Vendors drive BPO growth by acquiring or developing IP and industry-specific offerings: Insights from TBR’s 1Q14 IT Services Vendor Benchmark

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

TBR’s Professional Services Business QuarterlySM

Research Highlights and Outlook

Vendors drive BPO growth by acquiring or developing IP and industry-specific offeringsTechnology Business Research (TBR) Quarterly Webinar Series

July 24, 2014

TBR

2 TBR Quarterly Webinar Series | 7.24.14 | www.tbri.com | ©2014 Technology Business Research Inc.

PSBQ Research Highlights: Webinar Presenters

Elitsa BakalovaProfessional Services Analyst

Email: [email protected]: @ElitsaBakalova

Boz HristovProfessional Services Analyst

Email: [email protected]: @boztbr

Patrick HeffernanIT Services Practice Manager and Principal Analyst

Email: [email protected]: @TBR_PatrickH

Ramunas SvarcasProfessional Services Principal Analyst

Email: [email protected]: @rjsTBR

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• TBR’s Professional Services Practice provides continual coverage of 33 vendors in published quarterly and semiannual reports.• Of those vendors, 30 are included in our IT Services

Vendor Benchmark.o TBR reports are unique for their deep, holistic analysis

of leading vendor businesses.o Financial modeling and TBR insights help customers

gain a better understanding of vendor business models.o TBR reports and webinars are responsive to client time

lines, clear and concise, and provide insights across multiple layers of a vendor’s organization and infrastructure.

o TBR’s strategic assessment provides an impartial check on a vendor’s progress toward its strategic objectives.

Clients are gaining advantages and better understanding revenue opportunities through our reports and their personal relationships with TBR

PSBQ Research Highlights: Webinar Overview

TBR’s IT Services Vendor Benchmark delivers unique insight and value through in-depth analysis in a concise, consumable format

TBR Professional Services Business Quarterly (PSBQ) Portfolio

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PSBQ 1Q14 Research Highlights: Key Trends

Professional Services Vendor Trends for 1Q14

Portfolio: Vendors integrate industry expertise, cloud and analytics into BPO solutions, transforming clients’ operations from cost centers to value creators.

Delivery: Cloud-based delivery models and automation reduce the need for labor resources to deliver services inherent in the low-cost delivery structure.

BPO Performance: BPO growth continues to outpace other services as buyers seek new avenues to trim costs and standardize processes.

Vendors combine industry capabilities, cloud, analytics, and internal IP and tools to maximize BPO revenue and profits

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SOURCE: BLOG.ENTREPENUERARTS.COM

SOURCE: FREEWORLDMAPS.NET

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BPO trailing 12-month revenue growth in 1Q14 was driven by vendors’ emphasis on business outcomes and cost savings through provision of horizontal and industry-specific services and integration of analytics and cloud into BPO solutions

PSBQ 1Q14 Research Highlights: BPO Performance

BPO remains more resilient to decelerating IT services industry growth than other service lines due to its favorable value proposition

SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES

Note: Includes average trailing 12-month service line revenues from TBR’s IT Services Vendor Benchmark; not representative of a total global market view

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BPO was No. 1 in average TTM revenue growth; however, its growth decelerated in 1Q14 due to factors such as the adoption of Business Process as a Service (BPaaS), which drives down traditional BPO opportunities and shrinks the length and size of contracts


Operational and business improvements support BPO’s leading revenue growth, while cloud forces vendors to transform their delivery models


Note: 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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BPO growth leaders build scale through acquisitions and platforms for quick delivery and drive revenue expansion by adding industry specialization and analytics to increase value


BPO leaders expand vertical-specific offerings, while laggards struggle with price competitiveness due to less-developed global delivery models

Growth driven by enhanced industry

expertise


Note: Includes average trailing 12-month service line revenues from TBR’s IT Services Vendor Benchmark; not representative of a total global market view. Sphere size reflects volume of TTM revenue.

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Industry expertise, partnerships and cloud enable Cognizant and TCS to outperform counterparts and gain market share in the BPO space



Industry-specific BPaaS for banking, insurance, pharmaceutical and public sector; cross-industry platforms that cover F&A, procurement, human capital management and analytics; and TCS Digital Software and Solutions Group industry-focused solutions all support TCS’ nonlinear growth.

Cognizant develops industry expertise in its global delivery model to enhance its domain expertise and builds platform-based BusinessCloud solutions to enrich its BPO offerings. Cognizant will leverage its rapidly expanding footprint in the Philippines to capture BPO opportunities in the U.S. healthcare vertical.


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Vendors continue to ramp up internal investment in IP-based solutions while purchasing or partnering with niche companies to fill portfolio gaps

PSBQ 1Q14 Research Highlights: Portfolio

Vendors build industry-specific IP portfolios to differentiate BPO offerings, reduce reliance on labor-based services, and boost revenues and profits

Focus on Outcomes

Accelerating Analytics, Cloud, Mobility Adoption

Integration of Process and Technology

Smaller, Shorter Contracts Shift from Labor Arbitrage to Blended Global Delivery

Research and Development

Mergers and Acquisitions

Joint Ventures and Alliances

Customer Engagements

High RiskHigh Cost

Low RiskLow Cost

Medium RiskHigh Cost

Medium RiskMedium Cost

New services and/or new processes for delivering services

Lead to productivity improvements,new customers, increased profits

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Cloud:BPaaS solutions enhance the value of BPO services by integrating automation and cloud-based delivery.

Capgemini, Cognizant, TCS and Infosys invest in BPO platforms through internal innovation initiatives.

IBM and Xerox bought niche SaaS vendors to bolster BPO offerings around marketing and claims management.

Analytics:Harnessing clients’ data, analytics offerings transform operations from cost centers to value creators.

IBM packages capabilities from Watson Group and prior M&As (Cognos, SPSS) into predictive analytics solutions aimed at business functions such as customer experience, fraud detection and risk management.


Acquisitions and innovation enable BPO vendors to build scale and deliver business value with cloud and analytics technologiesAs traditional BPO services such as call centers become commoditized, vendors buy and develop technology-enabled offerings that add business value by enhancing productivity and delivering actionable data insights

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BPaaS revenue is less than BPO revenue, but automation of processes and security of private cloud attracts cost-driven, process-focused clients

SOURCE: TBR AND COMPANY DATA

Note: Includes 21 of the 29 vendors covered in TBR’s Managed Private & Professional Services Cloud Benchmark


BPaaS growth is driven by vendors’ targeted marketing, e-payments and HR capabilities; vendors add vertical flavor and analytics to their BPaaS solutions to appeal to customers in key cloud-adopting industries such as retail, healthcare and financial services

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Genpact integrates consulting, technology and analytics and merges them with proven BPO processes for solutions that improve clients’ businesses

Genpact strives to break out of the BPO mold by layering analytics, industry expertise and process re-engineering capabilities over traditional back-office services to solve business problems and reduce operating costs.


Genpact builds platform solutions based on process

knowledge

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PSBQ 1Q14 Research Highlights: Delivery

BPO headcount continues to decelerate as vendors replace the human component of traditional outsourcing with platform-based solutions

SOURCE: TBR’S GLOBAL DELIVERY BENCHMARK, SPRING 2014

Note: BPO headcount for 14 IT services vendors: Accenture, Atos, Capgemini, Cognizant, Dell Services, CSC, HCLT, HP Services, IBM GS, Infosys, TCS, T-Systems, Wipro ITS and Xerox*1Q14 numbers are based on TTM average, as the fall iteration of the Global Delivery Benchmark is in progress.

As BPO becomes more commoditized, the additional value of integrated cloud and analytics solutions into BPO deals will increase revenue per employee, since cloud and analytics solutions are grounded in technology, not people

Cloud and analytics as business disruptors for vendors

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PSBQ 1Q14 Research Highlights: Delivery

Investments in cloud-based BPO platforms enable TCS and Cognizant to climb up value chain as IBM rebalances workforce to position for growth

SOURCE: TCS AND TBRSOURCE: COGNIZANT AND TBR SOURCE: IBM AND TBR

Delivery automation enables vendors to grow profits faster than revenue; margins are influenced by companies’ abilities to quickly adjust to changing market dynamics with outcome-based solutions

TCSCognizant IBM

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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

• Select Benchmarks: Business Intelligence Services Vendor, Global Delivery, Healthcare IT Services, Management Consulting, Public Sector IT Services, Managed Private & Professional Services Cloud

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

Identify vendor talent management strategies. Highlight the recruitment channels being used to attract graduates such as campaigns and partnerships with universities. Identify training and skill development and leadership and career development. Assess strategies for improved utilization and attrition.

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

Security

Talent Management

Canada andLATAM

PSBQ Research Highlights: 2Q14 Key Topics

TBR will analyze IT services vendors’ investments and strategies to expand in security, Canada and LATAM and successfully manage talent

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Questions?

PSBQ 1Q14 Research Highlights

TBR


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

Elitsa BakalovaProfessional Services Analyst

Email: [email protected]: @ElitsaBakalovaTelephone: 603.929.1166

Boz HristovProfessional Services Analyst

Email: [email protected]: @boztbrTelephone: 603.758.1882

Patrick HeffernanIT Services Practice Manager and Principal Analyst

Email: [email protected]: @TBR_PatrickHTelephone: 603.758.1834

Ramunas SvarcasProfessional Services Principal Analyst

Email: [email protected]: @rjsTBRTelephone: 603.758.1833

TBR


PSP Syndicated Research CoverageTBR Professional Services Practice Syndicated Coverage

*Semiannual publication

IT Services Vendors Public Sector Vendors Benchmarks(Benchmark XLS data also available)

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

• 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 Benchmark* • Healthcare IT Services Vendor

Benchmark• IT Services Vendor Benchmark • Management Consulting Benchmark*• Public Sector IT Services Benchmark• BI Services Benchmark*• Managed Private & Professional Services

Cloud Benchmark

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

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

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TECHNOLOGY BUSINESS RESEARCH, INC.

About TBR

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