Modernization and migration: AO and cloud in 2014

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TECHNOLOGY BUSINESS RESEARCH, INC.

TBR’s Professional Services Business QuarterlySM

Research Highlights and Outlook

Modernization and Migration: Applications Outsourcing (AO) and Cloud in 2014 Technology Business Research (TBR) Quarterly Webinar Series

April 30, 2014

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2 TBR Quarterly Webinar Series | 4.30.14 | www.tbri.com | ©2014 Technology Business Research Inc.

Professional Services Business Quarterly Research Highlights and Outlook: Webinar Presenters

Jennifer HamelProfessional Services Analyst

Email: [email protected]: @jenhameltbr

Elitsa BakalovaProfessional Services Analyst

Email: [email protected]: @ElitsaBakalova

Patrick HeffernanIT Services Practice Manager/Principal Analyst

Email: [email protected]: @TBR_PatrickH

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Professional Services Business Quarterly Research Highlights and Outlook: Webinar Overview

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TBR Professional Services Business Quarterly (PSBQ) Portfolio

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PSBQ 4Q13 Research Highlights and 2014 Outlook: Key Trends

Professional Services Vendor Trends for 4Q13

Cloud Adoption: As vendors help clients migrate legacy workloads to the cloud, AO engagements shift, forcing new strategies and opportunities.

Industry Change: Partnerships fill gaps in technology, industry capabilities and geographic reach, while automation and IP take over in AO delivery.

AO Performance: AO growth decelerated to 4.2% year-to-year in 4Q13 as clients invested in shorter-term tactical projects and migrated legacy applications to cloud.

The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits

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PSBQ 4Q13 Research Highlights and 2014 Outlook: Performance

Outsourcing growth, including AO, is decelerating due to widespread commoditization of services and adoption of lower-priced cloud offerings

SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATESNOTE: Includes average trailing 12-month ITO revenue from TBR’s IT Services Vendor Benchmark; not representative of a total global market view.

Soft demand for traditional packaged applications, price pressures, services commoditization, demand for shorter-term tactical projects and shift to cloud drove a deceleration in AO revenue growth in 4Q13

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While AO was No. 2 in average trailing 12-month revenue growth, vendors have opportunities in application modernization and migration to cloud- and mobility-enabled IT environments and provision of industry-aligned application development


Cloud, mobility and industry specialization are key factors for AO revenue growth as vendors seek to accommodate clients’ needs

SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATESNOTE: Includes average trailing 12-month service line revenues from TBR’s IT Services Vendor Benchmark; not representative of a total global market view. Dots indicate year-to-year growth and arrows indicate directional change relative to the year-ago quarter.

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Vendors such as Accenture and TCS bundle AO with ITO and C&SI to deliver end-to-end solutions that drive AO growth


SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES

TCS bundles applications solutions with offerings across its service lines to create additional value for clients and pursue larger-scale signings opportunities. TCS focuses on development and management of mobile applications.

Accenture gains AO opportunities by bundling AO with C&SI and ITO to meet clients’ transformation needs, as well as tying AO with mobility capabilities. For example, Accenture works with YSPay in China to develop and deploy the Accenture Mobility Platform and provide related AO services.

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Professional Services Vendor Trends for 4Q13 — Cloud Adoption

Cloud computing overlaps vendors’ traditional outsourcing portfolios and revenues, forcing vendors to adjust business models to the new era

PSBQ 4Q13 Research Highlights and 2014 Outlook: Cloud Adoption

SOURCE: TBR AND COMPANY DATANOTE: Includes only 21 of the 29 vendors covered in TBR's Managed Private and Professional Services Cloud Benchmark.

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As cloud cuts into AO, vendors adjust long-term strategies and anticipate some near-term activity, particularly around migration


Long-term strategies

Example textThis is an example text.

Short-term burst of

activity and revenue

Bundling with other

Outsourcing services

Migrating legacy apps to

the Cloud

Developing vertically

aligned apps

Upgrading and modernizing apps for the

Cloud

IMAGE SOURCE: WWW.EMWARETECHNOLOGIES.COM

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AO vendors with the largest, most innovative and most vertical-focused expertise will succeed in the new cloud environmentAs every vendor adjusts, three distinct types will outpace their peers in the AO space


Innovation-led

Cloud-heavy

Vertical expertise

Atos

IBM

CapgeminiLeveraging strategic

alliances, partnerships and acquisitions to expand

breadth and depth

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PSBQ 4Q13 Research Highlights and 2014 Outlook: Industry Change

Vendors will bridge the gap between legacy application systems and cloud-based management platforms to pursue long-term AO growth

Cutting IT Costs Preparing for IT Future

AO Key Trends and 2014 Outlook

2012 2013 2014

2012 2013 2014

• IT spending is up; the recession is over.

• Vendors bundle applications services into end-to-end outsourcing portfolios.

• Vendors look to add value to AO offerings beyond cost takeout to differentiate.

• Strategic alliances emerge as the key method to quickly integrate industry expertise to improve AO solutions.

• Growing client interest in cloud and mobility will drive application modernization services.

• Vendors will use industry-oriented systems integration to shepherd clients toward platform-based managed application services.

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Clients embrace India-centric vendors’ ability to reduce AO costs and deliver modernization outcomes


India-centric vendors took market share from global firms by pricing aggressively to win contracts up for renewal in mature markets and cross-selling AO transformation

SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATESNOTE: Graph is based on data for Cognizant, Infosys, HCLT, TCS and Wipro ITS.

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SOURCE: TBR RESEARCH AND COMPANY DATA

Partnerships help India-centric firms fill gaps in emerging technologies, industry expertise and geographic reach.

Alliances enable India-centric vendors to maintain competitiveness as clients transition to cloud and mobile application environments


Vendor Partner DescriptionHCLT CSC (1Q14) HCLT and CSC will jointly deliver application modernization services to help enterprises

transition to cloud-enabled platforms, with CSC providing its BizCloud platform and HCLT contributing its low-cost delivery resources. The partners will establish two delivery centers in India and a Center of Excellence for banking.

TCS Nissan (4Q13) TCS partnered with Nissan to release the TCS Embedded Code Analyzer, a software assurance life cycle solution that helps automotive, high-tech and manufacturing companies improve time to market for products that rely on embedded software.

Wipro Tele2 (4Q13) Wipro ITS continued to show interest in the M2M segment, collaborating with Tele2 to design and implement solutions for M2M and the Internet of Things with a focus on Europe.

Wipro SOA Software (4Q13)

Wipro will implement SOA Software’s API management solutions.

Cognizant Infinite Corp. (3Q13)

Infinite Corp. specializes in migrating applications from IBM’s AS/400 application platform to newer environments, including the cloud. Cognizant offers Infinite’s application modernization services to its global client base.

Infosys SAP (2Q13) Infosys expanded its partnership with SAP to release an enhanced version of the SAP Retail Execution mobile application, which helps retail industry clients to glean sales insights via tablets and smartphones.

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IT services vendors will continue to strip labor out of their AO operating models through automation and IP monetization


While services will continue to require a human component, the number of people involved in basic redundant tasks will decline as automation takes over

Application Services Commoditization

SOURCE: TBR’S GLOBAL DELIVERY BENCHMARK SPRING 2014Note: AO headcount for 14 IT services vendors including Accenture, Atos, Capgemini, Cognizant, Dell Services, CSC, HCLT, HP Services, IBM GS, Infosys, TCS, T-Systems, Wipro ITS and Xerox.

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Vendors build out their portfolios and rebalance their personnel to best deliver services in the new age of IT


IBM GS: AO headcount will face consistent long-term contraction as the firm transitions its portfolio from resource-intensive bespoke applications development services to SaaS-based industry-specific applications delivery.

HP Svcs: HP Services is enhancing its global delivery capabilities by increasingly utilizing offshore and nearshore talent to lower its cost profile and better appeal to local customers.

Cognizant: Cognizant is ramping up hiring of onshore personnel with skills in cloud and mobility to meet regional clients’ demand for application modernization and offset the potentially negative impact of H-1B visa reform.

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PSBQ 4Q13 Research Highlights and 2014 Outlook: Summary

At the leading edge of cloud adoption, AO growth will continue until cloud adoption matures, revealing vendors with new revenue streams

Vendors must develop new cloud-related, innovative or vertically specific revenue streams or shift to managed services to avoid trailing further behind IT services leaders.

Application outsourcing vendors with the foresight to recognize the changing dynamics and commoditization of

outsourcing services will emerge from the convergence into the cloud

environment as winners.

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PSP Research Current Topics 1Q14 Report Key Themes• Select Vendor Reports:o Accenture o Atoso Capgeminio Cisco Serviceso Cognizanto CSCo Dell Serviceso Fujitsuo HP Serviceso IBM Global Serviceso Infosyso TCSo T-Systemso Wipro ITSo Xerox

• Benchmarks: Management Consulting, Healthcare IT Services, Public Sector, Global Delivery Market Landscape, Managed Private & Professional Services Cloud

Assess value propositions, key industries of investment and IP development in specific industry verticals. Assess leading and lagging vendors’ approaches to creating and developing IP (e.g., R&D, M&A, joint ventures, alliances, customer engagements).

Analyze how IT services vendors position to take advantage of the changing security landscape. Assess vendors’ security offerings and how offerings are scaled.

Understand IT services vendors’ near-term outlook for Canada and what their strategies are for local market expansion. Identify the verticals being targeted by IT services vendors in Canada, and which service offerings are gaining the most traction among clients in the region.

Industry-specific IP

Security

Canada

PSBQ 4Q13 Research Highlights and 2014 Outlook: 1Q14 Key Topics

TBR will analyze IT services vendors’ investments and strategies to expand capabilities in financial services, security and digital technology

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Questions?

PSBQ 4Q13 Research Highlights and 2014 Outlook

TBR


Patrick HeffernanIT Services Practice Manager/Principal Analyst

Email: [email protected]: @TBR_PatrickHTelephone: 603.758.1834

Jennifer HamelProfessional Services Analyst

Email: [email protected]: @jenhameltbrTelephone: 603.758.1875

James McIlroy Vice President of SalesEmail: [email protected]: 603.929.1166

Elitsa BakalovaProfessional Services Analyst

Email: [email protected]: @ElitsaBakalovaTelephone: 603.929.1166

TBR IT Services Vendor Benchmark Webinar Contact Information

Twitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannelLinkedIn: www.linkedin.com/company/technology-business-research

TBR 4Q13 Syndicated Research Topics | Confidential and Proprietary

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©2014 Technology Business Research Inc.

PSP Syndicated Research CoverageIT Services Vendors Public Sector Vendors Benchmarks

(Benchmark XLS data also available)

• Accenture• Atos• Capgemini• CGI*• Cisco Services• Cognizant• CSC• Dell Services• Fujitsu• HCL Technologies• HP Services• IBM Global Services• Infosys• T-Systems• Tata Consultancy Services• Unisys• Wipro IT Services• Xerox Services

• Booz Allen Hamilton*• CACI International*• General Dynamics IS&T*• L-3 Communications*• Leidos*• Lockheed Martin IS&GS*• ManTech*• Northrop Grumman IS&TS*• Raytheon Intelligence, Information &

Services*• SAIC*

• Global Delivery Market Landscape • Healthcare IT Services Vendor

Benchmark• IT Services Vendor Benchmark • Management Consulting Benchmark• Public Sector IT Services Vendor

Benchmark• Software Alliance Benchmark

Healthcare IT Services Vendors• Accenture HITS*• CSC HITS*• Dell HITS*• HP HITS*• IBM HITS*

Management Consulting Vendors• Bain & Company*• Booz & Company*• Boston Consulting Group*• Deloitte Consulting*• McKinsey & Co.*

TBR Professional Services Practice Syndicated Coverage

23

*Semiannual publication

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TECHNOLOGY BUSINESS RESEARCH, INC.

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