2Q14 EMEA ISG Outsourcing Index

Hosted by:

James Goodman

Barclays Capital

18 July 2014

The EMEA ISG Outsourcing Index

Second Quarter and First Half 2014

Market Data and Insights

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

2

Covering the state of the outsourcing industry for global and EMEA commercial

contracts.*

Welcome to the 47th Quarterly Outsourcing Index Review

Dr. David HowiePartner

Bernd SchaeferPartner

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At a Glance

BEST SECOND QUARTER EVER IN GLOBAL MARKET ACV, UP Y/Y AND Q/Q

MANUFACTURING REBOUNDS IN ALL SEGMENTS WITH

HIGHEST SECOND QUARTER EVER FOR BOTH ACV AND NUMBER OF AWARDS

RECORD SECOND QUARTER FOR GLOBAL ITO ACV

WITH STRENGTH IN BOTH NEW AND RESTRUCTURED CONTRACTING

GLOBAL BPO ACV UP SLIGHTLY Y/Y AND Q/Q

EVEN AS CONTRACT ACTIVITY TRENDS LAG BEHIND THE BROADER MARKET PACE

YEAR-ON-YEAR SECOND QUARTER AND HALF-YEAR ACV UP ACROSS ALL REGIONS

Scorecard 2Q14 2Q Y/Y 2Q Q/Q 1H14 1H Y/Y

ACV (€B)* Change Change ACV (€B)* Change

Global Market € 5.1 72% 6% € 9.9 34%

New Scope € 3.3 49% 7% € 6.3 41%

Restructurings € 1.8 139% 4% € 3.6 23%

Mega-relationships € 1.3 83% -9% € 2.7 43%

ITO € 3.9 101% 7% € 7.6 52%

BPO € 1.2 17% 2% € 2.3 -4%

Americas € 1.9 118% 22% € 3.4 21%

EMEA € 2.5 45% -2% € 5.0 32%

Asia Pacific € 0.7 94% 0% € 1.5 99%

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Second quarter ACV is up over 70% Y/Y against a weak 2Q13 and up 6% Q/Q

against a strong 1Q14. YTD, Global Market ACV is up 34%.

Quarterly Global Market ACV (€B)* and Counts

Global Market Contract Award Trends

Half-Year Global Market ACV (€B)* Half-Year Global Market Counts

663

510 628 627

534 518 411

340 330 329

651 529 617

501 516

432

329 331 314

1,161 1,157

643

201413121110090807062005

1H Counts 2H Counts

€ 9.9€ 7.4

€ 10.0€ 8.1

€ 10.1€ 8.2€ 8.8

€ 6.7€ 7.1€ 7.3

€ 8.4

€ 8.8€ 10.5€ 8.1€ 9.0€ 7.4€ 7.3€ 5.9

€ 7.5

€ 15.7

€ 18.8

€ 14.8

201413121110090807062005

1H ACV 2H ACV

€ 5.1€ 4.8€ 3.6

€ 4.7

€ 3.0

€ 4.4€ 4.4€ 4.5€ 5.0

340 323 299

352

211

299 278 251

292

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

ACV Counts

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2Q14 award activity is the highest ever for a second quarter. Contracting activity is

up Y/Y and Q/Q in all ACV bands except for the Mega-relationship category.

Global Market Contract Trends by Deal Size

ACV(€B)*

Comparing Global Market Contracting Awards (€B)*

Grouping in ACV Contract Size Bands

Contract Counts

7 11 2 9 7 9 8 8 12

24 22 19 21 16 17 23 19 23

133 118 117

137

79

125 113 119 105

176 172

161

185

109

148 134

105

152

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

€8-31M €32-79M €80M+€4-7M

€ 1.3

€ 0.7

€ 1.8

€ 1.2

€ 0.7

€ 1.1

€ 1.8

€ 1.0

€ 1.4

€ 0.9€ 0.5€ 0.7

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

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2Q14 New Scope and Restructuring ACV are up significantly Y/Y and up slightly Q/Q.

YTD results are up over 1H13 but in line with prior years.

Global New Scope and Restructuring Contract Award Trends

Half-Year Global New Scope ACV (€B)*

Half-Year Global Restructuring Contract Counts

220 151 163 156

118 114 80 58 66 67

213 147 142

122 92 81 48 54 66

364 310

133

201413121110090807062005

1H Counts 2H Counts

Half-Year Global New Scope Contract Counts

Half-Year Global Restructuring ACV (€B)*

443 359

465 471 416 404

331 282 264 262

438 382

475

379 424

351

281 277 248

797 847

510

201413121110090807062005

1H Counts 2H Counts

€ 6.3

€ 4.5

€ 6.5€ 5.9€ 7.2

€ 6.4€ 7.0

€ 5.5€ 4.3

€ 5.5

€ 5.1

€ 5.9€ 6.3€ 5.3€ 7.1

€ 5.4€ 6.0

€ 4.6

€ 5.3

€ 9.6

€ 12.4€ 10.9

201413121110090807062005

1H ACV 2H ACV

€ 3.6€ 2.9€ 3.5

€ 2.2€ 2.8€ 1.8€ 1.8€ 1.3

€ 2.8€ 1.8

€ 3.3€ 2.9€ 4.3€ 2.9

€ 2.0€ 2.0€ 1.3

€ 1.3

€ 2.2

€ 6.2€ 6.4

€ 4.0

201413121110090807062005

1H ACV 2H ACV

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€ 3.4

€ 1.7

€ -

€ 1

€ 2

€ 3

€ 4

New Scope Restructuring

Range of Prior 4 Halves Avg of Prior 4 Halves 1H13 1H14

Second Quarter ACV is up 45% Y/Y but down slightly 2% Q/Q. YTD ACV is up 32%

with 1H14 being the second best 1H performance ever.

EMEA Quarterly ACV (€B)* in Size Bands

EMEA Contract Award Trends

EMEA Quarterly ACV (€B)* and Counts

EMEA New Scope vs Restructuring ACV (€B)*EMEA Half-Year ACV (€B)*

€ 5.1

€ 3.8€ 4.4€ 4.3

€ 4.9€ 3.7

€ 5.8

€ 3.2€ 2.6

€ 4.0

€ 5.0€ 4.7

€ 6.3

€ 4.5€ 4.6

€ 3.7

€ 3.3€ 3.2

€ 3.6

€ 8.8€ 9.1

€ 7.6

201413121110090807062005

1H ACV 2H ACV

€ 2.5€ 2.6

€ 2.1

€ 2.9

€ 1.7€ 2.1

€ 2.3€ 2.3€ 2.2

148 168 160

176

110

143 135

109

130

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

ACV Counts

€ 1.1€ 0.6€ 0.6

€ 0.4€ 0.3€ 0.6

€ 0.7€ 0.6€ 0.6

€ 0.2€ 0.3€ 0.3

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

€8-31M €32-79M €80M+€4-7M

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DACH, Southern Europe and France rise significantly over 1H13. Almost all industries

are up over last year’s first half, with Manufacturing leading the charge.

EMEA Contract Award Trends Detail

EMEA Sub-regions Half-Year ACV (€B)*EMEA Industries

Half Year ACV (€B)*

€1.41

€1.00

€0.87

€0.66

€0.50

€0.32

€0.16

€0.13

€0.0 €1.0 €2.0

Manufacturing

Financial Services

Travel, Transport,

Leisure

Telecom & Media

Energy

Business Services

Retail

Healthcare & Pharma

1H13 1H14

€1.43

€0.74

€0.87

€0.24

€0.60

€0.93

€0.22

€0.04€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

U.K. &

Ireland

DACH Nordics Benelux Southern

Europe

France Africa &

Middle

East

E. Europe

& Russia


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Though modestly down on a strong first quarter, 2Q14 was the best ever second

quarter for ITO contract value and counts.

EMEA ITO Half-Year ACV (€B)*

EMEA ITO Contract Award Trends

€ 4.1

€ 2.8€ 2.7€ 3.0€ 4.1

€ 3.1

€ 4.6

€ 2.7€ 1.8

€ 3.3

€ 4.0€ 3.1

€ 5.1€ 3.8€ 3.7

€ 3.0

€ 2.1€ 2.3

€ 2.7

€ 6.8€ 5.8€ 6.0

201413121110090807062005

1H ACV 2H ACV

EMEA ITO Quarterly ACV (€B)* and Counts

€ 2.0€ 2.2€ 1.6

€ 2.4

€ 1.1

€ 1.7€ 1.4

€ 1.7€ 1.3

111 131 122 124

65

101 97 80 89

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

ACV Counts

EMEA ITO Domain Details ACV (€B)*

€2.05

€1.05

€0.63

€0.41

€- €0.5 €1.0 €1.5 €2.0 €2.5

Infrastructure

ADM

ADM + Infrastructure

Network Services

Avg of Prior 4 Halves 1H14

EMEA ITO Half-Year New vs. Restructuring ACV

€ 2.7

€ 1.4

€ 0

€ 1

€ 2

€ 3



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BPO continues its lacklustre performance in EMEA, with values hovering close to the

€1 billion mark for three successive half-year periods.

EMEA BPO Half-Year ACV (€B)*

EMEA BPO Contract Award Trends

€ 0.9€ 1.1

€ 1.6€ 1.3

€ 0.8€ 0.6€ 1.2

€ 0.6€ 0.8€ 0.7

€ 1.0

€ 1.6

€ 1.2

€ 0.7€ 0.9€ 0.7€ 1.2€ 0.9€ 0.9

€ 2.1

€ 3.2

€ 1.6

201413121110090807062005

1H ACV 2H ACV

EMEA BPO Quarterly ACV (€B)* and Counts

€ 0.5€ 0.4€ 0.4

€ 0.6€ 0.7

€ 0.4

€ 0.9

€ 0.7

€ 0.9

37 37 38

52 45 42 38

29

41

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

ACV Counts

EMEA BPO Domain Details ACV (€B)*

€ 0.34

€ 0.13

€ 0.12

€ 0.12

€ 0.06

€ 0.06

€ 0.03

€ 0.03

€ 0.02

€ 0.01

€ - € 0.1 € 0.2 € 0.3 € 0.4

Facilities Mgmt

R&D/KPO

Industry-Specific

F&A

Multi-Process

Contact Centers

HRO

Procurement

Document Mgmt

Supply Chain Mgmt

Avg of Prior 4 Halves 1H14

EMEA BPO Half-Year New vs. Restructuring ACV

€0.67

€0.25

€ 0.0

€ 0.2

€ 0.4

€ 0.6

€ 0.8

€ 1.0

€ 1.2

€ 1.4

€ 1.6



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

ISG Sourcing Market Standouts in EMEA

For ACV awards in the past 12 months*, EMEA and local based providers lead in all

segments. For lower two tiers, India-heritage providers are making inroads.

1Top 10 in Region across all company sizes

*Placements based on ACV of commercial contract awards sourced from ISG Contracts Knowledgebase®.

Service providers in alphabetical order; no rankings implied.

Revenues sourced from Hoovers and individual company financial fillings

SOURCING

STANDOUTS BY COMPANY SIZE

Co. Revenues > $10B

Capita

Carillion

Cognizant

EVRY

HCL1

Infosys1

MITIE

Orange Business Services

Tech Mahindra

Tieto

Accenture1

Atos1

Balfour Beatty

BT1

Capgemini1

CSC1

T-Systems1

HP

IBM1

TCS1

Asseco

Communisis

GP Strategies

iGATE

Innovation Group

Kelway

NNIT A/S

NorthgateArinso

Quindell

WEX

The Building 10Sourcing Standouts

The Breakthrough 10Sourcing Standouts

The Big 10Sourcing Standouts

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Second quarter ACV is up 118% Y/Y and 22% Q/Q, even as large deals remain

mostly absent from a mature market. YTD, Broader Market ACV is up 21%.

Americas Quarterly ACV (€B)* in Size Bands

Americas Contract Award Trends

Americas Quarterly ACV (€B)* and Counts

Americas Half-Year Segment Details ACV (€B)* Americas Half-Year ACV (€B)*

€ 3.4 € 2.8

€ 4.0

€ 3.0

€ 4.6

€ 3.4

€ 2.5 € 2.5

€ 3.7 € 3.0

€ 2.6

€ 3.0 € 3.4

€ 2.5 € 3.4

€ 2.5 € 2.9

€ 2.4 € 3.0

€ 5.4

€ 7.1

€ 6.0

201413121110090807062005

1H ACV 2H ACV

€ 1.9

€ 1.5

€ 1.2 € 1.4

€ 0.9

€ 1.9

€ 1.5 € 1.51 € 1.7

155

111 113

137

70

127 111 104 111

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

ACV Counts

€ 0.3 € 0.8 € 0.7

€ 0.6 € 0.4 € 0.2

€ 0.9 € 0.3

€ 0.6

€ 0.4 € 0.2

€ 0.3

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

€ 1.9

€ 1.5

€ 2.1

€ 1.3

€ -

€ 1

€ 1

€ 2

€ 2

€ 3

€ 3

New Scope Restructuring ITO BPO


€8-31M €32-79M €80M+€4-7M

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€ 0.19

€ 0.05 € 0.03

€ 0.02 € -

€ 0.05

€ 0.10

€ 0.15

€ 0.20

€ 0.25

€ 0.30

Canada Brazil Other LatAm Mexico


YTD, U.S.-based ACV is up significantly Y/Y and Q/Q. YTD, gains in the Americas are

led by the Financial Services and Manufacturing industries.

Americas Contract Award Trends Detail

Americas Half-Year Sub-regions ACV (€B)* Americas Industries ACV (€B)*

€ 0.93

€ 0.79

€ 0.48

€ 0.42

€ 0.27

€ 0.18

€ 0.19

€ 0.11

€- €0.4 €0.8 €1.2

Financial Services

Manufacturing

Telecom & Media

Energy

Business Services

Healthcare & Pharma

Retail

Travel, Transport,

Leisure

1H13 1H14

€ 3.09

€ -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

U.S.

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ISG Sourcing Market Standouts in the Americas

For ACV awards in the past 12 months*, Americas-based providers dominate the

largest tier, while India-heritage providers lead in both the mid-size and smaller

segments.







Aon Hewitt

CB Richard Ellis Group

CGI

Cognizant1

Genpact

HCL1

Infosys1

SAIC

Tech Mahindra

Wipro

Accenture1

AT&T

BT

Capgemini1

CSC1

Dell

IBM1

ISS Global

TCS1

Xerox1

Aditya Birla Minacs

Allscripts

EXL

GardaWorld

iGATE1

KPIT Technologies

Neoris

NIIT Technologies

Syntel

WNS Global Services

SOURCING



Co. Revenues > $10B

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Asia Pacific generates second consecutive strong quarterly performance with

significant Y/Y gains led by several large contract awards.

Asia Pacific Quarterly ACV (€B)* in Size Bands

Asia Pacific Contract Award Trends

Asia Pacific Quarterly ACV (€B)* and Counts

AP Half-Year Segment Details ACV (€B)* Asia Pacific Half-Year ACV (€B)*

€ 1.11

€ 0.38

€ 1.44

€ 0.05€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

New Scope Restructuring ITO BPO


€ 0.74€ 0.75

€ 0.42€ 0.37€ 0.38€ 0.37€ 0.50

€ 0.61

€ 1.11

37

44

26

39

31 29 32

38

51

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

ACV Counts

€ 0.38€ 0.16

€ 0.47

€ 0.15

€ 0.00€ 0.25

€ 0.12€ 0.14€ 0.26

€ 0.09€ 0.09€ 0.13

2Q141Q4Q3Q2Q131Q4Q3Q2Q12

€8-31M €32-79M €80M+€4-7M

€ 1.49

€ 0.75

€ 1.55

€ 0.84 € 0.62

€ 1.13

€ 0.58

€ 1.01 € 0.81

€ 0.35

€ 0.79

€ 1.11

€ 0.82 € 1.18

€ 1.03

€ 1.26 € 1.04

€ 0.42 € 0.87

€ 1.54

€ 2.67

€ 1.22

201413121110090807062005

1H ACV 2H ACV

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€ 0.32

€ 0.39

€ 0.20

€ 0.42

€ 0.15

€ 0.01€ 0.0

€ 0.1

€ 0.2

€ 0.3

€ 0.4

€ 0.5

€ 0.6

€ 0.7

€ 0.8

India and

South Asia

ANZ Greater

China

Japan Southeast

Asia

South Korea


YTD, ANZ and Japan step up contracting award activity. Gains in Manufacturing and

Telecom lead the YTD regional improvement.

Asia Pacific Contract Award Trends Detail

Asia Pacific Half-Year Sub-regions ACV (€B)* Asia Pacific Industries ACV (€B)*

€ 0.60

€ 0.36

€ 0.17

€ 0.17

€ 0.10

€ 0.06

€ 0.02

€ 0.02

€ - € 0.2 € 0.4 € 0.6 € 0.8

Manufacturing

Telecom & Media

Financial Services

Travel, Transport,

Leisure

Energy

Healthcare &

Pharma

Business Services

Retail

1H13 1H14

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ISG Sourcing Market Standouts in Asia Pacific

For ACV awards in the past 12 months*, Asia Pacific features diversity in the large

tier with providers from all regions. The middle tier is led by India-heritage providers.





SOURCING


Co. Revenues > $10B

Amdocs

Cognizant1

Dimension Data

HCL

Infosys1

Orange Business Services

SingTel Optus1

Tech Mahindra

Unisys

Wipro1

Accenture1

Alcatel-Lucent

Capgemini

CSC1

Fujitsu1

HP

IBM1

NTT Data

TCS1

Telstra1

ASG

Chinasoft

Hollysys Automation

Itron

Kratos Defense & Security

Lufthansa Systems

Pactera

Ramco

REDKNEE

UXC




Special Topic for Second Quarter and First Half 2014

Dr. David Howie

Partner

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EMEA Is the Largest Outsourcing Market

With 55% of the global ACV awarded in the last 3 years, a 70% increase since 2008,

EMEA is clearly a high-priority target for service providers.

€ 34 billion

€7 billion€23 billion

Sourcing Market Activity by Major RegionRecent 3-year Totals

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Variations in Sourcing Profiles Across Europe

Targeting the diverse markets of Europe requires a multifaceted approach. Market

growth rates and size, recent award levels and buyer penetration rates factor in.

S. Europe

DACH

Market Potential*Based on Percentage Forbes G-2000 Companies Not Sourcing as of 2013

*Sourced from ISG Momentum™ Geography Report

France is the largest

market in this sub-

region. Growth is up

considerably and the

market is under-

penetrated with

scope to grow.

Germany's GDP is

largest in Europe, and

combined with

relatively low

sourcing penetration,

potential for sourcing

growth is heightened.

€ 16.4

€ 6.0

€ 6.5

€ 11.1

€ 3.7

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

0% 10% 20% 30% 40% 50% 60%

U.K. & IrelandNordics

Benelux

Sourcing Profiles of Select European MarketsCurrent Market Size in Euros billionsCurrent Market Size in Euros billions

So

urc

ing

Gro

wth

Ov

er

10

Ye

ars

An

nu

ali

zed

Re

ven

ue

s

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Market Share Changes in Europe by Provider Peer Groups

Americas-based providers lost share in all regions as India-based providers gained.

S. Europe, the least mature market, remains a stronghold for EMEA-based providers.

U.K. & Ireland

Benelux

2005 - 07

17%

58%

25%

Since 2011

2005 - 07

25%

38%

37%

Since 20112005 - 07

23%

22%

54%

Since 2011

2005 - 07

20%

38%

42%

Since 2011

Nordics

DACH

India/AP-based ProviderIndia/AP-based Provider Americas-based ProviderAmericas-based Provider EMEA-based ProviderEMEA-based Provider

37%

48%

14%26%

69%

5%

55% 42%

4%

54%31%

14%

Share Shifts by Provider Peer Group in Select EMEA Markets

Southern Europe

2005 - 07

3%

50%47%

Since 2011

36%

61%

2%

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Five Factors That Drive Sourcing Success

Recognizing the best practices of the successful sourcing provider

Value

PropositionAddress customer demand for new and better-integrated

products, platforms and business solutions.

Work to present a local face and understanding of the local

culture through the sales and consulting process.

Sales

Culture

Delivery

Culture

Play to clients’ appetite for global delivery models, married to

more flexible, output-based commercial structures.

Technology

Leadership

Leverage cloud computing and smart analytics to focus

on strategic projects that drive growth.

Demonstrate deep domain expertise, as the impetus for sourcing

moves from the CIO organization towards the business users.

Solution

Verticalization

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� Global Market ACV is up significantly Y/Y and slightly Q/Q

� ITO 2Q activity is at record highs for ACV and number of contracts awarded

� All three regions have strong quarterly performances Y/Y and YTD

� YTD, Europe continues to account for the majority of the ACV with 51% of

the global market activity

� Americas 2Q results continue the upward trend despite a lack of large deals

� Asia Pacific has its second best half-year performance ever supported by an

uptick in large deal activity

� We expect 3Q14 ACV to be flat or lower Y/Y on a difficult comparison

against a robust 3Q13

� We see lots of transaction activity in the market that should come to award

in the second half of 2014

� Expect full-year ACV to exceed 2013 ACV levels by more than 25%, more in

line with full-year 2012 results

2Q and 1H 2014 EMEA ISG Outsourcing Index

Summary and Outlook

summarymarket

outlookmarket

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Please contact us with your questions and comments.

Learn More

--- Media Contacts ---

► Dr. David Howie

Partner, ISG

++44 7789 771 665

[email protected]

► Denise Colgan

Marketing Director, EMEA, ISG

+44 1737 371523

[email protected]

► Bhakti Gajjar

Cohn & Wolfe for ISG

+44 (0) 20 7331 5363

[email protected]

www.isg-one.com

Second Quarter and First Half 2014

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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.

Second Quarter and First Half TCV Scorecard

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

Scorecard 2Q14 2Q Y/Y 2Q Q/Q 1H14 1H14 Y/Y

TCV (€B)* Change Change TCV (€B)* Change

Global Market € 21.6 43% 2% € 42.6 28%

New Scope € 14.8 27% 8% € 28.4 36%

Restructurings € 6.8 97% -9% € 14.2 15%

Mega-deals € 5.6 144% 122% € 8.1 29%

ITO € 16.3 76% 7% € 31.5 54%

BPO € 5.3 -10% -10% € 11.1 -13%

Americas € 7.2 79% 9% € 13.7 17%

EMEA € 11.1 23% 1% € 22.0 24%

Asia Pacific € 3.3 62% -6% € 6.9 87%

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organizations to transform and optimize their operational environments through research, benchmarking, consulting and

managed services, with a focus on information technology, business process transformation, program management services and

enterprise resource planning. Clients look to ISG for unique insights and innovative solutions for leveraging technology, the

deepest data source in the industry, and more than five decades of experience of global leadership in information and advisory

services. Based in Stamford, Conn., the company has more than 800 employees and operates in 21 countries.

knowledge powering results®

www.isg-one.com

Leadership & Management

2Q14 EMEA ISG Outsourcing Index