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Topic: Impending Contract Renewals: “A Futuristic View of the Renewals Market Place” Information Technology Outsourcing (ITO) Market Report: May 2013 – Preview Deck

Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868


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Background and methodology of the research

Background of the research  The sourced services is a large US$400 billion market with deals lasting for an average of two to three years. As a result, a large portion of the market scope comes back to the planning/negotiation table as contracts keep expiring. Most of the deals had originally been procured via a competitive process involving Request for Proposals (RFPs), capability assessment, and short-listing of service providers  Renewals and recompetes provide opportunity for non-incumbent players to expand their wallet shares amidst disruptive factors such as saturation, slowing growth rate, and newer and more agile competitors etc. It also allows buyers a chance to make course corrections based on lessons learned during the lifetime of the just-concluded engagement and adjust sourcing strategy to suit current business environment  End-of-term assessments on the part of buyers also bring newer solutions within contention. For example, a traditional infrastructure deal being serviced by a full-service MNC provider may now be open for pitch by offshore service providers. There may also be scope for next generation IT technology paradigms, such as, cloud computing, to play a significant role. This research provides an analysis on the impending renewals in the coming 12-18 month period, focusing on the assessment of one large ITO engagement coming up for renewal The scope of this report includes:  Analysis of the ITO and BPO markets with deals in scope that are to renew in the future  Key vertical, geographical, and scope-based trends  Observations on how future renewals might look  Implications for key stake holders

Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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The analysis shared in this report is based on Everest Group’s “Transaction Intelligence Database”, the most comprehensive organized record of publicly announced outsourcing deals Filters

TI database 1

Accounts for more than 30% of the entire sourcing market

Removed deals that expired before April 1, 2013  This research only focuses on deals that will renew in the future, specifically after April 1, 2013 4,358 contracts

2

3,059 contracts 3 Across nine industry buckets

Four geographical regions

Seven ITO towers and four BPO functions in scope

2,694 contracts

2,612 contracts

4

Removed defense and government deals  Such deals usually are different from the regular commercial outsourcing contracts with very different sales diligence, contract scope, and set of providers specially targeting this segment of buyers Removed pure telecom and consulting deals  Telecom deals differ in key characteristics, specifically, they are, typically, voice network and equipment maintenance deals  Consulting deals are usually one-time contracts Removed deals that cannot be categorized  Certain deals cannot be categorized due to lack of sufficient information. This report ignores such deals

The analysis was performed on 2,612 outsourcing deals that expire on or after April 1, 2013 Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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Table of contents

(page 1 of 2)

Topic

Page no.

Background and methodology

5

Summary of key messages

7

Section I: Overview of contracts nearing end of term  Summary  Trends by cumulative total contract value among deals up for renewal  Overall outsourcing renewal trend  ITO renewals (global)  BPO renewals (global)  Industry-wise renewal trends  Geography-wise renewal trends  Renewals in defense and government sectors  Renewals by telecom service providers

10 11 12 17 18 19 20 21 23 25

Section II: Deep-dive into upcoming renewals by scope  Summary (ITO trends)  ITO trends by industry  ITO trends by geography  ITO renewal opportunities by industry  ITO trends by service provider category

26 29 30 34 39 40

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Table of contents

(page 2 of 2)

Topic

Page no.

Section II: Deep-dive into upcoming renewals by scope (continued)  Summary (BPO trends)  BPO trends by industry  BPO trends by geography  BPO trends by service provider category

45 47 51 54

Section III: Future renewals – peek under the hood  Summary  IO deals – geographical trends  ADM deals – geographical trends  Offshore service providers replacing incumbent MNCs  Prominence of GICs

56 57 59 63 66 68

Section IV: Implications for key stakeholders

69

Appendix  Glossary of key terms  ITO research calendar  Recommendations

73 74 76 77

Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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Summary of key messages

(page 1 of 2)

This report investigates the contracts that are going to come up for renewal during the next 18 months starting April 1, 2013. It provides analysis of IT and BPO deals along a number of silos e.g., industry, geography, and service provider category. Additionally the report offers a more detailed look into deeper level trends in IT contracts reaching end of term.

Some of the findings in this report, among others, are:

Overview of contracts nearing end of term

  

Deep-dive into upcoming renewals by scope – ITO

  

During next 18 months, over US$90 billion worth of IT and BPO contracts will be up for renewal BFSI, manufacturing and telecom will drive IT renewals in the next 18 months while BFSI dominates BPO renewals Western Europe will have greater proportion of renewals, however, of smaller average size as compared to North America

IT contracts will witness a dip in average deal size during the "12-18 month" period Telecom has large sized IO and ADM deals for renewal in the next 12 months while manufacturing has large sized bundled deals for renewal in the same period Large multinational providers dominate renewal spending among IT contracts Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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Summary of key messages

Deep-dive into upcoming renewals by scope – BPO

  

Future renewals – peek under the hood

 

(page 2 of 2)

Among the single-tower BPO deals, HRO and contact center contracts will drive renewals in the next 18 months BFSI and manufacturing will see most action on the BPO front Unlike IT contracts, BPO contracts will witness a jump in average size during the “12-18 month” period

Contracts with datacenter or network in scope will have the highest frequency among IO renewals in the next 18 months while contracts with maintenance in scope among ADM renewals will witness a spurge in frequency in the "12-18 month" period In the recent past, renewals with incumbents have been going down. Earlier, 95% of renewals used to stay with incumbents as opposed to 75 to 85% currently Global In-House Centers (GICs) are slowly regaining prominence as service providers are losing parts of contracts to them

Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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This study offers four distinct chapters providing a deep dive into key aspects of the global sourcing market; below are four charts to illustrate the depth of the report IT renewals by scope of service

IT renewal opportunities by vertical and scope

Bundled

ADM

IO

ADM IO Bundled

High Deal renewal opportunity

Sum of TCV of deals for renewal US$ billion

IT renewals opportunity

Industry AA Industry DD

Industry BB Industry CC

Industry EE Industry FF Industry GG Industry HH Industry II

0-12 months

12-18 months

Low

High Deal renewal volume

IT renewals by industry vertical Number of deals for renewal across industries Number of deals BFSI Energy & utilities

Deep dive into impending ITO renewals Deals currently running with said tower in scope Number of deals Consulting Application maintenance

Healthcare Manufacturing

Application development

Retail

Helpdesk

Services

Network

Technology

Desktop

Telecom Travel & transport Others

Source:

Datacenter All impending renewals

Everest Group (2013) Copyright Š 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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ITO research calendar

Published

Topic

Current

Release date

Application Services – Crowdsourcing or Outsourcing

November-2012

IT Services Landscape – Market Size, Trends, and Buyer Insights

December-2012

Who is Moving Enterprise IT's Cheese?

December-2012

Application Services – Past, Present, and Future

January-2012

How to Overcome Roadblocks while Shifting to Output-based Pricing? Impending Contract Renewals: “A Futuristic View of the Renewals Market Place”

March-2012 May-2012

Consumerization of IT – Enabling Enterprise Mobility

Q2-2013

Application Outsourcing Market Update 2013

Q2-2013

Infrastructure Outsourcing Market Update 2013

Q2-2013

Remote Infrastructure Management Market report

Q3-2013

Verticalizing Infrastructure Services

Q3-2013

IT Service Landscape with PEAK Matrix Assessment 2013

Q4-2013

Assessment of RIM Providers

Q4-2013

Network Service Outsourcing

Q4-2013 Copyright © 2013, Everest Global, Inc. EGR-2013-4-PD-0868

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Additional ITO research recommendations

The following documents are recommended for additional insight into the topic covered in this research report. The recommended documents either provide additional details on the topic or complementary content which may be of interest 1. IT Services Landscape – Market Size, Trends, and Buyer Insights (EGR-2012-4-R-0809); 2012: Everest Group’s research on IT services market estimates its size across different service segments, geographies, and industries. It also analyzes the adoption of next-generation services, buyer sourcing preferences, and deal trends

2. Enterprise Cloud Adoption: Year 2012 in Review (EGR-2013-4-R-0849); 2013: This research, focusing on the cloud adoption in 2012, is a part of the periodic Everest Group Cloud Vista enterprise cloud adoption report. It analyzes various deals signed by service providers in terms of buyer adoption trends by industry, geography, size, cloud opportunity, roles of the providers, insights on key deals, etc.

For more information on this and other research published by the Everest Group, please contact us: Jimit Arora, VP Research: Chirajeet Sengupta, Practice Director: Yugal Joshi, Practice Director: Sivaram S, Analyst:

Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Dallas, TX 75240

jimit.arora@everestgrp.com chirajeet.sengupta@everestgrp.com yugal.joshi@everestgrp.com sivaram.s@everestgrp.com

Phone: Email:

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Ito renewal intelligence report preview deck may 2013  

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