Magic Quadrant for North American OffshoreApplication Services

Gartner RAS Core Research Note G00161582, Helen Huntley, Allie Young, Partha Iyengar, Ian Marriott, Gianluca Tramacere, Arup Roy, 14 November 2008 R2938 12042009

The Magic Quadrant for North American offshore applicationservices positions companies being considered for globallydelivered application service initiatives, and it presents thecurrent provider landscape.

WHAT YOU NEED TO KNOWThe Magic Quadrant for North American offshore application services analyzes the market forapplication services delivered in a global delivery model (GDM). The relative positioning ofservice providers in this year’s Magic Quadrant is based on factors that Gartner hasdetermined to be most relevant to this market and model.

For 2008, Gartner has again analyzed service providers of globally delivered (offshore)application services in two separate Magic Quadrant reports, one for North America and theother for Europe. Some providers appear on only one Magic Quadrant; other providersappear in the North American as well as the European Magic Quadrant. We believe that tworeports are needed because we continue see variances in these two markets regarding:

• The maturity of the respective markets

• Buyer adoption levels

• Vendor competition levels

Therefore, although providers strive for globally common processes and methodologies, aprovider’s placement may be different on one Magic Quadrant than the other. Additionally, asthis market continues to evolve, future analysis may offer one global perspective versusregional perspectives, as we have done this year.

Expertise in the global delivery of application services requires a combination of technicalskills and competencies in the life cycle of application services (design, develop and manage)via a labor resource pool that is strategically located to offer clients holistic, integrated accessto on-site, onshore, “nearshore” and offshore service delivery. A service provider’s GDM relieson processes, methodologies, as well as project and program management to effectivelyleverage geographically dispersed resources in performing core technical application serviceskills on behalf of clients. Additionally, a service provider’s sales and marketing strategies areessential to communicate to the marketplace; current and prospective clients mustunderstand the unique skills and relationship approaches that differentiate a provider in a fast-evolving and hypercompetitive application service market.

To assist application service buyers, Gartner developed the 2008 Magic Quadrant for NorthAmerican Offshore Application Services (see Figure 1). Application service buyers mustassess which service providers bring the appropriate application competencies, global servicelocations, institutional and business cultures, and skill bases that meet their specific businessand application service needs. Each year, we emphasize that buyers shouldn’t simply

2evaluate service providers that appear in the Leadersquadrant. All selection processes are enterprise-specific; consequently, providers positioned in each ofthe different quadrants – Leaders, Challengers,Visionaries or Niche Players – should be evaluatedcarefully for your particular requirements. Forexample, a provider in the niche players category mayprove to be more appropriate for the requirements ofcertain application service buyers and theirorganizational needs than a provider in theChallengers or Leaders quadrants.

MAGIC QUADRANTMarket OverviewDuring the past year, competition in the applicationservices market has accelerated with a provider’sglobal delivery capabilities and processes being acornerstone of positioning. Just as globalization hashad an increasing impact on commerce andeconomic activity worldwide, globalization has alsochanged the IT services market. Specifically in thearea of application services, global delivery – oftenreferred to as “offshore services” – is transformingcompetition from the standpoint of a provider’s abilityto access skills broadly, support varying client needsfor geographic and time zone coverage, deliver scaleand flexibility, and provide variability in pricing options.All of these aspects of global delivery are dependenton a provider’s ability to:

• Set a strategy for global expansion and executeon that strategy

• Capitalize on and perfect its global deliveryinfrastructure

• Hire, train/retrain and retain skilled workers inmultiple geographies

• Optimize global processes, tools, methodologies andresources

• Communicate its value to the market and win business

For this year’s offshore application service Magic Quadrant,Gartner analysts identified four main forces that have had aprofound impact on this market, and that directly or indirectlyshaped our views for analyzing competitors and their progress:

• Interconnected and globalizing economies

• Broad and widespread economic pressures/woes

• Increasing pressure for IT to support the business

• More valid service provider options globally than ever before

At the most basic level, these forces describe the new challengesfor the demand and supply sides of the market. For userorganizations, the imperative for buyers of IT services to carefullyselect service providers that can assist them in meeting thesechallenges is critical. For service providers, these forces define amarket that is full of opportunities to assist buyers by supportingbusiness applications, but also a market fraught with newcompetitive challenges and risks, and a market that puts a premiumon business value, transparency, flexibility and cost efficiency.

Pertinent to this year’s offshore application service MagicQuadrant, these forces point to the hypercompetition in theapplication service market. Global service delivery has become acritical competitive element of service providers to support client

challengers leaders

niche players visionaries

completeness of vision

As of November 2008

Tata Consultancy Services

IBMInfosys TechnologiesAccentureWipro Technologies

CognizantSatyam Computer ServicesHCL Technologies

Patni Computer SystemsEDS

CSCSyntelHP

Perot Systems CapgeminiCGI

L&T InfotechUST GlobalMascon Global

Sapient

Keane

Note: EDS and HP have been evaluated separately because theacquisition was not final within the analysis time frame.Source: Gartner (November 2008)

Figure 1. Magic Quadrant for North American Offshore Application Services

The Magic Quadrant is copyrighted November 2008 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of amarketplace at and for a specific time period. It depicts Gartner’s analysis of how certain vendors measure against criteria for that marketplace, as defined byGartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only thosevendors placed in the “Leaders” quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartnerdisclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

© 2008 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission isforbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner’s research may discuss legal issues related to the information technology business, Gartnerdoes not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

3business applications and their globalization efforts. Serviceproviders able to deliver greater cost take-out or cost efficiencies,and to leverage a vast global labor pool on behalf of clientbusiness needs, will have a competitive advantage. However, withso many service providers pursuing application serviceopportunities and promoting their offshore competencies, thecompetitive landscape is crowded (for example, the analysisconsidered more than 100 vendors); skills and scale alone areinsufficient to achieve a position of market leadership and thenecessary revenue growth to sustain such a position. Therefore, inthis year’s Magic Quadrant, Gartner analysts relied on quantitative(revenue) as well as qualitative measures to select the provider listto be considered.

Some providers that appeared in the 2007 Magic Quadrant, butare not in this year’s study, remain viable players. However, with ahigher revenue bar for inclusion, these providers did not meet therequirements. Therefore, we emphasize that a change in oneservice provider’s position does not necessarily indicate weaknessin its individual performance or quality of service, but rather in acomparative review, its competition may be making moreaggressive moves. For example, a company that has been in theMagic Quadrant in previous years, but does not appear on thisyear’s Magic Quadrant, may be performing well for its clients, but itmay not have met the higher quantitative targets set for inclusionin this particular research effort. Similarly, an organization thatmoves from the Challengers to the Niche Players quadrant may bedoing well in its own right, but comparatively is not moving asquickly or aggressively as other competition.

Market TrendsIn terms of market maturity, North America is arguably the mostmature geography to adopt the GDM; offshore services are nowmainstream for North American (U.S. and Canada) buyers, yetthere are also many first-time users of offshore services that cometo Gartner asking for advice. Therefore, our view is that the NorthAmerica market, while comparatively mature, still presents a verylarge, untapped opportunity to providers.

In the course of our research for this Magic Quadrant, whichincluded briefings by service providers and input from serviceproviders’ clients, and in our ongoing offshore research, Gartneranalysts identified several key forces at work shaping the offshoreapplication service market today. Some of these forces have beenpresent and evolving for some time; others are new or taking onnew meaning. We believe these forces represent the mostinfluential forces that shape the competitive dynamics today:

• Hypercompetition and high revenue growth among applicationservice providers (ASPs). Given the rapid rate of globalexpansion, double-digit application service revenue growth forproviders, and increasing pace of competitive change amongservice providers in today’s application service market, it is notsurprising that service providers’ market positions are beingconstantly challenged. This is reflected in very aggressivecompetition for new business, but is also seen in some positionchanges in the Magic Quadrant from year to year. Despiteeconomic uncertainty and some changes in IT spending, whichGartner tracks closely, the global delivery of applicationservices from external providers continues to grow.

• Continued strong adoption of the offshore/GDM. Serviceproviders report record revenue and new contract signings forapplication services in a GDM. Clients are increasingly receptive

to offshore delivery and expect a global delivery option to bepresented; the offshore stigma that once prevailed is largely anonissue. The bar is being raised for all service providerspromoting offshore service delivery; while clients initiallyaccepted offshore application services for cost savings, theyexpect that a provider’s GDM will now also meet high standardsfor value, quality, skills, predictability and reliability. Serviceproviders are investing in processes, tools and methodologies tomake their services seamless. Furthermore, many providers arerevamping their approaches for global delivery centers byaligning centers/skills by vertical expertise; this can afford a“follow-the-sun” support model as well as diversification of skillsand risk in a more leveraged global model.

• Market convergence is occurring, but buyers must differentiatethe many provider options. Although the tenure, experience andsize of traditional service providers give them a significantadvantage, the marketplace is also endorsing the offshoreprovider capabilities by signing deals of significant size withIndia-based providers as well as other providers from emergingcountries. This leads Gartner to make the claim that theoffshore service providers have been the catalyst for a majorshift in the IT services market and outsourcing competitivelandscape. For some time, offshore providers operated “belowthe radar” of many enterprises, pursuing small-scale projectwork and staff augmentation services. However, now that theleading India providers, in particular, have extended their rangeof services across the whole spectrum of application servicesand into infrastructure, and have more visibility and expectationsfrom financial analysts, they have been competing boldly forlarger outsourcing deals – sometimes outside of their originalcomfort zone. The convergence in the market has resulted inmost provider types now offering an offshore value proposition;however, the result is a significant challenge for every providerto differentiate itself and have clearly unique value propositionsfor application services and their GDMs. For buyers, this meansthat lines between traditional service providers and offshoreproviders are converging.

• Looking beyond India to expanding global opportunities andfootprint. For service providers, this is the new reality withsignificant implications for their businesses. First, theglobalization of economies has broadened opportunities forservice providers to serve more clients in more geographieswith application services. This means that many providers aretaking concerted steps to systematically build out localpresence in more strategic country locations (particularly inEurope), establishing sales and marketing, but also new deliverycapabilities that serve those new markets – India is no longerthe only delivery source. Second, the shift from an India-centricoffshore delivery strategy to a global stage has meant that manyproviders are already far along in proactively evolving a deliveryfootprint to become a truly global one by building out deliverycenters in other countries/regions – Brazil, Russia, India andChina (BRIC countries) as well as other locations in LatinAmerica, Eastern Europe and Asia. Gartner predicted that thebilateral onshore-offshore model would give way to integrated,global delivery networks. Some providers are trailing in thisregard; what we wrote last year in the Magic Quadrant analysishas come true: “Providers that aren’t on the “accelerated” curveto fully integrate and systematically invest in and advance theirGDMs are quickly losing ground.” We believe that serviceproviders with concerted investments in strategically buildingout a multicountry, globally integrated delivery model will

4dominate in the future. For buyers of services, this means thatthere is an increasingly complex array of global delivery andcountry options available.

• Greater sophistication in service provider sales and marketingstrategies, and messages for application services/solutions. Ina year’s time, it is apparent which providers have made greatstrides to refine and hone their client-facing skills. Greaterclarity and sophistication in marketing messages, competitivevalues and vision statements for application services aresupported by concrete actions of hiring local sales skills,verticalizing offerings and even reorganizing (often by globalvertical competencies) for more-effective reach of clients.Ultimately, this attention to market-facing issues is mandatoryto achieve differentiation in this crowded market. Despiteinvestment and senior executive-level attention to this criticalaspect of their businesses, clear differentiation in the marketeludes many providers. For buyers, the evaluation process willlikely get more complex, because there is less differentiation inthe market. Buyers of services will need to interpret more-sophisticated messages to determine where and how serviceproviders can truly assist them.

• Greater attention to innovative pricing strategies and options.Service providers in this year’s research reported emphasis ondemonstrating new value to clients by offering alternativepricing options, including aligning pricing to business outcomesthrough outcome-based pricing. This reflects service providersuccess in moving offshore application service portfolios from astrictly cost-focused value proposition to one of moremeaningful business alignment and impact. The past criticismsof the offshore providers being effective only in low-risk, hourlylabor-based pricing schemes is no longer the case; manyservice providers actively promote alternative relationshipmodels where they will assume risk and accountability forapplication performance tied to business metrics.

• The pace of acquisitions and partnering is accelerating. The bignews acquisition completed in August 2008 was the HPacquisition of EDS, which has implications for two keyproviders in the offshore application service market, becausethey will seek to integrate their global delivery centers andposition themselves as one of the world’s largest IT servicesfirms. Many other service providers are relying on targetedacquisitions to support their global expansions, gain criticalskills and enter into new vertical markets or solution areas. Themarket has matured, but due to the pace of competitiveactivity, most providers will need to rely on an acquisitivestrategy – to some extent – to move quickly enough tocapitalize on growth opportunities. While partnering andsubcontracting will be used to fill skill gaps or address scalerequirements, these forms of skills provisioning are less reliableand arguably less satisfactory to clients (higher costs areinevitable when a third party is used).

• The continuing evolution of service provider services portfolios.The range and depth of service provider application skills areimpressive, and continue to grow. ERP, Web services,consulting, application testing and application modernizationservices are among the most prominent growth areas in thisyear’s discussions. However, there is also momentum for ASPsto expand into infrastructure services and business processareas. In contracts where bundling of services is required,these added services are now mandatory; however, they arenot covered in this Magic Quadrant.

Research ProcessGartner’s Magic Quadrant process involves conducting primaryresearch, including obtaining client references as well as eachservice provider’s representation of its organization. Additionalanalysis is conducted by Gartner analysts’ direct contact withenterprise buyers throughout the year. All these sources ofinformation are carefully analyzed with a heavy emphasis on clientfeedback. As a result, many individual categories have “clientreference” criteria factored into the scoring. Gartner considersclient feedback to be one of the most critical measures of a serviceprovider’s success.

Gartner evaluates service providers on their ability to execute andon their completeness of vision. When the two sets of criteria areevaluated together, the resulting analysis shows how well theprovider performs an array of services relative to its peers, andhow well it’s positioned for the future. This evaluation is a snapshotin time. Over time, the competitive nature of the offshore ASPmarket affects the relative position of the evaluated companies.

In addition to understanding the positions in this Magic Quadrant,enterprises must conduct due diligence and check references.They must ensure that their business cultures are synergistic or atleast compatible with the service provider’s culture. The mostcritical criteria for project success are a provider’s capability towork within an enterprise’s business culture and to work with anenterprise’s people to bring about the organizational changes thatare essential to a successful initiative. Evaluation criteria forselecting service providers should reflect your company’s desiredbusiness objectives, and should align with your enterprise andsourcing requirements.

Market Definition/DescriptionThis Magic Quadrant focuses on the application services deliveredvia a GDM (offshore/nearshore service model). Several of thefollowing definitions help to shape the scope of the Magic Quadrant:

• Application-related IT service revenue. Isolates IT servicesthat are specifically related to the life cycle of applicationdevelopment (AD) and support:• Design, development, testing and integration• AD, deployment and integration• Application maintenance and management

• IT service revenue. All IT-related services to design, build,enhance, operate and manage client IT environments, such as:• Consulting (business and IT)• Development and integration• IT management (infrastructure, applications, help desk) and

process management

• Offshore services. These denote any type of IT-enabledservice that involves nondomestic creation of services fordomestic consumption. (Context: “Offshore services” is anoverarching term to describe the incorporation of globallydispersed creation and consumption of IT-enabled services. Inreality, service delivery in a globally sourced model includes acombination of domestic and nondomestic resources. Thelocation of resources and a mode of delivery are implied in theterm “offshore services.”)

• Global delivery and GDM. Global delivery is the ability of anorganization’s service provider (internal or external) to sourceskills from several global locations. This disparate set ofresources must come together seamlessly, with high process

5maturity, and must operate in a secure and scalable globalinfrastructure supported by significant investments to mitigateor manage risk. A GDM encompasses the assets andcompetencies of a service provider (internal or external) appliedto delivering services using a combination of domestic andoffshore service locations and resources. Assets andcompetencies include investments in IT skills and laborresources, tools, policies and procedures, methodologies,infrastructure, management, HR functions, and deliveryprocesses. (Context: The terms “global delivery” or “globaldelivery model” have become common as offshore servicesmove beyond traditional geographic-centric delivery. Althoughthe term “offshore services” focuses on the location of serviceresources, the terms “global delivery” and “global deliverymodel” focus on the technical skills, process rigor, tools,methodologies, overall structure and strategies for seamlesslydelivering IT-enabled services from global locations.)

Application Service Delivery• Application services are delivered in the following categories:

• Application outsourcing (AO). A multiyear or annuity contractinvolving the purchase of ongoing application managementservices from an external service provider (ESP). The ESPsupplies the people, processes, tools and methodologies formanaging, enhancing, maintaining and supporting custom andpackaged software applications. AO strictly focuses on theapplication layer, isolating the services delivered in support ofthe life cycle of applications, typically defined by service levelsand ongoing performance metrics.

• Discrete/project-based. A contract involving the purchase ofapplication-related services for custom or packaged software,including one or more of these: design, development,integration or implementation. Project-based applicationservices are different from AO because they’re purchased for aspecified scope of work to be executed within a finite time.

• Staff augmentation. A contract to provision technical workersto supplement client-application-related responsibilities.Typically, these services are contracted on a time-and-expensebasis, in which the labor/hour rate is the key metric. Clients areresponsible for the risk and management responsibility of theoverall effort.

Inclusion and Exclusion CriteriaThe criteria for inclusion of service providers for these MagicQuadrants are based on a combination of qualitative andquantitative measures.

Quantitative Criteria for the 2008 Offshore Application ServiceMagic Quadrants:

• Service providers whose application-related IT servicesrevenue is a minimum of:• $200 million in North America (for the North American

Magic Quadrant)• $200 million in Europe (for the Europe Magic Quadrant)

• Service providers whose application services revenue deliveredin an offshore/nearshore model (Gartner’s GDM definition) is aminimum of:• $100 million in North America (for the North America Magic

Quadrant)

• $100 million in Europe (for the Europe Magic Quadrant)

• Service providers with a minimum of 30 offshore applicationservices clients within the given region

• Service providers with a minimum of 2,000 offshore applicationservices head count

Qualitative Criteria:

• Overall market interest and visibility as determined by seriousconsideration for selection from enterprise clients

• Gartner analyst interactions that reveal interest in specificservice providers for offshore/global service delivery

• The service provider serves multiple industries with a broadbase of application services

• Gartner analysts evaluate service providers on the quality andefficacy of the processes, systems, methods or procedures thatenable IT provider performance to be competitive, efficient andeffective, and to positively affect revenue, retention andreputation. Ultimately, service providers are judged on theirability to successfully capitalize on their vision.

Vendors AddedNo new service providers were added since the 2007 MagicQuadrant.

Vendors DroppedThese providers were dropped from those reported in the 2007Magic Quadrant: BearingPoint, Birlasoft, Deloitte, Headstrong,Hexaware Technologies, iGate, Softtek and Unisys.

Evaluation Criteria

Ability to ExecuteTable 1 shows the criteria and weightings related to serviceproviders’ execution.

Table 1. Ability to Execute Evaluation Criteria

Evaluation Criteria

Product/Service

Overall Viability (Business Unit, Financial, Strategy, Organization)

Sales Execution/Pricing

Market Responsiveness and Track Record

Marketing Execution

Customer Experience

Operations

Weighting

High

Standard

Standard

High

Standard

No rating

High

Source: Gartner

6

Completeness of VisionTable 2 shows the criteria and weightings related to serviceproviders’ vision.

LeadersLeaders are performing well, have a clear vision of marketdirection and are actively building competencies to sustain theirleadership positions.

ChallengersChallengers execute well for the portfolios of work they select, buthave a less-defined view of market direction. Consequently, theymay be the next generation of service providers, or they may notbe aggressive and proactive enough in preparing for the future.

VisionariesVisionaries articulate important market trends and directions.However, they may not be in a position to fully deliver andconsistently execute. They may need to improve their optimizationof service delivery.

Niche PlayersNiche players focus on a particular segment of the market, asdefined by such characteristics as functional area, vertical industry,client size or project complexity. Their ability to execute is limited tothose focus areas and assessed accordingly. Their ability toinnovate may be affected by this narrow focus.

Vendor Strengths and Cautions

AccentureStrengths

• Accenture’s heritage strength is business-led solutions; it willalso compete head-to-head on price with offshore, pure-playproviders in cost-based competitive deals as needed.

• New initiatives have been introduced within the offshorestructure during the past year that are designed to strengthenAccenture’s GDM: verticalization of India-based resources, anew “solutions architect” role to aid sales and pricingstrategies, and closer alignment of consulting and solutionimplementation (CSI), and management resources in deliverycenters.

• Accenture continues to evolve its global delivery network asintegral to its go-to-market sales and delivery strategy: 93% ofAccenture’s top 100 clients utilize Accenture’s global deliverynetwork for some level of service delivery (up from 70% oneyear ago).

Cautions

• Some clients perceive that Accenture lags behind itscompetition in terms of typical offshore/onshore resourceratios; greater communication with clients on the leverage of itsoffshore resource pool for application projects is needed.

• With the rise of multitower IT outsourcing, Accenture mustdevelop clearer marketing/sales messages and offerings toexplain to clients how it will deliver value with its GDM throughintegrated applications and infrastructure capabilities.

• Accenture is perceived in the market as a large, premium-priced service provider that may be inflexible to work with. In

cautionary economic times, this opens the door for offshorecompetitors to aggressively position themselves ahead ofAccenture for cost-sensitive buyers seeking flexible partners.

CapgeminiStrengths

• Aggressive plans exist to double offshore resources during thenext two years through a combination of organic and inorganicmeans. If executed, this should enable Capgemini to gaincritical mass in several locations in addition to India.

• Capgemini has invested heavily in the sales and marketing of itsRightshore initiatives, and has worked hard at institutingconsistent tools and methodologies across its delivery centersto ensure more seamless, integrated support for clients.

• Clients cite flexibility, commitment to meeting deliverables, lowturnover of on-site and offshore personnel, and high levels ofcommunication to establish the credibility of the offshoremodel.

Cautions

• Capgemini still has the largest proportion of itsoffshore/nearshore resources located in India, and most ofthem are from the Kanbay acquisition. While Capgemini hasadded scale to each of its non-Indian offshore/nearshoredelivery locations in 2008, its ability to achieve credible scalewill be key to its ongoing success.

• Clients cite a lack of proactivity in suggesting alternativeapproaches to improving support and driving down cost(indicative of immaturity in global delivery).

• Although Capgemini’s global delivery strategy for applicationservices has continued to develop during the past 12 months,relative success in North America continues to lag behind itsleading competitors. More work is required to further attractpotential clients through a convincing articulation of itscapabilities and differentiators for application project andoutsourcing services.

Table 2. Completeness of Vision Evaluation Criteria

Weighting

High

Standard

Standard

High

Low

High

Standard

Standard

Evaluation Criteria

Market Understanding

Marketing Strategy

Sales Strategy

Offering (Product) Strategy

Business Model

Vertical/Industry Strategy

Innovation

Geographic Strategy

Source: Gartner

7

CGIStrengths

• CGI promotes a client-centric model tailored for selecting theright delivery options from a continuum of service deliveryoptions (onshore, nearshore and offshore models); based onclient requirements and preference for pricing, scale and skillavailability, the appropriate choice is made.

• CGI effectively uses a metrics-based approach to drivealignment between sales, marketing and delivery personnel forits global delivery initiatives leading to consistency in approachand execution of client deals.

• Almost 70% of CGI’s revenue is related to application services;in its engagements, CGI’s culture is influenced by “employeesas shareholders,” which encourages flexibility in relationships,low turnover, executive-level interactions and client-tailoreddelivery approaches – which positively influence clientsatisfaction.

Cautions

• CGI’s offshore delivery footprint is primarily India-centric, withmuch smaller centers in Poland and Spain, which will belimiting in offering clients broad GDM options; CGI’s over-reliance on its extensive Canada operations gives CGI limitedgeographical alternatives to address clients’ renewed focus oncost reduction, which is driven by volatile economic conditions.

• Despite its revenue concentration in applications services,CGI’s predominant brand image is that of a primarily Canada-centric provider with strong infrastructure services capabilities;marketing efforts must be directed to correcting this image inorder to attract new U.S.-based clients aggressively seeking anoffshore applications services provider.

• CGI’s differentiation on outcome-based engagements needs tobe better articulated, especially when cost focus is soprevalent.

CognizantStrengths

• Cognizant continues to offer a “balanced” presence of offshoreand onshore resources, by virtue of – since inception – being aU.S.-headquartered company with a predominantly India-centric delivery capability. It has augmented this capability witha limited nearshore presence.

• Cognizant has invested in a strong innovative approach toimproving the overall productivity of its workforce and deliverythrough an enhanced project workbench with integratedknowledge management capabilities, branded as Cognizant2.0.

• Clients cite Cognizant’s relationship focus, responsiveness,commitment to meeting client goals, and depth/breadth ofservice offerings; this gives Cognizant extensive depth ofrelationship within existing accounts and hence a strong abilityto retain/grow those accounts.

Cautions

• Cognizant’s cautious approach to expanding its global footprintfor country locations has caused it to lose ground tocompetitors that have undertaken a more aggressiveexpansion of global delivery operations.

• While Cognizant has a direct sales presence in North America,a continued alliance-driven approach in select markets outsideof North America remains a concern, because other suchalliances have had limited or no success overall. Additionally,Cognizant appears to have an over-reliance on renewal/growthwithin existing accounts, and needs to strengthen its brandvalue messaging to address new account growth.

• Clients believe that Cognizant needs to be more proactive inproblem solving and reporting, resource planning, and servicequality enhancements.

CSCStrengths

• CSC has dedicated leadership to align its portfolio ofapplication services, consulting and global delivery; thismanagement structure aligns CSC’s technical skills, globaldelivery capabilities and vertical experience for client businesssolutions.

• Beyond expanding the size of its global delivery capabilities,CSC is in the process of developing unique applicationcapabilities for its GDM centers.

• Customers cite CSC’s depth of technical skills, its reliableservice delivery, its willingness to cooperate and the work ethicunderpinning quality in application services.

Cautions

• CSC’s visibility and brand recognition in globally deliveredapplication services is less well-established outside of itsinstalled base; it must continue to prioritize marketing effortsand strengthen brand awareness to attract and convinceprospective clients.

• CSC’s references cite resource management challenges (interms of finding the necessary volume and skill depth ofresources required to fulfill delivery obligations) and limitedinnovation in terms of new ideas/execution as areas forimprovement.

• While CSC’s acquisition and integration of Covansysstrengthens its India footprint, future rebranding initiatives tocommunicate and validate the additive benefits ofCSC/Convansys will be needed. CSC’s over-reliance on apresence in India puts CSC behind leading offshore applicationcompetition in establishing a global delivery footprint to supportclients.

EDSStrengths

• EDS has consolidated and transformed its Best Shore globaldelivery approach by consolidating offshore centers intoindustry-aligned Global Competency Centers (GCCs) in variousgeographies.

• EDS focuses on the total cost of operations (which it callsDesign for Run) and overall quality for client applications as acomponent of its full-stack service integration.

• EDS has created horizontal practices in Microsoft, Oracle, SAPand testing that are integrated with its industry teams. Thisfurther supports its vertical integration and orientation strategyand delivery.

8Cautions

• EDS needs to further market and demonstrate specificapplication capabilities through its integrated EDS Designed forRun approach that will aid clients in planning and implementingdownstream business agility.

• EDS largely appears on shortlists for infrastructure-centricoutsourcing, but clients have been reluctant to consider EDSfor large application-only deals in North America, especiallyimplementation services. Continued commitment and focusedstrategy on application business is necessary to prove to NorthAmerica clients that EDS is serious about growing itsapplication business.

• EDS is investing significantly in an industry approach via itsGCCs; however, application clients largely are still focused onimmediate cost savings, which will drive them to do short-termplanning focused on cost containment and reduction, notnecessarily industry competencies.

HCL TechnologiesStrengths

• HCL continues to leverage its integrated operationsmanagement framework to grow its application servicerevenue.

• HCL has a targeted sales strategy in pursuing deals that focuson business value delivery – as opposed to driving volume.

• Clients recognize HCL for its flexibility to adapt to changingbusiness needs and objectives, commitment to meeting on-time deliverables and to supporting client business, andcompetitive rates; lower attrition due to its “employee first”program is also cited.

Cautions

• HCL has been slow in building out a network of nearshoredevelopment centers; this will potentially inhibit its speed ofgrowth in situations where a nearshore presence is required orwould be a strong differentiator.

• Although HCL is positioning itself as a transformation partner, itstill needs to gain the confidence of many of its larger clients toexecute upstream application services and consulting work; tothis end, clients believe that HCL should be more proactiveand assertive in communicating on potential opportunities tolower costs or to innovate on current solutions.

• HCL has traditionally been viewed as a strong infrastructureservice provider, and its application service revenue hashistorically been significantly lower than its peers. It mustaggressively expand its application service marketing toestablish a strong and differentiated value proposition.

HPStrengths

• HP senior leadership has articulated a new HP applicationstrategy that is consistent with its overall service/outsourcingstrategy and has a global road map for implementation.

• Global service delivery is enhanced by HP Centers ofExcellence (COEs) that are linked and are aligned with industryor technology domains as well as initiatives to industrialize HP’sapplication services in areas like testing, modernization andmanagement services.

• HP has established a broad and robust GDM through 16 globaldelivery centers located across North America, Latin America,Europe, the Middle East and Africa (EMEA), and Asia/Pacific(APAC); 80% of these centers are in cost-advantaged locations.

Cautions

• While HP shows commitment to application outsourcing, clientsare not yet consistently shortlisting HP for application-services-only deals due to a lack of market awareness and presence.

• Clients cite weakness in HP’s ability to have adequate numbersof skilled on-site application resources and the need for greateradherence to standardized, repeatable methods for servicedelivery.

• While HP’s service business is promoting an offshoreapplication growth strategy, HP’s corporate messageemphasizes product before services. This places applicationservices behind HP product services, where it may become lostin the overall HP brand.

IBMStrengths

• During the past year, IBM evolved its global application servicedelivery processes and methodologies to ensure a consistentdelivery experience for clients and dedicated industry-specificoffshore centers.

• IBM’s market-led approach for services has been enhanced bya new application service consultant (ASC) role that helps alignclient business needs with IBM’s full service offerings andoffshore resourcing needs.

• Clients cite IBM’s commitment to finishing the work on time,dedication to meeting customer demand through flexibleworking relationships, hiring top talent, and ability to quicklyrecognize and solve technical issues.

Cautions

• IBM’s penetration and leverage of offshore/nearshore servicedelivery for business application solutions is lower overallcompared to its competition; opportunities exist to increase itslevels of offshore service mix.

• Clients perceive that IBM could be more proactive inpostimplementation initiatives to leverage automation toenhance reliability, reduce costs and improve efficiency; and tointroduce ideas for innovation to consistently drive more valuein offshore application service engagements.

• Clients report that IBM is generally slower to respond and lessflexible in its contracting approaches compared to some of itscompetitors that have fewer management approval layersenabling more agility.

Infosys TechnologiesStrengths

• Infosys continues to strengthen its global delivery capabilitiesthrough aggressive build-out of delivery centers andimprovements in global delivery processes and methodologies.

• The strong Infosys brand image, coupled with a highly scalablehiring process, has enabled Infosys to manage the challengesof attrition and competition for resources better than some ofits peers.

9• Infosys has reorganized its business units to deepen its

vertical-oriented transformational capabilities in an effort tobroaden its customer base.

Cautions

• Infosys’ inflexibility in pricing may slow its growth, especially ina tightening macroeconomic environment, unless it issuccessful in pursuing a higher percentage of larger andhigher-value deals.

• Infosys has not yet successfully leveraged its high-endconsulting business to support and extend its applicationservice business through its global delivery network.

• Infosys has been slow to take advantage of inorganic growthopportunities when compared to its direct competitors; failureto use strategic acquisitions may jeopardize Infosys’ growthrequirements.

KeaneStrengths

• Keane has made progress in evolving its heritage valueproposition for service-level agreement (SLA)-based, legacyapplication service business by leveraging Caritor’s business-focused application solutions approach.

• As Keane reinvents itself as a global service provider focusedon creating business value, its client loyalty, evolving brandfocus in application-centric services and nearshore strengthswill be cornerstones for growth/expansion.

• Keane’s status as a privately held company will allow it flexibilityin making key strategic investments, potentially sacrificingsome near-term revenue for long-term repositioning as a globalservice provider focused on business outcomes for clients.

Cautions

• Keane’s merger with Caritor has been challenging and takensignificantly longer than the market anticipated. It is still facedwith many pending issues related to the merger, which willhave to be successfully navigated to achieve success.

• Keane’s status as a privately held company may causetransparency to suffer, which is a critical attribute ofcompetition in a maturing globally delivered application serviceenvironment.

• Management visibility and aggressive, clear marketingcommunications will be of highest critical importance to gainawareness, market trust and respect for Keane’s strategicturnaround now under way.

L&T InfotechStrengths

• L&T Infotech has strong customer retention, whichdemonstrates that its focus on a “right-sized” approach toclient deals is working well and is building long-term clientcommitments that provide a basis for ongoing businessgrowth.

• Clients cite flexibility, strong account leadership and a servicedelivery excellence commitment as positive attributes.

• With a focused vertical concentration on manufacturing andfinancial services, L&T Infotech has deepened its offerings and

established a strong domain focus and industry-specificsolutions from strategy to execution.

Cautions

• While L&T Infotech has adopted a model that ties delivery valueto three primary client business metrics – reduced time tomarket, cost reduction and improved return on investment (ROI)– it is not at the point where it is able to consistently contractand measure outcomes in alignment with these businessmetrics.

• Despite adding some new accounts in 2007-2008, L&TInfotech struggles with broader market brand recognition thathurts its ability to attract new clients. Additional marketinginvestments (now under way) are critical to gain recognition andbolster its brand image.

• L&T Infotech’s growth strategy must be delicately balancedbetween growing existing accounts and attracting new clients.Over-reliance on growing existing client business may be aninappropriate risk-balancing exercise.

Mascon GlobalStrengths

• Mascon Global (MGL) continues to invest in the expansion of itsU.S. sales force and has an aggressive acquisition strategy tosupport growth of its U.S. business.

• MGL’s focus on leveraging its intellectual property has beendemonstrated in the development of industry-specific offeringsand repeatable solutions.

• MGL employs a multilocation GDM and dedicated client centersto support key accounts.

Cautions

• Despite an emphasis on APAC expansion into Singapore andChina, MGL has a largely India-based delivery orientation.Additionally, it has no onshore or nearshore delivery centers toserve North America clients.

• Aggressive growth targets may be difficult to achieve fromrelatively small deals that focus on providing staff augmentationservices; it has some exposure because 42% of its revenuecomes from its top 5 customers.

• MGL’s desire to move to higher-value services (IP-centric work)places it in head-to-head competition with other aggressiveIndia offshore players that have been in that value spot forsome time. MGL’s IT services heritage is associated with staffaugmentation work, so a brand value change to win bigger andmore-complex awards will take concerted time, effort andfinancial investment.

Patni Computer SystemsStrengths

• Patni’s clients continue to recognize it for flexibility andpartnering, and for having a mature and established offshorepresence, which positions it as a reliable alternative to thelargest India-centric providers.

• Patni is advancing its vertical go-to-market approach andoutput-based pricing model; this, along with its approach toposition itself as a smaller, nimbler alternative provider,resonates with its target clients.

10• An increased focus on the domestic India market is also

positive; it gives Patni an opportunity to perfect higher-endservices and have some reference wins, before offering them inthe global market.

Cautions

• Patni’s recent divestment/acquisition woes have createdsignificant top management distraction and it has lostmomentum in the market as a result.

• Patni remains conservative and low key in its marketing andbranding activities, which has further weakened its positioningoverall.

• Patni’s lack of a direct investment strategy and managementdiscomfort are evident in its hedging strategies in developing akey resource pool in China and, to a lesser extent, LatinAmerica, where it has chosen a partnership approach asopposed to a direct development presence.

Perot SystemsStrengths

• Perot Systems’ competitiveness is strongly rooted in verticalcompetency, quality certification and a service culture, which iscore to its application service approach.

• Perot Systems has launched a new application service salesstrategy with vertical and regional focus, as well as a verytargeted application-focused marketing effort in an effort tostrengthen its exposure in the market and broaden its targetedmidmarket client base.

• Offshore delivery of applications is a core element of PerotSystems’ service model, and a significant number of itsnongovernmental clients receive globally delivered services.Expansion in the Philippines has further strengthened its APACresource pool.

Cautions

• Perot Systems’ brand value in the North America market isrooted in its infrastructure heritage and not as strongly linked toapplication services, although application services make up thebiggest part of its total revenue.

• Perot Systems must focus on marketing/visibility as it faceschallenges in attracting new clients looking for an all-purposeapplication service/outsourcing relationship and being invited tocompete for globally delivered application RFPs.

• Perot Systems struggles to support customers that needflexibility in terms of resource management; it lacks sufficientscale in India to offer scalability for large deals.

SapientStrengths

• Sapient is differentiating itself as a provider capable ofdelivering on offshore AO projects using agile methodologiesand investing in expanding its capability (people, process andtechnology) in the areas of interactive marketing, businessintelligence, Web development, trading and risk management.

• Sapient’s global delivery presence, though primarily India-centric, has evolved over many years and is relatively mature inregards to process maturity, IP-based hiring and consistency ofdelivery.

• Sapient is viewed as a reliable and well-established midtierprovider, and serves as a solid alternative to the larger serviceproviders for discrete, project-based AD.

Cautions

• Significant gaps exist between the realistic ability to leverageagility-driven global delivery and client expectations. Havingpositioned itself as an agile global delivery expert, in what isinherently an immature proposition, Sapient will have to manageclient expectations very carefully.

• Sapient continues to be largely India-centric in its GDMapproach. This will be a disadvantage for clients looking toleverage a truly global delivery strategy for applications.

• Sapient has new leadership in critical (and some new) roles.The integration of new senior leadership, which takes time evenin the most stable times/situations, will be a greater challenge inthe fast-moving, rapidly evolving global sourcing landscape.

Satyam Computer ServicesStrengths

• Satyam has a targeted vertical strategy, and its domaincompetency, as well as its successful penetration in themanufacturing and automotive sectors, distinguishes it in themarket versus other India pure-play providers.

• Satyam aligns to changing customer expectations through aconsulting-led approach for its business solutions and viacenters of excellence in specific locations.

• Clients cite flexibility, experience and know-how of enterpriseapplications and commitment to customer satisfaction aspositive attributes.

Cautions

• Transformation and innovation are not primary brand attributesof Satyam; although Satyam is investing in capabilities toposition itself as a transformation partner, it is still a work inprogress.

• Satyam’s joint development and go-to-market approachleveraging partners for developing new service capabilities runsa high risk of failure because of misaligned objectives of thepartners and conflicting interests.

• Some Satyam clients cite a lack of proactiveness, lack ofinnovation and staffing issues (such as the high turnover of keyproject people) as common problems.

SyntelStrengths

• Syntel has developed deep client partnerships that have led tostrong deal retention and a basis for significant growth.

• Syntel has moved away from being viewed solely as a staffaugmentation firm (its heritage) and is now poised to supportlarger project-based or offshore development centeroutsourcing relationships.

• Syntel continues to move a greater proportion of its clientengagements to fixed-price contracts, as well as significantlyincreasing the offshore component of project teams.

11Cautions

• Syntel’s continued India-centric development center modellimits its capability with clients that are seeking a broader globalsourcing footprint and risk diversification.

• Syntel’s low brand awareness in the U.S. market has limited itsconsideration as a global sourcing alternative. It also hasrelatively lower brand visibility in India, which affects itscapability to attract and retain the best resources.

• Syntel needs to continue to expand its new businessacquisition capability at a faster pace to complement its abilityto grow existing relationships.

Tata Consultancy ServicesStrengths

• Tata Consultancy Services (TCS) has continued to win largenew contracts in application services and outsourcing on aglobal basis. Combined with its depth and breadth of capability,this has ensured continued revenue leadership among the Indiaproviders.

• TCS continues to make targeted acquisitions to grow itspresence in new markets and supplement its skills in industrydomains, and has recently reorganized to strengthen its verticalgrowth strategy.

• Customers cite TCS’s responsiveness, flexibility inengagements, management commitment, ability to scaleresources, low attrition rates offshore, commitment todeliverables and integrity.

Cautions

• Clients indicate some TCS inconsistency in proactively offeringalternative delivery approaches, such as increased automation,and in taking steps to improve efficiency and drive down cost.

• TCS must demonstrate greater ability to provide deepindustry/domain expertise across a broad range of industryverticals; while in some areas domain expertise was strong,clients in some industries cite gaps in market understanding ordepth of resources with vertical understanding.

• With continued strong growth and recent organizationalchanges, TCS will face challenges in maintaining consistencyand quality across its broad industry, service and geographicalcoverage areas. Hiring and training the sheer amount ofresources it needs to sustain and grow the business will alsobe challenging.

UST GlobalStrengths

• UST Global’s sweet spot is in AD with a larger proportion of itsapplication development and management (ADM) revenuecoming from development and related work, rather than puremaintenance work.

• UST Global is effectively leveraging its CIO advisor board forstrategic assistance with its business model, marketingmessages, and selling and deal origination assistance for largeenterprise accounts.

• UST Global is consistently cited by clients as being flexible inaccommodating client requirements in terms of how theengagement and relationship are structured.

Cautions

• Although some investments have been made in expanding itsglobal footprint, UST Global lacks critical mass in its non-Indiacenters, constraining its ability to deliver needed scale for clientglobal sourcing needs.

• UST Global’s brand awareness continues to be low in theoffshore application service market as well as in the broaderIndia resources market (outside of Thiruvananthapuram, whereit is headquartered).

• UST Global is now growing its development centers in Tier 1India cities, but its lack of long-term presence and experience inthese cities may pose challenges in recruitment and retention ofresources.

Wipro TechnologiesStrengths

• Wipro has made strong investments in its industry-verticalfocus, and now has a significant number of domain consultantsacross its broad vertical coverage area. Additionally, Wipro hasaccelerated its local hiring practices in consulting and sales toboost a local market presence, knowledge and capability.

• It has continued its investments in a global delivery network thatoffers a balanced portfolio of locations from which to supportclients. In addition to delivery centers in EMEA, Latin Americaand APAC, it is also focused on U.S. delivery capability to offerthe most appropriate resource location.

• Clients cite satisfaction with Wipro’s responsiveness, skilledworkers and commitment to meeting project goals.

Cautions

• While strong process capability underpins Wipro’s appeal as aprovider, an overly rigid approach to process quality raisesconcerns regarding its ability to deliver flexibility to its clients;some clients also cite lack of proactive communication onproject plans and delivery issues.

• Wipro’s new executive structure, which includes joint CEOs(announced in April 2008), will take time to perfect anddemonstrate effectiveness.

• While Wipro has successfully established its technology andprocess credentials in the market, more work is required tobuild the perception of its business acumen with C-levelexecutives.

Vendors Added or DroppedWe review and adjust our inclusion criteria for Magic Quadrantsand MarketScopes as markets change. As a result of theseadjustments, the mix of vendors in any Magic Quadrant orMarketScope may change over time. A vendor appearing in aMagic Quadrant or MarketScope one year and not the next doesnot necessarily indicate that we have changed our opinion of thatvendor. This may be a reflection of a change in the market and,therefore, changed evaluation criteria, or a change of focus by avendor.

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Evaluation Criteria Definitions

Ability to ExecuteProduct/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes currentproduct/service capabilities, quality, feature sets and skills, whether offered natively or through OEM agreements/partnerships asdefined in the market definition and detailed in the subcriteria.

Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization’sfinancial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continueinvesting in the product, to continue offering the product and to advance the state of the art within the organization’s portfolio ofproducts.

Sales Execution/Pricing: The vendor’s capabilities in all pre-sales activities and the structure that supports them. This includes dealmanagement, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.

Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success asopportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the ven-dor’s history of responsiveness.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization’s message in orderto influence the market, promote the brand and business, increase awareness of the products, and establish a positive identificationwith the product/brand and organization in the minds of buyers. This “mind share” can be driven by a combination of publicity, pro-motional, thought leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evalu-ated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillarytools, customer support programs (and the quality thereof), availability of user groups and service-level agreements.

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizationalstructure including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively andefficiently on an ongoing basis.

Completeness of VisionMarket Understanding: Ability of the vendor to understand buyers’ wants and needs and to translate those into products and serv-ices. Vendors that show the highest degree of vision listen and understand buyers’ wants and needs, and can shape or enhancethose with their added vision.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and external-ized through the Web site, advertising, customer programs and positioning statements.

Sales Strategy: The strategy for selling product that uses the appropriate network of direct and indirect sales, marketing, serviceand communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the cus-tomer base.

Offering (Product) Strategy: The vendor’s approach to product development and delivery that emphasizes differentiation, function-ality, methodology and feature set as they map to current and future requirements.

Business Model: The soundness and logic of the vendor’s underlying business proposition.

Vertical/Industry Strategy: The vendor’s strategy to direct resources, skills and offerings to meet the specific needs of individualmarket segments, including verticals.

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation,defensive or pre-emptive purposes.

Geographic Strategy: The vendor’s strategy to direct resources, skills and offerings to meet the specific needs of geographies out-side the “home” or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geographyand market.