Q1 2015 ISG Outsourcing Index EMEA

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*Contracts with ACV ≥ €4M from the ISG Contracts Knowledgebase®

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Hosted by:

James Goodman

Barclays Capital

20th April 2015

The ISG Outsourcing Index™

First Quarter 2015

EMEA Market Data and Insights

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Covering the state of the outsourcing industry for EMEA commercial contracts.*

Welcome to the 50th Quarterly ISG Outsourcing Index™ Review

Bernd SchaeferPartner

John KeppelPartner & President

Dr. David HowiePartner


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At a Glance

GLOBAL MARKET ACV COMES IN LIGHTER

DOWN 18% Y/Y AS MID-SIZE AND LARGER AWARDS FALL SHORT

WEAKNESS SPREAD BETWEEN NEW SCOPE AND RESTRUCTURING AWARDS

AMERICAS ACV UP 10% Y/Y WITH BPO, ENERGY,

HEALTHCARE AND PHARMA SECTORS PARTICULARLY ACTIVE

EMEA ACV DOWN 26% Y/Y; DESPITE A STRONG SHOWING IN FINANCIAL SERVICES AND IN THE DACH

MARKET; SLOWING IN THE UK, NORDICS AND FRANCE TURNED OVERALL RESULTS NEGATIVE

ASIA PACIFIC ACV DOWN 45% Y/Y; INDIA STEPS UP ITS

CONTRACTING PACE WHILE ANZ REMAINED SLUGGISH

Scorecard 1Q15 1Q Y/Y 1Q Q/Q 1Q15 1Q Y/Y 1Q Q/Q

ACV (€B)* Change Change Counts Change Change

Global Market € 4.1 -18% -22% 305 -7% -16%

New Scope € 2.5 -19% -7% 213 0% -11%

Restructurings € 1.6 -16% -39% 92 -20% -26%

Mega-relationships € 1.0 -32% -34% 8 -27% -11%

ITO € 2.8 -27% -26% 201 -16% -21%

BPO € 1.3 13% -12% 104 18% -4%

Americas € 1.8 10% -13% 143 27% -8%

EMEA € 1.9 -26% -29% 128 -24% -23%

Asia Pacific € 0.4 -45% -19% 34 -24% -15%

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As we forecast last quarter, 1Q15 Global ACV declines, down 18% Y/Y, as midsize

and larger awards fall short.

Global Market Quarterly ACV (€B)*

Global Market Quarterly Contract Counts

Global Market Contract Award Trends

$4.1

$5.2 $4.9 $4.8

$5.6

$4.8

1Q151Q141Q131Q121Q11

305

363 327 308

360 379

1Q151Q141Q131Q121Q11

-

50

100

150

200

250

300

350

400

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EMEA ACV in 1Q15 falls 26% Y/Y as the region sees decreases in both Restructuring

and New Scope awards. ITO ACV accentuates the decline, shrinking 36% Y/Y.

EMEA Quarterly Counts

EMEA Contract Award Trends

EMEA Quarterly ACV (€B)*

Like-Quarter Segment Details ACV (€B)*EMEA Trailing 12 Months ACV (€B)*

128 169

143 153

181

1Q151Q141Q131Q121Q11

-

40

80

120

160

200

€ 1.9

€ 2.6

€ 2.2

€ 2.7€ 2.5

1Q151Q141Q131Q121Q11

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

€ 9.3 € 9.7 € 9.3 € 11.4

€ 9.3

569 629

541 593

553

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11

ACV Counts

€ 1.4

€ 0.5

€ 1.4

€ 0.5

€ -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

New Scope Restructuring ITO BPO

Range of 5 Prior 1Qs Avg of 5 Prior 1Qs

1Q14 1Q15

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€ 0.60

€ 0.08

€ 0.52

€ 0.15

€ 0.40

€ 0.04€ 0.13

€ 0.02€ 0.00

€ 0.20

€ 0.40

€ 0.60

€ 0.80

€ 1.00

€ 1.20

€ 1.40

U.K. & Ireland Nordics DACH France Benelux Southern

Europe

Africa & Middle

East

E. Europe &

Russia

Range of 5 Prior 1Qs Avg of 5 Prior 1Qs 1Q14 1Q15

€ 0.99

€ 0.25€ 0.15 € 0.12 € 0.16

€ 0.03 € 0.01€ 0.13 € 0.10

€ 0.0

€ 0.2

€ 0.4

€ 0.6

€ 0.8

€ 1.0

€ 1.2

Financial

Services

Travel

Transport

Leisure

Manufacturing Telecom

& Media

Energy Business

Services

Consumer

Products

& Goods

Retail Healthcare

& Pharma


Despite a strong showing in Financial Services and in the DACH market, slowing in

the U.K. & Nordics plus a difficult compare in France pull down the market.

EMEA Sub-regions Like-Quarter ACV (€B)*

EMEA Industry Like-Quarter ACV (€B)*

EMEA Contract Award Trends Detail

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Co. Revenues < $2 BCo. Revenues $2 -10 B

ISG Sourcing Market Standouts in EMEA

Large multinationals and providers with strong local “home market” profiles head

up each of the service provider segments.

Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®.

Service providers in alphabetical order; no rankings implied.

Revenues sourced from Hoovers and individual company financial fillings

Co. Revenues > $10B

SOURCING

STANDOUTS GROUPED BY COMPANY SIZE

Cognizant

Capita

CGI

EVRY

HCL

Infosys

MITIE

Serco

Tieto

Wipro

Accenture

Atos

Balfour Beatty

BT

Capgemini

Fujitsu

HP

IBM

TCS

T-Systems

Endava

HH Global

IGATE

InnerWorkings

Kuehne & Nagel

Luxoft

MAYKOR

Mindtree

NNIT A/S

Xchanging

The Building 10Sourcing Standouts

The Breakthrough 10Sourcing Standouts

The Big 10Sourcing Standouts

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1Q15 Americas ACV is up 10% Y/Y with first quarter counts up 27% Y/Y. BPO ACV, up

7% Y/Y, has its best quarter in two years.

Americas Quarterly Counts

Americas Contract Award Trends

Americas Quarterly ACV (€B)*

Like-Quarter Segment Details ACV (€B)*Americas Trailing 12 Months ACV (€B)*

143 113 131

174

146

1Q151Q141Q131Q121Q11

-

50

100

150

200

€ 1.8€ 1.5

€ 2.1

€ 2.4

€ 1.7

1Q151Q141Q131Q121Q11

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 7.3

€ 5.2

€ 7.0€ 7.5€ 6.6

585

454 470

555

457

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11

ACV Counts

€ 0.8€ 1.0

€ 1.0

€ 0.8

€ 0.5

€ 0.7

€ 0.9

€ 1.1

€ 1.3

€ 1.5

€ 1.7

€ 1.9



1Q14 1Q15

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1Q15 ACV increases due to strength in the major markets of U.S. and Canada.

Healthcare & Pharmaceutical and Energy sectors are particularly active.

Americas Sub-regions Like-Quarter ACV (€B)*

Americas Industry Like-Quarter ACV (€B)*

Americas Contract Award Trends Detail

€ 0.27 € 0.30

€ 0.19

€ 0.32

€ 0.11 € 0.09

€ 0.25

€ 0.05€ 0.10

€ 0.0

€ 0.2

€ 0.4

€ 0.6

€ 0.8

Manufacturing Financial

Services

Telecom

& Media

Healthcare

& Pharma

Business

Services

Retail Energy Consumer

Products

& Goods

Travel

Transport

Leisure


€ 0.18

€ 0.01 € 0.00€ 0.02

€ 0.00

€ 0.05

€ 0.10

€ 0.15

€ 0.20

€ 0.25

Canada Brazil Mexico Other LatAm


€ 1.47

€ -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

U.S.

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ISG Sourcing Market Standouts in the Americas

Providers with substantial offshore profiles led in the Building tier. Several contact

centre firms are now positioned in the Breakthrough 10.






Aon Hewitt

CBRE

CGI

Cognizant

CompuCom

Genpact

HCL

Infosys

Teleperformance

Wipro

Accenture

Atos

BT

Capgemini

Dell

IBM

RR Donnelley

State Street

TCS

Xerox

Alorica

APAC Customer Services

EXL

Firstsource Solutions

ICF International

IGATE

KPIT Technologies

Luxoft

Syntel

TeleTech


Co. Revenues > $10B

SOURCING


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€ 0.33

€ 0.10

€ 0.40

€ 0.03€ 0.0

€ 0.2

€ 0.4

€ 0.6

€ 0.8



1Q14 1Q15

Asia Pacific 1Q15 ACV is down 45% Y/Y versus a robust quarter a year ago. Contract

counts are down 24% Y/Y yet are in line with 1Q12 and 1Q13.

Asia Pacific Quarterly Counts

Asia Pacific Contract Award Trends

Asia Pacific Quarterly ACV (€B)*

Like-Quarter Segment Details ACV (€B)*Asia Pacific Trailing 12 Months ACV (€B)*

34

45

34 33

52

1Q151Q141Q131Q121Q11

-

10

20

30

40

50

60

€ 0.43

€ 0.78

€ 0.44€ 0.43

€ 0.58

1Q151Q141Q131Q121Q11

€ 0.0

€ 0.2

€ 0.4

€ 0.6

€ 0.8

€ 1.0

€ 1.2

€ 2.1€ 2.0€ 2.8

€ 1.7€ 2.2

139 141

169

135

166

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11

ACV Counts

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€ 0.14

€ 0.02

€ 0.08€ 0.10

€ 0.05

€ 0.00€ 0.02 € 0.03

€ 0.00€ 0.00

€ 0.05

€ 0.10

€ 0.15

€ 0.20

€ 0.25

€ 0.30

Financial

Services

Manufacturing Telecom

& Media

Travel

Transport

Leisure

Energy Business

Services

Consumer

Products

& Goods

Retail Healthcare

& Pharma


India steps up its contracting pace. However, ANZ remains sluggish, holding back

overall regional results.

Asia Pacific Sub-regions Like-Quarter ACV (€B)*

Asia Pacific Industry Like-Quarter ACV (€B)*

Asia Pacific Contract Award Trends Detail

€ 0.02

€ 0.24

€ 0.08€ 0.06

€ 0.01 € 0.02€ 0.00

€ 0.05

€ 0.10

€ 0.15

€ 0.20

€ 0.25

€ 0.30

ANZ India and South

Asia

Japan Greater China Southeast Asia South Korea


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ISG Sourcing Market Standouts in Asia Pacific

Several Japanese providers joined the large multinationals in the Big 10 Sourcing

Standouts list. Australian and India-based providers contributed greatly to the two

smaller tiers.




Co. Revenues > $10B

SOURCING


Cognizant

HCL

Infosys

NEC

Orange Business Services

Tech Mahindra

Transfield Services

Unisys

United Group Services

Wipro

Accenture

BT

Fujitsu

HP

Hitachi

IBM

NTT Data

Ricoh

TCS

Ericsson

Aegis Limited

ChinaSoft

Hollysys Automation

Itron

Kratos Defense & Security

NGA Human Resources

Ramco

SITA

Vertex Group

WNS




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Relative to the Commercial Sector, Public Sector ACV grows in the past five years.

Most ACV is generated by ITO awards, with BPO ACV varying by geography.

Public Sector Trailing 12 Months Counts

Global Public Sector Award Trends

Public Sector Trailing 12 Months ACV (€B)*

Public Sector ITO vs. BPO TTM ACV (€B)* Public Sector Regional ITO vs. BPO % TTM ACV

1,293 1,224

1,180 1,283 1,176 1,400 1,188

978 891 876

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11

Commercial Sector Public Sector

88%

36%

91%

38%

12%

64%

9%

62%

U.S. & Canada U.K. Continental

Europe

Australia

ITO BPO

€ 28.7€ 24.0

€ 16.7€ 14.4

€ 16.5

€ 9.1€ 7.1€ 5.5€ 5.7€ 5.5

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11

Public Sector ITO ACV Public Sector BPO ACV

$18.7

$37.8

$31.1

$22.1 $20.1 $22.1

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11


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North America, led by Defence and Healthcare spending, account for a large share

of sourcing. Average ACV remains steady while durations fall.

Share of Public Sector ACV for Trailing 12 Months Top Public Sector Providers

in Recent 12 Months*

Global Public Sector Award Trends Continued

67%

17%7% 6% 2%

U.S. &

Canada

U.K. Continental

Europe

Australia Other

Global Average Deal Size and Duration Compare

3.814.15

3.12

4.36

*Service providers in alphabetical order; no rankings implied.

Placements based on counts of public sector contract awards sourced from ISG Contracts Knowledgebase ®.

Accenture

BT

Capita

Carillion

CGI

CSC

HP

Accenture

Atea

Atos

Capgemini

CGI

HP

IBM

Indra Sistemas

Serco

Accenture

Boeing

Fujitsu

Harris Corp.

IBM

NEC Corp.

Serco

Avg. Duration in Yrs.

Avg. Contract Value (€K)

U.S. & Canada Asia Pacific

U.K. Continental Europe

General Dynamics

L-3 Communications

Leidos Holdings

Lockheed Martin

Northrop Grumman

Raytheon

Science Applications

€ 14.4€ 15.4

€ 27.0€ 25.2

2Q14 -

1Q15

2Q13 -

1Q14

2Q12 -

1Q13

2Q11 -

1Q12

2Q10 -

1Q11


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Special Topic for First Quarter 2015

THE COMPOUNDED IMPACT OF AUTOMATION, ROBOTICS AND CLOUD –

THE ARC HEIGHTENS SOURCING PRICE WARS

John KeppelPartner & President

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The ARC Effect Accelerates and Broadens Pricing Changes

Automation, Robotics and Cloud (ARC) impact the managed service marketplace

more rapidly and broadly than anticipated. Clients look to benchmarking to take

advantage.

obotics

utomation

Most Recent

loud ?SaaSPaaS

IaaS

A Buyer’s Market

reveals price declines more than 20% in

some cases

Stirring Up the

Status Quo

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Providers Adjust – Talk of New Service Investments Abound

Providers are trying to leverage what they have, protect existing revenues and

invent their future businesses all at the same time – a significant challenge.

ARC leads to

supplanton-premises, fixed-pricing

models

Not just short-term

contracts, but effectively

pay-as-you-go models

to ensure flexibility

$4

$1

revenue is replaced with

only $1 of cloud-based

revenue

?

$3 to $4 dollars in hardware/software

Significant

Provider Challenge

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� As we forecast, Global Market ACV fell short Y/Y even as smaller deal flow

remained constant

� Americas results stayed consistent as the U.S. and Canada and several

industries (Energy and Healthcare/Pharmaceuticals) saw stepped-up activity

� EMEA and Asia-Pacific fell back Y/Y as they struggled with difficult

comparisons against a more robust quarter a year ago

� Positive results in selected geographic markets like India and DACH and

Financial Services in Europe were not enough to counterbalance declines in

larger, more established sourcing markets like the U.K. and ANZ

� We expect a difficult comparison in 2Q15 as markets such as France and Japan

have tough targets to match

� ACV should remain muted through the first half but we expect will turn more

positive in 2H15 – especially with strength in verticals like Energy and

Transportation, coupled with solid results in the larger sourcing markets like

the U.S. and DACH

1Q15 ISG Outsourcing Index™ - Global Summary and Outlook

summarymarket

outlookmarket

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Please contact us with your questions and comments.

Learn More

Paul ReynoldsPartner

+1 508 625 2194

[email protected]

ISG insights serving providers and market analysts

www.isg-one.comDr. David Howie

Partner

+44 7789 771 665

[email protected]

Denise Colgan

EMEA and AP Media Contact

+44 1737 371523

[email protected]

Rob Arnott

Cohn & Wolfe for ISG

+44 (0) 20 7331 5363

[email protected]

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First Quarter 2015

APPENDIX: SCORE CARD FOR TCV

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The ISG Outsourcing 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.

First Quarter 2015 TCV Scorecard

*Contracts with TCV ≥ €25M from the ISG Contracts Knowledgebase®

Scorecard 1Q15 1Q Y/Y 1Q Q/Q 1Q15 1Q Y/Y 1Q Q/Q

TCV (€B)* Change Change Counts Change Change

Global Market € 17.9 -17% -25% 305 -7% -16%

New Scope € 12.8 -8% 13% 213 0% -11%

Restructurings € 5.1 -32% -60% 92 -20% -26%

Mega-deals € 3.5 40% -61% 8 -27% -11%

ITO € 13.4 -14% -23% 201 -16% -21%

BPO € 4.5 -23% -32% 104 18% -4%

Americas € 5.6 -14% -29% 143 27% -8%

EMEA € 10.1 -10% -26% 128 -24% -23%

Asia Pacific € 2.2 -42% -11% 34 -24% -15%

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