The TPI EMEA Index
Hosted by:
Marc Geall,
Deutsche Bank Software and IT
Services Team
First Quarter 2012
April 16, 2012
EMEA Outsourcing Market Data and Insights
© 2012
Information
Services Group, Inc.
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ISG-one.com
*Contracts with TCV > €20M
Partner & President
North Europe, ISG
Covering the state of the outsourcing industry for global, commercial contracts
with total contract value greater than €20 million.
Welcome to the 37th Quarterly Outsourcing Index Call
Duncan Aitchison
2
Partner & Managing Director,
ISG Germany
Bernd Schaefer
John KeppelPartner & President Research
& Managed Services
and Chief Marketing Officer,
ISG
© 2012
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ISG-one.com
*Contracts with TCV > €20M
“
3
At A Glance
“
GLOBAL BROADER MARKET AWARDS AND TCV DROPPED
ON THE HEELS OF RECORD 2011 RESULTS
RESTRUCTURINGS NOTABLY ↑ Y/Y, WHILE
NEW SCOPE TCV CONTINUES TO DECLINE
EMEA TCV DECLINES ON DEARTH OF LARGE DEALS
AMERICAS TCV ↑ Q/Q
STRONG RESULTS INCLUDE THE LONE 1Q11 MEGA DEAL
Score Card
1Q12 TCV
(€B)
Q/Q
Change
1Q Y/Y
Change
1Q12
Counts
Q/Q
Change
1Q Y/Y
Change
Global Market € 14.9 -35% -22% 184 -18% -31%
Mega Deals € 1.2 -83% -93% 1 -80% -67%
New Scope € 8.5 -45% -46% 137 -23% -35%
Restructurings € 6.4 -13% 82% 47 2% -18%
ITO € 10.0 -37% -20% 120 -22% -29%
BPO € 4.9 -30% -20% 64 -11% -34%
EMEA € 6.9 -53% -32% 79 -23% -37%
Asia Pacific € 1.4 -33% -36% 18 flat -55%
Americas € 6.6 8% -3% 87 -16% -14%
© 2012
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Services Group, Inc.
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ISG-one.com
*Contracts with TCV > €20M
€ 13.8
€ 23.2 € 22.5
2 Prior
Qtrs Avg
€ 22.8
2Q061Q064Q05
€ 17.4 € 22.5 € 25.3
2 Prior
Qtrs Avg
€ 23.9
2Q101Q104Q09
€ 14.9 € 22.9 € 21.7
€ 15.7 € 19.2 € 19.8
€ 14.7 € 17.4 € 22.5
1Q12 4Q 3Q 2Q 1Q11 4Q 3Q 2Q 1Q10
4
1Q12 TCV declined a substantial 35% Q/Q and 22% Y/Y, not unusual after a strong
third and fourth quarter 2011.
Global Broader Market Contract Award Trends
Quarterly TCV (€B)* Comparison
↓40%↓27%
The TCV Hangover Effect - Previous Quarterly Precedence
↓35%
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*Contracts with TCV > €20M
€ 6.9
€ 14.6
€ 10.1 € 9.8
€ 7.3
1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
5
1Q12 TCV was down 53% Q/Q and 32% Y/Y. The ‘hangover’ effect and,
potentially, Eurozone financial concerns impacted results.
EMEA Contract Award Trends
Quarterly TCV (€B)* Comparison
€ 25.4
€ 26.1
€ 30.8
€ 25.0
€ 31.3
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
Quarterly TCV (€B)* ComparisonNew Scope vs. Restructuring TTM TCV (€B)* Comparison
€ 17.0
€ 9.5
€ 7.0
€ 9.7
€ 3.8
Restructuring TCV
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*Contracts with TCV > €20M
€ 2.5
€ 1.3 € 1.0
€ 1.4
€ 0.2 € 0.2 € 0.1 € 0.1 € -
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
€ 4.5
€ 5.0
UK &
Ireland
Scandinavia Benelux DACH France Southern
Europe
Africa &
Middle East
E. Europe &
Russia
Prior 5 Period Range Average 1Q11 1Q12
6
With the exception of a steady performance in DACH, and some activity in E.
Europe, EMEA sub-regions were down from their Prior Five-Like-Quarter averages.
EMEA Country Details in Contract Award Trends
Sub-Regional Like-Quarter TCV (€B)* Comparison
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*Contracts with TCV > €20M
€ 6.2 € 5.8
€ 1.8 € 2.5 € 4.7
€ 0.8 € 0.9
€ 3.6 € 4.7
€ 1.2 € 1.6
0
4
112
3
1122
1
0
2
1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09
TCV (B) Counts
7
Only one was signed in 1Q, an ITO mega deal in the Americas valued at €0.8B.
EMEA 1Q12 Mega Relationship counts were the 3rd highest in three years.
EMEA Mega Deals & Relationships Trends
Mega Deal TCV (€B)* Comparison
€ 0.4 € 1.1 € 1.0
€ 0.6 € 0.3
€ 1.4
€ 0.3 € 0.7 € 0.9 € 1.1
€ 0.2 € 0.1 € 0.3
4
8
332
6
234
9
113
1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09
ACV (B) Counts
75% of 1Q Mega
Relationships are
Restructurings
Mega Relationship ACV (€B)* Comparison
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*Contracts with TCV > €20M
€ 12.9
€ 7.6
€ 6.1
€ 9.0
€ 2.9
Restructuring TCV
€ 4.2
€ 10.1
€ 6.7
€ 8.6
€ 5.8
1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
8
EMEA ITO experienced Q/Q decreases of 38% in counts and 58% in TCV. The lack
of large deals meant that 1Q12 was the weakest ITO quarter for TCV since 3Q06.
EMEA ITO Contract Award Trends
Top ITO Providers
by TTM TCV
Note: Service providers in alphabetical order; no rankings implied.
Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.
TTM New Scope vs. Restructuring TCV (€B)*
New Scope
Accenture
Atos
BT
Capgemini
Capita
CSC
Dimension
Data
Fujitsu
HCL
HP
IBM
Infosys
TCS
T-Systems
Wipro
Restructuring
Atos
BT
Capgemini
CSC
HCL
Hexaware
HP
IBM
Infosys
T-Systems
Quarterly TCV (€B)* Comparison
€ 16.9
€ 19.8
€ 25.2
€ 16.9
€ 20.1
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
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*Contracts with TCV > €20M
€ 2.6
€ 4.5
€ 3.5
€ 1.1 € 1.6
1Q124Q113Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
9
BPO saw a Q/Q increase of 26% in counts but a decrease of 42% in TCV. Against
two 4Q11 Mega Deals, the TCV compare is tough.
EMEA BPO Contract Award Trends
Quarterly TCV (€B)* Comparison
Top BPO Providers
by TTM TCV
TCS
Accenture
Capgemini
Capita
Carillion plc
Convergys
HCL
HP
Infosys
Johnson Controls
Logica
Sabre
Sodexho
Xchanging
Xerox
TTM New Scope vs. Restructuring TCV (€B)*
Note: Service providers in alphabetical order; no rankings implied.
Placements based on 2011 TCV commercial contract awards sourced from ISG contracts database.
€ 4.1
€ 4.0
€ 3.3
€ 3.4
€ 1.9
Restructuring TCV
€ 8.5
€ 9.4
€ 6.8
€ 6.5
€ 6.3
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
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*Contracts with TCV > €20M
€ 0.7
€ 2.2
€ 0.4 € 0.5
€ 2.5
€ 0.4 € 0.2
€ 0.0 € -
€ 0.5
€ 1.0
€ 1.5
€ 2.0
€ 2.5
€ 3.0
€ 3.5
€ 4.0
€ 4.5
€ 5.0 Prior 5 Period Range Average 1Q11 1Q12
10
With the exception of a record high 1Q in Manufacturing, all EMEA industry sectors
performed under their Prior Five-Like-Quarter TCV averages.
EMEA Industry Details in Contract Award Trends
Industry Like-Quarter TCV (€B)* Comparison
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*Contracts with TCV > €20M
€ 1.4
€ 2.1 € 2.2
€ 1.1 € 1.3
1Q124Q3Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
11
AP contracting counts were flat Q/Q. However, TCV was down by one-third both
Q/Q and Y/Y, ending up well below the recent first-quarter average.
Asia Pacific Contract Award Trends
Quarterly TCV (€B)* Comparison
New Scope vs. Restructuring TTM TCV (€B)* Comparison
€ 4.5
€ 7.0
€ 7.2
€ 7.9
€ 6.1
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
€ 2.1
€ 2.0
€ 2.5
€ 1.0
€ 1.2
Restructuring TCV
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*Contracts with TCV > €20M
€ 6.6 € 6.2 € 6.8
€ 11.7
€ 7.5
1Q124Q3Q2Q1Q114Q3Q2Q1Q104Q3Q2Q1Q09
12
Americas TCV rose 8% Q/Q, making it one of the three highest quarters since the
beginning of 2010. Americas posted the only 1Q12 Mega Deal.
Americas Contract Award Trends
Quarterly TCV (€B)* Comparison
New Scope vs. Restructuring TTM TCV (€B)* Comparison
€ 9.6
€ 7.7
€ 12.4
€ 6.9
€ 6.2
Restructuring TCV
€ 16.6
€ 18.8
€ 21.2
€ 20.2
€ 19.2
2Q11-1Q12
2Q10-1Q11
2Q09-1Q10
2Q08-1Q09
2Q07-1Q08
New Scope TCV
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*Contracts with TCV > €20M
310
570690
13
Contract expirations are occurring at a faster rate as the result of dramatically
increased transaction counts and declining average contract durations.
Anticipating Increased Global Restructuring Volume
5
6933
377
20112002
Average Duration
Contract Awards
Record Levels of Expiring Contracts
Trends Impacting Restructuring Volumes
2012e2007
↑ 20% Y/Y
2011
↑ 250%
↓ 1 Yr.
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*Contracts with TCV > €20M
14
Contract renegotiations can be driven by either the client or the service provider,
but the leverage is, more often than not, with the Client.
Motivations Behind Pre-emptive Renegotiation Efforts
Client Motivations Provider Motivations
Increase Scope or Service Levels
Reduce Price for Existing Scope
Add Emerging Services
� Chance for Sole Sourced Renewal
� Retain Full Scope
� Introduce New Services
Restructuring creates the opportunity for Best-of-Breed providers to win
new clients looking for targeted solutions
�
�
�
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*Contracts with TCV > €20M
37%
32%
18%
13%
Americas Heritage Niche Providers India Heritage Major European
15
Applying the 80/80 rule: 80% of the time a deal is renegotiated with the
incumbent provider, and they typically retain about 80% of the scope.
Who will win these restructurings?
2012 Restructuring
by Provider Share of ACV
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*Contracts with TCV > €20M
16
� Global Broader Market ↓1Q12 loses momentum aGer two
quarters of impressive growth
� Restructuring TCV ↑ Y/Y, not enough to make up for New
Scope declines
� Shortfall in previously robust EMEA TCV had the greatest
impact on the global market
� EMEA ITO values at their lowest since 2Q06; BPO TCV ↓
while contract numbers ↑ Q/Q
� Look for a soft first half 2012 and a reviving second half
� Restructuring 2H12 activity may lead an upswing in the
overall market
1Q12 TPI Index Summary and Outlook
summarymarket
outlookmarket
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*Contracts with TCV > €20M
Learn More
17
Please contact us with your questions and comments.
--- Media Contacts ---
► John Keppel ► Duncan Aitchison
www.considerthesourceblog.com
Partner & President Research &
Managed Services and Chief
Marketing Officer
+44 (0)7879 432 212
Partner & President
North Europe, ISG
+44 (0)1628 21702
► Paul Reynolds
Chief Research Officer,
ISG Momentum
+1 508 625 2194
► Denise Colgan
Marketing Director, EMEA, ISG
+44 1737 371523
► Louise Fernley
Cohn & Wolfe for ISG
+44 207 331 5365
www.isg-one.com
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