Will the IT Services Market Remain Tightly Knit, Slowly Growing and Competitive?

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

Will the IT services market remain tightly knit, slowly growing and competitive? Insights from TBR’s IT Services Vendor Benchmark Technology Business Research (TBR) Quarterly Webinar Series

Oct. 15, 2014

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2 TBR Quarterly Webinar Series | 10.15.14 | www.tbri.com | ©2014 Technology Business Research Inc.

PSBQ Research Highlights: Webinar Presenters

Kevin Collupy

Research Analyst

Email: [email protected]

Twitter: @kevin_TBR

Patrick Heffernan

IT Services Practice Manager and Principal Analyst


Twitter: @TBR_PatrickH

Ramunas Svarcas

Professional Services Principal Analyst


Twitter: @rjsTBR

mailto:[email protected]



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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.

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PSBQ Research Highlights: Webinar Overview

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TBR Professional Services Business Quarterly (PSBQ) Portfolio

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PROFESSIONAL SERVICES BUSINESS QUARTERLYSM

IT Services Vendor BenchmarkSecond Calendar Quarter 2014

Publish Date: Sept. 26, 2014

Authors:

John Caucis, Professional Services Senior Analyst;

Stephanie Artigliere, Elitsa Bakalova, Jennifer Hamel, Boz Hristov, Sebastian Lagana and Cassandra Mooshian, Professional Services Analysts;

Jacob Gordon, Kevin Collupy, Deleon Narcisse, Meaghan McGrath, Allison Mulligan and Kelsey Mason, Research Analysts

Content Editor:

Patrick Heffernan ([email protected]), IT Services Manager/Principal Analyst

TBR


PSBQ 2Q14 Research Highlights: Key Trends

Professional Services Vendor Trends for 2Q14

Quarterly Focus: Vendors integrate industry expertise

with IP-rich offerings, make the business case around

cybersecurity and expand in LATAM to bolster revenues.

Active vendors: To accelerate their revenue growth,

vendors transform their business models and invest in

disruptive technologies and industry-oriented consulting.

IT Services Performance: IT services revenue growth was

in the low single digits in 2Q14 and TBR expects the

sluggish growth trend will continue in 2H14.

Vendors’ investments in disruptive technologies have yet to scale up to positively affect the tight and slowly growing IT services market

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PSBQ 2Q14 Research Highlights: IT Services Performance

IT services market growth remained in the low single digits in 2Q14, and TBR expects this trend to continue into 2H14

Note: Includes average trailing 12-month service line revenues for the 30 vendors covered in TBR’s IT Services Vendor Benchmark; not

representative of a total global market view

IT Services Market Overview

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C&SI Cloud, big data and analytics, mobility, social, security, and digital drive demand for consulting and integration services.

BPO Vendors provide business outcomes and cost savings through horizontal and industry-specific services, automation and platform-based solutions, and integration of analytics and cloud into BPO solutions.

AO Vendors develop solutions designed for clients to transform their business models while modernizing their application infrastructures.

ITO Vendors adapt traditional ITO service delivery to cloud-based platforms to match the demand for cloud-enabled managed services and offset decelerating ITO revenue growth.


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: Dots indicate year-to-year growth, and arrows indicate directional

change relative to the year-ago quarter. Includes average trailing 12-month

service line revenues from TBR’s IT Services Vendor Benchmark; not


Service Line Performance and Strategies

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Americas Vendors continue to compete for engagements in the U.S. in healthcare, financial services and retail industries. Companies invest in Canada and LATAM to diversify their Americas revenues and expand their nearshore delivery resources.

EMEA Vendor’s EMEA revenues benefit from increasing interest in outsourcing in continental Europe and vendors’ investments in disruptive technologies and security.

APAC Vendors leverage transformational, consulting-led solutions and vertical-specific offerings to strengthen their positions.


European recovery drives revenue higher for vendors in EMEA, while China is a pain point of vendors looking to grow APAC revenues


Note: Dots indicate year-to-year growth, and arrows indicate directional

change relative to the year-ago quarter. Includes average trailing 12-month

service line revenues from TBR’s IT Services Vendor Benchmark; not


Geographic Performance and Strategies

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IT services vendors such as Capita and Convergys expand with inorganic investments, while India-centric vendors cut costs to improve margins

Growing through acquisitions

India-centric vendors lead in revenue growth and profitability

Benefits from improved efficiency in service delivery


Note: Sphere size reflects volume of TTM revenue. 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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PSBQ 2Q14 Research Highlights: Quarterly Focus — Industry-specific IP

Investments in IP-rich industry offerings, with a layer of analytics and cloud, will support vendors’ efforts to provide high-value solutions

Focus on Outcomes

Accelerating Analytics, Cloud,

Mobility Adoption

Integration of Process

and Technology

Smaller, Shorter Contracts Shift from Labor Arbitrage to

Blended Global Delivery

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• Vendors invest in resources, utilize partners and make acquisitions to build out their IP-based solutions.

• Vendors invest in growing industries such as retail, manufacturing, and energy and utilities along with enterprise-based business capabilities.

Scouts for strategic acquisitions to gain cloud and analytics experts and tools to develop high-margin IP and products

Expands IP portfolio, investing in proprietary and codeveloped industry-specific solutions

Invests in R&D centers throughout emerging markets, positioning as a rising contender in IP-specific solutions

Accenture

TCS

Industry-specific IP

Xerox

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PSBQ 2Q14 Research Highlights: Quarterly Focus — Security, Compliance, Governance

Growth opportunities exist for vendors with broad, business-driven security portfolios as cybersecurity remains a top priority for clients

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• Vendors bundle security around transformational offerings and platforms, enabling companies to better reach their business goals.

• Vendors build out cloud portfolios with security capabilities to better enable users to customize solutions to their specific business needs.

The Critical Data Protection Program enhances IBM’s data security services with consulting to assess and monitor the security of critical business data.

Three new security-centric cloud solutions launched in 2Q14 highlight CSC’s cybersecurity technologies.

Cybersecurity gained through the Bull acquisition and organic investments in offerings will help Atos grow.

IBM GS

Security, Compliance, Governance

Atos

CSC

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Vendors with a LATAM presence can address demand for disruptive technologies that have yet to see widespread adoption in the region

PSBQ 2Q14 Research Highlights: Quarterly Focus — LATAM

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• Vendors invest in LATAM to reduce delivery costs and gain exposure in new geographies.

• Weak product sales in LATAM negatively impact product-related IT services revenues in the region, pushing vendors to focus on transformational and consulting-led cloud, mobility and analytics.

Expands delivery investments in SoftLayer data centers and security operations centers in LATAM

Increases its emphasis on user needs, such as people computing and offerings for “personas,” to add value to its offerings

Addresses demand for IT modernization and transformation services and digital solutions

IBM GS

LATAM

TCS

Unisys

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Human capital management helps vendors innovate their portfolios and improve their leadership, utilization and attrition

PSBQ 2Q14 Research Highlights: Quarterly Focus — Talent Management

Capgemini uses human capital management to improve its cost structure and support its strategic growth initiatives.

A talent program nurtures entrepreneurship and helps Atos identify high-performing individuals who make things happen.

A digitally enabled training program helps TCS improve in-demand capabilities and accelerate freshers’ time to market.

• Linking business and talent management provides visibility into career development, succession planning and staffing trends.

• The scarcity of skilled talent forces vendors to seek alternative channels to attain, train and retain a workforce with in-demand skills.

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Capgemini

Talent Management

TCS

Atos

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PSBQ 2Q14 Research Highlights: IBM Global Services

Restructuring and pricing pressure will weigh on revenue growth through 2014, but strategy-led digital solutions position IBM for long-term profits

IBM GS Strengths IBM GS Initiatives IBM GS Opportunities

• IBM has access to and offerings designed for C-Suite buyers beyond the CIO, a market that TBR believes the company is best positioned to serve.

• IBM skillfully integrates acquired and organically developed capabilities into differentiated solutions.

• IBM is shifting away from low-margin businesses such as customer-care BPO toward higher-value digital front-office solutions.

• Aggressive investments in cloud, analytics, mobility and security agendas, led by strategy consulting, help IBM fend off competition.

• Sustain profit expansion through 2H14, despite revenue declines, as the mix of high-margin digital offerings increases.

• Package industry-oriented consulting with analytics-enabled software to deliver differentiated, outcomes-focused solutions.

SOURCE: WWW.FOTOSEARCH.COM SOURCE: WWW.FOTOSEARCH.COM SOURCE: WWW.FOTOSEARCH.COM

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PSBQ 2Q14 Research Highlights: Accenture

A rebound in consulting, momentum in outsourcing sales and execution of growth strategies support Accenture’s better-than-expected results

Accenture Strengths Accenture Initiatives Accenture Opportunities

• Accenture grows in outsourcing by infusing its vertical offerings with analytics and industry-specific consulting expertise.

• Accenture stays ahead of the competition due to its industry, functional and technology expertise and ability to assist clients with business transformation through consulting.

• Investments in its Global Delivery Network and industrialized delivery support the company’s cost structure.

• The company combines organic investments in cloud, mobility and analytics with strategic acquisitions to expand its offerings and industry-specific capabilities and support growth.

• Capitalize on the demand for cost take-out and operational efficiency services in traditional and managed cloud outsourcing.

• Address transformative needs of C-Suite buyers through growth platforms such as Accenture Strategy.


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PSBQ 2Q14 Research Highlights: TCS

Investments in digital offerings and low-cost delivery position TCS to gain IT services market share; limited security capabilities could hinder pace

TCS Strengths TCS Initiatives TCS Opportunities

• TCS differentiates from competitors through automation framework and deep legacy and industry knowledge.

• TCS is experienced in training and expanding its global workforce, with a variety of programs catered to freshers and laterals.

• The company develops domain-specific, platform-agnostic solutions with embedded technical capabilities to address clients’ architectures.

• TCS’ high profitability generates the cash for its digitally enabled, vertical-specific investments and geographic expansion.

• Attract clients with an outcome-based value proposition to move away from the traditional low-cost outsourcer status.

• Invest in security solutions to enhance the value of product and service offerings.


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PSP Research Current Topics 3Q14 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

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

Analyze how IT services vendors position themselves to address clients’ need to convert data into insights for business improvement. Assess vendors’ analytics offerings (e.g., BI capabilities, predictive, prescriptive and cognitive analytics) and how offerings are scaled.

Analyze acquisition strategies by key IT service providers and the type of acquisition activity, such as large-scale mergers or small-scale tuck-in acquisitions. Analyze areas of service, industry, geographic and delivery resource expansion through M&A activity. Are vendors paying the right price and how are acquisitions financed? Highlight successes and challenges during acquisition integration.

Analyze alliance strategies by key IT service providers. Assess partners’ contributions and benefits of the collaboration, including positive effects for clients. Understand key areas of emphasis for SAP and Oracle partnerships by key IT service providers. Assess IT service vendors’ relationship history with SAP and Oracle, how it has evolved, differentiators gained and key challenges or threats.

Analytics

Acquisitions

Alliances

PSBQ Research Highlights: 3Q14 Key Topics

TBR will analyze IT services vendors’ strategies to expand their analytics portfolios and engage in acquisitions and alliances to support growth

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Questions?

PSBQ 2Q14 Research Highlights

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James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166

TBR IT Services Vendor Benchmark Webinar Contact Information

Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel LinkedIn: www.linkedin.com/company/technology-business-research

Elitsa Bakalova

Professional Services Analyst


Twitter: @ElitsaBakalova

Telephone: 603.929.1166

Patrick Heffernan

IT Services Practice Manager and Principal Analyst


Twitter: @TBR_PatrickH

Telephone: 603.758.1834

Ramunas Svarcas

Professional Services Principal Analyst


Twitter: @rjsTBR

Telephone: 603.758.1833

Kevin Collupy

Research Analyst


Twitter: @kevin_TBR

Telephone: 603.758.1879


https://twitter.com/TBRinc

http://www.slideshare.net/TBR_Market_Insight

http://www.youtube.com/user/TBRIChannel

https://www.linkedin.com/company/technology-business-research









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PSP Syndicated Research Coverage

TBR 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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About TBR Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. To learn how our analysts can address your unique business needs, please visit our website or contact us today.

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