Second Half and Full year 2013 Asia Pacific ISG Outsourcing Index

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Information about Second Half and Full year 2013 Asia Pacific ISG Outsourcing Index
Business & Mgmt

Published on February 17, 2014

Author: ISG_Inc

Source: slideshare.net

Description

The ISG Outsourcing Index (formerly the TPI Index) provides a quarterly review of the latest sourcing industry data and trends for clients, service providers, analysts and the media. For more than a decade, it has been the authoritative source for marketplace intelligence related to outsourcing transaction structures and terms, industry adoption, geographic prevalence and service provider performance.

The Asia Pacific ISG Outsourcing Index Market Data and Insights Second Half and Full Year 2013 Hosted by: Mitali Ghosh, Bank of America Merrill Lynch 10 February 2014

2 Welcome to the 15th Semi-Annual Asia Pacific Outsourcing Index Review Covering the state of the outsourcing industry for global, commercial contracts.* Sid Pai Partner and President, Asia Pacific Gerry Clark Partner, Asia Catherine Jaktman Dinesh Goel Partner, Australia and New Zealand Partner, India © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

3 At a Glance STRONGER SECOND HALF VALUES NOT ENOUGH TO LIFT ANNUAL VALUES 2013 GLOBAL DEAL ACTIVITY SLIGHTLY HIGHER, BUT VALUES FALL AFTER SEVERAL YEARS OF GROWTH, FINANCIAL SERVICES ACTIVITY SLOWS AND MANUFACTURING DECLINES SHARPLY ITO ACTIVITY UP, ESPECIALLY IN ADM, BUT BPO ACTIVITY RECEDES DUE TO LACK OF LARGE DEALS ASIA PACIFIC ACV FALLS COMPARED TO STAND-OUT 2012 EMEA SEES RISE IN ACTIVITY WITH SMALLER DEAL SIZES, BUT LACK OF LARGE DEALS IN AMERICAS LEADS TO DROP IN VALUE Scorecard © 2014 Information Services Group, Inc. All Rights Reserved Global Market New Scope Restructurings Mega-relationships ITO BPO Americas EMEA Asia Pacific 2H13 ACV (B)* $ $ $ $ $ $ $ $ $ 10.2 6.1 4.1 1.7 7.9 2.3 3.2 6.0 1.0 H/H Change 20% 27% 51% -18% 41% -21% -3% 44% -1% 2013 ACV ($B)* $ $ $ $ $ $ $ $ $ 18.7 11.2 7.5 3.7 13.5 5.2 6.5 10.2 1.9 isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® Y/Y Change -18% -27% -2% -38% -8% -37% -26% -6% -40% 2013 Counts 1,155 798 357 24 790 365 442 587 126 Y/Y Change 2% -5% 22% -31% 8% -9% -10% 18% -11%

4 Global Market Contract Award Trends For the full year, ACV was down 18% from 2012; however, second half contract counts reached their highest level ever to lift the full year ahead of 2012 by 2%. Broader Market Full-Year ACV ($B)* 1H ACV 2H ACV $20.6 $22.0 $22.0 $22.9 $9.9 $12.1 $10.9 $18.7 $15.2 $16.6 $18.2 $8.7 $6.7 $8.8 $8.5 $11.0 $8.7 $8.3 $8.5 $7.8 $9.7 $9.6 $12.1 $9.9 $12.0 $8.5 2004 05 06 07 08 09 10 11 12 2013 $16.2 $17.1 $7.4 $10.2 Broader Market Full-Year Contracting Counts 1H Counts 2H Counts 1,182 972 © 2014 Information Services Group, Inc. All Rights Reserved 774 562 611 617 259 277 306 304 316 285 305 313 379 05 06 07 08 575 2004 988 395 496 476 476 512 09 10 isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 1,132 1,155 577 526 661 605 606 494 11 12 2013

5 Global Market Contract Trends by Deal Size 2013 saw the continued dominance of contracting in the smallest ACV bands, and average deal size trended down across all bands. Comparing Broader Market Contracting Awards ($B)* Grouping in ACV Contract Size Bands $5-39M ACV($B)* $40-99M $100M + Contract Counts Average Contract Size 1,063 $14 $13 $11 $55 $57 $55 $179 $185 $11.3 60% $8.5 673 $6.6 482 $4.0 $3.1 $3.8 20% $153 70 $6.5 © 2014 Information Services Group, Inc. All Rights Reserved $5.7 $3.7 20% 2004 2008 2013 57 36 2004 68 31 24 2008 2013 isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 2004 2008 2013

6 Global Market New Scope & Restructuring Trends New Scope ACV dipped 27% from 2012, while Restructuring ACV held steady. Restructuring counts rose 22% from 2012, but New Scope awards continued down. New Scope Half and Full-Year ACV ($B)* 1H ACV $13.5 $13.6 $12.8 $12.6 $10.1 $5.6 $7.2 2004 $6.3 $7.2 $6.1 2H ACV 1H ACV $8.6 $6.4 $6.9 $11.2 $7.1 $4.5 $7.3 $5.1 $5.0 $6.3 $7.5 05 06 07 08 $7.4 09 $8.7 10 $7.2 11 12 $5.1 2013 895 © 2014 Information Services Group, Inc. All Rights Reserved 491 516 206 220 252 259 303 isg-one.com 08 266 226 239 257 2004 05 06 07 753 623 446 $5.1 $2.5 $1.4 $2.0 2004 05 $3.5 06 405 356 441 09 397 10 11 $2.4 $2.2 $2.2 07 08 09 839 $1.6 $3.6 $5.0 $3.3 $2.7 10 11 $7.5 $3.6 $4.1 $4.0 $3.4 12 2013 2H Counts 357 798 287 384 198 455 352 12 $7.6 $2.4 $3.1 1H Counts 320 369 $4.6 $7.7 Restructuring Half and Full-Year Counts 446 454 $4.6 $1.5 $1.6 2H Counts 774 472 $3.3 $2.0 $8.0 New Scope Half and Full-Year Counts 1H Counts 2H ACV $16.0 $15.1 $14.3 $15.3 $6.1 $6.3 Restructuring Half and Full-Year ACV ($B)* 2013 151 103 116 120 101 53 50 57 59 54 66 45 56 2004 05 06 07 *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 91 75 293 136 142 215 151 151 142 11 12 235 120 107 115 09 10 76 08 2013

7 Global Market Industry Trends Manufacturing stood out, with ACV off $2B+ from its prior 5-year average. Yet Energy and Travel, Transport & Leisure performed close to their prior 5-year highs. Broader Market 5 Prior Year ACV ($B)* by Industry Range of Prior 5 Years Avg of 5 Prior Years 2012 2013 $7 $6 $5.33 $5 $4 $3.48 $3 $2.59 $2.23 $2 $2.03 $1.41 $1 $1.01 $0.64 © 2014 Information Services Group, Inc. All Rights Reserved $Manufacturing Financial Services Telecom & Media Energy Travel, Transport, Leisure isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® Healthcare & Pharma Business Services Retail

8 Regional Comparison of Contract Trends As contract counts increase over the decade, average contract size shrinks. EMEA ACV grows compared to 2004, Asia Pacific holds steady while Americas shrinks. Full-Year ACV ($B)* Compare Americas ACV EMEA ACV Asia Pacific ACV $11.0 $9.9 $8.1 $7.2 $7.1 $7.6 $7.3 $7.5 $11.9 $10.9 $9.7 $8.3 Full-Year Contract Counts Compare $8.8 $8.1 Americas Counts $10.2 431 348 $6.5 251 $6.8 $1.9 2004 $1.5 $1.5 05 06 07 $2.1 08 $2.6 09 $3.2 $2.2 10 $2.1 11 241 $1.9 12 587 498 $8.8 $6.2 Asia Pacific Counts 535 $6.1 $2.5 EMEA Counts 2013 253 252 265 263 273 94 07 08 83 57 73 2004 05 06 © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 517 493 442 414 431 127 115 130 141 126 09 10 11 12 2013 273 81 442 332

9 Asia Pacific Contract Award Trends Although 2H held steady, full year ACV dropped substantially from 2012 and contract counts dipped 11%. Asia Pacific Full-Year ACV ($B)* 1H ACV 2H ACV 127 83 57 $1.9 $0.7 94 81 73 $2.1 $1.3 $1.2 $1.0 $0.4 $1.5 $0.5 $1.0 $1.2 $0.7 2004 05 06 07 08 $1.4 Asia Pacific Full-Year Counts in Bands Range of Prior 5 Years Avg of 5 Prior Years 2012 2013 126 $2.6 $1.3 $1.3 09 $2.2 $2.0 $1.5 $1.0 $0.7 $1.0 10 11 $1.3 $1.9 12 $2.0 $1.0 $1.0 2013 Asia Pacific New vs. Restructuring ACV ($B)* Range of Prior 5 Years Avg of 5 Prior Years 2012 $2.5 $1.5 © 2014 Information Services Group, Inc. All Rights Reserved 141 $3.0 $2.0 $1.0 130 115 $3.2 $2.5 $1.5 Full-Year Counts $2.0 $1.18 $1.5 $0.61 $0.5 $1.59 $1.0 $0.5 $0.15 $0.0 $5 - 39M $40-99M $0.36 $0.0 $100M + isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® New Scope Restructuring 2013

10 Asia Pacific Industry Contract Award Trends Several of the largest industries in Asia Pacific suffered declines in 2013, notably the Telecom & Media and Manufacturing sectors. Asia Pacific Industries Prior 5 Years ACV ($B)* Range of Prior 5 Years Avg of 5 Prior Years 2012 2013 $1.2 $1.0 $0.8 $0.65 $0.6 $0.4 $0.32 $0.28 $0.2 $0.22 $0.22 $0.16 $0.07 © 2014 Information Services Group, Inc. All Rights Reserved $0.03 $- Telecom & Media Financial Services Manufacturing Business Services Travel, Transport, Leisure isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® Energy Retail Healthcare & Pharma

11 Asia Pacific Sub-region Award Trends Japan was the only bright spot as all other markets in Asia Pacific suffered declines in 2013, most notably India and Australia-New Zealand. Asia Pacific Sub-regions Prior 5 Years ACV ($B)* Range of Prior 5 Years Avg of 5 Prior Years 2012 2013 $1.6 $1.4 $1.2 $1.0 $0.8 $0.62 $0.6 $0.4 $0.40 $0.38 $0.33 $0.2 © 2014 Information Services Group, Inc. All Rights Reserved $0.19 $0.03 $India and South Asia ANZ Greater China isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® ASEAN Japan South Korea

12 Asia Pacific ITO Contract Award Trends Full year ITO ACV finished around 5% down on 2012, but within its historical range, supported by Infrastructure and Network Services contract awards. Asia Pacific Full-Year ITO ACV ($B)* 1H ACV 2H ACV ITO Full-Year Counts 98 61 39 54 60 64 $2.04 $1.90 $1.47 $0.5 $0.95 $1.0 $0.6 $0.4 2004 05 $1.26 $0.4 $0.9 $0.9 06 07 $1.0 87 74 $1.74 $1.35 $0.8 $0.8 $0.5 08 2013 Top AP ITO Providers1 94 86 Top ITO ACV Leaders $1.46 $1.69 $1.3 $0.8 $0.9 $0.7 $0.9 $0.7 10 09 $0.7 $0.5 $1.2 CSC IBM Infosys Nihon Unisys Singapore Telecom Wipro $1.61 11 12 2013 Asia Pacific Full-Year ITO ACV ($B)* by Function 2012 Top ITO Counts Leaders 2013 ADM ADM + Infrastructure $0.307 Infrastructure © 2014 Information Services Group, Inc. All Rights Reserved Accenture CSC IBM Infosys TCS $0.411 $0.689 Network Services 1Service $0.201 $- $0.1 $0.2 $0.3 $0.4 $0.5 $0.6 $0.7 isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® $0.8 providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.

13 Asia Pacific BPO Contract Award Trends BPO ACV dropped to its lowest level since 2006 as large deals disappeared from the market in 2013. Full-Year Asia Pacific BPO ACV ($B)* 1H ACV 22 $0.42 $0.5 $1.0 41 29 43 $0.77 05 06 $0.56 $0.4 $0.2 $0.6 $0.2 $0.5 $0.41 $0.2 $0.2 07 $0.24 55 32 08 09 10 $0.60 $1.1 $0.3 $0.3 2012 11 12 2013 Accenture FIS IBM Infosys TCS // $.72 $0.079 Industry-Specific $0.124 F&A $0.034 Facilities Mgmt $0.030 Multi-Process © 2014 Information Services Group, Inc. All Rights Reserved Top BPO Counts Leaders 2013 $0.013 Contact Centers Fujitsu IBM Infosys Jones Lang LaSalle Sutherland Global TCS $0.34 $0.1 $0.3 Full-Year BPO ACV ($B)* by Function R&D/KPO Top BPO ACV Leaders $0.5 $0.57 $0.6 2013 Top AP BPO Providers1 BPO Full-Year Counts $1.55 $0.53 $0.4 2004 30 21 19 18 2H ACV $0.023 HRO $0.018 Document Mgmt $0.020 $- 1Service $0.1 $0.2 $0.3 isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® $0.4 providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.

14 Asia Pacific Outsourcing Revenue Trends With an active contracts CAGR of 10% and annualized revenue CAGR of 4%, the Asia Pacific outsourcing market shows steady growth. Asia Pacific Annualized Revenue & Active Contract Trends Annualized Revenues ($B)* Active Contracts 647 421 683 $11.3 $11.7 2012 2013 $9.7 2008 © 2014 Information Services Group, Inc. All Rights Reserved 2009 2010 2011 2008 to 2013 Active Contracts CAGR: 2008 to 2013 Annualized Revenue CAGR: isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® ↑ 10% ↑ 4%

15 Asia Pacific Market Share Comparison by Provider Category Although India-heritage companies led BPO values in 2013, they lost market share to the US-heritage and Other categories. Percentage of All Asia Pacific Annual Awards by Service Provider Category Other India-heritage US-heritage BPO Awards BPO ACV 19% ITO Awards BPO Counts 25% ITO ACV 51% 36% ITO Counts 35% 43% 27% 30% 38% 31% 73% 46% 40% 32% 34% 32% 8% © 2014 Information Services Group, Inc. All Rights Reserved 2012 29% 2013 9% 2012 38% 27% 34% 2013 2012 isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® 2013 2012 31% 31% 2013

OVERVIEW OF ASIA PACIFIC PUBLIC SECTOR RECOGNIZING AND REACTING TO KEY SOURCING MARKET TRENDS Special Topic for Full Year 2013 Catherine Jaktman Partner, Australia and New Zealand

17 Asia Pacific Public Sector Trends Australia-New Zealand continues to dominate public sector spend in the region. AP Public Sector vs. Commercial ACV ($B)* Public Sector ACV $3.08 Commercial Sector ACV $2.06 $2.15 2009 ACV Leaders $3.24 $2.73 $2.60 AP Top Public Sector Providers1 2011 $1.95 $1.88 2010 $2.86 $1.84 2012 2013 Counts Leaders AP Public Sector ACV % of All AP Contracts 54% 56% 48% © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com 2009 1Service 2010 Accenture Fujitsu IBM Serco Telstra Transfield Services Unisys 47% 49% 2011 2012 Accenture Data 3 Group Fujitsu Harris Corp. IBM NEC Serco TCS Telstra Thales Unisys 2013 providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®. *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

18 Recognizing the Key Forces for Change in Outsourcing Market Dynamics Market Saturation in Traditionally Strong Segments Sustained Period of Economic Pressure in the West Growth in G-2000 Sourcing from 5 Years Ago Northern Europe and U.S. Regions 30% Financial Services and Manufacturing 15% 1% Largest Western G-2000 Companies Americas Unit Cost Drops Client © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com Provider Competition Up Asia Pacific Sourcing Model Matures in Major Territories and Industries Stepped-up Pressure on Contract Pricing Deal Term Down EMEA Rise of the Small Deal SIAM* *Service Integration and Management *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase® Multiple ITO and BPO Providers

19 Taking Advantage of the New Market Forces Force 1 Market Saturation in Traditionally Strong Segments Get smarter with targeting strategies for underpenetrated markets and industries. Providers should Seek out underpenetrated industries like Energy, Pharma and Transportation. Cultivate new clients in bottom quartile of the G-2000 by offering new solutions. Force 2 Sustained Period of Economic Pressure in the West Solve the challenge of expanding into the more rapidly growing Eastern economies. Providers should Note Eastern Service Providers are maturing rapidly, are better positioned and are starting to win business from new G-2000 companies in the East. Force 3 Stepped-up Pressure on Contract Pricing Focus on delivering good returns, even on reducing revenues. Providers should Improve margins by optimizing the efficiency of delivered service. Drive down costs via technology innovations, process enhancements and automation. © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com Force 4 Sourcing Model Matures in Western Markets Providers should Leverage experience in * mature markets to make sourcing relevant to new buyers. Take the opportunity to move directly to current sourcing practices in new industries and with new buyers, avoiding the growing pains the early adopters experienced. *Service Integration and Management *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

20 Full-Year ISG Outsourcing Index Summary and Outlook  2013 had increased deal activity but at a smaller average deal size, the new market summary      normal. Services cost less, holding down overall ACV. ITO activity is up while BPO activity recedes due to lack of large deals. Manufacturing fell back globally , as did Telecom & Media in Asia Pacific Conversely, Energy and Travel, Transport & Leisure performed close to their prior 5-year highs. Asia Pacific results suffered from a lack of large deals that drive their market, especially in Australia/New Zealand and India. Americas results were down largely on a decline in U.S. ACV. EMEA had a sizable increase in the number of contracts and saw its fourth straight year of ACV over $10B.  In 1H14, look for positive Global Market results, based on a stronger market outlook © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com industry pipeline, and expect a Global Market increase of 3 - 5 percent.  The Asia Pacific market , however, is likely to remain soft through 1H14.  In 2014, expect service providers to continue to offer more varied solutions, such as systems integration work, transformation work, project services and, increasingly, automation.  ACV declined, but the effect on the market from recovering economies tempers that. Service providers’ responses to changing sourcing market dynamics will be key to their success. *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

21 Learn More Please contact us with your questions and comments. ► Gerry Clark ► Sid Pai Partner, Asia +65 9634 5927 gerry.clark@isg-one.com Partner & President, Asia Pacific +91 98800 33779 sid.pai@isg-one.com ► Dinesh Goel ► Catherine Jaktman Partner, India +91 98458 93787 dinesh.goel@isg-one.com Partner, Australia & New Zealand +61 2 6198 3283 catherine.jaktman@isg-one.com © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com blog.isg-one.com *Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®

Full Year 2013

23 Full Year TCV Scorecard 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. Scorecard 2013 TCV ($B)* Y/Y Change Global Market New Scope Restructurings Mega-deals ITO BPO Americas EMEA Asia Pacific $ $ $ $ $ $ $ $ $ 82.9 -20% 53.5 29.4 14.7 55.2 27.7 26.3 47.8 -24% -10% -8% -16% -26% -34% -5% 8.8 -35% © 2014 Information Services Group, Inc. All Rights Reserved isg-one.com *Contracts with TCV ≥ from from Contracts Knowledgebase® *Contracts with ACV ≥ $5M$25Mthe ISG the ISG Contracts Knowledgebase®

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