Asia Pacific TPI Index - Full Year and Second Half 2012

Hosted by:

The Asia Pacific TPI Index

Nimish Joshi

CLSA

Full Year and Second Half 2012

30 January 2013

© 2013 Information

Services Group, Inc. All Rights Reserved

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*Contracts with ACV ≥ $5M

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Welcome to the 13th Semi-Annual Asia Pacific TPI Index Call

Dinesh Goel Partner, India

Sid Pai Partner and President, Asia Pacific

Gerry Clark Partner, Asia

Covering the state of the outsourcing industry for global, commercial contracts.*

Tom McCormack Partner, Australia & New Zealand

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An ACV-based analysis of the market will avoid masking the effects of declining contract durations on TCV.

ACV Change Over Time 2003 - 2012

Refocusing on ACV as the Primary Measure of the Market

$21.2

$15.2

201211100908070605042003

TCV Change Over Time 2003 - 2012

Growth since 2003 = 39% Growth since 2003 = 10%

Typical Annual ACV* = $20 B

$99.1

$89.8

201211100908070605042003

Contract duration has shifted from 6 years in 2003 to 4.9 years in 2012

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At A Glance

“ “ GLOBAL ACV DOWN SLIGHTLY FOR THE YEAR

NUMBER OF MEGA RELATIONSHIP CONTRACTS UP FOR 2012, LIFTING ACV WHEN OVERALL CONTRACT NUMBERS WERE DOWN

BPO EXPANDED ON SEVERAL LARGE DEALS WHILE ITO PERFORMANCE WAS OFF FOR 2012

ASIA PACIFIC SURGED IN 2012 WHILE EMEA STRUGGLED ON A WEAK FIRST HALF

GUARDED OPTIMISM FOR 2013 WITH A POSSIBLE SLOWDOWN IN THE SECOND QUARTER

2012 2012 Y/Y 2012 2012 Y/Y 2H12

Scorecard ACV ($B)* Change Counts Change ACV ($B)*

Global Market $ 21.2 -3% 1,006 -13% $ 10.1

New Scope $ 14.0 -1% 748 -15% $ 6.7

Restructurings $ 7.2 -5% 258 -8% $ 3.4

Mega-relationships $ 5.7 7% 34 36% $ 2.7

ITO $ 13.3 -11% 652 -11% $ 6.5

BPO $ 7.9 14% 354 -18% $ 3.6

Americas $ 7.9 -3% 429 -16% $ 3.4

EMEA $ 10.2 -12% 443 -16% $ 5.4

Asia Pacific $ 3.1 55% 134 6% $ 1.3

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For the full year, ACV of $21.2 was down 3% from 2011 but ahead of the five year average.

Broader Market ACV ($B)*

Broader Market Counts

Global Market Contract Award Trends

$11.1 $9.9 $11.8 $9.6 $9.5 $7.5 $8.4 $8.2 $8.4 $6.7

$10.1 $11.9 $10.1 $11.4 $8.4 $8.8 $6.6 $8.7 $7.3 $8.5

$21.2 $21.8 $21.9 $20.9 $18.0 $16.3 $15.1

$16.9 $15.7 $15.2 $19.8

201211100908070605042003

1H ACV 2H ACV Prior 5 Yr Annual Avg

1,006 1,163

977 972 744

596 593 524 539 506 890

201211100908070605042003

Counts Prior 5 Yr Avg

_

Prior 5 Year Avg

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Asia Pacific was the only region to show market growth in 2012, while the Americas market was flat and EMEA struggled.

Full Year Contract Counts Compare

Regional Comparison of Full Year Contract Trends

Full Year ACV ($B)* Compare

$7.9

$8.1 $7.4

$10.2

$11.7

$7.0

$3.1 $2.0

$0.9

201211100908070605042003

Americas EMEA Asia Pacific

429 512

246

443

525

215 134 126

45

201211100908070605042003

Americas EMEA Asia Pacific

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With ACV of more than $3B awarded, Asia Pacific had its best year ever in 2012 -55% ahead of 2011 totals and comfortably ahead of the five year average.

Full Year Asia Pacific ACV ($B)*

Full Year Asia Pacific Count

Asia Pacific Contract Award Trends

$1.83 $1.04 $0.67

$1.28 $0.67

$1.16 $0.97 $0.43

$1.08 $0.32

$1.3

$1.0 $1.6 $1.2

$1.4 $1.3

$0.5 $1.1

$0.7

$0.5

$3.13

$2.02 $2.22 $2.53

$2.12 $2.42

$1.49 $1.48 $1.76

$0.85

$2.3

201211100908070605042003


Full Year Asia Pacific ACV ($B)* by Bands

$2.1 $1.7 $1.6

$2.2

$1.5 $1.3 $1.1 $1.0 $1.1 $0.8

$1.0

$0.3 $0.7

$0.3

$0.6 $1.2

$0.3 $0.5 $0.7

$0.1

201211100908070605042003

$5 - 99M $100M +

129 124 114 122

88 71 69

50 71

44

5 2 3

2

4

7 3

3

5

1

201211100908070605042003

$5 - 99M $100M +

Prior 5 Year Avg

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New Scope awards made up 88% of the market in 2012 as the region saw the end of a three year cycle of restructurings.

Full Year Asia Pacific New Scope ACV ($B)*

Full Year Asia Pacific Restructuring ACV ($B)*

Asia Pacific New Scope & Restructuring Trends

$1.0 $0.8 $0.6 $0.8 $0.6 $0.9

$0.4 $0.3 $0.9

$0.3

$1.7

$0.5 $1.1 $1.1 $1.3

$1.0

$0.4 $0.8 $0.5

$0.4

$2.75

$1.33 $1.61 $1.88 $1.90

$1.95

$0.85 $1.14

$1.36

$0.70

$1.73

201211100908070605042003


$0.30 $0.20 $0.12

$0.46

$0.10 $0.24

$0.52

$0.08 $0.20

$0.02

$0.09 $0.50

$0.49

$0.19

$0.12

$0.24

$0.11

$0.26 $0.20

$0.14

$0.38

$0.70 $0.61 $0.65

$0.23

$0.48

$0.64

$0.34 $0.40

$0.15

$0.5

201211100908070605042003


Prior 5 Year Avg

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On the back of very large deals’ACV in India increased substantially making this the largest market in the region overtaking ANZ, the traditional market leader

Asia Pacific Market Details in Contract Award Trends

Full Year Asia Pacific ACV ($B)* by Market

$1.06

$0.71

$0.21 $0.16

$0.10 $0.04

$1.13

$0.53

$0.12 $0.10 $0.13

$0.01

$0.69

$1.46

$0.21

$0.32 $0.40

$0.05 $0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

ANZ India and South Asia Japan ASEAN Greater China South Korea

Prior 5 Period Range Prior 5 Year Avg 2011 2012

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Though traditionally the market leader, the Financial Services sector now ranked 3rd

behind Telecom & Media and Manufacturing.

Asia Pacific Industry Segment Contract Trends – ACV ($B)

Full Year Asia Pacific ACV ($B)* by Industry

$0.79

$0.69

$0.35

$0.17 $0.12

$0.08 $0.03 $0.04

$0.67

$0.72

$0.27

$0.17 $0.11

$0.07 $0.01 $0.01

$0.67

$0.99

$0.80

$0.25 $0.15

$0.22

$0.02 $0.03 $-

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

Prior 5 Year Range Prior 5 Year Avg 2011 2012

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While the number of contract awards in Financial Services and Telecom & Media fell in 2012, all other sectors either increased or equalled 2011 levels.

Asia Pacific Industry Segment Contract Trends - Counts

Full Year Asia Pacific Contract Counts by Industry

33 24

20

11 9

6 3

2

47

25 23

13

8 7 2

1

37

19

28

14 14 15

2

5

0

5

10

15

20

25

30

35

40

45

50

Prior 5 Year Range Prior 5 Year Avg 2011 2012

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ITO ACV grew 21% in 2012 as the number of contract awards reached the highest level in the last three years.

Asia Pacific ITO Contract Award Trends

Full Year Asia Pacific ITO Counts

ACV Leaders

Accenture Capgemini Chinasoft

CSC HP

IBM Infosys

iSoftStone Mahindra Satyam

TCS

Counts Leaders

Accenture Alcatel-Lucent

BT Chinasoft

Fujitsu HCL HP

IBM Infosys

TCS Wipro

Top Asia Pacific ITO Providers by 2012 Contract Awards

Full Year Asia Pacific ITO ACV ($B)*

Note: Service providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.

$0.9 $0.7 $0.4

$1.2

$0.5 $1.0 $0.9

$0.3 $0.9

$0.3

$0.9 $0.7 $1.3

$0.8

$0.8

$0.9

$0.4

$0.6

$0.5

$0.5

$1.7

$1.4

$1.8 $2.0

$1.3

$1.9

$1.3 $1.0

$1.4

$0.8

$1.7

201211100908070605042003

1H ACV 2H ACV Avg of Prior 5 Yrs

87 85 74

95

62 58 53 35

54 39

75

201211100908070605042003

Counts Avg of Prior 5 Yrs

Prior 5 Year Avg

Prior 5 Year Avg

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$1.0

$0.3 $0.2 $0.1 $0.2 $0.2 $0.1 $0.1 $0.2

$0.4

$0.3 $0.2 $0.5

$0.6 $0.4

$0.1 $0.5 $0.2

$1.4

$0.6 $0.4

$0.6

$0.8

$0.5

$0.2

$0.5 $0.4

$0.1

$0.6

201211100908070605042003

1H ACV 2H ACV Avg of Prior 5 Yrs

2012 was a stand-out year for BPO awards as the region awarded its highest ever number of contracts ever and ACV soared by 133%.

Asia Pacific BPO Contract Award Trends

Full Year Asia Pacific BPO Counts

ACV Leaders

Gen-i Genpact

IBM iGATE

Infosys Jones Lang LaSalle Mahindra Satyam Sykes Enterprises

Transfield Services WNS

Counts Leaders

Fidelity Genpact

IBM Infosys

Korn/Ferry Mahindra Satyam Transfield Services

Wipro

Full Year Asia Pacific BPO ACV ($B)*

Top Asia Pacific BPO Providers by 2012 Contract Awards

Note: Service providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.

47 41 43

29

30 20 19 18 22

6

33

201211100908070605042003

Counts Avg of Prior 5 Yrs

Prior 5 Year Avg

Prior 5 Year Avg

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Contact Center and Industry-Specific BPO lifted BPO ACV in 2012. Asia Pacific BPO Contract Award Trends by Function

Asia Pacific BPO ACV ($B)* by Function 2011 vs. 2012

$0.09

$0.16

$0.06 $0.02

$0.12

$0.02 $0.02

$0.06 $0.01 $0.04

$0.19

$0.10

$0.03 $0.05

$0.11

$0.01

$0.09

$0.03

$0.01 $0.00 $0.01

$0.30

$0.04

$0.00

$0.13

$0.04

$0.08

$0.02 $0.00

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

Prior 5 Period Range Avg of Prior 5 Yrs 2011 2012

$0.77

Prior 5 Year Avg _

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With an active contracts CAGR of 12% and annualised revenue CAGR of 6%, Asia Pacific market shows robust performance.

Asia Pacific Outsourcing Revenue Trends

Annualized Revenue & Active Contract Trends

2007 to 2012 Active Contracts CAGR: ↑ 12% 2007 to 2012 Annualized Revenue CAGR: ↑ 6%

$11.3 $10.8

$8.4

636 592

356

201220112010200920082007

Annualized Revenue ($B)*Active Contracts

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While all Provider categories took a similar share of ITO ACV, India-heritage providers dominated BPO values – on the back of larger deal awards.

Asia Pacific Market Share Comparison by Provider Category

2012 Asia Pacific Market Share by Service Provider Category Contract Numbers and ACV of Awards

32% 30%

73%

40%

32% 27%

8%

9%

36% 43%

19%

51%

ITO ACVITO CountsBPO ACVBPO Counts

India-heritage US-heritage Others

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Public Sector ACV accounted for 30% of the regional market.

Comparing Public and Private Sector Trends in ACV($B)*

Public Sector ACV by AP Market

Public vs. Private Sector Analysis for the Asia Pacific

Public Sector Percentage of All Contracts

33% 34%

51% 48% 47%

20122011201020092008

46%

16% 17% 10% 16%

40% 81% 78% 83% 70%

15%

3% 5% 8% 13%

20122011201020092008

India and South Asia ANZ Other AP

$3.13

$2.02 $2.12 $1.57

$1.03 $1.86

20122011201020092008

Private Sector ACV% Public Sector ACV%

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The Top 10 Service Providers List, based on ACV awarded in 2012, for contracts over $5 million in annual contract value, shown in alphabetical order.

Public Sector Top 10 Service Providers

Service providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.

Top 10

Asia Pacific Public Sector

Accenture

Capgemini

China Unicom

CSC

Cubic Corp

Fujitsu

Gen-i

HCL Technologies

HP

IBM

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Key Short-term Trends in Sourcing for 2013 and Beyond

Emerging Markets to Continue their Increasing Impact on Sourcing ACV

LatinAm and Mexico

China and India

ACV Change from 2007

+150% +100%

BPO Expansion Continues with Industry Specific Solutions Leading the Way

$ +60%

BPO ACV Change from 2010

$ $ $ $ $ $ $ $

U.S. G201-500 Companies Recent Sourcing Adoption Rate Expands Large Deal Potential for Providers

2010 2012 32%

Adoption Rate

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Four disruptive technology trends impact enterprises today and shape long-term industry trends

Disruptive Technologies Shape Long-term Industry Trends

Social Media Collaboration

Computing & Storage

Mobility

Big Data/Analytics

Cloud

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2H12 TPI Index Summary and Outlook

Contract push-out and lingering fiscal uncertainties in both the U.S. and Europe could make for a softer global first half in 2013

Outlook for 2013 ACV awards is one of cautious optimism

Market growth, in terms of Annualised Revenue, is projected to be 3 - 4% in 2013

Asia Pacific outlook is hard to call. Increase in demand could be offset by the emergence of difficult economic factors in India and Australia

A sluggish 2H Global ACV pulled down results, yet 2012 performance nearly met 2011 levels

While fewer contracts were awarded globally for 2012, Mega-relationships supported the market value

BPO ACV and Asia Pacific ACV helped lift the global market for 2012

Asia Pacific finished the year up 55% compared to 2011. Increases of 21% for ITO and 133% for BPO made this the region’s best ever year.

summary market

outlook market

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Learn More Please contact us with your questions and comments.

► Sid Pai

www.considerthesourceblog.com

Partner & President, Asia Pacific +91 9880033779 [email protected]

► Gerry Clark Partner, Asia +65 9634 5927 [email protected]

► Dinesh Goel Partner, India +91 98458 93787 [email protected]

► Tom McCormack Partner, Australia & New Zealand +61 4 1378 6424 [email protected]

Full Year and Second Half 2012

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The Asia Pacific TPI 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.

TCV At A Glance

*Contracts with TCV >$25M

2012 2012 Y/Y 2H12 2H12 Y/Y

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

Global Market $ 99.1 -9% $ 49.3 -22%

New Scope $ 66.2 -9% $ 32.6 -13%

Restructurings $ 32.9 -10% $ 16.7 -34%

Mega-deals $ 16.0 -34% $ 8.1 -55%

ITO $ 62.5 -15% $ 31.0 -29%

BPO $ 36.5 1% $ 18.3 -4%

Americas $ 37.5 0% $ 17.1 -15%

EMEA $ 48.6 -22% $ 26.1 -31%

Asia Pacific $ 13.0 31% $ 6.1 15%

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Asia Pacific TPI Index - Full Year and Second Half 2012