Hosted by:
The Asia Pacific TPI Index
Mitali B Ghosh
Bank of America Merrill Lynch
First Half 2012
30 July 2012
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
2
Partner & President, Asia Pacific
Covering the state of the outsourcing industry for global and regional commercial contracts.
Arno Franz
Welcome to the 12th Semi-Annual Asia Pacific TPI Index Call
Partner, South & East Asia
Gerry Clark
Partner, India
Dinesh Goel
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
3
GLOBAL BROADER MARKET TCV DOWN 8% Y/Y
NUMBER OF CONTRACT AWARDS RETURNS TO HISTORICAL LEVELS
MEGA DEAL TCV ROSE 22%, STRENGTHENING THE GLOBAL MARKET
RESTRUCTURING TCV UP ALMOST 40%
ASIA PACIFIC RETURNS AN IMPRESSIVE HALF YEAR PERFORMANCE
YEAR TO DATE, STRONG MEGA DEAL AND ASIA PACIFIC RESULTS WERE NOT ENOUGH TO OFFSET BROADER MARKET DECLINE
At A Glance
“
“ Score Card
1H12 TCV ($B)*
1H Y/Y Change
1H12 Counts
1H Y/Y Change
Global Market $ 41.4 -8% 373 -28%
Mega Deals $ 7.8 23% 6 50%
New Scope $ 27.0 -22% 286 -30%
Restructurings $ 14.4 39% 87 -19%
ITO $ 26.8 - 6% 234 -24%
BPO $ 14.6 -13% 139 -33%
Asia Pacific $ 6.5 44% 59 -11%
EMEA $ 17.8 -24% 153 -32%
Americas $ 17.1 flat 161 -28%
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
4
1H12 TCV was down 8%, contract numbers dropped 28% overall and were a little short of the five-year averages.
Half-year TCV ($B)*
Global Broader Market Contract Award Trends
Half-year Counts by TCV Bands
$41.4 $45.1 $51.1 $42.5 $49.0 $40.7
$57.2 $43.8 $52.9 $42.9 $45.4 $45.7
201220112010200920082007
1H TCV 2H TCV Avg of 5 Prior 1Hs
277
404
286 291 231 199
366
308 327
250 193 282
20121110090807
$25-99M TCV Band
1H 2H Avg of 5 Prior 1Hs
96 111 124 115 116 93
113 99 130 111 95 112
20121110090807
$100M+ TCV Band
1H 2H Avg of 5 Prior 1Hs
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
5
The effect of the continuing economic uncertainty impacting the Americas’ and EMEA outsourcing markets is less pronounced in Asia Pacific.
Half-year Contract Counts Compare
Regional Comparison of First Half Contract Trends
161
224
134 153
225
123
59 66
35
1H121H111H101H091H081H07
Americas EMEA Asia Pacific
Half-year TCV ($B)* Compare
$17.13 $17.1
$26.3
$18.4 $15.6
$15.3 $17.8
$23.5
$19.6
$6.5 $4.5 $5.8
1H121H111H101H091H081H07
Americas EMEA Asia Pacific
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
6
Asia-Pacific TCV was up 44% Y/Y leading to the strongest first half performance in almost a decade. Contract awards counts fell slightly but remained ahead of recent halves.
Half-year Asia Pacific TCV ($B)*
Asia Pacific Contract Award Trends
Half-year Asia Pacific Counts by TCV Bands
$6.5 $4.5 $2.8
$6.4 $3.5
$5.8
$4.9 $7.1
$6.6 $8.0
$5.8
$4.6
201220112010200920082007
1H TCV 2H TCV Avg of 5 Prior 1Hs Includes a $1.2B Mega Deal in India
43 53
40 28 25 20
36 36
41 42
30 33
20121110090807
$25-99M TCV Band
1H 2H Avg of 5 Prior 1Hs
16 13 8 19 11 15
9 11
18 13 11
13
20121110090807
$100M+ TCV Band
1H 2H Avg of 5 Prior 1Hs
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
7
With three years of consecutive first-half growth, new scope awards dominate in the region, accounting for 94% of TCV – the highest percentage ever.
Half-year Asia Pacific New Scope TCV ($B)*
Half-year Asia Pacific Restructuring TCV ($B)*
Asia Pacific New Scope & Restructuring Trends
$0.42 $0.78 $0.49
$2.08
$0.50 $0.65
$2.57
$0.24 $0.94
$0.05
$2.24 $2.10
$0.98
$0.56
$1.01
$0.55
$0.65
$0.81
$0.35 $0.90
201211100908070605042003
1H TCV 2H TCV Avg of 5 Prior 1Hs
$6.1
$3.7 $2.3 $4.3 $3.0
$5.1
$2.9 $1.9
$6.2
$1.7
$2.6 $5.0
$5.6 $7.5 $4.8
$2.4 $4.1
$2.6
$2.3 $3.7
201211100908070605042003
1H TCV 2H TCV Avg of 5 Prior 1Hs
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
8
India TCV rebounds in the first half of 2012. Even discounting the mega deal award signed, India TCV grew significantly.
Asia Pacific Country Details in Contract Award Trends
Like-half Asia Pacific TCV ($B)* by Country
$1.44
$3.23
$0.76 $0.68
$0.35
$0.03 $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
ANZ India Japan Greater China ASEAN South Korea
Prior 5 Period Range Average 1H11 1H12
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
9
Telecom & Media and Financial Services sectors together accounted for 65% of all TCV signed in the region.
Asia Pacific Industry Segment Contract Trends
Like-half Asia Pacific TCV ($B)* by Industry
$2.33
$1.88
$0.85
$0.49
$0.18 $0.12
$0.58
$0.05 $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
Telecom &Media
FinancialServices Manufacturing
Travel,Transport,
Leisure
Energy Healthcare &Pharma
BusinessServices
Retail
Prior 5 Period Range Average 1H11 1H12
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
10
Despite the drop in number of contracts awards in 1H12 all sectors, except for Manufacturing, met or exceeded their five year averages.
Asia Pacific Industry Segment Contract Trends
Like-half Asia Pacific Contract Counts by Industry
12
18
7
5 5
3
8
1 0
2
4
6
8
10
12
14
16
18
20
Telecom &Media
FinancialServices Manufacturing
Travel,Transport,
Leisure
Energy Healthcare &Pharma
BusinessServices
Retail
Prior 5 Period Range Average 1H11 1H12
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
11
ITO TCV rose 10% Y/Y. The number of smaller contracts dropped, while the number of larger contracts increased slightly.
Asia Pacific ITO Contract Award Trends
Half-year Asia Pacific ITO Counts by TCV Bands
TCV Leaders Capgemini
CSC HP
IBM TCS
Counts Leaders
HCL HP
IBM Infosys
TCS
Top Asia Pacific ITO Providers by 1H12 Contracts
Half-year Asia Pacific ITO TCV ($B)*
Note: Service providers in alphabetical order; no rankings implied. Placements based on ISG contracts database.
$3.3 $3.0 $1.8
$6.0 $2.8
$4.9
$3.7 $6.4
$3.5
$3.4
$4.3
$3.7
201220112010200920082007
1H TCV 2H TCV Avg of 5 Prior 1Hs
30 33
22 20 18 14
22
25 31
29
20 21
20121110090807
$25-99M TCV Band
2H 1H Avg of 5 Prior 1Hs
10 9 6 19
9 12 8
8
10
7 8 11
20121110090807
$100M+ TCV Band
2H 1H Avg of 5 Prior 1Hs
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
12
BPO accounted for almost half of the regional market in 1H12 as TCV, driven by a rise in larger contract awards, more than doubled Y/Y
Asia Pacific BPO Contract Award Trends
Half-year Asia Pacific BPO Counts by TCV Bands
TCV Leaders Genpact
IBM Mahindra^
Sykes WNS
Counts Leaders Genpact
Mahindra^
$3.2
$1.5
$1.0 $0.3 $0.7 $0.9
$1.2 $0.7
$3.0
$4.6
$1.5 $0.9
201220112010200920082007
1H TCV 2H TCV Avg of 5 Prior 1Hs
Half-year Asia Pacific BPO TCV ($B)*
Top Asia Pacific BPO Providers by 1H12 Contracts
Note: Service providers in alphabetical order; no rankings implied. Placements based on ISG contracts database.
^Includes both Mahindra Satyam and Tech Mahindra
13
20 18
8 7 6
14
11
10 13
10 12
20121110090807
$25-99M TCV Band 2H 1H Avg of 5 Prior 1Hs
6 4 2
0
2 3
1 3 8 6 3 3
20121110090807
$100M+ TCV Band 2H 1H Avg of 5 Prior 1Hs
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
13
India-heritage companies outperformed US-heritage firms in every category.
Asia Pacific Market Share Comparison by Provider Category
1H12 Asia Pacific Market Share by Service Provider Category Contract Numbers and TCV ($B)* of Awards
27%
28%
14%
11%
ITO TCV
ITO Counts
BPO TCV
BPO Counts
US-heritage
31%
38%
8%
32%
Other
42%
35%
77%
58%
India-heritage
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
14
With an active contracts CAGR of 12% and annualised revenue CAGR of 6%, Asia Pacific market shows robust performance.
Asia Pacific Outsourcing Revenue Trends
Annualized Revenue & Active Contract Trends
2007 to 2012 Active Contracts CAGR: ↑ 12% 2007 to 2012 Annualized Revenue CAGR: ↑ 6%
$10.8 $10.5
$8.1
551 521
316
201220112010200920082007
Annualized Revenue ($B)Active Contracts
*
Special Topic for First Half 2012
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
16
6.35 6.48 6.14 6.10 6.07 5.95 5.88 5.72 5.48 5.31 5.10 4.98 5.05 4.85
6.4 6.0
5.5
5.1
1999 00 01 02 03 04 05 06 07 08 09 10 2011 1H12
Avg Duration Duration Plateau
Declines in duration may appear small, but even a slight decline can have large impact on TCV levels.
Duration Trend Impact on the Global Market
Average Contract Durations Over Time
What if all 1H12 contracts* had 1999 average durations of 6.4?
$41 B
$57 B
1H12 Actual TCV
Hypothetical 1H12 TCV with 1999-2000 Durations
38%
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
17
Durations decreased across a range of contract types.
Does the 1H12 duration-dip signal the start of a step down?
32%
46%
22% 34%
51%
15%
Durations< 5 Years
Durations5 - 6.9 Years
Durations7+ Years
2009 1H12 2009 1H12 2009 1H12
Distribution of Contracts* Moves Towards Lower Durations
Average Durations Fall for All Contract Sizes*
4.9
6.6
4.8
6.1
4.9
6.2
4.6
6.0
TCV < $200M TCV > $200M
2009 1H12 2011 2010 2009 1H12 2011 2010
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
18
Factors Influencing Downward Trend in Contract Durations
Stepped Up Market Competition Amidst increased provider competition, companies – particularly New Sourcing Adopters – push for shorter contract commitments, leveraging the providers’ desire to seal the deal.
Outsourcing Savvy Clients and Providers Solution improvements enable more efficient and effective delivery of innovations, making the best solutions at the best prices available via more frequent contract negotiations.
Disposability of Cloud Solutions Service Providers note that contracts with Cloud in scope are shorter in duration than Managed Services deals.
5.1 4.4
2009 1H12
↓14%
Average Duration for New Adopters
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
19
Global Broader Market TCV down 8% Y/Y
Asia Pacific growth of 44% propped up the global broader market, Americas remained flat and EMEA struggled
New scope awards in Asia Pacific accounted for 94% of TCV
BPO accounted for almost half of Asia Pacific TCV
India TCV rebounded strongly
India-heritage service providers outperformed their US-heritage counterparts across all categories
Anticipate a soft 3Q globally though 4Q TCV may pick up because of larger deals in the pipeline
Unprecedented levels of TCV in 2H12 are required for the global market to meet the record-high 2011 TCV result
Asia Pacific on track to have it’s best year yet for BPO awards
Asia Pacific need only deliver its five year average performance to result in a banner year for outsourcing
Asia Pacific 1H12 TPI Index Summary and Outlook
summary market
outlook market
© 2012 Information
Services Group, Inc. All Rights Reserved
isg-one.com
*Contracts with TCV > $25M
20
Learn More Please contact us with your questions and comments.
► Arno Franz
www.considerthesourceblog.com
Partner & President, Asia Pacific +61 (0) 2 9006 1610 [email protected]
► Gerry Clark Partner, South & East Asia +65 (0) 9634 5927 [email protected]
► Dinesh Goel Partner, India +91 98458 93787 [email protected]
www.isg-one.com