TBR TECHNOLOGY BUSINESS RESEARCH, INC. TBR’s Professional Services Business Quarterly SM Research Highlights and Outlook Are traditional ITO revenue streams making way for cloud? Technology Business Research (TBR) Quarterly Webinar Series Feb. 13, 2014
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Are traditional ITO revenue streams making way for cloud?
The TBR Professional Services research team invites you to an invitation-only webinar on Thursday, Feb. 13, 2014, for a recap and analysis of the ITO service line in 3Q13, key trends and vendors’ performances and strategies as reported in TBR’s IT Services Vendor Benchmark.
Analysts Stephanie Artigliere and Elitsa Bakalova and Senior Analyst Ramunas Svarcas will share their perspectives on the latest IT services vendor results and provide additional insight into vendor performance and the future of the IT services market.
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TBR
T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .
TBR’s Professional Services Business QuarterlySM
Research Highlights and Outlook
Are traditional ITO revenue streams making way for cloud? Technology Business Research (TBR) Quarterly Webinar Series
• The Professional Services Practice publishes quarterly and semiannual reports, continually covering 33 vendors.
• Of those vendors, 31 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 timelines, 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 in its strategic objectives.
Clients are gaining advantages and better understanding revenue opportunities through our
reports and their personal relationships with TBR.
Professional Services Business Quarterly Research Highlights and Outlook: 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
While technology- and analytics-enabled solutions supported BPO’s leading average trailing 12-month growth in 3Q13, cloud, mobility and analytics technologies stemmed the rate of C&SI revenue growth deceleration relative to outsourcing services.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance
ITO growth will continue to trail behind other service lines and decelerate to an estimated 0.6% average trailing 12-month growth in 4Q13
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
NOTE: Includes total 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.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance
The ongoing shift to lower-priced cloud computing pressured traditional ITO revenue streams in 3Q13
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
NOTE: Includes total trailing 12-month ITO revenue from TBR’s IT Services Vendor Benchmark; not representative of a total global market view.
Average trailing 12-month ITO growth decelerated since 1Q12, as deal completions, price pressures, demand for shorter-term tactical projects in place of traditional ITO deals and an ongoing shift to cloud computing slowed ITO revenue performance.
HP’s ITO revenue decline followed a shift in demand from outsourcing to cloud hosting engagements with lower initial spend
PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
Bringing HP’s Technology Services segment into its Enterprise Group better aligns support and IT outsourcing services with the technologies they manage and support. However, customer demand is shifting to shorter-cycle, smaller contracts to manage IT spending, driving down ITO revenue.
Managed private cloud and cloud professional services are rapidly gaining popularity in the market. The initial influx of cloud drove consulting engagements that then informed and educated customers on the benefits of cloud on IT operations and business outcomes.
“If it is a new application, we would much rather have
someone else host it and manage it.”
— IT Director of a U.S.-based, higher-education organization
Cloud environments offer cost-effective, secure alternatives to investments in on-premises or traditionally hosted and managed IT, driving fundamental changes in vendors’ legacy outsourcing business models.
Professional Services Vendor Trends for 3Q13 — Cloud Adption
Cloud computing overlaps vendors’ traditional outsourcing portfolios and revenues, forcing vendors to adjust business models to the new era
PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption
SOURCE: TBR 3Q13 MANAGED PRIVATE & PROFESSIONAL SERVICES CLOUD BENCHMARK
IT outsourcing revenues are increasingly turning into managed cloud revenue dollars as vendors adjust to cloud-driven business models
IT outsourcing revenue growth fluctuated between 0% and -5% year-to-year over the past five quarters, while managed private cloud revenue growth ranged between 30% and 35% over the same period, indicating a real threat to traditional ITO vendors.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption
SOURCE: TBR 3Q13 MANAGED PRIVATE & PROFESSIONAL SERVICES CLOUD BENCHMARK
NOTE: Graph is based on data for 22 vendors: Accenture, Atos, Capgemini, Cisco, Cognizant, CSC, Dell, Deloitte, Dimension Data, EMC, Fujitsu, HCLT, HP,
IBM, Infosys, Oracle, SAP, TCS, T-Systems, Wipro, Xerox and Unisys.
To invest in emerging technologies, IT services vendors have:
Client demand for analytics, cloud, mobility and digital fueled 3 main strategies: Acquire, hire and consolidate
SOURCE: TBR RESEARCH AND COMPANY DATA
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
New technologies require vendors keep pace with ever-accelerating changes. With business models built on low-cost delivery and/or differentiated IP, vendors that adjusted fastest lead the pack.
Acquisitions enable vendors to expand their industry expertise and bring solutions to market faster than through internal R&D activity, though these avenues require concessions such as revenue sharing, reduced control and integration costs.
Acquisitions provide an immediate boost to revenues, expand offerings and create a platform for new IP
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
Vendor Target Description
IBM Xtify (4Q13) Xtify provides cloud-based mobile messaging tools that help organizations improve mobile sales, drive in-store traffic and engage customers with personalized offers.
IBM The Now Factory (4Q13)
The Now Factory specializes in analytics software that helps communications service providers deliver better customer experiences and drive revenue opportunities.
IBM CSL Int’l (2Q13) CSL International’s CSL-Wave software enables clients to monitor and manage z/VM and Linux on IBM System z environments; facilitates setting up and managing clouds on the mainframe, enabling companies to provide enhanced services and support around big data, analytics and mobility.
CSC ServiceMesh (4Q13) The ServiceMesh Agility Platform automates the deployment and management of applications across the private, public and hybrid clouds.
CSC Infochimps (3Q13) Infochimps provides PaaS related to big data, enhancing CSC’s presence in the cloud and big data market.
Accenture Acquity Group (3Q13) As a digital marketing company, Acquity provides strategy, digital marketing and technical services to help companies enhance their brand experiences and e-commerce performance.
All IT services vendors face challenges recruiting and retaining talented staff with skills in emerging technologies
Leading vendors set aggressive hiring targets and looked for mature professionals (with experience in emerging technologies or industry expertise) and talented “freshers.”
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
TCS announced plans to increase its FY14 hiring target from 45,000 to 50,000.
Cognizant will increase hiring of experienced, client-facing professionals to upsell social, mobile, analytics and cloud solutions in 2014.
16.0%
15.5%
22.4%
19.5%
10.9%
109.4%
0% 20% 40% 60% 80% 100% 120%
3Q12
3Q13
3Q12
3Q13
3Q12
3Q13
TCS
CO
GN
IZA
NT
CG
I
YTY Growth
TOP THREE TTM REVENUE GROWTH
SOURCE: TBR AND COMPANIES
TBR
Vendors struggle to find low-cost talent with necessary skills in emerging technologies, as well as experienced hires capable of blending industry expertise and digital, analytics, or cloud capabilities. With all vendors seeking the best talent, competitive pressures lead to higher attrition rates across nearly the entire sector.
Digital, cloud computing and strategy services pave the way for new routes to market for IBM and Accenture
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
Leading companies make investments concrete by opening delivery centers and changing organizations and portfolios to meet new digital demand.
IBM Digital Front Office Pulls together mobile, social, business analytics; integrates IBM Global Business Services with IBM Software and IBM Research to drive holistic transformation for clients IBM Interactive Experience Fuses strategy, data and design from IBM Interactive and 100+ IBM Researchers from the Customer Experience Lab to drive personalization and business model redesign
Accenture Digital
Pulls digital marketing, mobility and analytics services into one organization
Accenture Strategy
Combines business, technology, and operations strategy services into one organization
IBM Global Cloud Footprint IBM is investing $1.2 billion in 2014 to expand its global cloud footprint to deliver cloud services from 40 data centers in 15 countries and five continents. IBM will open 15 new data centers adding to its 13 global data centers from SoftLayer and 12 from IBM.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends
Vendors will convert technologies and analytics outputs into client business value to succeed
Building
Capabilities Increasing Value
IT Services Key Trends and 2014 Outlook
2012 2013 2014
In 2012 it was about building capabilities — through acquisitions, alliances and innovations — in technology trends such as cloud, digital, mobility and analytics.
In 2013 vendors continue acquiring and partnering for technology-centric services to bring scale to their offerings. Clients are shifting from learning about emerging technologies to understanding exactly how those technologies disrupt business models, creating opportunities for IT services vendors.
In 2014 increased customer awareness and vendor capabilities will fuel rapidly expanding demand for emerging technologies, pressuring vendors to get to scale quickly.
PSP Research Current Topics 4Q13 Report Key Themes
• Select Vendor Reports: o Accenture o Atos o Capgemini o Cisco Services o Cognizant o CSC o Dell Services o Fujitsu o HP Services o IBM Global Services o Infosys o TCS o T-Systems o Wipro ITS o Xerox
• Benchmarks: Management Consulting, Healthcare IT Services, Public Sector, Global Delivery Market Landscape, Managed Private & Professional Services Cloud
Analyze leading and lagging performers and the go-to-market strategies and investments made by vendors to craft industry-specific solutions.
Analyze how IT services vendors position to take advantage of the changing security landscape. Assess vendors’ security offerings and how offerings are scaled.
Assess how vendors distinguish digital offerings from mobility and social consulting services and if vendors pair analytics with digital solutions. Compare and contrast industries that vendors target most for digital.
Vertical Strategy: Financial Services
Security
Digital
PSBQ 3Q13 Research Highlights and 2014 Outlook: 3Q13 Key Topics
TBR will analyze IT services vendors’ investments and strategies to expand capabilities in financial services, security and digital technology
Patrick Heffernan Senior Analyst and Engagement Manager, Professional Services Practice Email: [email protected] Twitter: @TBR_PatrickH Telephone: 603.758.1834
Ramunas Svarcas Senior Analyst and Engagement Manager, Professional Services Practice Email: [email protected] Twitter: @rjsTBR Telephone: 603.758.1833
James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166
Elitsa Bakalova Analyst, Professional Services Practice Email: [email protected] Twitter: @ElitsaBakalova Telephone: 603.929.1166
TBR IT Services Vendor Benchmark Webinar Contact Information
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