Third Quarter 2012, EMEA TPI Index

Hosted by:

John KingBarclays Capital

19 October 2012

The TPI EMEA Index

Third Quarter 2012

EMEA Outsourcing Market Data and Insights

© 2012Information

Services Group, Inc.All Rights Reserved

isg-one.com

*Contracts with ACV > €4M

2

Partner

Covering the state of the outsourcing industry for global, commercial contracts.

Duncan Aitchison

Welcome to the 40th Quarterly Outsourcing Index Call

Partner

Bernd Schaefer

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40th quarterly presentation signals a decade of TPI Index Conference CallsMilestones

Spring2003

Winter2004

Summer2005

Spring2011

Fall

2008

Inaugural Global and

EMEA Index Calls

The Index audience routinely includes 250 analysts,

clients and service providers.

The ISG Contracts Knowledgebase®exceeds 24,000 contract records.

Today

RecognisedIndia-heritage

providers as an emerging entity

that would affect how SPs compete

Identified the growing influence of restructurings,

and their impact on service providers

Led in calling out the

industry-wide sourcing

downturn

Identified the growing shift of sourcing growth

towards emerging markets

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Going forward, an ACV-based analysis of the market will avoid masking the effects of declining contract durations on TCV.

ACV Change Over TimeYear-to-date at 3Q

Refocusing on ACV as the Primary Measure of the Market

TCV Change Over TimeYear-to-date at 3Q

Growth since 2003 = 40%Growth since 2003 = 9%

Typical Quarterly ACV = €4BTypical Annual ACV = €16B

€ 12

€ 8

201211100908070605042003

€ 57

€ 52

201211100908070605042003

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At A Glance

*See Appendix for TCV Scorecard

Scorecard

3Q12 ACV (€B)*

3Q Y/Y Change

3Q Q/Q Change

YTD ACV (€B)*

YTD Y/Y Change

Global Market € 3.8 -6% -10% € 11.8 3%

New Scope € 2.6 16% -19% € 7.9 2%

Restructurings € 1.2 -33% 17% € 4.0 6%

Mega-Relationships € 1.2 1% -26% € 3.6 51%

ITO € 2.5 -13% 8% € 7.3 -3%

BPO € 1.3 12% -32% € 4.5 17%

EMEA € 2.0 -12% 14% € 5.5 -8%

Americas € 1.3 -11% -8% € 4.3 2%

Asia Pacific € 0.5 55% -51% € 1.9 72%

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ACV was down 6% Y/Y and 10% Q/Q; YTD, ACV of $14.8B is up 3.5%.

Global Market YTD ACV (€B)*

Global Market YTD Counts*

Global Market Contract Award Trends

187 243

189 196 179

147 129 112 80 115

-100 200 300 400 500 600 700 800

201211100908070605042003

1H Counts 3Q Counts

€ 3.8€ 4.1€ 3.2€ 3.2€ 3.0

€ 2.3€ 2.0€ 2.7€ 2.7€ 3.2

$0

$3

$5

$8

$10

$13

$15

201211100908070605042003

1H ACV 3Q ACV

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26 mega-relationships have been awarded YTD, surpassing total for all of 2011; greater percentage of larger deal activity occurring in emerging markets.

YTD Contracts Counts with ACV > €80M

Emerging MarketsContract Counts with ACV > €40M

Global Market Contract Trends for the Largest Deals

8

5

6

4

6

4

35109

0

10

20

30

201211100908070605042003

1H Counts 3Q Counts

16

8

478

2012e2011201020092008

Emerging Markets defined as outside North American, Western Europe and ANZ markets.

e

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EMEA ACV was down 13% Y/Y but up 18% Q/Q; both restructuring and new scope activity is down year to date.

EMEA YTD ACV (€B)*

EMEA YTD Counts*

EMEA Contract Award Trends

EMEA New Scope vs. Restructuring YTD ACV (€B)*

80 109

85 93 87 60

-

100

200

300

400

20121110090807

1H Counts 3Q Counts

€ 2.0€ 2.3€ 1.4€ 1.3

€ 1.6

€ 1.2€ 1.0€ 1.1

€ 1.5€ 1.2

$0

$2

$4

$6

$8

201211100908070605042003

1H ACV 3Q ACV

€ 3.6€ 3.9

€ 3.6€ 3.2

€ 1.9€ 2.2€ 1.9€ 0.3

201211100908070605042003

YTD New Scope YTD Restructured

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ACV awards in the UK rose substantially YTD, while DACH fell almost 40% on a tough compare with 2011 and Nordics dropped by 17%

EMEA Country Details in Contract Award Trends

YTD Sub-regions for EMEA - ACV (€B)*

€ 2.40

€ 1.05

€ 0.83

€ 0.61

€ 0.22 € 0.16 € 0.17 € 0.09

€ -

€ 0.3

€ 0.5

€ 0.8

€ 1.0

€ 1.3

€ 1.5

€ 1.8

€ 2.0

€ 2.3

€ 2.5

€ 2.8

€ 3.0

UK & Ireland DACH Scandinavia Benelux France Southern Europe

Africa & Middle East

E. Europe & Russia

Low Average 3Q11 YTD 3Q12 YTD

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Third quarter ITO ACV was one of the strongest on record, up 40% Q/Q . Year to date ACV is down around 20%, while contract numbers fell 24%

EMEA ITO YTD ACV (€B)*

EMEA ITO Contract Award Trends

EMEA ITO YTD Counts*

Note: Service providers in alphabetical order; no rankings implied.

Top EMEA ITO

Providers

by YTD ACV*

Accenture Atos BT

CapgeminiCSC

Fujitsu HCL HP

IBM Infosys

Mahindra Satyam Orange

TCS T-Systems

Wipro

56

69

61 70

59 37

32 31 21

29

-

50

100

150

200

250

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1H Counts 3Q Counts

€ 1.4€ 1.9

€ 1.1

€ 1.1

€ 1.1

€ 0.9

€ 0.5

€ 0.9

€ 1.3€ 1.0

€ 0

€ 1

€ 2

€ 3

€ 4

€ 5

201211100908070605042003

1H ACV 3Q ACV

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Year to Date ACV in 2012 has been the highest ever in EMEA, though the pace of contract awards has slowed.

EMEA BPO YTD ACV (€B)*

EMEA BPO Contract Award Trends

EMEA BPO YTD Counts*

Note: Service providers in alphabetical order; no rankings implied.

Top EMEA BPO

Providers

by YTD ACV*

Accenture Capgemini

CGI HCL HP

Infosys Interserve PlcISS Global A/S

Johnson Controls Jones Lang LaSalle Mahindra Satyam

MitieSerco

Sodexho Xchanging

€ 0.61

€ 0.41

€ 0.35€ 0.18

€ 0.47

€ 0.32€ 0.44

€ 0.20€ 0.26€ 0.23

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

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1H ACV 3Q ACV

24 40

24 23 28 23

33

14 12 11

-

25

50

75

100

125

201211100908070605042003

1H Counts 3Q Counts

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The Financial Services sector accounted for the lion’s share of contract awards in 2012, up almost 60% Y/Y.

EMEA Industry Details in Contract Award Trends

YTD Industry Details for EMEA - ACV (€B)*

€ 1.22

€ 1.95

€ 0.86

€ 0.56 € 0.41

€ 0.20 € 0.12 € 0.21

€ -

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

Low Average 3Q11 YTD 3Q12 YTD

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Americas ACV was down 11% Y/Y and 8% Q/Q; YTD, ACV is flat; the U.S. is becoming a predominantly restructuring-based market.

Americas YTD ACV (€B)*

Americas YTD Counts*

Americas Contract Award Trends

Americas New Scope vs. Restructuring YTD ACV (€B)*

77 106

86 79

67 63

-

50

100

150

200

250

300

350

20121110090807

1H Counts 3Q Counts

€ 2.4€ 3.0

€ 3.9€ 3.4

€ 1.9€ 1.2

€ 1.9€ 1.1

201211100908070605042003


€ 1.3€ 1.5

€ 1.4€ 1.5

€ 1.0€ 0.8

€ 0.9€ 1.4€ 0.9€ 1.9

€ 0

€ 2

€ 4

€ 6

€ 8

201211100908070605042003

1H ACV 3Q ACV

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Asia Pacific ACV was up Y/Y and Q/Q; YTD, ACV is up significantly; over 90% of YTD awards are new scope.

Asia Pacific YTD ACV (€B)*

Asia Pacific YTD Counts*

Asia Pacific Contract Award Trends

30 28

18 24 25 24

-

20

40

60

80

100

20121110090807

1H Counts 3Q Counts

Asia Pacific New Scope vs. Restructuring YTD ACV (€B)*

€ 1.83

€ 0.80€ 0.33

€ 0.11€ 0.33€ 0.01

201211100908070605042003


€ 0.54

€ 0.35€ 0.36

€ 0.44

€ 0.46€ 0.35€ 0.15

€ 0.22

€ 0.29

€ 0.12

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

201211100908070605042003

1H ACV 3Q ACV

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Assessing the Level of Cloud Adoption

27%20%

9%

2012 YTD20112010

1

3 ISG Quarterly Provider Survey: Cloud Computing

300e220

110

2012e20112010

↑100%

*ISG Contracts Knowledgebase®

Provider Pipeline

► Half have cloud scope in 25% of their pipeline opportunities

► Cloud-based opportunities are up over previous periods

► All providers expect cloud services to grow faster than traditional ITO, predominantly in the U.S. market

Percentage of ISG Advised Contracts with Cloud in Scope

Number of Industrywide Contracts with Cloud in Scope* 2

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Recognising the Realities of Cloud Deployment

Converged / Utility / Dynamic ComputingSaaSIaaS

Public CloudShared Infrastructure

Private CloudDedicated Infrastructure

Cloud Deployment Models

Cloud

Strategy

Cloud Service Models

BPaaS

Caution!Does not fully realise cloud’s

promise

Perceived RiskSecurity & data

privacy concerns

Opportunity

• Economies of Scale

• Standard

•Modern

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Expansion of existing ITO business

Integrating acquisitions

Opportunities and Challenges in the Provider Community

Unbound by legacy constraints

Security and privacy concerns

Pure-play SaaS and IaaS Providers

1

Traditional Multinational Providers

Application transformation and modernisation

Reliance on infrastructure partners

2

India-heritageProviders

5

Innovative shared hosting platforms

Supporting large, complex clients

Mid-marketHosting Providers

Existing relationship with IT and procurement

Cannibalisation of licencerevenue streams

Traditional Software Companies

34

Solution

Assessment

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Cloud’s disruptive effects on sourcing will accelerate, especially for the sourcing market’s traditional IT providers.

Cloud Trends

Traditional IT providers face significant pressure from well-known software vendors, nimble mid-market players and emerging pure-play infrastructure and SaaS providers

Cloud growth will be choppy at the enterprise level with SaaS leading the way in HR, CRM and collaboration

IaaS will lag in favour of dedicated, standardised and virtualised infrastructure services

Highly Disruptive

Trends

Less Disruptive

Trends

Buyer type shifting from the IT department to the functional business units, especially SaaS-based HR and CRM

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EMEA ACV rose 14% Q/Q but year-to-date is down 8%

Broader Market 3Q ACV down due to tough 3Q11 compare

YTD ACV strengthened slightly on larger contracts, BPOand Asia Pacific results

Contract counts fell Q/Q and year-to-date from 2011 but remain within broader historical norms

While TCV performance may lag, from an ACV perspective, the end result will likely be in line with recent year’s performance of approximately €16 billion

3Q12 TPI Index Summary and Outlook

summarymarket

outlookmarket

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Please contact us with your questions and comments.

Learn More

--- Media Contacts ---

► John Keppel ► Duncan AitchisonPartner & President Research & Managed Services and Chief Marketing Officer+44 7879 432 [email protected]

Partner & PresidentNorth Europe, ISG+44 7879 471 [email protected]

► Denise Colgan Marketing Director, EMEA, ISG +44 1737 [email protected]

► Louise FernleyCohn & Wolfe for ISG+44 207 331 [email protected]

blog.isg-one.com

Third Quarter 2012

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The TPI 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.

3Q12 TCV Score Card

Scorecard

3Q12 TCV (€B)*

3Q Y/Y Change

3Q Q/Q Change

YTD TCV (€B)*

YTD Y/Y Change

Global Market € 19.6 -12% -2% € 57.1 -3%

Mega Deals € 4.5 -22% -11% € 10.8 0%

New Scope € 13.0 12% -13% € 38.4 -3%

Restructurings € 6.6 -38% 31% € 18.7 -2%

ITO € 12.7 -21% 7% € 36.2 -7%

BPO € 6.9 10% -15% € 20.9 6%

EMEA € 10.0 -21% 18% € 27.1 -15%

Americas € 7.1 -8% -6% € 22.2 4%

Asia Pacific € 2.5 37% -37% € 7.8 45%

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Third Quarter 2012, EMEA TPI Index