Zinnov Zones For Digital Technology Services

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Zinnov Zones for Digital

*Zinnov’s Global Service Provider Ratings have been rebranded to ‘Zinnov Zones’

Market Landscape – Enterprise Digital Transformation

Digital Journey of Enterprises

Evolution of Service Provider Landscape

Zinnov Zones Ratings for Digital

Agenda

3

A view on IT investments by enterprises..

Source: Zinnov Analysis

Traditional IT

IT Modernisation

Digital Enablement

Enterprise Digital Transformation

Operating SystemEnterprise Application SuitesSecurity InfrastructureHardware SupportNetwork Support

Virtualisation and Cloud based infrastructureSocial Media ApplicationsMobile enterprise application suitesRelational databases and Analytics, BI applicationsIdentity management

Creating an infrastructure to provide access to business

information and manage/run business applications

Evolution of legacy IT infrastructure, including both

hardware & software, to align with changing business requirements

Investments in enabling technologies to support digital use

cases and execute data driven business processes

Finding newer possibilities to maximize the customer

experiences and operational efficiencies

Service Oriented Enterprise ArchitectureAdvanced analytics led enterprise applicationsBig Data InfrastructureOmni-channel Commerce PlatformsDigital Marketing PlatformsIoT platformsSensors and Beacons technology4Application Program InterfaceData LakesHigh Performance computing architecture

Data driven UX DesigningDigital ManufacturingArtificial IntelligencePredictive AnalyticsNatural Language InteractionImage RecognitionRobotic Process AutomationRobo-advisorsNear Field CommunicationCryptocurrencyWearable technologiesConnected ecosystemsVirtual and Augmented Reality

4

Enterprise Digital Transformation Spending

Enterprise Digital Transformation Spending

EDT market is estimated to be worth $29 Bn globally and is growing at over 30% per annum in times of otherwise stagnating IT spend

Source: Zinnov Research

1635 1692

445

845227

490

29

136

Global Digital Market Spending and Growth ($ Bn)

Traditional IT IT Modernization Digital Enablement Enterprise Digital Transformation

<1%

<14%

<17%

<36%

2015 2020

Enterprise digital transformation spending forms ~11% of the overall digital market, rest being constituted by expenditure towards digital enablement

BFSI, manufacturing and Retail currently constitute nearly 50% of the overall market for EDT

Nearly 40% of the overall spend is around use cases pertaining to customer targeting and engagement

5

~$29 Bn EDT market currently drives ~$2 Bn worth of spend with digital service providers


Digital Enablement Spending Enterprise Digital Transformation Spending

USD 300-320 Mn

USD 2 Bn

USD 15 Bn

USD 1.4-1.5 Bn

USD 10 Bn

USD 69 Bn

USD 2.3-2.5 Bn

USD 15 Bn

USD 115Bn

USD 6-7.5 Bn

USD 37 Bn

USD 250 Bn

2015 2020 2015 2020

Share of Indian Service Providers

Services Consumed Via Digital Service Providers

Share of Services in Spending

20% realization of the total addressable Enterprise Digital transformation services market of $70 Bn; 30% realization expected by 2020

80% expenditure of services being made in-house, in addition to a small share of global in-house centers

Indian SPs account for ~15% of the services opportunity currently

6

NA and Europe are the largest contributors to global digital spending; Asian market to become the 2nd largest by 2020


Split of EDT Spend by Geographies

North AmericaBanking, Retail, Hi-Tech and Healthcare

EuropeManufacturing, Telecom, Insurance

AsiaManufacturing, Services, Oil & Gas

2015 2020

14

6838

%

2015 2020

9

3029%

2015 2020

5

33

43%

South AmericaUtilities, Oil and Gas and Banking

Middle East & AfricaOil and Gas, Mining and Agriculture

AustraliaServices, Banking and Insurance

2015 2020

0.61.725%

2015 2020

0.31.738%

2015 2020

0.61.522%

High Concentration of large enterprises Availability of Top Digital Talent Large number of Tech Start-ups

High Cost of Digital Talent

High government focus on digital Availability of Top Digital Talent

High Cost of Digital Talent Low Economic Growth Unstable political condition

High IT spending growth Low cost talent Availability Major Offshoring and Outsourcing hotspots Rapid Economic growth

Scarcity of Top Talent

Low cost talent availability Near Shore Advantage w.r.t US geo

Low Economic Growth Unstable US government Low share of large enterprises

Start-up hubs, such as Israel Near shore advantage w.r.t. European Customers

Geo-political instability

Availability of Top talent Government focus on digital transformation

Low economic growth High cost of Digital Talent





Agenda

8

Top global enterprises are leading adoption of Digital Transformation initiatives with Forbes 500 companies accounting for 40% of spending


Total Digital Spend contribution from Forbes Global 500 - 2015$ 102 Billion

0-100 101-200 201-300 301-400 401-5000.00%0

0.5

1

1.5

2

2.5

Global Forbes 500 companies – by decreasing order of digital spend

Forbes 500 Digital Spend Contribution Breakup

Spen

d in

USD

Bill

ions

10%11%15%18%45%

100 200 300 400 500

Forbes 500 com-pa-nies40%

Others60%

Share of Forbes 500 Companies in Global Digital Spend

9

Disruptive impact of digital technologies and new entrants has been the highest on BFSI and retail industries


Healthcare

Telecom

Education

Utilities

Travel & Hospitality

Manufacturing

Media & Entertainment

Retail

BFSI

Stag

e of

Dig

ital D

isru

ption

Low

Dig

ital

Disr

uptio

n

Digital led Business EnhancementsBusiness DisruptionsTimeline

Retail• Automated Warehouse Management• Mobile POS• Personalized marketing• Robotic Sales agents• Customer Churn Analytics• Drone based Delivery

• Virtual Shops• Retail 3D printing• Ecommerce/Aggregators

BFSI• Personal Financial Advisors• Fraud Detection• Internal Threat Detection• Banking Customer Sentiment Analysis

• Crowdfunding• P2P Lending• Cryptocurrency• Payment Wallets• Usage based insurance• Insurance Gamification

Media and Entertainment• Data Driven Marketing• Social Media Analytics• Digital Infotainment Solutions

• Immersive Virtual Reality• Connected TV• Programmatic Advertising• Online platforms for Aggregated Content

Manufacturing• Connected factories• Robotic Workers• Advanced SCM Analytics• Demand Prediction• Virtual Prototyping

• Additive Manufacturing• Predictive Maintenance

Travel and Hospitality• Connected hotels• Predictive Pricing • Personalized marketing campaigns• In-flight VR entertainment

• Alternative Lodging Platforms• Aggregated Hospitality & Event platforms• Travel and Hospitality Aggregators

Med

ium

Di

srup

tion

High

Di

srup

tion

Low Digital Spend Medium Digital Spend High Digital Spend

10

Enterprises are rapidly evolving on three key fronts in order to transform themselves digitally (1/3)


1. ORGANIZATIONAL READINESS

• Technology ownership moving beyond the CIO and CTO• Investments by BUs into digital technology uptake

Enterprises are increasingly appointing Chief Digital Officers to own and implement digital charter for the organization

2 01 2 2 0 1 3 2 0 1 4 2 01 5

220 38

0 800

1600

A P P OIN TMEN T o f Ch ief Dig i t a l O ffic ers (CDO ) in Lar g e En t er p r ises g lo b al ly (2012- 2015)

CAGR: >90%

CIO and CTOLead Technology

Uptake in Pre Digital Era

Focus on running the shop (Support & Maintenance)

Digital transformation ownership extending beyond CIO/CTO office has shifted focus from “running the shop” to driving significant business benefit

Technology ownership and budgets moving beyond CIO & CTO

BU Heads

CIO/CTO

CDO

CMO

CINO/CSO

COO

CEO

60%

40%

30%

28%

25%

13%

5%

Stakeholders Within Large enterprises with Leadership role in Digital Transformation

Initiatives

New role being introduced into Organizations

11Source: Zinnov Analysis

2. DIGITAL INVESTMENTS

Enterprises across industries are setting up digital labs to foster innovation and implement technology

• Set up digital innovation labs and CoEs• Investments into hiring of relevant digital talent

Despite growth in digital talent, availability remains lowEnterprises continue to focus on acquisition and nurturing of talent to support digital objectives

2 0 1 3 2 01 4 2 01 5

11

34

65

S et u p o f d ig i t a l lab s b y Lar g e En t erp r ises

6x growth in 2 years

77%Enterprises feel that the talent crunch is

the biggest impediment to going

digital

50%Estimated shortage of

Data Scientist professionals globally

in 2015Talent Type Availability Hiring Focus

Data Scientist

UI/UX Consultant

Domain Experts

Integration Architects

Solution Architects

2 01 3 2 0 1 5

750 11

50

Glo b al A v ai lab i l i t y o f d ig i t a l Talen t ( ‘000)

CAGR: ~24%

Key Focus Areas of Digital LabsROBOTICS, IoT, ADVANCED ANALYTICS, DESIGN AND EXPERIENCE, BIG DATA, CYBER

SECURITY, COGNITIVE COMPUTING, WEARABLES, VIRTUAL REALITY


12Source: Zinnov Analysis, Start up data from Mattermark

3. ECOSYSTEM LEVERAGE

Enterprise are leveraging the exploding digital start-up ecosystem for adoption of digital technologies

• Partnerships with startups for adoption of digital technologies• Association with universities with focus on digital

Universities with high focus on research in digital technologies are being partnered by enterprises

Executives from large enterprises believe that small

businesses will support growth in

a partnership

41%

2 0 0 0 2 0 0 5 2 0 1 0 2 0 1 5

1259

203

407G row t h i n num be r of di g i t a l s t a r t - ups

CAGR: >25%

Contextual Knowledge Management

Enhancement of web-based customer engagement

In-store Robotic Assistants for Customers

Use of AI, Wearables etc. to improve worker safety

Massachusetts Institute of Technology University of Cambridge Imperial College London Harvard University University of Oxford University College London Stanford University California Institute of Technology Princeton University Yale University

Design & Experience

Big Data & Analytics

Internet of Things

Cognitive Computing RoboticsTop Global Academic Institutes

Passenger focused big data and ML applicationsWearable robotsAutonomous vehicle technology






Agenda

14

Application engineering, and data management and analytics service offerings account for ~70% of service providers’ digital revenue

Source: Zinnov Analysis*Figures do not add up to 100% due to overlap among clients across service lines

Digital Application Engineering

Digital SMAC Applications

Mobile/ Web Apps Dev

Cognitive Solutions

Robotics and Automation

Digital Consulting & Transformation Services

Customer Maturity Assessment

Digital Road map definition

Use Case Prioritization

Design & Experience Services

Customer Experience Mapping

U/UX Development

Design on new forms

Digital Platform Integration

API Management

Horizontal Platform orchestration

Solutions Integration

Data Management & Analytics Services

Data Architecture

ETL, Data Curation

Advanced Analytics

BI & Data Visualization

38%

33%

17%

8%4%

Digital Application Engineering

Data Management & Analytics

Digital Platform Integration

Digital Consulting Services

Design and Experience Services16%

20%

23%

27%

31%

Share of Digital Services – by Service Lines (2015)

Share of Clients* (2015)

15

Service Providers need to differentiate across five key aspects in order to become leaders in the digital age


Focus on Digital Talent Hiring

Creation of Digital Assets

Leveraging Digital Ecosystem

Agile/DevOps Development

Work on new-age delivery models

Service Providers must undertake initiatives to upskill internal

workforce and hire top talent from to build an able digital workforce

Re-usable IPs such as products and accelerators along with a robust lab

network is essential for SPs to differentiate themselves in market

Service Providers should enhance their digital capabilities by

partnering important stakeholders such as start ups and universities

Agile/DevOps development methodologies help SPs deliver high quality of services in a smaller time

frame and reasonable costs

Enterprises are demanding new age delivery models such revenue

sharing, risk-reward sharing models forcing SPs to execute on these

1 2 3 4 5

Higher lateral hiring by Digital SPs as compared to IT Service Providers

35%

Higher median compensation of Digital

employees against IT20%

Of IPs (both Solutions & Accelerators) built by SPs serve BFSI clients

28%

Service Providers have Design and UX focus in

their digital labs70%

of revenue made through outcome based contracts

Expected to grow rapidly as services mature

1%

Six Key Digital Talent Categories

Approx. 15-20% higher experience in digital workforce vs. IT/ITeS

Advantages of Digital Labs

Building cross-technology solutions through inter-BU collaboration

Development Of IPs Collaboration with ecosystem

Three Stages of SP collaboration with startup ecosystem:

Explore and Engage Partner Invest and Acquire

Few SP partnerships with universities

Growth in demand for DevOps skills over last

year70%

Need for Dev-ops and Agile

Increase in revenue for clients22%

30X Increase in speed of deployment

50X Reduction in software failures

Multiple GTM Models being explored by service providers

Consulting partner Led Customer as a channel Delivery team led 3-in-a-box/4-in-a-box model Digital as a separate P&L17%

• INTEGRATIONARCHITECT

• APPLICATIONARCHITECT

• DATA SCIENTIST• DOMAIN EXPERT• UX CONSULTANT• DEVOPS ANALYST

Key areas of collaboration include:Advanced Analytics |Mind

Controlled Robots |Cyber security | Smart city tech | IoT | Computer

Vision | Design

16

Existing capabilities of Product Engineering Service Providers provide them a head start in digital services market


Key Advantages of a Product Engineering Vendor Over Incumbent IT Services Vendor

PRODUCT ENGINEERING

VENDORS’ ADVANTAGES

Customer Engagement

Focus

New Products & Services

Digital Stakeholder

Connects

Design Thinking & Agile

New Age TalentEcosystem

Connects

A

B

F

E

DC

>10% of global digital spend will be on new products & services, which is the prime focus

of PES vendors

Zinnov estimates >$100 Bn spend by 2020 on UI/ UX capabilities, API

management & application factories, all strong suits of traditional PES vendors

PES vendors have traditionally engaged with both startup and university ecosystem to

augment their research capabilities

PES vendors employ a large proportion of new technologies and research focussed talent, which is not the case for traditional IT services firms

PES vendors were early movers in Agile, Scrum, DevOps and Design Thinking fields

Deep connects with engineering organizations, CTO & BUs as compared to IT services firms who have traditionally restricted their engagement to CIO’s





Agenda

18

Zinnov Zones for Digital – Analysis Framework


Zinnov has evaluated participating service providers on two key areas basis which they were plotted on a 2-dimensional matrix

Scalability

Nurture Zone Breakout Zone Execution Zone Leadership Zone

Positioning reflects the scores on Digital Prowess and Scalability

Digital Prowess1 Scalability2

Scale of Digital Business

Product Engineering Experience

Digital Clientele

Services Spread

Ecosystem Leverage

Digital Workforce

Digital Assets

Engagement Models

Scal

abili

tySc

ale

of D

igita

l Bus

ines

s, P

rodu

ct E

ngin

eerin

g Ex

perie

nce,

Dig

ital C

lient

ele

Digital ProwessServices Spread, Ecosystem Leverage, Digital Workforce, Digital Assets, Engagement Models

19

Digital Prowess Parameters explained


Services Spread

Ecosystem Leverage

Digital Workforce

Digital Assets

Engagement Models

Capability of delivering end to end services across the five key domains of digital technology services, namely – a) Consulting b) Design and Experience c) Application Engineering, 4) Platform Integration & 5) Data Management and Analytics

Leveraging digital ecosystem through acquisitions or partnerships with niche technology start-ups and prominent digital technology platforms | Strong connects with leading universities and academic institutes having focus on research in digital technologies| Relevant acquisitions in the digital space

Availability of digital skills such as Domain Experts, Data Scientists, UI/UX Consultants & Solution architects | High proportion of lateral hires and best in class fresh talent | Certifications & Trainings in digital platforms & technologies | Proportion of workforce with PhD | Avg. experience of Digital Workforce

Focus on creation of Digital Labs and Centres of Excellence, Intellectual Property (IPs), products, accelerators, tools and frameworks across digital technology areas

Ability to deliver across all types of engagement models including T&M, Fixed Price and Outcome based models, thus catering to digital native customers | Execution of projects on agile practices

Digital Prowess is further constituted of five key parameters:

The cumulative score of enterprises based on the Digital Prowess axis is used for classifying the service providers on one of the Zinnov Zones below-


Scalability has further been broken down into three key parameters as mentioned below-

Scale of Digital Business

Digital Clientele

Product Engineering Experience

Total Digital Revenue and Headcount across digital technology service lines | Geographic spread of revenue across key hubs of digital services demand

Width of digital client portfolio | Existence of large marque clients and a higher number of large value accounts within the digital clientele

Revenue and headcount in product engineering services, thus signifying intensity of PES experience (critical for scaling up digital business due to expertise across product development, design and R&D)

Cumulative Score on the Digital Prowess parameters defines the horizontal position of Service Providers within the framework

Cumulative Score on the Scalability parameters defines the vertical position of Service Providers within the framework

20


Source: Data shared by participant companies, Zinnov Research


Low

HighOverall Ratings

Scal

abili

tySc

ale

of D

igita

l Bus

ines

s, P

rodu

ct E

ngin

eerin

g Ex

perie

nce,

Dig

ital C

lient

ele

Digital ProwessServices Spread, Ecosystem Leverage, Digital Workforce, Digital Assets, Engagement Models

EPAM

Persistent Systems

Mindtree

GlobalLogic

Luxoft

Ness Software Engineering Services

L&T Infotech

Syntel

IGATE*

Tech Mahindra

Infogain

Innominds

Pactera

Hexaware

Happiest Minds

Ascendum

*IGATE was acquired by Capgemini. Current positioning does not include Capgeminig details and is based on IGATE data only

Digital Consulting and Transformation Services

Ratings across 5 service lines:

Design & Experience Services

Digital Application Engineering Services

Digital Platform Integration Services

Data Management & Analytics Services Provider

1.

2.

3.

4.

5.

22




Low

HighDigital Consulting and Transformation Services Ratings

Scal

abili

tySc

ale

of C

onsu

lting

Bus

ines

s, Pr

oduc

t Eng

inee

ring

Expe

rienc

e, C

lient

ele

Digital ProwessVertical Spread, Ecosystem Leverage, Consulting Workforce, Digital Assets, Engagement Models

EPAM

Persistent Systems

Mindtree

GlobalLogic

Luxoft


L&T Infotech

Syntel

IGATE*

Tech Mahindra

Infogain

InnomindsPactera

Hexaware

Happiest Minds

*IGATE was acquired by Capgemini. Current positioning does not include Capgemini details and is based on IGATE data only

23




Low

HighDesign & Experience Services Ratings

Scal

abili

tySc

ale

of D

&E

Busin

ess,

Pro

duct

Eng

inee

ring

Expe

rienc

e, C

lient

ele

Digital ProwessDesign & Experience Services Spread, Ecosystem Leverage, Design Workforce, Digital Assets, Engagement Models

EPAM

Persistent SystemsMindtree

GlobalLogic

Luxoft


L&T Infotech

Syntel

IGATE*Tech Mahindra

Infogain

Innominds

Pactera

HexawareHappiest Minds


24




Low

HighDigital Application Engineering Services Ratings

Scal

abili

tySc

ale

of A

pp E

ngg.

Bus

ines

s, Pr

oduc

t Eng

inee

ring

Expe

rienc

e, C

lient

ele

Digital ProwessApp. Eng. Services Spread, Ecosystem Leverage, App. Development Workforce, Digital Assets, Engagement Models

EPAM

Persistent Systems

Mindtree

GlobalLogic

Luxoft


L&T Infotech

Syntel

IGATE*

Tech Mahindra

Infogain

Innominds

PacteraHexaware

Happiest Minds

Ascendum


25



Nurture Zone

Low

HighDigital Platform Integration Services Ratings

Scal

abili

tySc

ale

of P

latfo

rm In

tegr

ation

Bus

ines

s, P

rodu

ct E

ngin

eerin

g Ex

perie

nce,

Clie

ntel

e

Digital ProwessPlatform Integration Services Spread, Ecosystem Leverage, Integration Workforce, Digital Assets, Engagement Models

Breakout Zone Execution Zone Leadership Zone

EPAM

Persistent Systems

Mindtree

Luxoft


L&T Infotech

SyntelIGATE*

Tech Mahindra

Infogain

Innominds

Pactera

Hexaware

Happiest Minds


26




Low

HighData Management & Analytics Services Provider Ratings

Scal

abili

tySc

ale

of D

ata

Mgm

t. &

Ana

lytic

s Bus

ines

s, P

rodu

ct E

ngin

eerin

g Ex

perie

nce,

Clie

ntel

e

Digital ProwessData Management & Analytics Services Spread, Ecosystem Leverage, Analytics Workforce, Digital Assets, Engagement Models

EPAM

Persistent Systems

Mindtree

GlobalLogicLuxoft


L&T Infotech

Syntel

IGATE*

Tech Mahindra

Infogain

Innominds

Pactera

Hexaware

Happiest Minds


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Zinnov Zones For Digital Technology Services

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