Asia Pacific

The ISG Asia Pacific Outsourcing Index
Market Data and Insights
Second Half and Full-Year 2014
Hosted by:
Mitali Ghosh,
Bank of America Merrill Lynch
29 January 2015
2
Welcome to the Semi-Annual Asia Pacific Outsourcing Index Review
Covering the state of the outsourcing industry for global commercial contracts, with
a special focus on Asia Pacific.*
Sid Pai
Partner and President,
Asia Pacific
Catherine Jaktman
Dinesh Goel
Partner,
Australia and New
Zealand
Partner,
India
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
3
At a Glance
ALTHOUGH 2ND HALF RESULTS FELL SHORT OF THE STELLAR 1H PERFORMANCE
ALL REGIONS EXPERIENCED GROWTH FOR THE FULL YEAR
2014 ACV IS UP 16% WITH STRONG ITO GROWTH AND UNEVEN RESULTS IN BPO
ASIA PACIFIC IS UP 45% OVER 2013 ON STRENGTH OF THE LARGEST MARKETS,
ALTHOUGH ACV DID TAIL OFF IN THE SECOND HALF
AMERICAS HAS SOLID GAINS, UP 22% WITH INCREASED CONTRACT COUNTS
EMEA IS UP 7% LIFTED BY MEGA-RELATIONSHIP AWARDS
Scorecard
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2H14
ACV ($B)*
H/H
Change
Global Market
$
10.5
-16%
New Scope
$
6.0
-24%
Restructurings
$
4.5
-3%
Mega-relationships
$
2.7
-20%
ITO
$
7.6
-21%
BPO
$
2.9
-2%
Americas
$
4.0
-6%
EMEA
$
5.5
-15%
Asia Pacific
$
1.0
-44%
2014
ACV ($B)*
Y/Y
Change
2014
Counts
Y/Y
Change
$
$
$
$
$
23.1
14.0
9.1
6.2
17.3
16%
16%
16%
53%
19%
1,218
810
408
33
880
4%
1%
9%
22%
3%
$
$
$
$
5.8
8.2
11.9
3.0
8%
22%
7%
45%
338
484
588
146
-7%
8%
-1%
11%
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
4
Global Market Contract Award Trends
In 2014, ACV is up by double digits while contract awards reach the second-highest
ever, second only to 2011’s record performance .
2H and Full-Year Broader Market ACV ($B)*
1H ACV
$19.1
$18.3
$17.0
$9.7
2H ACV
$20.9
$21.9
$22.9
$9.6
$11.6
$10.2
$11.3
$10.3
08
09
$23.7
$13.4
$9.2
$8.9
2005
06
07
1H Counts
$12.7
10
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714
466
1,183
1,175
542
656
1,063
535
519
558
648
641
519
10
11
12
13
363
369
364
428
528
2005
06
07
08
09
630
$12.6
$12.6
$10.3
$9.4
11
12
13
2014
Global Market Size
Commercial Sector Outsourcing Market Size ($B)
Active Contracts
1,077
894
350
$10.5
$10.6
2H Counts
1,278
338 358
$11.1
$9.4
$7.7
$9.5
727
$23.1
$19.9
2H and Full-Year Broader Market Contract Counts
701
$23.6
6,262
1,218
554
3,062
664
2014
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
$110
$84
2005 06
07
08
09
10
11
12
13 2014
5
Americas Market Contract Award Trends
In 2014, ACV is up 22% while counts grew 8% for the year. The increase in demand
in the Americas and the award of larger deals lifts the market.
Americas 2H and Full-Year ACV ($B)*
1H ACV
$8.1
$8.1
$4.0
$3.2
$7.4
$6.7
$3.8
2005
06
$8.5
$9.0
$4.2
$3.2
$3.3
$3.6
$3.4
07
08
$4.3
$8.2
$6.7
$3.8
$4.4
$5.1
$3.8
09
10
$4.0
$3.2
$4.2
$3.5
11
Americas 2H and Full-Year Contract Counts
1H Counts
$8.9
$8.2
$5.8
$4.9
$4.0
2H ACV
12
13
2014
Americas Market Size
Commercial Sector Outsourcing Market Size ($B)
2H Counts
Active Contracts
522
304
146
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320
142
376
306
148
191
432
453
207
194
259
500
448
218
2,558
484
218
$44
$40
251
1,453
158
178
158
185
225
259
263
2005
06
07
08
09
10
11
282
12
197
13
266
2014
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
2005 06
07
08
09
10
11
12
13 2014
6
EMEA Market Contract Award Trends
20 Mega-relationship awards and larger contract signings boost ACV in EMEA as
contract counts remain largely flat.
EMEA 2H and Full-Year ACV ($B)*
1H ACV
$13.3
$11.9
$9.5
$4.5
$8.4
$7.2
$5.0
06
$11.5
$7.2
08
09
406
325
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313
314
208
303
249
248
$11.9
$5.5
$6.5
$4.8
10
11
12
13
2014
EMEA Market Size
Commercial Sector Outsourcing Market Size ($B)
Active Contracts
522
473
$6.3
$5.5
2H Counts
602
488
$5.9
$5.4
EMEA 2H and Full-Year Contract Counts
1H Counts
$11.2
$6.0
$4.6
07
$11.3
$7.9
$5.5
$5.9
$4.1
$3.3
2005
$10.6
$4.7
$4.3
$3.9
2H ACV
247
595
588
338
270
2,900
$56
1,286
151
172
154
174
198
239
225
275
257
318
160
299
141
2005
06
07
08
09
10
11
12
13
2014
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
$32
2005 06
07
08
09
10
11
12
13 2014
7
Asia Pacific Contract Award Trends
Large deal awards make a welcome return to the market, fuelling ACV growth of
45% for the year. 2nd half activity trailed off compared to the record first half.
Asia Pacific 2H and Full-Year ACV ($B)*
1H ACV
Asia Pacific 2H and Full-Year Counts
2H ACV
1H Counts
2H Counts
$3.4
$2.5
$1.6
$1.7
$1.1
$0.6
$1.1
$1.3
2005
06
$2.4
$2.4
$1.4
$1.6
$1.6
$1.4
$1.2
$0.9
$0.7
$0.5
07
$3.0
$2.8
08
09
10
$2.2
$1.1
$1.4
$2.0
$2.0
$1.1
$1.0
$1.0
$2.0
13
44
48
112
2014
2005
151
154
79
77
68
64
74
09
10
161
77
50
46
45
06
07
08
132
67
67
41
$1.0
12
94
72
31
11
94
143
86
11
84
12
65
13
146
66
80
2014
Asia Pacific Full-Year ACV ($B)* in Size Bands Asia Pacific Full-Year Segment Details ACV ($B)*
Range of Prior 3 Years
Avg of Prior 3 Years
Prior 5 Year Range
Avg of 5 Prior Years
2013
2014
2013
2014
$2.0$2
$1.5$2
$1.3
$1.0$1
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$0.5$1
$0.63
$0.8
$0.9
$0.76
$0.47
$-$0
$5M-$39M
$40M-$99M
Range of Prior 3 Years
2013
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
$100M +
*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
Avg of Prior 3 Years
2014
$2.7
$1.9
$1.1
$0.3
New Scope
Restructuring
ITO
BPO
8
Asia Pacific Contract Award Trends Detail
Annually, most sub-markets in Asia Pacific exceed 2013’s performance with strength
in ANZ, India and Japan. Telecom and Manufacturing post major comebacks.
Asia Pacific Sub-regions Full-Year ACV ($B)*
Range of Prior 3 Years
Avg of Prior 3 Years
2013
2014
$2.0
$1.5
$1.0
$0.93
$0.73
$0.66
$0.5
$0.37
$0.25
$0.02
$0.0
ANZ
India and South Asia
Japan
Greater China
Southeast Asia
South Korea
Asia Pacific Industry Full-Year ACV ($B)*
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$1.2
$1.0
$0.8
$0.6
$0.4
$0.2
$-
Range of Prior 3 Years
$0.66
$0.63
Avg of Prior 3 Years
2013
2014
$0.73
$0.41
$0.18
Financial
Services
Telecom
& Media
Manufacturing
Travel
Transport
Leisure
Energy
*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
$0.07
Business
Services
$0.08
Healthcare
& Pharma
$0.16
Consumer
Products
& Goods
$0.05
Retail
9
Asia Pacific Outsourcing Revenue Trends
Although growth has slowed somewhat, the Asia Pacific market continues to grow
at a healthy rate.
Asia Pacific Market Size Trends
Commercial Sector Outsourcing Market Size ($B)
Active Contracts
804
$13.9
323
$7.8
2005
06
07
08
09
10
11
2009 to 2014 Active Contracts CAGR:
2009 to 2014 Annualized Revenue CAGR:
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
12
13
↑7.2%
↑4.2%
2014
10
ISG Sourcing Market Standouts in Asia Pacific
Several Japanese providers join the large multinationals in the Big 10 Sourcing
Standouts list. Australian and India-based providers contribute greatly to the two
smaller tiers.
SOURCING
STANDOUTS GROUPED BY COMPANY SIZE
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The Big 10
Sourcing Standouts
The Building 10
Sourcing Standouts
The Breakthrough 10
Sourcing Standouts
Accenture
BT
CSC
Fujitsu
Hitachi
HP
IBM
Ricoh
TCS
Telstra
Cognizant
HCL
Infosys
Orange Business Services
Singtel Optus
Tech Mahindra
Transfield Services
United Group Services
Unisys
Wipro
ChinaSoft
Hollysys Automation
Itron
Kratos Defense & Security
NGA Human Resources
Pactera
Ramco
Redknee Solutions
SITA
WNS
Co. Revenue > $10B
Co. Revenue $2B - $10B
Co. Revenue < $2B
Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase®.
Service providers in alphabetical order; no rankings implied.
Revenue
sourcedwith
from Hoovers
individual
fillings.
*Contracts
ACV ≥and
$5M
from company
the ISGfinancial
Contracts
Knowledgebase®
11
Asia Pacific Public Sector Trends
Public Sector ACV rockets in 2014 as a result of large contract awards in Australia.
Conversely, the number of awards shrinks to its lowest level since 2008.
AP Half-Year Public Sector vs. Commercial ACV ($B)*
Commercial Sector
$3.0
Public Sector
ACV Leaders
$2.5
$2.5
$2.1
$1.8
$2.0
$1.5
$1.6
$1.2
$1.0
$1.0
$1.2
$1.0
$1.1
1H13
2H13
$0.6
$0.5
$-
1H10
2H10
1H11
2H11
1H12
2H12
AP Top Public Sector Providers1
1H14
2H14
Accenture
Fujitsu
Harris Corp.
IBM Global Services
IHMS
Lockheed Martin
NEC
Serco Group
Servcorp
Transfield Services
AP Half-Year Public Sector vs. Commercial Contract Counts
Commercial Sector
100
80
60
68
52
68
Counts Leaders
Public Sector
67
51
65
50
52
49
53
1H14
2H14
40
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20
-
1H10
1Service
2H10
1H11
2H11
1H12
2H12
1H13
2H13
Accenture
Boeing
CSC
Data 3 Group
Fujitsu
Harris Corp.
IBM Global Services
Lockheed Martin
NEC
Serco Group
providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.
*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
CLOUD ADOPTION FORCES INFLECTION POINT IN THE MARKET
Special Topic for Second Half 2014
Dinesh Goel
Partner
13
The Sourcing Industry Is at an Inflection Point
Expect
Restructurings in Next 2 Years
Almost Half Infrastructure Related
Competitive Bids
Western-heritage Providers
Traditional
Leaders
Tower-based ITO
India-heritage+Niche Providers
Hard charging
Growth
Tower-based ITO
IaaS Gets Real
Scale Cloud Providers
Cloud Multisourcing; Workloads Go to Best Cloud Option
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Providers must reinvent to succeed
Shed outdated business models and adopt radically different strategies
*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
14
Get the focus right.… There is plenty of new space to play in.
Realign to Market Opportunities
Must Move Fast and Invest
CATCH THE DIGITIZATION WAVE
THE LEADER BOARD WILL CHANGE
Driven by the Internet of Things
Bought out, bailed out or bow out
Focus on
Applications &
Testing
$
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
Bought by smaller
competitors
Consolidation
Government support
15
ISG Outsourcing Index 2H14 Summary and Outlook
 2H measures failed to match a stellar first half market performance
 Despite that, all regions saw significant Y/Y growth
 Global ACV up double digits for the full year; both New and Restructured
market
summary
scope up
 Mature sourcing markets provide significant growth in Asia Pacific, moderate
gains in the Americas and a slight increase in EMEA
 ITO ACV saw 19% growth for 2014; BPO gains uneven against very weak 2013
 Manufacturing and Energy post impressive annual growth
 Expect a healthy industry growth going forward
market
outlook
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 Comparisons for 1H15 will be challenging against 1H14’s $12.6B in ACV
 Sourcing industry sits at an inflection point with not only long-standing
Western-heritage providers facing off against India-heritage providers, but
now cloud-based providers join the fray
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
16
Learn More
Please contact us with your questions and comments.
Sid Pai
Partner & President, Asia Pacific
+91 98800 77339
[email protected]
www.isg-one.com
Dinesh Goel
Partner, India
+91 98458 93787
[email protected]
Catherine Jaktman
Partner, Australia & New Zealand
+61 2 6198 3283
[email protected]
Paul Reynolds
Partner and Chief Research Officer
+1 508 625 2194
[email protected]
ISG insights serving providers, CIOs & market analysts
© 2015
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Group, Inc.
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*Contracts with ACV ≥ $5M from the ISG Contracts Knowledgebase®
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