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Global Outsourcing Market Data and Insights
Hosted by:
Moshe Katri, Cowen & Co.
First Quarter 2011
April 19, 2011
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John KeppelPartner & President,Information Services and
Chief Marketing Officer,TPI
2
Partner & President,Global Operations, TPI
Partner & President,TPI EMEA
Partner & Director,TPI North Asia
Mark Mayo
Duncan Aitchison
Michael Rehkopf
Welcome to the 34th Quarterly Outsourcing Index CallCovering the
state of the outsourcing industry for global, commercial
contractswith total contract value greater than $25 million.
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SOURCING MARKET25% from 4Q10,
but NEW SCOPE PERFORMANCE WAS STEADY
RESTRUCTURINGS DOWN after a record 2010,
IMPACTING ITO AND THE AMERICAS
A RESURGENCE OF BPO, 66% year over year,
with ACTIVITY LEVELS NEAR A 5 YEAR HIGH
OUTLOOK FOR 2011 suggests
INDUSTRY UPSWING based on increasing activity levels
3
1Q11 HEADLINES
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At A Glance4
1Q11TCV ($B)*
Q/QGrowth
Y/YGrowth
Global Broader Market 17.4 -25% -28%
Restructurings 2.5 -64% -73%
New Scope 14.9 -7% steady
Americas 5.4 17% -56%
EMEA 10.1 -28% -5%
Asia-Pacific 1.9 -57% -42%
ITO 10.9 -46% -47%
BPO 6.6 111% 66%
SCORECARD
SOURCING MARKET25% IN 1Q11
NEW SCOPE PERFORMANCE STEADY
RESTRUCTURINGS DOWN, IMPACTING ITO & AMERICAS
RESURGENCE OF BPO, ACTIVITY NEAR A 5 YEAR HIGH
OUTLOOK FOR 2011 INDUSTRY ACTIVITY LEVEL UPSWING
*Industrywide ITO and BPO Contracts with TCV > $25M
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Broader Market Contract Awards TCV ($B)*
Broader Market Contract Award Trends5
TCV is down 25% from the fourth quarter of 2010. Additionally,
its one of the
lower results when compared to the 10 past 1Qs.
*Industrywide ITO and BPO Contracts with TCV > $25M
$18.2 $21.2 $19.4
$31.2$24.3
$19.7 $16.9$23.1
$17.4
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Quarter to Quarter Comparisons
- 25%
$23.7 $20.0 $21.7$24.5
$28.7
$21.5 $22.1 $18.2$24.3
$17.4
1Q02 03 04 05 06 07 08 09 10 1Q11
10 Years of First Quarters
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?
$27.4
$14.8
$23.2
$2.5$9.4$3.6$9.9
201110090807060504032002
Annual Restructuring 1Q Restructuring
Comparing New vs. Restructuring Contracts Awarded6
New Scope TCV was down 7% Q/Q and TCV of restructurings fell by
more than
64% Q/Q and 73% Y/Y.
Broader Market New vs. Restructured Contracts TCV ($B)*
Quarter to Quarter Comparison
*Industrywide ITO and BPO Contracts with TCV > $25M
$15.0$14.9 $16.1
$14.9
$3.2$9.4
$7.0
$2.5
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
New TCV Restructured TCV
- 64%
- 7%
10 Year Trend in Annual Restructuring TCV
Lower than
average
1Q11, after
record 2010
Total Year
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Americas Contract Award Trends7
Contracting activity in the Americas increased this quarter,
after having
slowed during each of the past three quarters.
Americas Contract Awards TCV ($B)*
*Industrywide ITO and BPO Contracts with TCV > $25M
$8.1 $8.4 $8.7$9.5
$12.3$10.4
$7.3
$4.6
$5.4
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
$19.7
$24.9
$24.2
$23.1
$25.5
$36.5
$8.0
$14.0
$8.1
$7.7
$6.8
$19.6
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
2Q06-1Q07
2Q05-1Q06
New Scope
Restructuring
Quarter to Quarter Comparison
Trailing 12 Months
+ 16.7%
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EMEA Contract Award Trends8
TCV awarded in EMEA declined 5% Y/Y and 28% Q/Q.
EMEA Contract Awards TCV ($B)*
*Industrywide ITO and BPO Contracts with TCV > $25M
$8.8 $8.3 $7.4
$19.2
$10.7$8.2 $7.3
$14.0
$10.1
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
-28% Includes 3 of 4
1Q11 mega-
relationships
$29.3
$36.9
$30.0
$40.0
$26.3
$25.7
$10.3
$8.7
$11.7
$4.9
$7.4
$9.0
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
2Q06-1Q07
2Q05-1Q06
New Scope
Restructuring
Trailing 12 Months
Quarter to Quarter Comparison
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$1.3
$4.5$3.4
$2.5$1.3 $1.1
$2.3
$4.4
$1.9
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
Asia Pacific Contract Award Trends9
TCV awarded in Asia Pacific was up 42% Y/Y, although it declined
57% Q/Q.
Asia Pacific Contract Awards TCV ($B)*Quarter to Quarter
Comparison
- 57 %
*Industrywide ITO and BPO Contracts with TCV > $25M
No mega-
relationships in
1Q11
$7.5
$8.7
$9.5
$7.4
$6.6
$6.5
$2.2
$3.1
$1.2
$1.5
$2.6
$1.5
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
2Q06-1Q07
2Q05-1Q06
New Scope
Restructuring
Trailing 12 Months
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$9.7
$12.1
$9.5
$1.1
$8.2
$2.2
1Q11
1Q10
1Q09
New Scope Restructuring
ITO Industrywide Contract Award Trends10
ITO TCV awards declined 46% Q/Q and 47% Y/Y. 1Q11 ITO
Restructurings are
down from the previous two first quarters.
ITO Contract Awards TCV ($B)*
$10.9
$19.9
$12.0$13.9$20.3
$23.3
$13.8$15.9
$11.7
1Q114Q103Q102Q101Q104Q093Q092Q091Q09
Quarter to Quarter Comparison
-46 %
Regional Comparison
*Industrywide ITO Contracts With TCV > $25M:
32%
38%
57%
50%
11%
12%
1Q11
Prior
5yrs
Americas EMEA Asia Pacific
Comparing First Quarters
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725965655083
655860
1Q114Q103Q102Q101Q104Q093Q092Q091Q09
BPO Industrywide Contract Award Trends12
BPO TCV Awarded in 1Q11 was up 111% Q/Q and 66% Y/Y. Second
best
quarter by number of contracts in past five years.
BPO Contract Awards TCV ($B)*
$6.6
$3.1
$4.9$5.8$4.0
$7.9
$5.6$5.3$6.5
1Q114Q103Q102Q101Q104Q093Q092Q091Q09
+ 111%
Includes the Saudi
Telecom contact
center mega-
relationship and a
large Shell-Logicaloyalty-cards-
processing
agreement
*Industrywide BPO Contracts With TCV > $25M:
Quarter to Quarter Contract Count Comparison
Quarter to Quarter TCV Comparison
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$10.1
$3.1
$1.3
$5.2
$0.8
$0.7
$0.7
$1.2
4Q10
$5.5
$5.9
$1.3
$0.9
$5.4
$1.8
$2.0
$1.5
$4.0
$3.3
$5.4
$1.9
$1.1
$1.0
$0.4
$0.4
Financial Services
Manufacturing
Telecom and Media
Energy
Travel, Transport
Business Services
Healthcare & Pharma
Retail
1Q10 1Q11
Industry Segments Contract Award TrendsTelecom & Media and
Manufacturing gained Q/Q. However, Financial Services
dropped from $10B in 4Q10 to a more historically normal $4B in
1Q11.
TCV ($B)* Awarded by Industry
23% 19%
31%27% Telecom
& Media
Manufacturing
Other1
Financial
Services
13
* ITO and BPO Contracts with TCV > $25M
Quarter to Quarter Comparison
1Q11 Share of TCV
1
Segments with TCV < $2B
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1Q11 Top 15 Service Providers by TCV14
The Top 15 Service Providers List, based on TCV awarded in the
first quarter,
shows a mix of Multinationals and Newer Firms.
AccentureAegis
CapgeminiCGI
CSCCSG Systems
EDB ErgoGroupHCLHPIBM
Logica
T-SystemsTCS
XchangingXerox ACS
Indian-Heritage
Providers won 20%
of TCV in 1Q11
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Spotlight on Research
15
First Quarter 2011
Michael Rehkopf
Partner & Director,TPI North Asia
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Special Topic Framework
16
10 Year Pathto Success for
Indian Providers
Todays Market, Dramatic
Changes in the Last Decade
Current State of
Chinas Provider
Community
China Providers:
Normal Growth
1 3
2
4?
China Providers:Breakthrough growth
for a more in-depth discussion: [email protected]
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The Chinese Service Provider Community18
From a revenue perspective, the Chinese provider market is
structurally similar
to the India provider market of ten years ago.
Camelot Longtop
Chinasoft Neusoft
hiSoft Rayoo Tech
Insigma SinoCom
iSoftStone VanceInfo
Highly
Fragmented
Market
85,000
Employees
$
2.4 billion
Revenues
10 Largest Chinese Providers
for a more in-depth discussion: [email protected]
$$
$$
$$$
$
19
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1
Changing Market Dynamics19
Factors impacting all providers, including the Chinese.
33%
69%
7 Yrs Ago
Today
More Transactions Include
Offshore Delivery Than Ever
43
2
37
Large Companies Leveraging
Multi-sourcing More Than Ever
10 Yrs AgoToday
Number of Service Providers
Making Up 75% Share of TCV
10 Yrs Ago Today
7
15
Continued Growth in Savings
Realized through Outsourcing
7 Yrs Ago
for a more in-depth discussion: [email protected]
2x
53%33%
% G2000
Today
20
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Chinese Provider Future Growth
Large, underpenetrated
domestic market
Scale and experience gained
from domestic market wins
supports big global deal wins
Potential to acquire service
centers from current externalpartners and subcontractors
Chinese government as a
potential buyer
20
What might help Chinese providers accomplish breakthrough
growth?
Breakthroughfactors
for a more in-depth discussion: [email protected]
Labor arbitrage advantages not
unique
Intellectual property and data
privacy distraction
U.S. firms look outside Asia
Pacific for additional delivery
centers Time lag to develop middle
management
Constrainingfactors
21
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1Q11 TPI Index Summary
21
Steady market recovery supported by:
Strong activity across all regions
Increasing BPO interest
Stable new scope performance
marketBroader
Global TCV down 25% from strong 4Q10
One of the lowest 1Qs in 10 years
Restructurings down, fueling Global decline
New scope performance stable
sectorsMajor
Low restructurings greatly impacted ITO and Americas TCV
BPO TCV remarkably strong Q/Q and Y/Y. Number of contractssecond
best in five years
Manufacturing and Telecom & Media strong 1Q11 results
outlookTPI
22
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i
Learn More22
Please contact us with your questions and comments.
--- Media Contacts ---
John KeppelPartner & President,Information Services and
Chief
Marketing Officer, TPI
+44 (0)7879 432 212
[email protected]
Duncan AitchisonPartner & President,TPI EMEA
+44 (0)1628 21702
[email protected]
Andrew ParkDirector, Global Communications
& Branding , TPI+1 919 259 9252
[email protected]
Rhena WallaceCohn & Wolfe for TPI
+1 212 798 [email protected]
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