PROFESSIONAL SERVICES BUSINESS QUARTERLY SM IT Services Vendor Benchmark First Calendar Quarter 2014...

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

PROFESSIONAL SERVICES BUSINESS QUARTERLYSM

IT Services Vendor BenchmarkFirst Calendar Quarter 2014

Publish Date: June 27, 2014

Authors: John Caucis, Professional Services Senior Analyst; Stephanie Artigliere, Elitsa Bakalova, Jennifer Hamel, Boz Hristov, Sebastian Lagana, Cassandra Mooshian and Joseph Walent, Professional Services Analysts; Jacob Gordon, Harry Norton, Kevin Collupy, Deleon Narcisse, Meaghan McGrath, and Kelsey Mason, Research Analysts

Content Editors: Patrick Heffernan ([email protected]), IT Services Practice Manager/Principal AnalystRamunas Svarcas,Professional Services Principal Analyst

mailto:[email protected]

TBR

©2014 Technology Business Research, Inc.1Q14 IT Services Vendor Benchmark | Professional Services Business Quarterly

Table of Contents

Executive Summary3 Key Findings4 Market Overview and Market Leaders11 Other Market Trends21 Future Outlook

Segment Views22 Consulting and Systems Integration (C&SI)26 Information Technology Outsourcing (ITO)29 Business Process Outsourcing (BPO)32 Applications Outsourcing (AO)

Geographic Views35 Americas38 EMEA41 APAC

Financial Metrics44 Key Metrics46 Cost Metrics48 Productivity/Resource Metrics54 Operations/Investment Metrics

Appendix60 IT Services Segment Definitions61 IT Services Vendor Benchmark Coverage62 TBR Coverage 64 About TBR

TBR offers this benchmark data in an Excel format.For further information, contact your TBR account executive.

Contents

2

TBR

©2014 Technology Business Research, Inc.1Q14 IT Services Vendor Benchmark | Professional Services Business Quarterly3

Vendors invest in vertical-specific and next-generation IT services; however, commoditization exerts downward pressure on revenue growth

Executive Summary: Key Findings

IT Services* Vendor Trends for 1Q14

*IT services include consulting and systems integration (C&SI), applications outsourcing (AO), IT outsourcing (ITO) and business process outsourcing (BPO). IT services market growth is determined on the basis of the 30 vendors included in TBR’s Professional Services Business Quarterly coverage. The growth rates represent trailing 12-month comparisons and compare 1Q12-4Q12 and 1Q13-4Q13 periods.

Service lines: Vendor emphasis on embedding growth offerings such as cloud, mobility, big data and analytics, security, and social media into their core consulting and systems integration (C&SI) offerings accelerated C&SI TTM revenue growth from 1.5% year-to-year in 1Q13 to 2.1% year-to-year in 1Q14. Commoditization of traditional IT services and businesses shifting to cloud environments continue to hinder legacy IT outsourcing (ITO) revenue streams. In 1Q14 ITO TTM revenue declined 1.1% year-to-year in contrast to 0.8% growth year-to-year in 1Q13.

Geographies: India-centric vendors’ regional expansion in EMEA through investments in resources, offerings and alliances helped improve revenue share in EMEA. Average EMEA TTM revenue shifted from a 2.1% year-to-year decline in 1Q13 to 2.5% year-to-year growth in 1Q14. APAC average TTM revenue declined by 4.8% year-to-year in 1Q14, down from 4.4% year-to-year growth in 1Q13, due to slowing economic growth in China, India and Australia.

Performance: Average trailing 12-month (TTM) IT services revenue grew 1.1% year-to-year in 1Q14, lower than the 1.5% year-to-year growth in 4Q13 and the 3.5% year-to-year growth in 1Q13. To counter slowing IT services growth, firms are investing in sales initiatives and transforming their portfolios to provide vertical-specific solutions and emerging technologies that encompass developed or acquired IP.

SOURCE: PPTBACKGROUNDS.NET

SOURCE: BLOG.ENTREPENUERARTS.COM

SOURCE: FREEWORLDMAPS.NET

TBR


• TCS’ investments in R&D and strategic partnerships such as those with Microsoft Business Solutions ramp up the firm’s capabilities to meet the supply-side demand for digital transformation solutions spanning cloud, mobility and big data. However, to sustain its double-digit revenue growth in FY15, TCS will need to hire and acquire more tech-savvy consultants to help competitively tout its portfolio across mature and emerging markets. As TCS increases its focus on these opportunities, adding consultants will help it capture multiple digital-focused deals that support overall sales.

• Fujitsu, despite its announcement of a Global Delivery Organization, continues to report TTM revenue declines, still challenged by its long-standing inability to build and expand revenue streams outside Japan. Fujitsu’s business is more seasonal than its peers’ due to its reliance on hardware and IT to sell accompanying IT services, thus affecting its TTM growth.

Executive Summary: Market Overview and Market Leaders

TCS’ emphasis on digital offerings and a rebound in spending in Europe led the firm to the most revenue growth among benchmark services vendors

Note: Bubbles indicate YTY revenue growth and arrows indicate directional change relative to the year-ago quarter (accelerating or decelerating growth).

$58,

219

$56,

671

$34,

071

$31,

669

$28,

269

$28,

774

$28,

612

$26,

166

$14,

616

$14,

762

$13,

132

$13,

559

$11,

568

$13,

443

$14,

195

$12,

998

$12,

607

$11,

889

$11,

627

$11,

862

-3.4%

-2.7%-4.6%

-7.0%

3.6%1.8%

-4.8%

-8.5%

10.2%

1.0%

-3.7%

3.3%

13.7%

16.2%

-1.9%

-8.4%-9.2%

-5.7%

5.0%

2.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14

IBM GS HP SVCS ACCENTURE FUJITSU ERICSSON CAPGEMINI TCS CSC T-SYSTEMS XEROX

TTM

Rev

enue

Gro

wth

YTY

TTM

Rev

enue

in $

mill

ions

IT SERVICES REVENUE LEADERS: TOP TEN TTM REVENUE TBR

SOURCE: TBR AND COMPANIES

TBR


Growth and Profit Leaders• CGI continued to register the positive

revenue impact of its 2012 acquisition of professional services peer Logica, putting it in the lead position in 1Q14 TTM services revenue growth, despite posting its second consecutive quarter of sequential revenue contraction. TBR expects CGI will slip further in growth rankings in 2Q14.

• Cognizant registered strong year-to-year revenue growth, benefiting from 2013 large-scale outsourcing wins and recent consulting acquisitions that accelerated expansion in Europe. Cognizant adhered to its strategy of reinvesting profits over its target 19% to 20% margin range in growth initiatives such as cloud and analytics technologies, global delivery expansion, and niche acquisitions such as Itaas Inc., a digital video solutions company headquartered in the U.S.

India-centric firms lead peers in growth and profitability by meeting the need of clients in Europe to reduce costs using nearshore delivery centers


TBR


Revenue growth and profitability laggards are investing in automation and improved productivity to reduce service delivery costs Growth and Profit Laggards• To improve profitability, Fujitsu needs to

better automate its processes and delivery and further consolidate its workforce while better utilizing offshore labor. TBR expects the tasks will take at least one year to pay off as the company struggles with shifting to a global delivery model.

• CSC’s high level of exposure to contracting federal IT services budgets combined with its migration of commercial clients to lower-cost, higher-value cloud-based infrastructure yielded four quarters of revenue contraction. Improved activity from CSC’s commercial business will help mitigate revenue declines in the government business in 2Q14.

• IBM GS’ revenue remains challenged by declining global sales and competitive pressures brought on by low-cost firms. The company identifies and invests in industry disruptors and technologies to realign its business to grow revenue and profit. IBM accelerated investments in 1Q14 to build out technology initiatives such as BlueMix, MobileFirst and Smarter Commerce.


TBR


India-centric vendors gain market share by leveraging low-cost global service delivery capabilities to offer competitively priced IT solutions


• The positive effect of CGI’s acquisition of Logica diminished during 1Q14, leading to a drop of 5,910 basis points in TTM revenue growth from the year-ago quarter. However, CGI still led all IT services firms in the benchmark as the acquisition still impacts TTM revenue growth.

• TCS had a strong close to its fiscal year, delivering robust, broad-based revenue growth of 15.2% year-to-year in 1Q14 and 16.2% for FY14 against the year-ago compare. The firm gained momentum in continental Europe, where it registered 36.1% year-to-year growth in FY14 as the demand for cost-saving transformational solutions from budget-conscious clients in Germany, France and Nordic countries drove regional signings.


TBR


IBM GS: IBM drives its service business through its Global Business Services unit due to the demand for digital transformation via next-generation applications and IT environments. Conversely, IBM’s Global Technology Services unit poses challenges for overall services revenues owing to the erosion of legacy ITO due to cloud.

HP Services: HP Services ranks second in TTM revenue as a result of its sheer size and global footprint. Revenue decline is decelerating, however, as the company builds out its portfolio to better align with market trends.

Accenture: Maintaining its lead in the market will depend on the firm’s ability to leverage and synchronize growth platforms such as digital, strategy, technology and BPO at a pace faster than the converging IT services market.

Revenue and growth leaders are leveraging next-generation IT offerings and investments in European expansion to solidify their top positions


CGI: Industry-leading TTM revenue growth reflects the addition of Logica’s revenues to CGI financials, providing favorable year-to-year compares. Western Europe, particularly the U.K., served as an engine for organic growth as higher-value service offerings resonated with clients in the region.

Cognizant: Growth was broad-based across industries and service lines, primarily driven by Europe, aided by recent onshore consulting acquisitions and large-scale outsourcing contracts won in 2H13. TBR expects growth will decelerate in 2Q14 as longer decision cycles for new deals in the pipeline delay revenue recognition until 2H14.

Capita: Capita delivered double-digit revenue growth thanks to its market focus in the U.K. and enhanced capabilities gained through integration of the slew of M&As the firm pursued over the past three years. The firm won deals with public and private sector clients for a total of £1.1 billion in 1Q14.

TBR


C&SI• Top Revenue: IBM GS, $20.4B• Top Growth: CGI, 48.2% year-to-year*• Client migration to cloud-based ecosystems and mobile

platforms will continue to drive consulting and integration services. Vendors will look to embed growth technologies such as cloud, mobility, analytics and social media into core C&SI offerings. Enterprises will continue to build onshore delivery resources and invest in training programs to enhance their global delivery models and better compete.

BPO• Top Revenue: Xerox, $10.5B• Top Growth: Cognizant, 25% year-to-year• Demand for BPO and services that support cost takeout

and improve operational efficiency will drive outsourcing growth. Vendors will expand core BPO (horizontal — F&A, HR, etc.) and industry-specific BPO, and focus on growing in emerging markets in 2014.

AO• Top Revenue: Accenture, $7.8B• Top Growth: SAP Services, 21.7% year-to-year• Increasing demand for application modernization

services will expand AO revenue as clients seek to move traditional applications to cloud and mobility IT environments. The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits.

ITO• Top Revenue: IBM GS, $23.4B• Top Growth: Capita, 544.6% year-to-year*• Evolving ITO delivery models, economic conditions and

businesses shifting to cloud environments continue to hinder legacy ITO revenue streams. Vendors will establish data centers in APAC and LATAM to capture the increasing demand.

9

Client migration to cloud-based IT systems drives growth for consulting and AO but leads to ITO revenue declines due to cannibalization



*The inclusion of acquired Logica and Northgate Managed Services revenues skews CGI’s and Capita’s year-to-year growth figures, respectively, bringing the firms to top spots in TTM revenue growth.

TBR


Americas• Top Revenue: IBM GS, $25.2B• Top Growth: Genpact, 24.7% year-to-year• Revenue from healthcare and financial services

industries continues to increase in the Americas but not enough to yield growth in 1Q14. Despite an uptick in public sector signings, the small value of those contracts outweighs the growth in healthcare and financial services. Vendors will look to capitalize on the increased healthcare spending spurred by the Affordable Care Act, while others, including some India-centric firms and Cisco and Fujitsu, invest in Canada to diversify their revenues in the Americas.

EMEA• Top Revenue: IBM GS, $18.2B• Top Growth: CGI, 56.6% year-to-year*• Vendors will leverage their established footprints and

capabilities in faster-recovering central European countries and developed MEA markets to drive revenues and offset pricing challenges across EMEA.

• Europe-based vendors are increasing investments in big data and analytics, cloud, digital innovation, mobility, and particularly security due to increased demand from clients as they shift from legacy application and IT systems to the cloud.

APAC• Top Revenue: Fujitsu, $18.7B• Top Growth: WNS, 58.8% year-to-year• Persistent challenges in China’s business environment

will continue to impact IT vendors’ expansion plans in low-cost markets in APAC. Vendors will selectively target M&As that will boost their global footprints in underpenetrated regions such as Australia, New Zealand and the Philippines, where firms such as Cognizant and Atos continue to leverage acquisitions Medicall and WindowLogic, respectively, to expand in APAC.

10

Economic recovery in Europe drives higher IT services spending in EMEA, while the economic slowdown in China hurts APAC growth


Note: Bubbles indicate YTY revenue growth and arrows indicate directional change relative to the year-ago quarter (accelerating or decelerating growth). *The inclusion of acquired Logica revenue skews CGI’s year-to-year growth figures, bringing the

firm to the top spot in TTM revenue growth.

6.1%

2.7%-2.1%

2.5%

4.4%

-4.8%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

$-

$1,000

$2,000

$3,000

$4,000

$5,000

1Q13 1Q14 1Q13 1Q14 1Q13 1Q14

Americas EMEA APAC

TTM

Rev

enue

Gro

wth

YTY

TTM

Rev

enue

in $

mill

ions

TTM GEO REVENUE AND TTM GEO REVENUE GROWTH TBR

SOURCE: TBR

TBR


• Wipro continues to hone its delivery efficiency and quality through the use of platform-based managed services offerings such as ServiceNXT, increasing the firm’s profitability despite smaller deal sizes. Gross profit jumped 20.6% year-to-year to $626 million, and operating margin expanded 430 basis points year-to-year in 1Q14 to 24.5% on the strength of productivity improvements and increased employee utilization.

• Dell Services’ TTM operating margin benefits from the firm’s emphasis on shifting its work mix from commoditized services to high-value application development and maintenance (ADM) and BPO engagements providing industry knowledge and expertise. TBR expects increased spending on training to educate direct and channel sales staff on the full portfolio of Dell Services solutions will exert downward pressure on the firm’s operating margin in 2014.

Operating margin leaders are bolstering profitability by emphasizing sales of higher-margin, next-generation IT and optimizing their services mix

Executive Summary: Other Market Trends

40.2

%

41.7

%

27.0

%

29.4

%

27.0

%

29.0

%

25.9

%

24.0

%

19.4

% 23.2

%

20.7

%

22.5

%

18.4

%

19.2

%

17.4

%

17.4

%

16.5

%

16.1

%

14.8

%

15.5

%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14

CISCO SVCS ORACLE SVCS TCS INFOSYS HCLT WIPRO COGNIZANT IBM GS DELL SVCS GENPACT

TTM

Ope

rati

ng M

argi

nIT SERVICES PROFITS LEADERS: TOP TEN TTM OPERATING MARGIN

TBR


TBR


Please contact TBR if you are interested in company-specific go-to-market views, including M&A analyses, alliance analyses, deal analyses or other GTM-related information.


Operating margin leaders are investing in automation, efficiency-enhancing tools and training to drive productivity gains

Cisco Services: Cisco Services’ peer-leading margins continued to expand during the quarter, indicating improved efficiency in service delivery as a result of reorganization, automation, leverage of channel partners and reduced variable compensation expenses. TBR expects Cisco Services’ margins will be among the highest in the IT services industry over the next couple of years.

Oracle Services: TBR estimates that Oracle Services’ operating margin grew 240 basis points year-to-year in 1Q14, driven by a 54% operating margin in hardware systems support, which was 42.4% of Oracle services revenue. TBR believes that reported 10% annual growth in hardware system product revenue initiated almost 5% annual growth in hardware systems support and, coupled with increased efficiencies, led to an increase of 450 basis points in hardware systems support operating margin year-to-year. Oracle’s position in TBR’s IT Services Vendor Benchmark will continue to improve as the company monetizes investments in hardware and drives increased profitability from hardware support.

TCS: TCS remained a leader in TTM operating margin, expanding 200 basis points against the year-ago compare to 29% in 1Q14. Robust margin performance was due to TCS’ ability to successfully manage operational costs and reinvest in its portfolio, arming it with tools and IP that enable the company to stay ahead of its competition. TCS noted in its earnings call that it will give wage hikes as high as 14% to top performers for FY15, and promotions are planned in FY2Q15, but the effect on margins will not be significant.

27.0%

29.0%

27.0%

29.4%

40.2%

41.7%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

TCS

ORA

CLE

SVCS

CISC

O S

VCS

TTM Operating Margin

TOP THREE TTM OPERATING MARGIN TBR


TBR


Vendors build industry-specific IP portfolios to differentiate, reduce reliance on labor-based services and boost revenues and profitsIP-rich industry-related solutions help vendors to differentiate, capture growth and increase margins

TBR AssessmentVendors continue ramping up internal investment in IP-based solutions while purchasing or partnering with niche firms to fill portfolio gaps. Industry-related solutions help IT firms address specific client needs and support growth across service areas such as C&SI and BPO. IP-related solutions enhance vendors’ brand recognition and market differentiation; however, it takes several quarters after its release before new IP contributes revenue.

Examples of vendors’ recent investments in industry-specific IP: • Accenture and SAP partnered to develop the Business Solutions Group and

launch the Upstream Production Operation solution. The Business Solutions Group will coinnovate intellectual-property-driven technology solutions centered on specific industries and in collaboration with select clients. Accenture’s continual investments in its IP assets coupled with the firm’s decision to automate parts of IT infrastructure management services through implementation of IPsoft’s IPcenter solution, will enable Accenture to deliver transformation services and solutions converging business processes and IT.

• Capgemini is experiencing client interest in its IP-based products and solutions under the Ready2Series brand. The Ready2Series includes industry-specific solutions that provide the firm with opportunities to accelerate long-term revenue growth across verticals and services such as C&SI and BPO.

• Infosys’ efforts to improve sales efficiency were highlighted by its success in capturing large-scale outsourcing engagements. The firm continued to invest in IP tools such as Process Progression Model, an end-to-end BPO platform, to address the shift in client demand from BPO to Business Process Services.

• Cognizant looks to expand its presence in the healthcare industry. IP-based solutions enable the firm to differentiate from peers. The firm builds industry-specific IP for the healthcare vertical through a combination of internal R&D and customer cocreation. Cognizant codeveloped an online quoting tool, QuoteNow, with U.S.-based health insurance provider Fallon Community Health Plan. The firm also offers the CareSERV Medical Management Platform, which combines cloud and analytics technologies with Cognizant’s clinical staff to optimize care and utilization management, and the iAlign analytics platform that assists life sciences clients with sales planning.


SOURCE: BLOGS.ADOBE.COM

TBR


Vendors invest in security services and capabilities to meet the demand for mobile and cloud security

TBR AssessmentSecurity is increasing in importance for clients, driven by the shift of legacy applications and IT systems to the cloud, coupled with enterprise mobility, the Bring-Your-Own-Device trend and public awareness of security breaches. Less visibility of security capabilities positions firms such as Capgemini and Atos at a competitive disadvantage, which they attempt to overcome with new alliances, offerings and security service delivery announcements. At the same time IT service providers such as IBM, HP and Accenture are continually expanding their security practices to attract clients across the IT services life cycle.

Examples of vendors’ recent investments in security:• Security services emerged as a key interest area for partnering in 1Q14, as

IBM looks to shore up managed security offerings that complement its cloud and on-premises infrastructure management portfolios. IBM and CrowdStrike Inc. will launch Advanced Cyber Threat Intelligence Service in 1H14.

• Xerox’s alliance efforts in 1Q14 were centered around enhancing its offerings by adding new capabilities to security (Authentix) and automation (LabTech, DocuSign) solutions.

• HP opened a 130,000-square-foot Security Operations Center in Sydney, which will join HP’s U.S. and U.K. security centers.

• In February CSC released an incident response offering for commercial clients enabling uninterrupted access to CSC’s cybersecurity professionals in case of a cybersecurity incident. In April CSC unveiled a new cybersecurity offering, AppSEC on Demand, which enables organizations to test the security of their software applications in a hosted secure environment that meets U.S. federal and commercial regulatory requirements.

• Atos plans to make its managed security and cybersecurity services more visible to the market in 2014. Atos launched a Security Service Delivery unit at the end of 2013 with a global reach and 24/7 availability. In 2014 the firm is enhancing its cybersecurity offerings and launching services such as Next Generation Endpoint Protection, Cyber Threat Management Dashboard, Cloud Data Loss Prevention and Identity & Access Management as a Service.

• Capgemini partnered with Unisys in March to resell Unisys’ Stealth cybersecurity software. Capgemini’s security offerings are not visible to clients, with the exception of Sogeti, which has an IT security offerings group. The firm embeds security across consulting, technology services and outsourcing.

14

IT service providers remain focused on providing solutions to the evolving security needs of their global clients


SOURCE: CFO.COM

TBR


Vendors’ strategic investments in Canada will position the IT service companies to benefit from the growing need for IT solutions from expanding financial and oil & gas companies in the region

TBR AssessmentFaced with challenging prospects in emerging LATAM and APAC countries such as difficult business environments in Brazil and China, vendors are intensifying their expansion efforts in Canada. Vendors seek growth opportunities from the vast amounts of natural resource companies and continued growth in the financial services industry in the region. TBR expects the pace of investments in Canada will continue to increase through 2014.

Examples of vendors’ recent investments in Canada:• Cognizant acquired Itaas Inc., a digital video solutions firm headquartered in the

U.S. Cognizant will onboard an estimated 200 employees across Canada, the U.S. and India. Cognizant adds next-wave technology capabilities including connected device application development and strengthens its position in the underpenetrated media and communications market.

• As part of its plan to invest $4 billion over the next 10 years in Ontario, Canada, and create 1,700 new jobs, Cisco is investing $100 million in Toronto, which will be a site for one of four Internet of Everything Innovation Centers. The move signals Cisco’s transition toward becoming a Services-led business, as Toronto will be the North American hub for thought leadership and innovation, facilitating adoption of Cisco technologies and Smart+Connected solutions.

• Fujitsu is combining alliances, joint ventures and niche applications to increase its global sales and marketing reach. The company extended its Westcon marketing agreement to cover the U.S. and Canada, whereby Westcon will sell Fujitsu’s integrated data center solutions in the region. TBR believes this approach will boost sales, but that larger acquisitions in the U.S. and Europe may be necessary for significant market gains.

• Wipro’s chairman, Azim Premji, noted in 1Q13 that Wipro planned to hire locally in Canada to pursue opportunities in the oil and gas industry. In 1Q14 the firm highlighted Canada’s financial services vertical as a key growth area as declining natural resource prices are pressuring banks to cut operational costs. Wipro faces competition from top India-centric peers such as TCS and Cognizant, and from up-and-coming players such as Tech Mahindra, which has a broader delivery footprint in Canada and offers similar services.

15

Canada emerges as a key focus for IT services growth through alliances, acquisitions and organic investments for several IT services firms


SOURCE: WIKIPEDIA.ORG

TBR


IT services vendors focus on improving client relationships — best accomplished with client proximity and use of channel partners

16

Vendors invest in sales initiatives to improve client relationships, expand wallet share with key accounts and support revenue growth

TBR AssessmentVendors such as Cisco, Unisys and Xerox emphasize channel sales due to the superior margins attributed to shared sales and marketing costs as well as low fixed costs. Capgemini’s culture change to foster client relationships, coordinate efforts globally, offer all dimensions of the firm’s portfolio and leverage its consulting business to generate sales will help it catch up with competitors such as Accenture and IBM, which, in TBR’s view, have stronger relationships with clients.

Examples of vendors’ recent investments in sales:• Unisys expands channel-led sales to keep sales costs under control and expand

coverage of its addressable market. The company generates less than 5% of total revenue from the reseller channel currently, and is partnered with over 60 value-added resellers (VARs). The latest announced channel partnerships, with Hotelogix for the hospitality sector in Kuwait and with Capgemini to expand cybersecurity sales, are indicative of solution areas Unisys will target in 2014.

• Xerox is attempting to emulate Cisco’s and HP’s channel programs by offering enhanced training and incentives for its partners through a modified Global Partner Program, which provides partners access to Xerox’s tools and expertise.

• Infosys’ sales strategy will continue to focus on increasing mindshare of end-to-end services capabilities spanning clients’ operational, transformation and innovation needs. Investments in its onshore sales force will enable the firm to tout its IT transformational capabilities and help Infosys regain its status as a premium professional services vendor during FY15. Infosys will seek to adopt a more holistic selling approach by marketing its expertise in delivering high-value, vertical-specific business solutions and developing a market-competitive portfolio as the IT services market evolves.

• Capgemini’s Account Management Strategic Initiative (AMSI) helps the firm accelerate and diversify its portfolio growth, improve the win rate on big deals, generate more sole-sourcing deals and improve cost effectiveness of its business development efforts. AMSI follows a “One Group” approach, which is to sell the entire Capgemini portfolio and expand wallet share with clients, and offer the Rightshore global delivery model.


SOURCE: FOTOSEARCH.COM

TBR




Key Deals in 1Q14

Vendor/Client Deal Value Years TBR Insights

CGI/Trafikverket$220 million (CAD)

4, with two 1-year options

The Swedish Transport Administration signed CGI to provide application development services by coordinating its IT systems.

Accenture/Washington Metro $184

million N/A

Accenture will implement a new electronic fare payment system based on Accenture Fare Management Solution to expand fare payment options, adding chip-enabled credit cards, federal government ID cards and mobile phones that use near-field communications.

Wipro/Deutsche Bank Germany

$125 million Multiyear Deutsche Bank selected Wipro to provide ADM services.

Unisys/Extraordinary Security Department for Large-scale Events (SESGE)

$110 Million N/A

Unisys Brazil and a few other companies won a contract from the SESGE to provide IT services such as infrastructure solutions for the 2014 FIFA World Cup. Unisys Brazil will support the integrated command and control centers that will monitor and manage communications for security purposes.

Infosys/TNT Express $100 Million Multiyear

The contract is part of TNT Express’ $200 million IT modernization initiative. Infosys will provide ADM outsourcing services helping the logistics provider streamline its supply-chain tracking system.

HCLT/Student Loans Company (SLC)

£50 million ($69.1 million)

1The U.K.-based education lender selected HCLT, in collaboration with software vendor Misys and implementation partner Deloitte, to upgrade SLC’s core banking and payment system.

Application outsourcing signings coupled with multiple smaller deals for cloud migration fuel revenue expansion

TBR



Key Acquisitions in 1Q14Companies People ImpactIBM GS/ Cloudant Inc. 65 The acquisition will be merged into IBM’s recently formed Information and Analytics Group to

enhance the firm’s portfolio in big data, analytics, cloud and mobility.

Accenture/ ClientHouse

10-50 (Est.)

ClientHouse expanded Accenture’s Salesforce.com and Veeva Systems implementation capabilities and expertise. The ClientHouse office in Jena, Germany, will be a Center of Excellence and training facility for Accenture clients, which will help Accenture gain SaaS traction in Europe.

Atos/Bull 9,200

On May 26 Atos announced its intent to acquire France-based IT services firm Bull to expand in cloud, cybersecurity and big data; support its expansion outside Europe and solidify its core C&SI and Managed Services capabilities in the region.

Key Alliance Additions/Changes in 1Q14Companies Scope of Alliance/Impact

Accenture/SAP

Accenture expanded its collaboration with longtime partner SAP, forming the joint venture Business Solutions Group, to develop and implement industry-specific solutions that are based on the SAP HANA Cloud Platform and other cloud, analytics, digital and mobility technologies. Accenture and SAP introduced the Upstream Production Operations solution, and Accenture opened its 12th Innovation Center for SAP Solutions. Accenture will gain consulting and implementation business opportunities around its collaboration with SAP.

IBM/ CrowdStrike Inc.

IBM and CrowdStrike Inc., a security solutions and services provider, will develop a new managed security service, Advanced Cyber Threat Intelligence Service. The service will provide proactive monitoring capabilities to minimize and mitigate threats before they become an issue.

Wipro/AgnikWipro partnered with connected vehicle software company Agnik to utilize Agnik’s cloud-based big data and analytics technology to augment Wipro’s machine-to-machine solutions for the automotive industry. The partnership will strengthen Wipro’s capabilities for the manufacturing and high-tech industries.


Partnerships enable IT services vendors to offer end-to-end solution packages for cloud migration and IT infrastructure security improvement

TBR



Vendors continue reorganization efforts and hire industry-specific experts to address growing demand in cloud and analytics

Trends and Strategy Changes• Hiring levels will continue to fluctuate across IT services vendors.

Vendors such as IBM, Xerox and CSC reduced or stabilized headcount in 1H14, and the firms will shift hiring focus to lower-cost labor pools in the latter half of 2014 in addition to hiring people with industry-specific expertise and in growth areas such as cloud and analytics.

• Vendors hire across the globe to diversify global revenues and increase leverage of low-cost resources for service delivery. Accenture will recruit in APAC, Africa and LATAM to support its growth strategy, while Capgemini’s strategy is to increase its India headcount from 37.3% of total headcount, or 50,000 employees, to 50% in the next three years.

Management Changes• Capgemini is grouping its APAC operations in one unit to expand

in the local market, and appointed Luc-François Salvador, formerly the CEO of Sogeti, to chair of the new APAC entity.

• Fujitsu appointed Michael Keegan to lead its business in the U.K. and Ireland, taking over for Duncan Tait, who was recently promoted to head of EMEIA, CSVP, Fujitsu Ltd. In early 2014 Fujitsu announced a restructuring initiative to improve operational efficiency and communication across divisions, which led to nine top management resignations.

• Infosys’ C-level exits continued, with Senior VP Chandrashekar Kakal, head of the Indian Business Unit, and Chief Compliance Officer Nithyanandan Radhakrishnan resigning in April. In June Infosys appointed Vishal Sikka, former CTO of SAP, as CEO and managing director.

TBR


HCLT’s and TCS’ R&D investments position them to overtake Cognizant, which continued to lead IT services vendors in organic growth

*ORGANIC REVENUE GROWTH IS ESTIMATED WHEN NOT REPORTED. GROWTH IS IN U.S. DOLLARS. REVENUE GROWTH IS MEASURED ON A YEAR-TO-YEAR BASIS FROM 1Q13 TO 1Q14.


• HCLT: HCLT has not made an acquisition since 1Q11, instead focusing on expanding its IP through alliances and R&D. The firm targets large-scale transformational deals to maintain double-digit organic revenue growth, winning several infrastructure management and Digital Systems Integration deals in 1Q14.

• Ericsson: While Ericsson did not make any acquisitions that would impact services revenue in 1Q14, the company’s top line fell 8.7% year-to-year partially due to unfavorable compares with large deals won in 1H13.

TBR


According to TBR estimates, IT services’ average TTM revenue growth year-to-year will accelerate slightly from 1.1% in 1Q14 to 1.3% in 2Q14. Demand in Europe and North America is gradually improving; however, clients’ hesitancy to invest in transformational projects is hampering growth. IT services growth in 2014 will be driven by companies focusing on incorporating vertical-specific solutions into their operations to boost performance and efficiency. Vendors take advantage of the growing verticalization trend by adding vertical-specific consulting headcount as well as acquiring and developing industry-specific IP. Vendors turn to small niche acquisitions to broaden portfolios, develop unique capabilities and receive immediate revenue boosts; however, some acquisitions take time to engineer, thus challenging revenue growth.

Executive Summary: Future Outlook

Vendors are building out cloud, analytics and mobility portfolios and expanding low-cost headcount to position for profitable growth

Key: Bubble = 1Q14 Vendor Position; Arrow = 2Q14 Expected Vendor Position

TBR


Segment Views: C&SI

Leaders• The positive impact of CGI more that doubling its C&SI revenue stream when it purchased Logica in 3Q12 continues to project

the company to the front of the pack with 48.2% year-to-year growth of TTM C&SI revenue.• Infosys’ expanding sales forces in the U.S. and Europe will drive CS&I revenue growth. However, long-term sales success

depends on the firm’s ability to tout its services as a unified entity rather than separate subsidiaries. Consulting, package implementation & systems integration (C&PI&SI) revenue growth decelerated to 7.3% year-to-year in 1Q14 from 12.6% and 27.6% year-to-year expansion in 4Q13 and 3Q13, respectively, due to reportedly muted discretionary spending from mature-market clients. In 1Q14 Infosys won a large-scale engagement to implement an Oracle-based finance ERP transformation platform for SITA, a global air transport IT services vendor, which we expect will fuel segment sales during FY1H15.

• EMC ended the quarter with a year-to-year TTM growth rate of 16.4%, which was led by the shift in software license orders to subscription-based services within Pivotal. EMC is also realizing an increase in C&SI engagements driven by customer adoption of cloud-related services realized in Pivotal implementation services.

India-centric firms are expanding consulting headcount in Europe and the U.S. to capture high-value consulting-led engagements

TBR


Public sector spending declines and continued hesitancy by firms to spend on transformational engagements weigh on laggards’ C&SI revenues

Laggards• CSC’s TTM C&SI revenue was down 12.6% year-to-year in 1Q14, as defense and civilian U.S. government agencies

continued to pull back on discretionary IT project spending. TBR expects CSC’s shift to a partner-oriented consulting organization within its commercial operations will serve as a partial counterweight to expected contraction of nonoperational federal IT spend in 2014.

• Convergys aggressively reshaped its portfolio over the past two years to concentrate on its core customer management business. In 1Q12 the firm sold its information management business, which Convergys generated most of its C&SI revenues from, resulting in weaker C&SI capabilities and deteriorating C&SI revenues for 1Q14. TBR believes that although Convergys is focused on scaling its customer management business, evidenced by its acquisition of Stream Global, the recently acquired company will boost its exposure to C&SI, leading to a recovery in C&SI revenue growth in 2Q14.

Segment Views: C&SI

TBR


Segment Views: C&SI

C&SI revenue leaders leverage vertical-specific capabilities and next-generation IT expertise to consult and deliver desired business outcomes

IBM GS: IBM will drive low-single-digit C&SI growth in 2014 anchored by its end-to-end solution packages, which leverage cross-service-line offerings. The newly established Interactive Experience consulting practice will help fuel service line growth as clients seek more data-driven strategy development.

Accenture: The firm uses its vertical expertise and will target C-Suite executives by pairing the consulting expertise of the Accenture Strategy Growth platform with the technology capabilities of the recently formed Business Solution Group in collaboration with SAP.

Fujitsu: Increased IT services spend stemming from public sectors in more mature markets in APAC enabled Fujitsu to drive solutions/SI revenue growth year-to-year in local currency during 1Q14.

CGI: Adjusting for the impact of the Logica acquisition, CGI’s systems integration projects in the U.S. and Europe expanded C&SI revenue 48.2% year-to-year in 1Q14 as public and private sector engagement teams fielded additional demand.

TCS: Consulting growth was driven by advisory demand around implementation and managed services, secure application developments, and the adoption of cloud, analytics and social media.

Cognizant: Cognizant continues to invest in cloud, analytics and mobility offerings to address growing demand for transformational IT solutions, led by domain-specific consulting. TBR believes Cognizant will leverage its “Code Halo” thought leadership approach to build mindshare around its business intelligence (BI) and analytics strategy consulting services.

$10,759

$9,882

$15,417

$15,304

$20,387

$20,440

$- $5,000 $10,000 $15,000 $20,000 $25,000

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

FUJIT

SUAC

CENT

URE

IBM

GS

Revenue in $ mi lions

TOP THREE TTM C&SI REVENUE


TBR

17.5%

20.5%

13.6%

21.7%

133.9%

48.2%

0.0% 50.0% 100.0% 150.0%

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

COG

NIZ

ANT

TCS

CGI

YTY Growth

TOP THREE TTM C&SI REVENUE GROWTH


TBR

TBR


Segment Views: C&SI

To overcome hesitancy, vendors provide narrow, niche C&SI solutions as a stepping stone for larger future engagements with clients

Key Deals 1Q14Company TBR Insights

Accenture/ Government of Canary Islands

Accenture will deliver technology services and management consulting to modernize the client’s judicial information system and improve information sharing.

IBM/ Bank of China

IBM provided end-to-end consulting and implementation services to aid the Bank of China in the development and launch of a new global online banking platform that coordinates and centralizes customer information from the bank’s 30 countries.

Capgemini/ HEMA

In an ongoing collaboration with HEMA, Capgemini will provide IT services including business consulting, SAP application management, application development, e-commerce hosting and ITO services.

Portfolio and Go-to-Market Changes• Demand for C&SI will be driven by system integration

services as clients seek to transform infrastructures. Firms will look to leverage expertise to capture C&SI in other verticals to help broaden pipelines.

• Consulting revenues will be driven by digital engagements in cloud, mobility, security, social media and analytics as clients look to modernize their infrastructure, especially in regions such as North America and Europe.

Trends and Outlook• Vendors will look to fuel growth in the C&SI segment by

focusing on disruptive and innovative solutions such as cloud, big data and analytics, mobility and security.

• Xerox took restructuring actions in April to sharpen the strategic focus of its HR consultancy, splitting Buck Consultants’ retirement business into two separate divisions, Corporate Solutions and Trustee Services. David Piltz, a veteran of Buck Consultants, will run Buck Trustee Services, and John Deacon, recruited from Helm Godfrey, will lead Buck Corporate Solutions.

Key M&As 1Q14Company TBR Insights

Xerox/ Smart Data Consulting

Xerox acquired Smart Data to expand its e-discovery capabilities and consulting services. The firm’s consulting focus and e-discovery managed services will help fill gaps in Xerox’s Litigation Services portfolio.

TBR


EMC SVCS

COGNIZANT

CGI

SAP SVCS

GENPACT

INFOSYS

CAPGEMINI

DELL SVCS

XEROXORACLE SVCS

ACCENTURE

WIPRO

TCSIBM GS

CONVERGYS ATOS

HP SVCS

T-SYSTEMS

CSC

UNISYS

ERICSSONFUJITSU

HCLT

BT SVCS

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

-20% -10% 0% 10% 20% 30% 40% 50% 60%

Tota

l Ser

vice

s TTM

Rev

enue

Gro

wth

YTY

ITO TTM Revenue Growth YTY

1Q14 ITO SERVICES TTM REVENUE AND YTY GROWTH TBR

NOTE: SPHERE SIZE REFLECTS VOLUME OF TTM REVENUE.SOURCE: TBR ESTIMATES AND COMPANY DATA

Avg. Total Services TTM YTY Growth = 1.1%

Avg. ITO TTM YTY Growth = -1.1%

CAPITA

550%

≈

LeadersEMC’s ITO TTM year-to-year revenue growth of 41.8% was driven by the company’s converged infrastructure

capabilities within VCE Vblocks, which enables customers to harness the power of on-premises IaaS. Solutions such as EMC Unified Infrastructure Manager for VCE Vblock Systems provide customers with life cycle management and integrated compliance services.

LaggardsPricing pressures in IT and telecommunications services coupled with strict profitability criteria for new business and

cancellation of unprofitable deals negatively impacted T-Systems’ ITO revenue growth. T-Systems continues to focus on higher-growth opportunities such as cloud instead of traditional IT systems management. In April the firm sold its subsidiary Individual Desktop Solutions GmbH (IDS), which provides on-site desktop services and solutions, to the Aurelius group.

26

Segment Views: ITO

Vendors are developing cloud-based ITO offerings — replacing traditional engagements with lower-revenue-stream deals, but at a higher margin

TBR


Segment Views: ITO

ITO revenue and growth leaders are transitioning their ITO sales capabilities to capture more small deals

IBM GS: IBM continues to expand SoftLayer to capture large-scale engagements that counter ITO runoff. In 1Q14 IBM committed $1 billion to develop PaaS and hybrid cloud infrastructure to support cloud-based applications and environments.

HP Services: Smaller, more tactical and frequent cloud deals replace large-scale transformations, eroding traditional revenues but improving profitability. HP reported double-digit growth in cloud-related revenue in 1Q14 due to the wider adoption of cloud.

Fujitsu: In March Fujitsu developed advanced cloud optimization services that enable end users to automate services and more efficiently manage operations.

Capita: In 1Q14 Capita fully integrated IT managed services vendor Northgate Managed Services, which it had purchased in 1Q13, under the name of Capita Managed IT Services (CMITS), impacting the spike in ITO revenue growth. We expect the subsidiary to become Capita’s key ITO revenue contributor and will grow revenues at a pace mirroring or surpassing corporate growth because demand from regional clients for data center managed services is on the rise.EMC Services: EMC relies on the federation and its partner program, which provides EMC customers with partners’ “as a Service” offerings, to continue to drive EMC Services’ revenue growth.HCLT: HCLT maintains double-digit year-to-year ITO expansion by capitalizing on ITO vendor churn in the U.S., Europe and Australia. The firm recently won a cloud contract with a telecom client in the Middle East for SaaS and IaaS.

26.2%

36.2%

34.2%

41.8%

N/A

544.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

HCLT

EMC

SVCS

CAPI

TA

YTY Growth

TOP THREE TTM ITO REVENUE GROWTH


TBR

≈

550.0%

$7,140

$6,624

$15,568

$14,482

$24,559

$23,412

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

FUJIT

SUHP

SVC

SIB

M G

S

Revenue in $ mi llions

TOP THREE TTM ITO REVENUE


TBR

TBR


Segment Views: ITO

Trends and OutlookVendors will strengthen their positions by integrating new

capabilities in cloud, security and mobility to exploit the increasing demand for cost-reducing digital solutions. Migration of clients from traditional ITO to cloud architectures will continue to impact revenues through 2014. Vendors will selectively engage in partnerships to optimize ITO offerings as cloud continues to revolutionize the segment.

Portfolio and Go-to-Market Changes• Capital investments, acquisitions and strategic partnerships

will remain a key point for global vendors as they attempt to build out their capabilities in cloud and offset declining revenues in their traditional ITO business. In addition to IBM’s announced $1.2 billion investment in cloud data centers, the firm recently acquired Database as a Service (DBaaS) provider Cloudant and SaaS vendor Silverpop to enhance its cloud-based application offerings.

• Vendors are reorganizing portfolios around high-growth managed service offerings such as cloud, specifically in IaaS and in regions such as France and North America. CSC will leverage its BizCloud and managed security services to reduce pricing pressures in ITO. Vendors will also bundle ITO with C&SI, AO and BPO offerings to differentiate from peers as traditional ITO services progressively become commoditized.

Capital investments, M&As and alliances will expand as vendors look to build capabilities in cloud to supplement ITO revenues


Infosys/ UL

Infosys modernized and transformed UL’s technology infrastructure, uniting disparate business units, technology operations and platforms in a connected structure.

Wipro/ Carillion Plc.

Wipro will deliver ITO, AO and BPO services to the U.K.-based construction services company through the integrated transformation and outsourcing deal.

TCS/ Cargill

TCS was chosen by the U.S. firm to act as an outsourcing partner for IT operations, which will impact 900 employees at Cargill. As part of the deal some of these employees will transfer to TCS.

Key M&As 1Q14Company TBR Insights

TCS/ Mitsubishi

TCS merged TCS Japan with Mitsubishi’s IT Frontier subsidiary, generating a combined $600 million in annual revenue. With 51% ownership, TCS will maintain control of the merger, which will expand TCS’ footprint in Japan and add 1,400 employees from IT Frontier for a total of 2,400 employees in the country.

TBR


Leaders• Cognizant continues to develop industry expertise within its global delivery model to enhance its domain expertise

while still leveraging its global delivery capabilities to provide services that are cost-competitive against IBM and Accenture. We expect Cognizant will leverage its rapidly expanding footprint in the Philippines to capture BPO opportunities in the U.S. healthcare vertical.

Laggards• HP’s TTM BPO revenue declined 13.4% year-to-year, partly due to account runoffs and the industry shift to a la carte

adoption of Business Process as a Service (BPaaS) cloud solutions, driving down traditional BPO opportunities and shrinking the length and size of contracts.

29

Segment Views: BPO

BPO leaders are expanding their vertical-specific offerings, while laggards struggle with price competitiveness due to a lack of low-cost headcount

TBR


Segment Views: BPO

BPO leaders build scale through acquisitions and platforms for quick delivery and drive revenue expansion by adding analytics to increase value

Xerox: Xerox continued to dominate in BPO despite the runoff of its government student loan business, which slowed its growth. Xerox’s acquisition of Invoco will help grow BPO in Europe in 1H14.

Accenture: Accenture will benefit from the acquisitions of Europe-based ClientHouse and Evopro Group, which targeted capabilities in cloud and embedded software and will transform labor-intensive BPO to BPaaS offerings.

Capita: Capita continues to win new business by leveraging M&As that add industry-specific BPO services. In 1Q14 Capita acquired U.K.-based residential mortgage administration services vendor Crown Mortgage Management, which we believe will expand Capita’s offerings within the commercial sector’s financial services vertical.

Cognizant: Cognizant leverages Horizon 2 and large-scale, vertical-specific deals in BPO, generating approximately 20% of the firm’s total sales through deals that package BPO with consulting, AO and ITO. The firm also builds platform-based BusinessCloud solutions to enrich its BPO offerings.TCS: TCS supports nonlinear growth in BPO by leveraging partnerships such as the one with Microsoft Business Solutions to expand industry-specific, platform-based BPaaS offerings. New offerings from the Digital Software and Solutions Group will augment its other vertical solutions.Infosys: Infosys will expand and leverage its portfolio of cloud-based BPO platforms such as DigitizeEdge to support opportunities in high-growth verticals and markets. Infosys’ deal with Orange Business Services showcases its expanding reach in the communications vertical within continental Europe.

TBR


Segment Views: BPO

Trends and Outlook• Acquisitions and alliances will expand BPO portfolios in high-

growth areas such as mobility, analytics, social, cloud and big data.

• Enterprises will augment their BPO platforms and invest in platforms to capture the growing demand in high-growth verticals such as healthcare, retail and energy in the U.S. and Europe.


Accenture/ Statoil ASA

Accenture will provide finance and control services that will improve cost-effectiveness and expand the global organization.

Infosys/ Royal Philips

Infosys was awarded a five-year contract extension by the European company to continue to provide financial and actuarial services, as well as procurement solutions.

TCS/ AMP

AMP outsourced back-office functions to TCS to enhance efficiency and reduce employee costs. AMP will cut jobs as a result of the outsourced work.

Xerox/ BBVA Compass

Xerox signed an outsourcing deal with BBVA Compass to take over mortgage servicing, loan processing and various back-office tasks.

Portfolio and Go-to-Market Changes• Vendors will continue to seek tuck-in acquisitions that will

enhance their BPO offerings and help differentiate against peers. Xerox’s acquisitions provide it with vertical-specific capabilities in the insurance and commercial healthcare industry (ISG Holdings) as well as the legal services segment (Smart Data Consulting), which will position the firm to improve its margins through increased sales of higher-margin vertical-specific offerings, specifically in the BPO segment.

• Firms will expand core BPO (horizontal — F&A, HR, etc.) and industry-specific BPO and increase focus on vertically oriented BPO to bring in analytics and platform-driven BPO. Capgemini shifted from a horizontal- and F&A-centric structure to a vertically oriented BPO structure to bring analytics- and platform-driven BPO.

BPO portfolios will be augmented by acquisitions and alliances in high-growth areas such as mobility, cloud and big dataKey M&As 1Q14Company TBR Insights

Xerox/ISG Holdings

Xerox’s purchase of ISG Holdings adds 700 people and vertical-specific BPO capabilities for the insurance and commercial healthcare industries, building out the firm’s higher-margin vertical services.

TBR


Segment Views: AO

AO leaders benefit from cloud application modernization capabilities, while laggards’ lack of low-cost resources hurt their competitiveness

LeadersSAP Services will transition to a strategic advisory role to differentiate itself by focusing on providing outcomes to its

customers. Application development services will remain a core driver of the company’s AO revenue as it tailors offerings to customers’ industry- or role-specific needs through codevelopment efforts. SAP leverages its Co-Innovation Labs (COILs) to collaborate with partners on industry-specific solutions.

LaggardsBT remains challenged in the AO segment due to India-based competitors such as Wipro and HCLT, which have

flooded the European market, taking market share from Europe-based vendors such as Capgemini, T-Systems and Atos. The India-based companies can provide low-cost solutions by comparison.

TBR


Segment Views: AO

Leading AO vendors are ramping up alliances and developing cloud and vertical-specific AO offerings to bolster their portfolios

Accenture: Competition within the application services market and clients’ shifts toward multisourcing contracts have pressured pricing, forcing Accenture to increase use of its Global Delivery Network. The firm will continue to bundle AO with C&SI and ITO.

TCS: Applications consolidation and rationalization are driving opportunities in AO. Development and management of mobile applications will remain a main focus of TCS.

Infosys: Infosys will strengthen key partnerships with Microsoft, SAP and Oracle to capture end-to-end applications engagements as clients move enterprise workloads to cloud environments. Infosys was employed to deploy Oracle Business Suite and integrate a Strategic Financial Systems system for global technology airline company SITA, enabling it to improve operational efficiency.

SAP: SAP Custom Development drives SAP’s AO revenue as the company helps customers streamline the application development process. SAP is interested in expanding in the financial services industry, customizing SAP for Banking to meet banks’ specific needs while providing seamless integration with existing SAP applications.

Cognizant: The firm benefits from clients seeking to reduce IT costs and increase flexibility by outsourcing applications management. The fastest BusinessCloud platform builds on Cognizant’s AO strengths by providing clients with instant access to the firm’s testing resources.

Genpact: Through its strategy to concentrate on select verticals such as banking, financial services and insurance (BFSI), healthcare and retail, Genpact leverages its institutional domain expertise to deliver industry-focused application and database managed services to accelerate AO growth.

TBR


Segment Views: AO


TCS/ Qantas

This contract is part of a larger deal awarded to IBM in which TCS will provide application, transformation and maintenance solutions for Qantas. Over time the contract value will be reduced, and 200 employees will be transferred to IBM.

Atos/LCH.Clearnet

Atos will provide systems integration, managed services, application hosting, and application and production management.

IBM/BP

IBM was selected by BP to provide application management and integration services for the firm’s global enterprise systems as well as provide service desk support for BP’s employees across the Americas and Europe.

Accenture/Tryg

Accenture will provide application and maintenance services for the client’s noncore insurance applications such as finance and accounting (F&A), CRM and Web solutions that support Denmark and Norway operations.

Infosys/Lansforsakringar AB

Infosys provides development and management support services for the client’s application infrastructure.

Portfolio and Go-to-Market Changes• Application modernization will be a primary growth

driver in 2014 as demand continues to increase from enterprises looking to migrate applications to the cloud, to cut IT costs and allow for outsourcing management for enterprise applications. TBR anticipates cloud opportunities will help companies broaden revenue streams in 2014 as firms increasingly adopt SaaS applications, in turn weakening demand for traditional AO services.

• Vendors such as Capgemini, Xerox, Fujitsu and Wipro will win repeat business and augment value by bundling ITO, BPO and C&SI with AO into end-to-end solutions to generate revenues.

Trends and Outlook• Application consolidation and rationalization will

help drive revenue opportunities in AO.• Vendors will seek partnerships to couple solutions

and services to provide clients end-to-end cloud application solutions. Infosys will strengthen key partnerships with Microsoft, SAP and Oracle to capture end-to-end applications engagements as clients move enterprise workloads to cloud environments.

AO providers will expand revenue pipelines by offering end-to-end solutions that bundle AO with C&SI and ITO services

TBR


Geographic Views: Americas

Americas revenue growth leaders leverage vertical-specific expertise to win engagements in healthcare and financial servicesLeaders• The U.S. healthcare and financial services

industries continue to generate opportunities for Cognizant, though hesitant spending due in part to recent regulatory shifts caused North America year-to-year revenue growth to decelerate compared to 4Q13 and 1Q13. We believe Cognizant’s acquisition of Itaas, Inc. will enable the firm to broaden its vertical reach in the U.S. to the cable industry.

• In North America, Genpact expands its onshore sales and delivery presence and targets underpenetrated verticals such as capital markets and healthcare with solutions that aid with regulatory compliance and process transformation.

• EXL has recently won a transformation project that embeds analytics technology with a U.S. bank. We expect EXL to continue to leverage its industry-specific solutions to differentiate in the marketplace, including successfully deploying EXL Landa’s CareRadius medical management suite for two leading BlueCross BlueShield health plans.

TBR


Constrained public sector spending in the Americas negatively affected revenue growth laggards


Laggards• CSC derives approximately one-third of its

revenue from its North American Public Sector segment, making up roughly half of its Americas business. CSC will continue to be a laggard in Americas revenue through 2014 due to continued headwinds in the federal IT sector.

• TBR estimates HP Services experienced a 6.9% year-to-year revenue decline in the Americas in 1Q14 despite winning large deals with DMDC and the Colorado Department of Health Care Policy and Financing, and a high-profile win with the U.S. Department of Homeland Security. We believe HP’s embrace of OpenStack will aid the company in rebounding within the Americas to improve interoperability of what were previously disparate customer infrastructures.

• IBM invests in niche IP-focused acquisitions in the U.S. to bolster the company’s cloud portfolio and entice legacy infrastructure services clients to become cloud clients. The firm recently acquired Massachusetts-based DBaaS provider Cloudant and Atlanta-based marketing automation vendor Silverpop.

TBR


Leaders are leveraging vertical-specific capabilities and expertise in cloud-based services to drive revenue growth


IBM GS: IBM’s Americas performance will hinge on the firm’s success in the cloud market space. It continues to bet big on its cloud capabilities. In 1Q14 the firm announced plans to open cloud data centers in Washington, D.C.; Toronto, Dallas and Mexico City, among other global locations, as part of its SoftLayer expansion.

HP Services: HP’s growth in the healthcare industry will continue, driven by demand for HP’s healthcare solutions. HP won a $116 million contract to support the implementation of a new Medicaid management system for the Colorado Department of Health Care Policy and Financing.

Accenture: TBR expects the firm will utilize the managed service contract to improve HealthCare.gov as a lever to pursue payer and provider opportunities in Canada, where patient demand for access to electronic health records is on the rise.

Genpact: The acquisition of healthcare IT services firm Jawood in 1Q13 continued to boost Genpact’s TTM Americas revenue growth in 1Q14 as the company leverages cross-selling opportunities within its expanded client base.

Cognizant: Cognizant continues to build onshore delivery resources in the U.S. to drive Americas growth. Following the firm’s 4Q13 announcement of plans to hire 10,000 U.S. employees over the next three years, Cognizant expanded its delivery center in Tampa, Fla., by opening a new 500-seat facility in 1Q14.

TCS: TBR believes TCS’ recent onshore hiring efforts in the U.S. and Canada to offset potential visa reform are generating higher-value, longer-term signings opportunities, particularly in the BFSI and healthcare verticals.

12.9%

14.9%

19.1%

17.5%

16.7%

24.7%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

TCS

COG

NIZ

ANT

GEN

PACT

YTY Growth

TOP THREE TTM AMERICAS REVENUE GROWTH


TBR

$13,033

$13,701

$15,472

$14,664

$26,344

$25,211

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

ACCE

NTU

REHP

SVC

SIB

M G

S


TOP THREE TTM AMERICAS REVENUE


TBR

TBR


Geographic Views: EMEA

EMEA revenue growth leaders make local acquisitions to inorganically improve exposure to new clients and expand revenues in the regionLeaders• Actively shifting its revenue mix in Europe

on the heels of acquiring Europe-based Logica provided CGI with a solid platform to capture a lead position in growth and revenue.

• Like its India-centric peers, Cognizant continues to target opportunities in Europe, where clients are increasingly open to outsourcing. Recent consulting acquisitions position the firm well in continental European countries such as Germany and France, where language and cultural customs have made onshore, client-facing resources a prerequisite to serving those regions.

• WNS is benefiting from the South Africa-based Fusion Outsourcing acquisition in 2Q12. The firm expands headcount in South Africa to meet local market demand and uses its locations in the country to deliver global contracts. In the South African market the firm is doing customer service work, but identifies insurance as an area of future opportunity.

TBR



EMEA laggards invest in cloud, analytics and mobility offerings to capture high-value deals that encompass C&SI and outsourcing componentsLaggards• Atos experienced growth challenges in EMEA in

1Q14, but this performance is in line with Atos’ expectations, and the growth pressures will likely remain in 2Q14. However, TBR expects Atos’ growth to gradually recover in 2H14. Atos’ investments in higher-value services with an emphasis on cloud, security and vertical specialization, largely in C&SI but also starting in ITO, will help the firm ramp up revenue growth through 2016.

• TBR estimates CSC’s business in Europe was down 9.8% year-to-year on a TTM basis in 1Q14 as overall demand remains soft. Early signs of expansion of IT services spending in Europe toward the end of 1Q14 indicate an improving market for CSC’s operations in the region in 2H14.

• Aon Hewitt’s U.K. pension consulting and administration business supports marginal EMEA growth, but demand remains weak in continental Europe. We believe the acquisition of U.K.-based consultancy Lorica Employee Benefits in March enhances Aon Hewitt’s HR consulting portfolio and removes a local competitor in one of the firm’s key markets.

TBR



Vendors in EMEA benefit from increasing client interest in outsourcing to reduce costs and demand for IT modernization and cloud services

IBM GS: IBM GS drives revenue performance in Europe through large-scale transformation and outsourcing deals as demand grows in the region for cost reduction and transitioning to cloud and mobile IT environments. The firm also seeks to diversify EMEA revenue over the long term through “Project Lucy,” IBM’s 10-year, $100 million innovation investment initiative in Africa.Accenture: Demand for outsourcing services from budget-conscious clients in central and northern Europe supported regional sales. The firm won a five-year ADM services contract with insurance vendor Tryg and a BPO services agreement with energy firm Statoil.T-Systems: The firm transforms its portfolio to support digital innovation, but offerings such as cloud are small in revenue share and will not offset revenue declines in the firm’s core Information and Communications Technology business.

CGI: The company’s TTM revenue growth in EMEA is a result of integrating U.K.-based Logica, which enhanced the firm’s capabilities, footprint and revenue in Europe. Demand for CGI’s SI and modernization services remained healthy in 1Q14, leading TBR to expect further expansion for the company in the region.Cognizant: Cognizant continues to target opportunities in Europe, where clients are opening up to outsourcing. Recent consulting acquisitions position the firm well in Germany and France, where language and cultural customs have made onshore, client-facing resources a prerequisite to serving those regions.Convergys: The acquisition of peer Stream Global in January expanded the firm’s capabilities in Europe. Rising European outsourcing spending and the Stream Global acquisition contributed to the firm’s 25.1% year-to-year TTM revenue growth in 1Q14.

TBR


Geographic Views: APAC

To compete with local APAC firms, vendors expand local market resources through acquisitions and increase their global delivery staffLeaders• Convergys accelerated its APAC revenue

growth to 27.6% in 1Q14 by leveraging an aggressive M&A strategy, evidenced by its acquisition of Datacom’s Philippines and Malaysian operations in 2Q13 as well as its purchase of Stream Global in 1Q14. We believe Convergys will continue to expand its headcount and operations in the region, leading to further growth in 2Q14.

• WNS made improvements to its sales team structure by expanding the team across geographies, including APAC, and verticals, strengthening industry-specific expertise. This structure better positions WNS to win business in geographies where the firm was previously underpenetrating the market.

• Capgemini’s emphasis on strengthening its leadership outside Europe will help diversify its global revenue. Salvador, formerly the CEO of Sogeti, became head of Capgemini in APAC and will group the company’s operations in the region into one unit to facilitate local market expansion.

TBR



Slowing growth in China and reduced APAC public sector spending negatively impact laggards

Laggards• Unisys’ growth in APAC was negatively

affected due to weakness in public sector spend in the region, particularly in Australia and New Zealand.

• Ericsson will continue to suffer from poor comparisons to 2Q13 due to network completions in Japan and lower spend on 2G in China. The scaling up of LTE deployments in China offers deployment and integration opportunities for the vendor.

• TBR sees an opportunity for SAP to return to growth in CY14 by capitalizing on newer partnerships, including its work with China Telecom, to galvanize revenue growth in high-opportunity countries and regions such as China. Weak demand in Japan resulted in SAP’s APAC revenue contracting in the quarter.

TBR


Firms are investing in APAC delivery centers in Malaysia, Australia and the Philippines to offer cost-competitive IT solutions


Fujitsu: Outside of its core geography in Japan, Fujitsu uses its virtualization and transformational data center services to win favor in emerging economies. The company pursues business in Australia and New Zealand in 2Q14 to diversify its existing APAC client base.

IBM GS: IBM will continue to invest in its service delivery capabilities in APAC, evidenced by its new delivery center in Malaysia. IBM looks to capture multiyear deals in growth markets that are centered on cloud-centric IT modernization. Deals won in 1Q14 indicate traction in India for run-the-business and change-the-business projects.

HP Services: The company expands in APAC, targeting Australia as a strategic pivot point to serving the region. In April HP opened a 130,000-square-foot Security Operations Center in Sydney, which will join HP’s U.S. and U.K. security centers. The investment in Australia follows HP’s partnership with the state of South Australia in February and helps support its desired growth in APAC.

WNS: WNS relies on its service delivery capabilities in the Philippines, Sri Lanka and India to meet outsourcing demand from clients with an APAC presence. WNS has invested in centers in special economic zones in India, enabling the firm to improve its delivery capabilities.

Convergys: The firm is scaling its APAC operations through M&A, evidenced by its acquisition of Datacom’s Malaysian and Philippines operations as well as its purchase of Stream Global in 1Q14. Convergys invests in APAC business to expand its presence in the region and capture demand for customer management outsourcing.

Cognizant: Cognizant’s APAC revenue expansion was led by increasing demand for large-scale outsourcing engagements supporting IT modernization, including the firm’s recent application development deal with Infocomm Development Authority of Singapore.

40.0%

27.0%

6.4%

27.6%

162.0%

58.8%

0.0% 50.0% 100.0% 150.0% 200.0%

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

COG

NIZ

ANT

CON

VERG

YSW

NS

YTY Growth

TOP THREE TTM APAC REVENUE GROWTH


TBR

$6,491

$6,135

$14,015

$13,239

$20,927

$18,673

$0 $5,000 $10,000 $15,000 $20,000 $25,000

1Q13

1Q14

1Q13

1Q14

1Q13

1Q14

HP S

VCS

IBM

GS

FUJIT

SU


TOP THREE TTM APAC REVENUE


TBR

TBR


Financial Metrics

Key Metrics (Revenue and Growth)

Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

RANKING TBR SCORE COMPANY TOP 3 COMPANIES

1 8.75 IBM GS2 6.72 HP SVCS3 6.68 FUJITSU4 6.49 ACCENTURE5 5.26 TCS6 5.23 CAPGEMINI7 5.20 CSC8 5.14 ERICSSON9 5.06 XEROX

10 5.03 ATOS11 5.02 T-SYSTEMS12 4.99 CISCO SVCS13 4.90 CGI14 4.89 COGNIZANT15 N/A DELL SVCS16 4.78 INFOSYS17 4.65 WIPRO18 4.65 CAPITA19 4.59 BT SVCS20 4.55 ORACLE SVCS21 4.53 HCLT22 4.43 EMC SVCS23 4.39 AON HEWITT24 4.36 SAP SVCS25 4.30 UNISYS26 4.27 CONVERGYS27 4.25 GENPACT28 4.14 CIBER29 4.11 WNS30 4.11 EXL

$13,813 $7,834

$7,694 $7,131

$3,503 $3,429

$3,329 $3,149

$2,923

$2,828 $2,812

$2,725 $2,453 $2,422

$2,180 $2,092

$1,721 $1,708

$1,537 $1,417 $1,361

$1,066 $965

$868 $691

$606 $528

$218 $130 $122

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000

SOU

RCE: TBR AND

COM

PANY D

ATA

REVENUE (IN $ MILLIONS)

1Q144Q13Average

1Q14 Average = $2,775 1Q14 Standard Deviation = $2,908

TBR

TBR


Financial Metrics

Key Metrics (Revenue and Growth)



1 5.88 CONVERGYS2 5.73 COGNIZANT3 5.48 TCS4 5.43 HCLT5 5.39 CAPITA6 5.18 FUJITSU7 5.16 WNS8 5.15 WIPRO9 5.09 INFOSYS

10 5.09 EMC SVCS11 5.04 CGI12 4.93 EXL13 4.93 GENPACT14 N/A DELL SVCS15 4.80 CISCO SVCS16 4.73 ORACLE SVCS17 4.73 AON HEWITT18 4.72 ACCENTURE19 4.68 CAPGEMINI20 4.67 XEROX21 4.63 CIBER22 4.56 IBM GS23 4.56 BT SVCS24 4.53 ATOS25 4.43 UNISYS26 4.40 CSC27 4.40 ERICSSON28 4.32 HP SVCS29 4.25 T-SYSTEMS30 4.23 SAP SVCS

TBR

22.7%19.9%

15.2%

14.3%

13.5%9.6%

9.3%9.0%

7.9%

7.8%7.0%

5.0%4.8%

3.5%2.6%

1.2%1.2%

1.0%0.2%

0.1%-0.7%

-2.0%-2.1%

-2.5%

-4.4%

-5.0%-5.1%

-6.5%-7.8%

-8.2%

-15% -10% -5% 0% 5% 10% 15% 20% 25%

SOU

RCE: TBR AND

COM

PANY D

ATA

REVENUE GROWTH

1Q144Q13Average

1Q14 Average = 3.7% 1Q14 Standard Deviation = 8.0%

TBR


Cost MetricsFinancial Metrics



1 8.40 CISCO SVCS2 6.45 TCS3 6.18 ORACLE SVCS4 5.85 EMC SVCS5 5.82 COGNIZANT6 5.61 HCLT7 5.58 GENPACT8 5.57 EXL9 5.57 AON HEWITT

10 5.44 CONVERGYS11 5.42 WNS12 5.41 INFOSYS13 5.35 WIPRO14 5.24 IBM GS15 5.20 ATOS16 4.81 ACCENTURE17 4.67 CGI18 N/A DELL SVCS19 4.57 BT SVCS20 4.48 CAPITA21 4.47 ERICSSON22 4.42 CSC23 4.33 XEROX24 4.25 CIBER25 4.21 FUJITSU26 4.08 CAPGEMINI27 4.07 T-SYSTEMS28 3.79 HP SVCS29 3.21 SAP SVCS30 3.02 UNISYS

TBR

65.4%46.8%

44.3%41.2%

40.9%38.9%38.6%38.5%38.4%

37.2%37.1%37.0%

36.4%35.3%

35.0%31.3%

30.0%29.2%29.1%

28.1%28.1%

27.6%26.7%

25.9%25.6%

24.4%24.2%

21.6%16.1%

14.3%

0% 10% 20% 30% 40% 50% 60% 70% 80%

SOU

RCE: TBR AND

COM

PANY D

ATA

GROSS MARGIN

1Q144Q13Average


TBR


Financial Metrics

Cost Metrics



1 6.50 INFOSYS2 6.44 WIPRO3 6.34 UNISYS4 6.31 ORACLE SVCS5 6.16 SAP SVCS6 N/A DELL SVCS7 6.02 HCLT8 5.82 HP SVCS9 5.62 FUJITSU

10 5.54 CAPGEMINI11 5.42 TCS12 5.37 ACCENTURE13 5.35 XEROX14 5.31 CGI15 5.23 CSC16 5.18 CAPITA17 4.83 IBM GS18 4.69 COGNIZANT19 4.69 BT SVCS20 4.54 CIBER21 4.49 ERICSSON22 4.26 T-SYSTEMS23 4.20 GENPACT24 4.16 WNS25 4.14 CISCO SVCS26 4.01 EXL27 3.24 EMC SVCS28 3.20 ATOS29 3.01 AON HEWITT30 2.64 CONVERGYS

TBR

11.5%11.8%

12.4%12.6%

13.4%13.5%

14.2%15.4%

16.5%17.0%

17.7%17.9%18.1%18.3%

18.7%19.1%

21.1%21.9%21.9%

22.7%23.0%

24.3%24.7%24.9%25.0%

25.8%30.2%30.4%

31.5%33.6%

0% 5% 10% 15% 20% 25% 30% 35% 40%

SOU

RCE: TBR AND

COM

PANY D

ATA

OPERATING EXPENSES AS A % OF SALES

1Q144Q13Average


TBR


Productivity/Resource Metrics

TBR

Financial Metrics



1 8.57 CISCO SVCS2 7.28 EMC SVCS3 7.01 BT SVCS4 5.48 ORACLE SVCS5 5.42 FUJITSU6 5.38 SAP SVCS7 5.28 T-SYSTEMS8 5.26 ERICSSON9 5.16 IBM GS

10 5.05 HP SVCS11 N/A DELL SVCS12 4.84 CSC13 4.81 ATOS14 4.77 CGI15 4.76 UNISYS16 4.75 AON HEWITT17 4.71 CIBER18 4.64 CAPITA19 4.61 XEROX20 4.57 ACCENTURE21 4.56 CAPGEMINI22 4.33 HCLT23 4.30 COGNIZANT24 4.29 INFOSYS25 4.26 TCS26 4.25 WIPRO27 4.19 GENPACT28 4.14 CONVERGYS29 4.13 EXL30 4.11 WNS

TBR

$860,367$616,166

$565,155$276,257

$265,993$258,814

$238,886$235,070

$217,413$196,947$187,022

$157,285

$149,893$144,084$141,311$138,840

$132,290$117,985$112,372

$104,897$104,312

$59,460$54,807$52,012

$46,995$45,141

$34,657$24,341$22,153$19,049

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000

SOU

RCE: TBR AND

COM

PANY D

ATA

REVENUE PER EMPLOYEE

1Q144Q13Average


TBR


Financial Metrics




1 10.00 CISCO SVCS2 6.00 EMC SVCS3 5.83 ORACLE SVCS4 5.15 IBM GS5 N/A DELL SVCS6 4.98 BT SVCS7 4.97 SAP SVCS8 4.81 CGI9 4.81 ERICSSON

10 4.80 FUJITSU11 4.80 ACCENTURE12 4.78 HCLT13 4.78 TCS14 4.77 HP SVCS15 4.76 CSC16 4.76 INFOSYS17 4.74 AON HEWITT18 4.73 XEROX19 4.73 COGNIZANT20 4.72 WIPRO21 4.71 CAPITA22 4.70 UNISYS23 4.69 CAPGEMINI24 4.68 ATOS25 4.65 GENPACT26 4.62 T-SYSTEMS27 4.61 EXL28 4.59 WNS29 4.59 CONVERGYS30 4.57 CIBER

TBR

$358,456$92,196

$81,345$37,911

$30,037

$26,548$25,839

$15,855

$15,839

$15,195$15,194

$13,853

$13,656

$13,137

$12,815$12,478

$11,399

$10,763

$10,505$10,179

$9,503

$8,480

$7,811$7,463

$5,358$3,466$3,239

$1,871

$1,386

$418

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000

SOU

RCE: TBR AND

COM

PANY D

ATA

OPERATING INCOME PER EMPLOYEE

1Q144Q13Average


TBR


Productivity/Resource MetricsFinancial Metrics

Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR. TBR estimates utilization rates or uses reported utilization rates by the vendors based on their own definitions, which can vary across the vendors.


1 6.76 SAP SVCS2 6.62 CIBER3 N/A DELL SVCS4 6.61 HP SVCS5 6.53 ACCENTURE6 6.53 IBM GS7 6.14 COGNIZANT8 6.02 HCLT9 5.94 TCS

10 5.65 T-SYSTEMS11 5.47 XEROX12 5.43 CAPGEMINI13 5.11 ORACLE SVCS14 5.07 CSC15 5.03 EXL16 4.89 INFOSYS17 4.81 ERICSSON18 4.78 CISCO SVCS19 4.67 CGI20 4.61 WIPRO21 4.27 UNISYS22 4.25 AON HEWITT23 4.16 EMC SVCS24 4.01 ATOS25 4.00 FUJITSU26 3.98 BT SVCS27 3.98 GENPACT28 3.94 CAPITA29 3.92 CONVERGYS30 3.34 WNS

TBR

88.3%87.5%87.5%

87.5%

87.0%87.0%

84.9%84.2%83.8%

82.2%81.2%

81.0%79.2%79.0%78.8%78.0%

77.6%

77.4%76.8%76.5%

74.6%74.5%

74.0%73.2%73.1%73.0%73.0%72.8%72.7%

69.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

SOU

RCE: TBR AND

COM

PANY D

ATA

UTILIZATION RATE

1Q144Q13Average


TBR


Financial Metrics


Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR. TBR estimates turnover rates or uses reported turnover rates by the vendors based on their own definitions, which can vary across the vendors.


1 6.08 ATOS2 6.08 CISCO SVCS3 6.01 SAP SVCS4 5.73 CIBER5 5.71 TCS6 5.58 ACCENTURE7 5.52 CGI8 5.48 CAPITA9 5.43 BT SVCS

10 5.43 FUJITSU11 5.29 ERICSSON12 5.20 IBM GS13 5.19 COGNIZANT14 5.17 ORACLE SVCS15 5.15 EMC SVCS16 5.15 T-SYSTEMS17 5.11 CONVERGYS18 5.02 UNISYS19 5.00 CAPGEMINI20 5.00 XEROX21 4.93 AON HEWITT22 4.92 HCLT23 4.89 WIPRO24 4.87 HP SVCS25 4.81 CSC26 N/A DELL SVCS27 4.33 INFOSYS28 3.72 GENPACT29 2.45 EXL30 2.04 WNS

TBR

9.3%9.3%

9.7%11.2%11.3%

12.0%12.3%12.5%

12.8%12.8%

13.6%14.0%

14.1%14.2%14.3%14.3%

14.5%15.0%15.1%15.1%

15.5%15.5%15.7%15.8%

16.1%16.5%

18.7%22.0%

28.8%31.0%

0% 5% 10% 15% 20% 25% 30% 35%

SOU

RCE: TBR AND

COM

PANY D

ATA

TURNOVER RATE

1Q144Q13Average


TBR


Financial Metrics




1 7.44 GENPACT2 7.34 HP SVCS3 6.24 INFOSYS4 6.21 CAPITA5 6.07 SAP SVCS6 6.04 ORACLE SVCS7 5.73 ACCENTURE8 5.73 COGNIZANT9 5.63 EXL

10 5.58 EMC SVCS11 5.42 IBM GS12 5.35 CSC13 4.99 XEROX14 4.93 AON HEWITT15 N/A DELL SVCS16 4.67 BT SVCS17 4.57 CONVERGYS18 4.56 CGI19 4.56 FUJITSU20 4.45 ATOS21 4.38 WNS22 4.38 CAPGEMINI23 4.20 ERICSSON24 4.18 CIBER25 4.17 UNISYS26 4.14 WIPRO27 3.96 HCLT28 3.73 T-SYSTEMS29 3.65 TCS30 3.20 CISCO SVCS

TBR

3.903.83

3.023.00

2.902.88

2.652.65

2.582.54

2.432.38

2.112.071.88

1.881.81

1.801.80

1.721.671.67

1.54

1.521.52

1.49

1.361.201.13

0.81

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

SOU

RCE: TBR AND

COM

PANY D

ATA.

BACKLOG/REVENUE

1Q144Q13Average

1Q14 Average = 2.12 1Q14 Standard Deviation = 0.75

TBR


Financial Metrics

Productivity/Resource Metrics — Delivery

• Convergys expanded its headcount 64.5% year-to-year in 1Q14 due to its acquisition of Stream Global, which added more than 42,000 employees to its operations, and the acquisition of Datacom’s Malaysian and Philippines locations, which added 1,000 employees. TBR believes Convergys will continue to expand its headcount in 2Q14 as it scales its operations as part of its ambition to become the leading customer management services provider globally.

• Capita continued to add resources through inorganic investments. The firm has added roughly 1,000 people since January, expanding its capabilities in fields such as IT security, residential mortgage services and legal services, and verticals such as transportation. We expect Capita will continue to scout for strategic fit discounted opportunities throughout the U.K., further expanding its resource base. In addition, the firm will pursue organic investments to strengthen its capabilities in IT managed services, as the recently launched CMITS entity announced plans to hire 400 professionals in Northern Ireland.

8.8%

10.6%

-2.7%

9.8%

2.4%

0.2%

-13.8%

6.0% 6.9%7.8% -0.8%

-8.4%

64.5%

5.9%-3.4%

6.8%

-0.3%0.0% -1.8%

-2.8%

4.2%

-0.4%

0.6%

33.0%

-0.5%

-0.6%-0.2%

2.7%

-3.0%

11.1%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

TCS

ACC

ENTU

RE

IBM

GS

COG

NIZ

ANT

INFO

SYS

WIP

RO

HP

SVCS

CAPG

EMIN

I

HCL

T

GEN

PACT

XER

OX

CSC

CON

VERG

YS

WN

S

DEL

L SV

CS EXL

ATO

S

ERIC

SSO

N

CGI

T-SY

STEM

S

AO

N H

EWIT

T

ORA

CLE

SVCS

BT S

VCS

CAPI

TA

FUJIT

SU

CISC

O S

VCS

UN

ISYS

SAP

SVC

S

CIB

ER

EMC

SVCS

Serv

ices

Hea

dcou

nt G

row

thYT

Y

Tota

l Ser

vice

s H

eadc

ount

SERVICE VENDORS' ONSHORE AND OFFSHORE HEADCOUNT, 1Q14

Onshore Headcount Nearshore + Offshore Headcount Total Headcount YTY Growth

SOURCE: TBR AND COMPANY DATA

TBR

TBR


Financial Metrics

Operations/Investment Metrics



1 7.87 CISCO SVCS2 6.97 ORACLE SVCS3 6.70 TCS4 6.32 INFOSYS5 6.22 HCLT6 6.21 WIPRO7 5.63 COGNIZANT8 N/A DELL SVCS9 5.13 IBM GS

10 5.10 GENPACT11 5.04 ACCENTURE12 4.97 EXL13 4.92 WNS14 4.86 CGI15 4.79 EMC SVCS16 4.59 FUJITSU17 4.59 CAPITA18 4.56 CSC19 4.54 XEROX20 4.41 CAPGEMINI21 4.39 BT SVCS22 4.36 AON HEWITT23 4.28 HP SVCS24 4.17 ERICSSON25 4.12 ATOS26 4.01 CONVERGYS27 3.97 CIBER28 3.91 SAP SVCS29 3.83 UNISYS30 3.62 T-SYSTEMS

TBR

40.3%31.7%

29.1%25.5%

24.6%24.5%

19.0%15.7%

14.3%13.9%

13.3%12.7%

12.2%11.7%11.0%

9.1%9.1%

8.8%8.6%

7.4%7.2%

6.9%6.2%

5.1%4.6%

3.6%3.2%

2.7%1.9%

-0.1%

-5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

SOU

RCE: TBR AND

COM

PANY D

ATA.

OPERATING MARGIN

1Q144Q13Average


TBR


Financial Metrics


*Indicates metrics for corporate parents.

Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR and the firm is removed from the Operations/Investment Metrics graphs.


1 6.66 CISCO* 1Q14 Average 1Q14 Average = 69.5 1Q14 Standard Deviation = 24.32 6.41 ORACLE* 1Q14 Standard Deviation3 6.27 CGI 69.53 4 6.22 WNS 69.53 5 6.09 ACCENTURE6 6.09 IBM*7 6.03 DEUTSCHE TELEKOM AG*8 6.00 HP*9 5.66 XEROX CORPORATE*

10 5.54 BT*11 5.44 EXL12 5.31 INFOSYS13 5.13 FUJITSU LIMITED*14 5.13 COGNIZANT15 4.99 WIPRO16 4.94 UNISYS17 4.52 CSC18 4.50 ATOS19 4.37 CIBER20 4.34 TCS21 4.13 HCLT22 3.88 CAPITA23 3.84 GENPACT24 3.81 AON HEWITT25 3.54 CAPGEMINI26 3.48 SAP*27 3.27 EMC*28 2.06 ERICSSON29 1.40 CONVERGYS

TBR

34.6439.4042.0042.83

45.2945.36

46.4247.09

53.2955.60

57.4459.9763.2663.30

65.9566.75

74.5975.11

77.4977.98

81.9886.66

87.4587.95

93.0294.14

97.93120.57

132.99

0 20 40 60 80 100 120 140

SOU

RCE: TBR AND

COM

PANY D

ATA

DAYS SALES OUTSTANDING

1Q144Q13Average


TBR


Financial Metrics



1 7.51 INFOSYS 1Q14 Average2 7.04 COGNIZANT 1Q14 Standard Deviation3 6.96 EXL4 6.76 TCS5 6.39 CISCO*6 6.32 ORACLE*7 6.02 GENPACT8 5.60 WIPRO9 5.38 HCLT

10 5.15 ERICSSON11 4.90 CIBER12 4.72 CSC13 4.70 CONVERGYS14 4.62 EMC*15 4.57 ACCENTURE16 4.55 UNISYS17 4.52 CAPGEMINI18 4.49 WNS19 4.41 XEROX CORPORATE*20 4.40 FUJITSU LIMITED*21 4.32 ATOS22 4.30 IBM*23 4.29 HP*24 4.19 AON HEWITT25 4.10 DEUTSCHE TELEKOM AG*26 4.07 CAPITA27 3.99 SAP*28 3.97 CGI29 3.92 BT*

TBR

4.71 4.19

4.09 3.88

3.47 3.39

3.06 2.60

2.35 2.10

1.83 1.63

1.61 1.52

1.46 1.44

1.40 1.37

1.28 1.28

1.19 1.17 1.15

1.04 0.95

0.91 0.83

0.80 0.74

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

SOU

RCE: TBR AND

COM

PANY D

ATA

CURRENT RATIO

1Q14

4Q13

Average




TBR


Financial Metrics



1 6.41 INFOSYS 1Q14 Average2 6.38 EXL 1Q14 Standard Deviation3 6.34 TCS4 6.29 COGNIZANT5 5.88 WIPRO6 5.84 CIBER7 5.75 HCLT8 5.60 WNS9 5.47 SAP*

10 5.41 CISCO*11 5.40 EMC*12 5.36 ERICSSON13 5.34 GENPACT14 5.32 ORACLE*15 5.11 CONVERGYS16 5.03 CAPGEMINI17 5.03 XEROX CORPORATE*18 4.92 ATOS19 4.91 CGI20 4.73 ACCENTURE21 4.70 CSC22 4.47 DEUTSCHE TELEKOM AG*23 4.45 HP*24 4.42 AON HEWITT25 4.17 CAPITA26 4.14 FUJITSU LIMITED*27 3.97 IBM*28 3.40 BT*29 2.52 UNISYS

TBR

0.17 0.17

0.19 0.20

0.32 0.33

0.36 0.40

0.43 0.45 0.46 0.47 0.47 0.48

0.54 0.56 0.56

0.59 0.59

0.65 0.65

0.72 0.73 0.73

0.81 0.81

0.86 1.02

1.27

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

SOU

RCE: TBR AND

COM

PANY D

ATA

DEBT/ASSET RATIO

1Q144Q13Average




TBR


Financial Metrics



1 7.85 TCS 1Q14 Average2 6.78 HCLT 1Q14 Standard Deviation3 6.49 INFOSYS4 6.16 ACCENTURE5 6.10 COGNIZANT6 5.98 WIPRO7 5.61 ORACLE*8 5.61 IBM*9 5.43 SAP*

10 5.32 EXL11 5.04 GENPACT12 4.98 BT*13 4.95 WNS14 4.93 CISCO*15 4.76 CGI16 4.70 CSC17 4.60 HP*18 4.59 EMC*19 4.54 ERICSSON20 4.52 CAPGEMINI21 4.51 CONVERGYS22 4.48 ATOS23 4.44 CAPITA24 4.43 AON HEWITT25 4.43 XEROX CORPORATE*26 4.35 UNISYS27 4.18 DEUTSCHE TELEKOM AG*28 4.14 FUJITSU LIMITED*29 3.66 CIBER

TBR

31.0%22.5%

20.2%17.6%

17.1%16.2%

13.2%13.2%

11.9%10.9%

8.7%8.3%8.0%7.9%

6.5%6.1%

5.2%5.2%

4.8%4.6%4.5%

4.3%4.0%3.9%3.9%

3.3%1.9%

1.6%-2.2%

-5% 0% 5% 10% 15% 20% 25% 30% 35%

SOU

RCE: TBR AND

COM

PANY D

ATA

RETURN ON ASSETS

1Q144Q13Average




TBR


Financial Metrics



1 5.39 IBM* 1Q14 Average2 5.27 ACCENTURE 1Q14 Standard Deviation3 5.23 TCS4 5.21 HCLT5 5.17 ORACLE*6 5.17 WIPRO7 5.17 INFOSYS8 5.16 COGNIZANT9 5.16 SAP*

10 5.15 HP*11 5.15 CAPITA12 5.15 CSC13 5.15 GENPACT14 5.14 CGI15 5.13 AON HEWITT16 5.13 WNS17 5.13 CISCO*18 5.13 EXL19 5.12 CAPGEMINI20 5.11 ATOS21 5.11 XEROX CORPORATE*22 5.11 EMC*23 5.11 ERICSSON24 5.10 CONVERGYS25 5.10 DEUTSCHE TELEKOM AG*26 5.10 FUJITSU LIMITED*27 5.06 CIBER28 5.05 UNISYS29 3.25 BT*

TBR

81.7%51.2%

39.5%35.8%

25.0%24.3%24.2%

22.3%21.7%

20.1%19.8%19.5%

18.2%17.7%

15.1%14.2%13.7%13.5%

10.6%10.2%9.5%9.4%9.3%

7.3%6.9%

5.9%-3.5%

-6.5%-470.8%

-150% -100% -50% 0% 50% 100%

RETURN ON EQUITY

1Q144Q13Average


SOU

RCE: TBR AND

COM

PANY D

ATA

-500%-600%



TBR


Appendix: IT Services Segment Definitions

IT Services Definitions

Category TBR Definition

Consulting and Systems Integration (C&SI)

Business Consulting Advisory services such as strategy consulting, M&A, process improvements, change management, capacity planning, ops assessments, etc.

IT Consulting Advisory services around information technology, applications portfolio optimization, package (SAP, Oracle) consulting and IT governance consulting, systems engineering and technical assistance, digital, mobile, analytics and cloud

Systems Integration Processes that include planning, design, implementation and project management of a solution; these may involve development of systems and custom apps, as well as integration of enterprise packaged software (SAP, Oracle, Siebel, etc.)

Outsourcing

Business Process Outsourcing (BPO)

BPO involves the transfer of management and execution of one or more complete business processes or entire business functions to an external service provider. This can be further segmented into HR, F&A, SCM, CRM, etc.

Information Technology Outsourcing (ITO)

Server, network, desktop outsourcing (either on-site or remote), cloud computing, infrastructure management, security, compliance and continuity; this can be further segmented into server and data center, network, desktop, disaster recovery, hosting, etc.

Applications Outsourcing (AO)

AO includes support and maintenance of enterprise applications.

TBR

60

TBR


Vendor Coverage in the 1Q14 IT Services Vendor BenchmarkAppendix: IT Services Vendor Benchmark Coverage

Accenture

Aon Hewitt

Atos

BT Services

Capgemini

Capita

CGI

Ciber

Cisco Services

Cognizant

Convergys

CSC

Dell Services

EMC Services

Ericsson

EXL

Fujitsu

Genpact

HCLT

HP Services

IBM GS

Infosys

Oracle Services

SAP Services

TCS

T-Systems

Unisys

Wipro

WNS

Xerox

61

TBR Quarterly and Semiannual Industry CoverageComputing, Storage & Devices Software Professional IT Services Networking &

Mobility 12 Vendors Covered 11 Vendors

CoveredCA TechnologiesDell Software*HP SoftwareIBM SoftwareMicrosoftOracle Red Hat SAP AGSAS Institute*SymantecVMware

AccentureAtosBain & Co.*Booz & Co.*Boston Consulting

Group*CapgeminiCGI*Cisco ServicesCognizantCSCDell ServicesDeloitte

Consulting*FujitsuHCL TechnologiesHP ServicesIBM Global ServicesInfosysMcKinsey & Co.*PwC*T-SystemsTata Consultancy

ServicesUnisys

Wipro IT ServicesXerox

Public Sector IT Services

10 Vendors Covered 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*

Healthcare IT Services

5 Vendors CoveredAccenture HITS*CSC HITS*Dell HITS*HP HITS*IBM HITS*

12 Vendors CoveredAlcatel-LucentCisco Systems EricssonGoogleHewlett-Packard Telecom & Mobility*

Huawei* IBM Telecom & Mobility* Juniper Networks Microsoft Telecom & Internet* Nokia Networks Samsung Networks*ZTE*

5 Enterprise Operators CoveredAT&T Business Solutions*BT Global Services*Orange Business Services*Verizon Enterprise Solutions*Vodafone Enterprise Services*

6 Operators CoveredAT&T T-Mobile USAComcast* Time Warner Cable*

Sprint Verizon

Acer* AppleAsus*DellEMCFujitsu

HPIBM

IntelLenovoNetAppSamsung*

Accenture Cloud*Amazon Web ServicesAtos Cloud*Capgemini Cloud*Cognizant Cloud*CSC Cloud*Dell Cloud*Deloitte Cloud*Fujitsu Cloud*Google Cloud*HP Cloud*IBM Cloud*

Infosys Cloud*Microsoft Cloud*

Oracle Cloud*Rackspace*Salesforce.comSAP Cloud*ServiceNow*TCS Cloud*Verizon Cloud*Wipro Cloud*Workday

Cloud23 Vendors Covered

*Semiannual publicationwww.tbri.com ©2014 Technology Business Research, Inc.

23 Vendors Covered

TBR

Corporate IT Buying Behavior & Satisfaction StudiesApple Enterprise Notebooks PCs* Services & SupportCisco UCS* x86-based ServersDesktops

SourceITSourceIT Business Applications4 Segment Views CoveredSourceIT Consulting and Systems Integration for Business Applications4 Segment Views Covered

TBR Quarterly and Semiannual Industry Benchmark Coverage

TBR

www.tbri.com ©2014 Technology Business Research, Inc.

Cloud

Computing Devices Benchmark— Benchmark XLS Data 19 Vendors Covered

Data Center Benchmark— Benchmark XLS Data17 Vendors Covered

Data Center Addressable Market Forecast

— XLS Data

Devices Addressable Market Forecast — XLS Data

Software Vendor Benchmark — Benchmark XLS Data 30 Vendors Covered

Business Intelligence Software Vendor Benchmark*

— Benchmark XLS Data 31 Vendors Covered

Business Intelligence Addressable Market Forecast

— XLS Data

IT Services Vendor Benchmark — Benchmark XLS Data 30 Vendors Covered

Public Sector IT Services Benchmark — Benchmark XLS Data 21 Vendors Covered

Healthcare IT Services Benchmark — Benchmark XLS Data 18 Vendors Covered

Management Consulting Benchmark* — Benchmark XLS Data16 Vendors Covered

Global Delivery Benchmark* — Benchmark XLS Data14 Vendors Covered

Business Intelligence Services Vendor Benchmark*

— Benchmark XLS Data

IT Services Addressable Market Forecast — XLS Data

Telecom VendorTelecom Vendor Benchmark

— Benchmark XLS Data 11 Vendors Covered

Telecom Infrastructure Services Benchmark — Benchmark XLS Data 39 Vendors Covered

Expanded Telecom Infrastructure Services Benchmark — Benchmark XLS Data 39 Vendors Covered

Telecom Infrastructure Services Margin Benchmark — Benchmark XLS Data 5 Vendors Covered

Telecom Infrastructure Services Global Addressable Market Forecast

— XLS Data

Telecom Infrastructure Services North America Addressable Market Forecast

— XLS Data

Enterprise NetworkingEnterprise Network Vendor Benchmark* — Benchmark XLS Data 15 Vendors Covered

Enterprise Networking Addressable Market Forecast — XLS Data

Network Infrastructure Services Addressable Market Forecast

— XLS Data

Network Infrastructure Services Benchmark — Benchmark XLS Data 13 Vendors Covered

OperatorU.S. & Canada Mobile Operator Benchmark — Benchmark XLS Data 10 Vendors Covered

Carrier Cloud Benchmark*— Benchmark XLS Data

Cloud Benchmark— Benchmark XLS Data50 Vendors Covered

Managed Private & Professional Services Cloud Benchmark*

— Benchmark XLS Data29 Vendors Covered

Cloud Components Benchmark* — Benchmark XLS Data11 Vendors Covered

Cloud Addressable Market Forecast — XLS Data

Software

Networking & Mobility Professional IT ServicesComputing, Storage & Devices

*Semiannual publication

Customer Research ProgramBusiness Intelligence Software Customer Research*Business Intelligence Services Customer Research*Private Cloud Customer Research*Hybrid Cloud Customer Research*Professional Services Cloud Customer Research*

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

About Us

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.

Contact Us

[email protected] Merrill DriveHampton, NH 03842USA

This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.

All reports are available in PowerPoint and PDF. If you are viewing a PDF and require access to data, tables, etc. for use in internal documents, please visit www.tbri.com

and download the PowerPoint version.

mailto:[email protected]

http://www.tbri.com/

http://www.tbri.com/

PROFESSIONAL SERVICES BUSINESS QUARTERLY SM IT Services Vendor Benchmark First Calendar Quarter 2014...

Documents

Transcript of PROFESSIONAL SERVICES BUSINESS QUARTERLY SM IT Services Vendor Benchmark First Calendar Quarter 2014...