM IBM IBM
Infosys Infosys Infosys
TCS TCS TCS
Tech Mahindra Tech Mahindra Tech Mahindra
iGATE iGATE
Wipro Wipro
Allscripts Atos Amdocs
Atento BT ChinaSoft
CB Richard Ellis Capita Fujitsu
Dell Carillion Hollysys
Garda World EVRY Lufthansa Systems
ISS Global Orange Optus
Minacs Quindell Pactera
Xerox Tieto Redknee
T-Systems Telstra
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For the past 12-month total, Public Sector ACV represents 64% of global awards, outpacing the Commercial sector, with larger average contract size in comparison.
Public Sector Trailing 12 Months Counts
Global Public Sector Award Trends
1,183 1,099 1,173 1,094 1,009
1,066 956 874 849
704
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
Commercial Sector Public Sector
Public Sector Trailing 12 Months ACV ($B)*
Public Sector ITO vs. BPO TTM ACV ($B)* Public Sector ACV Percentage of All Contracts
64% 55%
51% 56%
49%
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
$19.7
$35.1
$27.1 $24.4
$27.4
$21.6
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
Commercial Sector Public Sector
$28.1
$20.3 $17.6
$20.3 $16.5
$7.1 $6.8 $6.8 $7.1 $5.1
2Q13 -1Q14
2Q12 -2Q13
2Q11 -1Q12
2Q10 -1Q11
2Q09 -1Q10
Public Sector ITO ACV Public Sector BPO ACV
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The U.S. and U.K. Public Sectors have ACV market shares that far outpace other markets. U.S.-based providers are market leaders, regardless of geography.
Share of Public Sector ACV for Trailing 12 Months Top 10 Providers by Major Region
Global Public Sector Award Trends by Region
ITO vs. BPO ACV for Trailing 12 Months
61%
23%
8% 7%
US & Canada U.K. ContinentalEurope
Australia
U.S. & Canada CACI CGI CSC
General Dynamics Harris Corp.
HP Lockheed Martin
Mantech Northrop Grumman
SAIC
Australia Accenture
CSC Data 3 Fujitsu
HP IBM
Optus Serco Telstra Unisys
U.K. Atos BT
Capgemini Capita
CGI CSC
Fujitsu HP
IBM Serco
Europe Accenture
Atos BT
Capgemini Fujitsu
HP IBM
Indra T-Systems
Tieto
72% 39%
89% 67%
28% 61%
11% 33%
US & Canada UK ContinentalEurope
Australia
ITO BPO
Other = 2%
Note: Service providers in alphabetical order; no rankings implied. Placements based on ACV of public sector contract awards sourced from ISG Contracts Knowledgebase ®.
Special Topic for First Quarter 2014
Esteban Herrera Partner
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A Look at the Growth in the U.S. Healthcare Market The U.S., which has the largest Healthcare market globally, is experiencing dynamic change along with a shift in the mix between Commercial and Public Sector sourcing.
2002-04
Since 2011
57% U.S Market Share
that’s $6.7 billion in contracting
Global Public and Commercial Healthcare Market Activity
nearly Doubled from 10 years ago
U.S. Federal Healthcare Market
Activity Surges (U.S. $B)
$2.56
$1.55
$1.29
$1.33
$2.86
$3.10
Since 2011
2008-2010
U.S. Federal U.S. State and Local U.S. Commercial
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U.S. Healthcare Change – There’s big work to be done Seismic shifts in the U.S. Healthcare industry are creating compliance and efficiency challenges, triggering unprecedented Commercial and Public sector spending.
A complete transformation of the business model
► From B2B to B2C
► Population and wellness-management solutions (big data)
► Bundled payments require formation of ACOs
Affordable Care Act
Competition drives effectiveness and efficiency
► Project work shifts spend from staff augmentation to managed services
► M&A activity by both payers and providers to handle administrative burden
► Blurred lines between payer and provider may drive vertical integration S $ $ $
Provider Competition
Uncertainty
ICD10 Implementation uncertainty around new claims coding protocol
► Industry effectively caught “half-pregnant” without many choices
► Claims processing efficiency and effectiveness under threat
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Broader Market ACV turned positive with larger deals driving growth
New Scope awards support positive results in the IT market, while the BPO market trends remain uneven
Europe continues to generate consistent ACV results, and contracting activity remains high
Large ITO awards helped support Asia Pacific ACV growth as contracting activity rebounded from a softer 2013
Americas had its best quarterly ACV result since 1Q13
The U.S. Healthcare market (both public and commercial sector) is undergoing significant change, with a heightened focus on cost control, making it an ideal market for stepped-up sourcing activity
We expect first-half 2014 ACV growth in excess of 15%
We expect full-year 2014 ACV growth to reach high single-digits over a weak 2013. The industry pipeline is showing good activity levels
Number of contracts should continue to grow at a larger magnitude than ACV as many second-generation contracts get renewed in multi-sourced environments
1Q14 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 Partner and President, ISG +44 (0)7879 432 212 john.keppel@isg-one.com
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► Jim Baptiste Matter Communications for ISG +1 978 518 4527 jbaptiste@matternow.com
www.isg-one.com
First Quarter 2014
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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.
First Quarter TCV Scorecard
*Contracts with TCV ≥ $25M from the ISG Contracts Knowledgebase®
Scorecard 1Q14 1Q Y/Y 1Q Q/Q
TCV ($B)* Change Change
Global Market $ 24.9 25% 18%
New Scope $ 16.1 12% 50%
Restructurings $ 8.8 57% -16%
Mega-deals $ 3.2 17% -37%
ITO $ 17.7 26% 37%
BPO $ 7.3 22% -13%
Americas $ 8.3 51% -12%
EMEA $ 12.5 0% 29%
Asia Pacific $ 4.1 110% 102%
Information Services Group is a leading technology insights, market intelligence and advisory services company, serving more than 500 clients around the world to help them achieve operational excellence. ISG supports private and public sector organizations to transform and optimize their operational environments through research, benchmarking, consulting and managed services, with a focus on information technology, business process transformation, program management services and enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.
knowledge powering results®
www.isg-one.com
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