Third Quarter 2013 Global ISG Outsourcing Index

Hosted by:

SK Prasad Borra, Rishi Jhunjhunwala and Paul Thomas Goldman Sachs

10 October 2013

The Global ISG Outsourcing Index

Third Quarter 2013

Market Data and Insights

© 2013 Information Services

Group, Inc. All Rights Reserved

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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 44th Quarterly Outsourcing Index Review

Esteban Herrera Partner

John Keppel Partner & President

Dr. David Howie Partner



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At a Glance

Scorecard 3Q13 3Q Y/Y 3Q Q/Q YTD YTD

ACV ($B)* Change Change ACV ($B)* Change

Global Market $ 5.8 1% 66% $ 14.1 -20%

New Scope $ 3.2 -19% 21% $ 8.3 -30%

Restructurings $ 2.6 42% 200% $ 5.8 3%

Mega-relationships $ 1.4 -15% 119% $ 3.4 -26%

ITO $ 4.4 15% 102% $ 9.7 -13%

BPO $ 1.4 -29% 5% $ 4.4 -31%

Americas $ 1.8 -7% 65% $ 4.9 -26%

EMEA $ 3.5 16% 89% $ 7.8 -5%

Asia Pacific $ 0.5 -41% -13% $ 1.4 -47%

‘ ‘ ‘ ‘ BEST 3Q PERFORMANCE EVER FOR BOTH ACV AND NUMBER OF CONTRACTS AWARDED

GREATEST 3Q PERFORMANCE EVER IN RESTRUCTURING MARKET DRIVEN BY 9 RESTRUCTURING MEGA-RELATIONSHIPS

STRONGEST 3Q ITO PERFORMANCE EVER IN TERMS OF BOTH ACV AND NUMBER OF CONTRACT AWARDS, WHILE BPO ACV SLOWS FOR SECOND STRAIGHT QUARTER ON INCONSISTENT LARGE DEAL ACTIVITY

EMEA HAS STRONGEST 3Q PERFORMANCE EVER, DRIVEN BY MEGA-RELATIONSHIPS AND GENERALLY HIGH CONTRACTING ACTIVITY

AMERICAS AND ASIA PACIFIC DOWN Y/Y DUE TO LACK OF LARGE DEALS AND WEAK PERFORMANCE IN THE TRADITIONAL LEADING INDUSTRY SECTORS



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3Q Broader Market ACV of just under $6B was up 1% Y/Y and up 65% Q/Q and resulted in the best third quarter ever.

Year-to-date Broader Market ($B)*

Year-to-date Contracting Counts

Broader Market Contract Award Trends

$8.3

$11.8 $9.8

$12.0 $9.6 $9.6

$7.6 $8.5 $8.2 $8.4

$5.8

$5.7 $5.6

$4.4 $4.1 $3.9

$2.9 $2.6 $3.5 $3.7

201312111009080706052004

$0

$5

$10

$15

$201H ACV 3Q ACV

485 601 604

505 472

364 299 295 262 297

353 255 273 228 208

191 149 129 115 96

-

200

400

600

800

1,000

201312111009080706052004

1H Counts 3Q Counts



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New scope ACV of $3.2B was off 19% Y/Y against a tough 3Q12 compare, but up 21% Q/Q. Restructuring ACV of $2.6B was the highest quarter to date.

Restructuring Year-to-date ACV ($B)*

Broader Market New Scope & Restructuring Trends

New Scope Year-to-date ACV ($B)*

Restructuring Year-to-date Counts New Scope Year-to-date Counts

$5.1 $8.0 $7.1

$8.7 $7.4

$7.4

$6.1 $5.0 $6.3 $7.0

$3.2

$3.9 $3.1

$2.6 $3.1 $2.8

$2.3 $2.0

$2.5 $2.4

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$0

$2

$4

$6

$8

$10

$12

$141H ACV 3Q ACV

$3.2 $3.8 $2.6 $3.4 $2.2 $2.2 $1.5 $3.5

$1.9 $1.4

$2.6 $1.8 $2.5 $1.8 $1.0 $1.0 $0.7

$0.6 $1.0 $1.3

201312111009080706052004

$0

$2

$4

$6

$8

$10

$12

$14

1H ACV 3Q ACV

352 454 453

392 365

291 245 232 211 249

238 198 205

171 172 154

128 109 91 75

-

100

200

300

400

500

600

700

201312111009080706052004

1H Counts 3Q Counts

133 147 151 113 107 73 54 63 51 48

115 57 68

57 36 37 21 20 24 21

-

100

200

300

400

500

600

700

201312111009080706052004

1H Counts 3Q Counts



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$1.4 $0.7

$1.4 $1.0 $1.7

$2.2

$0.8

$2.3 $1.7

$1.1 $0.9 $0.7 $1.4 $1.2 $1.3 $1.4 $1.1 $1.3

$3.3

$1.9 $2.8 $2.9 $2.8 $2.5

$3.6 $3.1

$2.7

3Q132Q1Q4Q3Q122Q1Q4Q3Q11

10 5 8 7 9 12 6 12 6

20 16 13 23 20 23 23 18 21

323

187

256 242 226 241

296 270

246

3Q132Q1Q4Q3Q122Q1Q4Q3Q11

Ten Mega-relationships were awarded in 3Q13, yet the market is being driven increasingly by smaller contract awards.

Broader Market Quarterly Counts by Bands

Broader Market Contract Trends by Deal Size

Boarder Market Quarterly ACV(B)* by Bands

$5-39M $40-99M $100M + $5-39M $40-99M $100M +



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3Q ITO ACV of almost $4.4B was up 15% Y/Y and 100% Q/Q. ITO ACV performance was the best third quarter ever.

ITO Year-to-date ACV ($B)*

ITO YTD Industry ACV ($B)*

ITO Contract Award Trends

$5.3 $7.3

$6.3

$9.2

$6.8 $6.5 $5.7 $6.3 $6.0 $4.8

$4.4 $3.8

$3.9

$3.2

$3.0 $2.6 $1.9 $1.6 $2.4

$2.8

201312111009080706052004

$0

$5

$10

$151H ACV 3Q ACV

ITO Year-to-date Counts

298 374 377

316 320

230 194 173 165 184

247 164 166

131 136

119 95

72 70 62

-

100

200

300

400

500

600

201312111009080706052004

1H Counts 3Q Counts

$2.04

$2.58

$0.69

$1.31

$1.38

$0.67

$0.64

$0.36

$- $1 $2 $3 $4

Manufacturing

Financial Services

Telecom & Media

Energy

Travel, Transport, Leisure

Healthcare & Pharma

Business Services

Retail

YTD 3Q12 YTD 3Q13



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3Q BPO ACV of just under $1.4B was down 29% Y/Y but up 5% Q/Q. YTD performance slowed as BPO dropped 31% from a year ago.

BPO Year-to-date ACV ($B)*

BPO YTD Industry ACV ($B)*

BPO Contract Award Trends

BPO YTD Counts

$3.1

$4.5 $3.5

$2.9 $2.8 $3.1

$2.0 $2.2 $2.2

$3.6

$1.4

$1.9 $1.7

$1.2 $1.1 $1.3

$1.0 $1.0 $1.1

$0.9

201312111009080706052004

$0

$2

$4

$6

$81H ACV 3Q ACV

187 227 227

189 152 134 105 122 97 113

106 91 107

97

72 72

54 57

45 34

-

100

200

300

400

201312111009080706052004

1H Counts 3Q Counts

$1.18

$0.68

$1.08

$0.45

$0.37

$0.17

$0.33

$0.17

$- $0.5 $1.0 $1.5 $2.0

Financial Services

Manufacturing

Telecom & Media

Energy

Travel, Transport, Leisure

Business Services

Healthcare & Pharma

Retail

YTD 3Q12 YTD 3Q13



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85% of the Top ITO Provider list is unchanged from previous years. The Top BPO group has more turnover, yet 40% of Top BPO providers do repeat year-to-year.

Top Service Providers Across the Globe

Notes: Service providers in alphabetical order; no rankings implied. Placements based on ACV from commercial contract awards sourced from ISG Contracts Knowledgebase ®.

Accenture

AT&T

Atos

BT

Capgemini

CGI

CSC

Dell

HCL

HP

IBM

Infosys

Tech Mahindra Nihon Unisys

Polaris Software Labs

Singtel Optus

TCS

T-Systems

Virtusa

Wipro

Xerox

Accenture

Aditya Birla Minacs

Allscripts

Aon Hewitt

Atos

Capgemini

Capita Group

CGI

Communisis

CSG

CSC

Fidelity

Genpact HCL

Infosys

StarTek

TCS

Wipro

WNS

Xchanging

Xerox

ITO 2013 YTD BPO 2013 YTD



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Americas 3Q ACV of $1.8B was down 7% Y/Y but up 65% Q/Q; At 139, the number of 3Q13 contract awards increased significantly, up 30% Y/Y and 107% Q/Q.

Americas Year-to-date ACV ($B)*

Segment Details Like-Quarter ACV ($B)*

Americas Contract Award Trends

YTD Counts

180 274 262

245 216

157 135 145 124 128

139 107 118 104

82

72 63 48 56 42

-

100

200

300

400

500

201312111009080706052004

1H Counts 3Q Counts

$1.1

$0.7

$1.1

$0.7

$0.0

$0.5

$1.0

$1.5

New Scope Restructuring ITO BPO

Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs3Q12 3Q13

$3.1

$4.8 $3.8

$5.8

$4.3

$3.0 $3.1

$4.6 $3.7

$4.4 $1.8

$1.9 $2.0

$2.0

$1.9

$1.2 $1.0

$1.1 $1.9 $1.2

201312111009080706052004

$0

$2

$4

$6

$8

$10

1H ACV 3Q ACV



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Most of the sub-regions had 3Q ACV up Q/Q but down Y/Y. YTD, Manufacturing accounted for over 75% of the Americas decline.

Americas Contract Award Trends Detail

$0.10

$0.00

$0.03 $0.01

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

$0.50

Canada Mexico Brazil OtherLatAm

Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs 3Q12 3Q13

Americas Sub-regions 5 Prior Like-Quarter ACV ($B)*

$1.10

$0.97

$0.95

$0.63

$0.40

$0.33

$0.28

$0.27

$0.0 $1.0 $2.0 $3.0

Financial Services

Telecom & Media

Manufacturing

Healthcare & Pharma

Energy

Retail

Business Services

Travel, Transport,Leisure

YTD 3Q12 YTD 3Q13

Americas Industries YTD ACV ($B)*

$1.63

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

U.S.



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EMEA 3Q ACV of $3.5B was up 16% Y/Y and 88% Q/Q. The strongest 3Q ACV ever was driven by nine Mega-relationships and very high contracting activity.

EMEA Year-to-date ACV ($B)*


EMEA Contract Award Trends

YTD Counts

245 252 272

204 201 171

125 113 115 128

176

111 124

102 94 94

63 66 45 44

-

100

200

300

400

500

201312111009080706052004

1H Counts 3Q Counts

$1.8 $1.7

$2.9

$0.6

$0

$1

$2

$3

$4


Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs

3Q12 3Q13

$4.3 $5.1 $5.0 $5.6 $4.1

$5.9

$3.3 $2.9 $4.1

$2.9

$3.5 $3.1 $3.2 $2.0

$1.6

$2.0

$1.5 $1.3

$1.3 $2.1

201312111009080706052004

$0

$2

$4

$6

$8

$101H ACV 3Q ACV



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DACH, France and Southern Europe had strong quarters, up Y/Y and Q/Q. YTD, Transportation was up 88%, while weakness persisted in Financial Services and Manufacturing.

EMEA Contract Award Trends Detail

EMEA Sub-regions 5 Prior Like-Quarter ACV ($B)*

$2.3

$1.6

$1.2

$1.2

$0.6

$0.5

$0.2

$0.2

$0 $1 $2 $3

Financial Services

Manufacturing


Energy

Telecom & Media

Business Services

Healthcare & Pharma

Retail

YTD 3Q12 YTD 3Q13

EMEA Industries YTD ACV ($B)*

$0.84

$0.38

$1.02

$0.21 $0.21

$0.31

$0.55

$0.04 $0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

U.K. &Ireland

Nordics DACH Africa &Middle

East

France Benelux SouthernEurope

E. Europe& Russia




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$0.9

$2.0

$1.0 $0.7

$1.3

$0.7

$1.2 $1.0

$0.4

$1.1

$0.5

$0.8

$0.5 $0.4

$0.6

$0.6

$0.4 $0.2

$0.3

$0.4

201312111009080706052004

$-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.01H ACV 3Q ACV

Asia Pacific 3Q ACV of $0.5B was down 41% Y/Y and 13% Q/Q. Quarterly regional performance lacked significant large deal activity.

Asia Pacific Year-to-date ACV ($B)*


Asia Pacific Contract Award Trends

YTD Counts

60 75 70

56 55

36 39 37 23

41

38 37 31

22 32

25 23 15

14 10

-

20

40

60

80

100

120

201312111009080706052004

1H Counts 3Q Counts

$0.24 $0.21

$0.44

$0.01 $0.0

$0.2

$0.4

$0.6

$0.8


Prior 5 Like-Qtr Range Avg of 5 Prior Like-Qtrs3Q12 3Q13



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India was down Y/Y due to difficult comparisons in 2012 when several large deals were awarded. The YTD regional performance was affected by slowing in the Financial Services, Manufacturing and Telecom sectors.

Asia Pacific Contract Award Trends Detail

$0.25

$0.06 $0.07

$0.05

$0.02 $0.01 $0.0

$0.1

$0.1

$0.2

$0.2

$0.3

$0.3

$0.4

$0.4

$0.5

ANZ GreaterChina

ASEAN India andSouth Asia

Japan South Korea


Asia Pacific Sub-regions 5 Prior Like-Quarter ACV ($B)*

$0.40

$0.25

$0.19

$0.19

$0.16

$0.15

$0.06

$0.02

$0.0 $0.4 $0.8 $1.2

Financial Services


Energy

Manufacturing

Telecom & Media

Healthcare & Pharma

Business Services

Retail

YTD 3Q12 YTD 3Q13

Asia Pacific Industries YTD ACV ($B)*

Special Topic for Third Quarter 2013

John Keppel

Partner & President



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Since 2011, Public Sector ACV has outpaced Commercial Sector ACV by almost 30%.

Public Sector Sourcing, a Large and Growing Market

$6.6

$2.7

$7.2 $7.0 $7.4 $7.9 $7.9

$5.6 $5.1

$9.7 $9.2

1Q2011

2Q 3Q 4Q 1Q2012

2Q 3Q 4Q 1Q2013

2Q 3Q2013

Commercial Sector ACV $BPublic Sector ACV $B

Public Sector Sourcing

Outpaces Commercial Sourcing*

56% Public Sector Share of

Outsourcing Market*

ACV from 2011 until today

$135 billion



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Regional Public Sector Markets Defined The U.K. and U.S. Federal Public Sectors hold ACV market shares that far outpace their GDP share. U.S. and European-based providers tend to be market leaders regardless of geography.

53%

5% 3%

26%

6% 5%

Europe

Accenture BT

Capgemini Indra Sistemas

T-Systems

U.K.

Atos BT

Capgemini Capita Serco

ANZ

Accenture CSC

Fujitsu IBM

Telstra

U.S. State/Local

Accenture CGI HP

MAXIMUS Xerox

Canada

Bell Canada HP

IBM Lockheed Martin

SNC-Lavalin

U.S. Federal

CSC General Dynamics Lockheed Martin

Northrop Grumman SIAC

*Other Regions = 2%

Percentage Share of Public Sector Market by Major Region*

Top 5 Providers by Geographic Segment Listed

Note: Service providers in alphabetical order; no rankings implied. Placements based on the number of public sector contracts awards sourced from ISG Contracts Knowledgebase ®.



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Unique Aspects of Public Sector Contracting As with the commercial sector, the public sector primary sourcing objectives are cost savings and operational efficiency. However, there are notable differences in how they get there.

Public Sector Core Contracting Attributes

Maximizing service delivery reach trumps shareholder value in scope decisions

Geographic scope is local, not global Service integration and management emphasized, as

provider consortium bids are more prevalent Procurement constraints on contracting attributes like size,

duration and renewal processes Reluctance to offshore outsourced solutions due to a

perception that jobs may be ‘exported’ from the local area



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Record-breaking 3Q ACV performance with impressive contracting activity levels across the globe

Market fueled increasingly by smaller deals, yet 3Q activity included 10 Mega-relationships

ITO contracting activity vigorous across all industries

BPO ACV in a lull, but activity levels remain strong, with performance shifting away from central processes and into industry-specific verticals

EMEA turned in a great performance particularly in Restructurings, with solid New Scope results as well

Americas ACV slowed, but contract activity picked up

Asia Pacific continues to struggle to return to more recent higher contracting levels, although 2012’s high was an outlier

Robust contracting activity in 3Q13 should continue through 4Q

ACV and contract volume to surpass Q4 2012 results

First half weakness remains a drag on annual ACV, so expect the year to finish strong but end down, somewhere in the range of 12-15% lower than full year 2012

3Q13 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 [email protected]

► Alex Kozlov Director, ISG +1 617 558 3377 [email protected]

blog.isg-one.com

► Jim Baptiste Matter Communications for ISG +1 978 518 4527 [email protected]

Third Quarter 2013



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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.

3Q13 TCV Scorecard

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

Scorecard 3Q13 3Q Y/Y 3Q Q/Q YTD YTD

TCV ($B)* Change Change ACV ($B)* Change

Global Market $ 24.4 -12% 35% $ 63.4 -20%

New Scope $ 14.7 -20% 6% $ 39.3 -28%

Restructurings $ 9.7 6% 134% $ 24.1 -3%

Mega-deals $ 4.1 -29% 42% $ 12.0 -12%

ITO $ 18.3 2% 72% $ 41.3 -19%

BPO $ 6.1 -36% -17% $ 22.1 -22%

Americas $ 6.1 -35% 17% $ 20.4 -33%

EMEA $ 16.3 10% 63% $ 36.2 -84%

Asia Pacific $ 2.0 -40% -28% $ 6.8 -36%

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