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The Asia Pacific TPI Index
Nimish Joshi
CLSA
Full Year and Second Half 2012
30 January 2013
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*Contracts with ACV ≥ $5M
2
Welcome to the 13th Semi-Annual Asia Pacific TPI Index Call
Dinesh Goel Partner, India
Sid Pai Partner and President, Asia Pacific
Gerry Clark Partner, Asia
Covering the state of the outsourcing industry for global, commercial contracts.*
Tom McCormack Partner, Australia & New Zealand
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*Contracts with ACV ≥ $5M
3
An ACV-based analysis of the market will avoid masking the effects of declining contract durations on TCV.
ACV Change Over Time 2003 - 2012
Refocusing on ACV as the Primary Measure of the Market
$21.2
$15.2
201211100908070605042003
TCV Change Over Time 2003 - 2012
Growth since 2003 = 39% Growth since 2003 = 10%
Typical Annual ACV* = $20 B
$99.1
$89.8
201211100908070605042003
Contract duration has shifted from 6 years in 2003 to 4.9 years in 2012
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*Contracts with ACV ≥ $5M
4
At A Glance
“ “ GLOBAL ACV DOWN SLIGHTLY FOR THE YEAR
NUMBER OF MEGA RELATIONSHIP CONTRACTS UP FOR 2012, LIFTING ACV WHEN OVERALL CONTRACT NUMBERS WERE DOWN
BPO EXPANDED ON SEVERAL LARGE DEALS WHILE ITO PERFORMANCE WAS OFF FOR 2012
ASIA PACIFIC SURGED IN 2012 WHILE EMEA STRUGGLED ON A WEAK FIRST HALF
GUARDED OPTIMISM FOR 2013 WITH A POSSIBLE SLOWDOWN IN THE SECOND QUARTER
2012 2012 Y/Y 2012 2012 Y/Y 2H12
Scorecard ACV ($B)* Change Counts Change ACV ($B)*
Global Market $ 21.2 -3% 1,006 -13% $ 10.1
New Scope $ 14.0 -1% 748 -15% $ 6.7
Restructurings $ 7.2 -5% 258 -8% $ 3.4
Mega-relationships $ 5.7 7% 34 36% $ 2.7
ITO $ 13.3 -11% 652 -11% $ 6.5
BPO $ 7.9 14% 354 -18% $ 3.6
Americas $ 7.9 -3% 429 -16% $ 3.4
EMEA $ 10.2 -12% 443 -16% $ 5.4
Asia Pacific $ 3.1 55% 134 6% $ 1.3
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*Contracts with ACV ≥ $5M
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For the full year, ACV of $21.2 was down 3% from 2011 but ahead of the five year average.
Broader Market ACV ($B)*
Broader Market Counts
Global Market Contract Award Trends
$11.1 $9.9 $11.8 $9.6 $9.5 $7.5 $8.4 $8.2 $8.4 $6.7
$10.1 $11.9 $10.1 $11.4 $8.4 $8.8 $6.6 $8.7 $7.3 $8.5
$21.2 $21.8 $21.9 $20.9 $18.0 $16.3 $15.1
$16.9 $15.7 $15.2 $19.8
201211100908070605042003
1H ACV 2H ACV Prior 5 Yr Annual Avg
1,006 1,163
977 972 744
596 593 524 539 506 890
201211100908070605042003
Counts Prior 5 Yr Avg
_
Prior 5 Year Avg
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Asia Pacific was the only region to show market growth in 2012, while the Americas market was flat and EMEA struggled.
Full Year Contract Counts Compare
Regional Comparison of Full Year Contract Trends
Full Year ACV ($B)* Compare
$7.9
$8.1 $7.4
$10.2
$11.7
$7.0
$3.1 $2.0
$0.9
201211100908070605042003
Americas EMEA Asia Pacific
429 512
246
443
525
215 134 126
45
201211100908070605042003
Americas EMEA Asia Pacific
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With ACV of more than $3B awarded, Asia Pacific had its best year ever in 2012 -55% ahead of 2011 totals and comfortably ahead of the five year average.
Full Year Asia Pacific ACV ($B)*
Full Year Asia Pacific Count
Asia Pacific Contract Award Trends
$1.83 $1.04 $0.67
$1.28 $0.67
$1.16 $0.97 $0.43
$1.08 $0.32
$1.3
$1.0 $1.6 $1.2
$1.4 $1.3
$0.5 $1.1
$0.7
$0.5
$3.13
$2.02 $2.22 $2.53
$2.12 $2.42
$1.49 $1.48 $1.76
$0.85
$2.3
201211100908070605042003
1H ACV 2H ACV Prior 5 Yr Annual Avg
Full Year Asia Pacific ACV ($B)* by Bands
$2.1 $1.7 $1.6
$2.2
$1.5 $1.3 $1.1 $1.0 $1.1 $0.8
$1.0
$0.3 $0.7
$0.3
$0.6 $1.2
$0.3 $0.5 $0.7
$0.1
201211100908070605042003
$5 - 99M $100M +
129 124 114 122
88 71 69
50 71
44
5 2 3
2
4
7 3
3
5
1
201211100908070605042003
$5 - 99M $100M +
Prior 5 Year Avg
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New Scope awards made up 88% of the market in 2012 as the region saw the end of a three year cycle of restructurings.
Full Year Asia Pacific New Scope ACV ($B)*
Full Year Asia Pacific Restructuring ACV ($B)*
Asia Pacific New Scope & Restructuring Trends
$1.0 $0.8 $0.6 $0.8 $0.6 $0.9
$0.4 $0.3 $0.9
$0.3
$1.7
$0.5 $1.1 $1.1 $1.3
$1.0
$0.4 $0.8 $0.5
$0.4
$2.75
$1.33 $1.61 $1.88 $1.90
$1.95
$0.85 $1.14
$1.36
$0.70
$1.73
201211100908070605042003
1H ACV 2H ACV Prior 5 Yr Annual Avg
$0.30 $0.20 $0.12
$0.46
$0.10 $0.24
$0.52
$0.08 $0.20
$0.02
$0.09 $0.50
$0.49
$0.19
$0.12
$0.24
$0.11
$0.26 $0.20
$0.14
$0.38
$0.70 $0.61 $0.65
$0.23
$0.48
$0.64
$0.34 $0.40
$0.15
$0.5
201211100908070605042003
1H ACV 2H ACV Prior 5 Yr Annual Avg
Prior 5 Year Avg
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On the back of very large deals’ACV in India increased substantially making this the largest market in the region overtaking ANZ, the traditional market leader
Asia Pacific Market Details in Contract Award Trends
Full Year Asia Pacific ACV ($B)* by Market
$1.06
$0.71
$0.21 $0.16
$0.10 $0.04
$1.13
$0.53
$0.12 $0.10 $0.13
$0.01
$0.69
$1.46
$0.21
$0.32 $0.40
$0.05 $0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
ANZ India and South Asia Japan ASEAN Greater China South Korea
Prior 5 Period Range Prior 5 Year Avg 2011 2012
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Though traditionally the market leader, the Financial Services sector now ranked 3rd
behind Telecom & Media and Manufacturing.
Asia Pacific Industry Segment Contract Trends – ACV ($B)
Full Year Asia Pacific ACV ($B)* by Industry
$0.79
$0.69
$0.35
$0.17 $0.12
$0.08 $0.03 $0.04
$0.67
$0.72
$0.27
$0.17 $0.11
$0.07 $0.01 $0.01
$0.67
$0.99
$0.80
$0.25 $0.15
$0.22
$0.02 $0.03 $-
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
Prior 5 Year Range Prior 5 Year Avg 2011 2012
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While the number of contract awards in Financial Services and Telecom & Media fell in 2012, all other sectors either increased or equalled 2011 levels.
Asia Pacific Industry Segment Contract Trends - Counts
Full Year Asia Pacific Contract Counts by Industry
33 24
20
11 9
6 3
2
47
25 23
13
8 7 2
1
37
19
28
14 14 15
2
5
0
5
10
15
20
25
30
35
40
45
50
Prior 5 Year Range Prior 5 Year Avg 2011 2012
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ITO ACV grew 21% in 2012 as the number of contract awards reached the highest level in the last three years.
Asia Pacific ITO Contract Award Trends
Full Year Asia Pacific ITO Counts
ACV Leaders
Accenture Capgemini Chinasoft
CSC HP
IBM Infosys
iSoftStone Mahindra Satyam
TCS
Counts Leaders
Accenture Alcatel-Lucent
BT Chinasoft
Fujitsu HCL HP
IBM Infosys
TCS Wipro
Top Asia Pacific ITO Providers by 2012 Contract Awards
Full Year Asia Pacific ITO ACV ($B)*
Note: Service providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.
$0.9 $0.7 $0.4
$1.2
$0.5 $1.0 $0.9
$0.3 $0.9
$0.3
$0.9 $0.7 $1.3
$0.8
$0.8
$0.9
$0.4
$0.6
$0.5
$0.5
$1.7
$1.4
$1.8 $2.0
$1.3
$1.9
$1.3 $1.0
$1.4
$0.8
$1.7
201211100908070605042003
1H ACV 2H ACV Avg of Prior 5 Yrs
87 85 74
95
62 58 53 35
54 39
75
201211100908070605042003
Counts Avg of Prior 5 Yrs
Prior 5 Year Avg
Prior 5 Year Avg
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$1.0
$0.3 $0.2 $0.1 $0.2 $0.2 $0.1 $0.1 $0.2
$0.4
$0.3 $0.2 $0.5
$0.6 $0.4
$0.1 $0.5 $0.2
$1.4
$0.6 $0.4
$0.6
$0.8
$0.5
$0.2
$0.5 $0.4
$0.1
$0.6
201211100908070605042003
1H ACV 2H ACV Avg of Prior 5 Yrs
2012 was a stand-out year for BPO awards as the region awarded its highest ever number of contracts ever and ACV soared by 133%.
Asia Pacific BPO Contract Award Trends
Full Year Asia Pacific BPO Counts
ACV Leaders
Gen-i Genpact
IBM iGATE
Infosys Jones Lang LaSalle Mahindra Satyam Sykes Enterprises
Transfield Services WNS
Counts Leaders
Fidelity Genpact
IBM Infosys
Korn/Ferry Mahindra Satyam Transfield Services
Wipro
Full Year Asia Pacific BPO ACV ($B)*
Top Asia Pacific BPO Providers by 2012 Contract Awards
Note: Service providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.
47 41 43
29
30 20 19 18 22
6
33
201211100908070605042003
Counts Avg of Prior 5 Yrs
Prior 5 Year Avg
Prior 5 Year Avg
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Contact Center and Industry-Specific BPO lifted BPO ACV in 2012. Asia Pacific BPO Contract Award Trends by Function
Asia Pacific BPO ACV ($B)* by Function 2011 vs. 2012
$0.09
$0.16
$0.06 $0.02
$0.12
$0.02 $0.02
$0.06 $0.01 $0.04
$0.19
$0.10
$0.03 $0.05
$0.11
$0.01
$0.09
$0.03
$0.01 $0.00 $0.01
$0.30
$0.04
$0.00
$0.13
$0.04
$0.08
$0.02 $0.00
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
Prior 5 Period Range Avg of Prior 5 Yrs 2011 2012
$0.77
Prior 5 Year Avg _
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With an active contracts CAGR of 12% and annualised revenue CAGR of 6%, Asia Pacific market shows robust performance.
Asia Pacific Outsourcing Revenue Trends
Annualized Revenue & Active Contract Trends
2007 to 2012 Active Contracts CAGR: ↑ 12% 2007 to 2012 Annualized Revenue CAGR: ↑ 6%
$11.3 $10.8
$8.4
636 592
356
201220112010200920082007
Annualized Revenue ($B)*Active Contracts
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While all Provider categories took a similar share of ITO ACV, India-heritage providers dominated BPO values – on the back of larger deal awards.
Asia Pacific Market Share Comparison by Provider Category
2012 Asia Pacific Market Share by Service Provider Category Contract Numbers and ACV of Awards
32% 30%
73%
40%
32% 27%
8%
9%
36% 43%
19%
51%
ITO ACVITO CountsBPO ACVBPO Counts
India-heritage US-heritage Others
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Public Sector ACV accounted for 30% of the regional market.
Comparing Public and Private Sector Trends in ACV($B)*
Public Sector ACV by AP Market
Public vs. Private Sector Analysis for the Asia Pacific
Public Sector Percentage of All Contracts
33% 34%
51% 48% 47%
20122011201020092008
46%
16% 17% 10% 16%
40% 81% 78% 83% 70%
15%
3% 5% 8% 13%
20122011201020092008
India and South Asia ANZ Other AP
$3.13
$2.02 $2.12 $1.57
$1.03 $1.86
20122011201020092008
Private Sector ACV% Public Sector ACV%
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The Top 10 Service Providers List, based on ACV awarded in 2012, for contracts over $5 million in annual contract value, shown in alphabetical order.
Public Sector Top 10 Service Providers
Service providers in alphabetical order; no rankings implied. Placements sourced from ISG Contracts Knowledgebase®.
Top 10
Asia Pacific Public Sector
Accenture
Capgemini
China Unicom
CSC
Cubic Corp
Fujitsu
Gen-i
HCL Technologies
HP
IBM
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Key Short-term Trends in Sourcing for 2013 and Beyond
Emerging Markets to Continue their Increasing Impact on Sourcing ACV
LatinAm and Mexico
China and India
ACV Change from 2007
+150% +100%
BPO Expansion Continues with Industry Specific Solutions Leading the Way
$ +60%
BPO ACV Change from 2010
$ $ $ $ $ $ $ $
U.S. G201-500 Companies Recent Sourcing Adoption Rate Expands Large Deal Potential for Providers
2010 2012 32%
Adoption Rate
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Four disruptive technology trends impact enterprises today and shape long-term industry trends
Disruptive Technologies Shape Long-term Industry Trends
Social Media Collaboration
Computing & Storage
Mobility
Big Data/Analytics
Cloud
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2H12 TPI Index Summary and Outlook
Contract push-out and lingering fiscal uncertainties in both the U.S. and Europe could make for a softer global first half in 2013
Outlook for 2013 ACV awards is one of cautious optimism
Market growth, in terms of Annualised Revenue, is projected to be 3 - 4% in 2013
Asia Pacific outlook is hard to call. Increase in demand could be offset by the emergence of difficult economic factors in India and Australia
A sluggish 2H Global ACV pulled down results, yet 2012 performance nearly met 2011 levels
While fewer contracts were awarded globally for 2012, Mega-relationships supported the market value
BPO ACV and Asia Pacific ACV helped lift the global market for 2012
Asia Pacific finished the year up 55% compared to 2011. Increases of 21% for ITO and 133% for BPO made this the region’s best ever year.
summary market
outlook market
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Learn More Please contact us with your questions and comments.
► Sid Pai
www.considerthesourceblog.com
Partner & President, Asia Pacific +91 9880033779 [email protected]
► Gerry Clark Partner, Asia +65 9634 5927 [email protected]
► Dinesh Goel Partner, India +91 98458 93787 [email protected]
► Tom McCormack Partner, Australia & New Zealand +61 4 1378 6424 [email protected]
Full Year and Second Half 2012
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The Asia Pacific TPI 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.
TCV At A Glance
*Contracts with TCV >$25M
2012 2012 Y/Y 2H12 2H12 Y/Y
Scorecard TCV ($B)* Change TCV ($B)* Change
Global Market $ 99.1 -9% $ 49.3 -22%
New Scope $ 66.2 -9% $ 32.6 -13%
Restructurings $ 32.9 -10% $ 16.7 -34%
Mega-deals $ 16.0 -34% $ 8.1 -55%
ITO $ 62.5 -15% $ 31.0 -29%
BPO $ 36.5 1% $ 18.3 -4%
Americas $ 37.5 0% $ 17.1 -15%
EMEA $ 48.6 -22% $ 26.1 -31%
Asia Pacific $ 13.0 31% $ 6.1 15%
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