20th April 2015 isg-one.com *Contracts with ACV 4M from the ISG Contracts Knowledgebase

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1 1 The ISG Outsourcing Index EMEA Market Data and Insights First Quarter 2015 Hosted by: James Goodman Barclays Capital 20th April 2015

2 2 Welcome to the 50 th Quarterly ISG Outsourcing Index Review Covering the state of the outsourcing industry for EMEA commercial contracts. * John Keppel Partner & President Dr. David Howie Partner Bernd Schaefer Partner *Contracts with ACV 4M 5M from the ISG Contracts Knowledgebase

3 At a Glance 3 GLOBAL MARKET ACV COMES IN LIGHTER DOWN18% Y/Y AS MID-SIZE AND LARGER AWARDS FALL SHORT WEAKNESS SPREAD BETWEEN NEW SCOPE AND RESTRUCTURING AWARDS AMERICASACV UP10% Y/Y WITHBPO, ENERGY, HEALTHCARE AND PHARMA SECTORS PARTICULARLY ACTIVE EMEA ACV DOWN26% Y/Y; DESPITE A STRONG SHOWING INFINANCIALSERVICES AND IN THEDACH MARKET; SLOWING IN THE UK, NORDICS AND FRANCE TURNED OVERALL RESULTS NEGATIVE ASIAPACIFICACV DOWN45% Y/Y; INDIA STEPS UP ITS CONTRACTING PACE WHILE ANZ REMAINED SLUGGISH Scorecard 1Q Y/Y 1Q Q/Q 1Q Y/Y 1Q Q/Q ACV ( B)* Change Change Counts Change Change Global Market % -22% 305-7% -16% New Scope % -7% 213 0% -11% Restructurings % -39% 92-20% -26% Mega-relationships % -34% 8-27% -11% ITO % -26% % -21% BPO % -12% % -4% Americas % -13% % -8% EMEA % -29% % -23% Asia Pacific % -19% 34-24% -15%

4 Global Market Contract Award Trends As we forecast last quarter, Global ACV declines, down 18% Y/Y, as midsize and larger awards fall short. 4 Global Market Quarterly ACV ( B)* $4.8 $5.6 $4.8 $4.9 $5.2 $4.1 Global Market Quarterly Contract Counts

5 EMEA Contract Award Trends EMEA ACV in falls 26% Y/Y as the region sees decreases in both Restructuring and New Scope awards. ITO ACV accentuates the decline, shrinking 36% Y/Y. 5 EMEA Quarterly ACV ( B)* EMEA Quarterly Counts EMEA Trailing 12 Months ACV ( B)* Like-Quarter Segment Details ACV ( B)* ACV 541 Counts Range of 5 Prior 1Qs Avg of 5 Prior 1Qs 9.3 2Q Q Q Q Q New Scope Restructuring ITO BPO 0.5

6 EMEA Contract Award Trends Detail Despite a strong showing in Financial Services and in the DACH market, slowing in the U.K. & Nordics plus a difficult compare in France pull down the market. 6 EMEA Sub-regions Like-Quarter ACV ( B)* Range of 5 Prior 1Qs Avg of 5 Prior 1Qs U.K. & Ireland Nordics DACH France Benelux Southern Europe Africa & Middle East 0.02 E. Europe & Russia EMEA Industry Like-Quarter ACV ( B)* Financial Services 0.99 Range of 5 Prior 1Qs Avg of 5 Prior 1Qs Travel Transport Leisure 0.25 Manufacturing Telecom & Media Energy Business Consumer Services Products & Goods Retail Healthcare & Pharma

7 ISG Sourcing Market Standouts in EMEA Large multinationals and providers with strong local home market profiles head up each of the service provider segments. 7 SOURCING STANDOUTS GROUPED BY COMPANY SIZE The Big 10 Sourcing Standouts The Building 10 Sourcing Standouts The Breakthrough 10 Sourcing Standouts Accenture Atos Balfour Beatty BT Capgemini Fujitsu HP IBM TCS T-Systems Cognizant Capita CGI EVRY HCL Infosys MITIE Serco Tieto Wipro Endava HH Global IGATE InnerWorkings Kuehne & Nagel Luxoft MAYKOR Mindtree NNIT A/S Xchanging Co. Revenues > $10B Co. Revenues $2-10 B Co. Revenues < $2 B Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings

8 Americas Contract Award Trends Americas ACV is up 10% Y/Y with first quarter counts up 27% Y/Y. BPO ACV, up 7% Y/Y, has its best quarter in two years. 8 Americas Quarterly ACV ( B)* Americas Quarterly Counts Americas Trailing 12 Months ACV ( B)* Like-Quarter Segment Details ACV ( B)* Q Q11 - ACV Q12 - Counts Q Q Range of 5 Prior 1Qs Avg of 5 Prior 1Qs New Scope Restructuring ITO BPO 0.8

9 Americas Contract Award Trends Detail ACV increases due to strength in the major markets of U.S. and Canada. Healthcare & Pharmaceutical and Energy sectors are particularly active. 9 Americas Sub-regions Like-Quarter ACV ( B)* Range of 5 Prior 1Qs Avg of 5 Prior 1Qs U.S Canada Brazil Mexico Other LatAm Americas Industry Like-Quarter ACV ( B)* 0.8 Range of 5 Prior 1Qs Avg of 5 Prior 1Qs Manufacturing Financial Services Telecom & Media 0.19 Healthcare & Pharma 0.32 Business Services Retail Energy Consumer Products & Goods 0.05 Travel Transport Leisure 0.10

10 ISG Sourcing Market Standouts in the Americas Providers with substantial offshore profiles led in the Building tier. Several contact centre firms are now positioned in the Breakthrough SOURCING STANDOUTS GROUPED BY COMPANY SIZE The Big 10 Sourcing Standouts The Building 10 Sourcing Standouts The Breakthrough 10 Sourcing Standouts Accenture Atos BT Capgemini Dell IBM RR Donnelley State Street TCS Xerox Co. Revenues > $10B Aon Hewitt CBRE CGI Cognizant CompuCom Genpact HCL Infosys Teleperformance Wipro Co. Revenues $2-10 B Alorica APAC Customer Services EXL Firstsource Solutions ICF International IGATE KPIT Technologies Luxoft Syntel TeleTech Co. Revenues < $2 B Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings

11 Asia Pacific Contract Award Trends Asia Pacific ACV is down 45% Y/Y versus a robust quarter a year ago. Contract counts are down 24% Y/Y yet are in line with and. 11 Asia Pacific Quarterly ACV ( B)* Asia Pacific Quarterly Counts Asia Pacific Trailing 12 Months ACV ( B)* Like-Quarter Segment Details ACV ( B)* ACV 169 Counts Range of 5 Prior 1Qs Avg of 5 Prior 1Qs 2.2 2Q Q Q Q Q New Scope Restructuring ITO BPO

12 Asia Pacific Contract Award Trends Detail India steps up its contracting pace. However, ANZ remains sluggish, holding back overall regional results. 12 Asia Pacific Sub-regions Like-Quarter ACV ( B)* Range of 5 Prior 1Qs Avg of 5 Prior 1Qs ANZ India and South Asia Japan Greater China Southeast Asia South Korea Asia Pacific Industry Like-Quarter ACV ( B)* Financial Services 0.14 Range of 5 Prior 1Qs Avg of 5 Prior 1Qs 0.02 Manufacturing Telecom & Media 0.08 Travel Transport Leisure 0.10 Energy Business Services Consumer Products & Goods Retail Healthcare & Pharma

13 ISG Sourcing Market Standouts in Asia Pacific Several Japanese providers joined the large multinationals in the Big 10 Sourcing Standouts list. Australian and India-based providers contributed greatly to the two smaller tiers. 13 SOURCING STANDOUTS GROUPED BY COMPANY SIZE The Big 10 Sourcing Standouts The Building 10 Sourcing Standouts The Breakthrough 10 Sourcing Standouts Accenture BT Fujitsu HP Hitachi IBM NTT Data Ricoh TCS Ericsson Cognizant HCL Infosys NEC Orange Business Services Tech Mahindra Transfield Services Unisys United Group Services Wipro Aegis Limited ChinaSoft Hollysys Automation Itron Kratos Defense & Security NGA Human Resources Ramco SITA Vertex Group WNS Co. Revenues > $10B Co. Revenues $2-10 B Co. Revenues < $2 B Placements based on ACV of commercial contract awards in the past 12 months sourced from ISG Contracts Knowledgebase. Service providers in alphabetical order; no rankings implied. Revenues sourced from Hoovers and individual company financial fillings

14 Global Public Sector Award Trends Relative to the Commercial Sector, Public Sector ACV grows in the past five years. Most ACV is generated by ITO awards, with BPO ACV varying by geography. 14 Public Sector Trailing 12 Months ACV ( B)* Commercial Sector Public Sector Public Sector Trailing 12 Months Counts Commercial Sector Public Sector $22.1 $20.1 $22.1 $31.1 $37.8 $18.7 1,176 1,283 1,180 1,400 1,188 1,293 1, Q10-2Q11-2Q12-2Q13-2Q14-2Q10-2Q11-2Q12-2Q13-2Q14 - Public Sector ITO vs. BPO TTM ACV ( B)* Public Sector Regional ITO vs. BPO % TTM ACV Public Sector ITO ACV Public Sector BPO ACV ITO BPO % 88% 64% 9% 91% 62% Q Q Q12-2Q13-2Q14-36% U.S. & Canada U.K. Continental Europe 38% Australia

15 Global Public Sector Award Trends Continued North America, led by Defenceand Healthcare spending, account for a large share of sourcing. Average ACV remains steady while durations fall. 15 Share of Public Sector ACV for Trailing 12 Months Top Public Sector Providers in Recent 12 Months* 67% U.S. & Canada 17% U.K. 7% 6% 2% Continental Europe Australia Other Global Average Deal Size and Duration Compare Avg. Duration in Yrs Avg. Contract Value ( K) Q10 - Commercial Sector Public Sector 2Q11-2Q12-2Q *Service providers in alphabetical order; no rankings implied. Placements based on counts of public sector contract awards sourced from ISG Contracts Knowledgebase Q14 - U.S. & Canada General Dynamics L-3 Communications Leidos Holdings Lockheed Martin Northrop Grumman Raytheon Science Applications U.K. Accenture BT Capita Carillion CGI CSC HP Asia Pacific Accenture Boeing Fujitsu Harris Corp. IBM NEC Corp. Serco Continental Europe Accenture Atea Atos Capgemini CGI HP IBM Indra Sistemas Serco

16 16 THE COMPOUNDED IMPACT OF AUTOMATION, ROBOTICS AND CLOUD THE ARC HEIGHTENS SOURCING PRICE WARS Special Topic for First Quarter 2015 John Keppel Partner & President

17 The ARC Effect Accelerates and Broadens Pricing Changes Automation, Robotics and Cloud (ARC) impact the managed service marketplace more rapidly and broadly than anticipated. Clients look to benchmarking to take advantage. 17 utomation Stirring Up the Status Quo obotics loud? SaaS PaaS IaaS Most Recent reveals price declines more than 20% in some cases A Buyer s Market

18 Providers Adjust Talk of New Service Investments Abound Providers are trying to leverage what they have, protect existing revenues and invent their future businesses all at the same time a significant challenge. 18 ARC leads to Not just short-term contracts, but effectively pay-as-you-go models to ensure flexibility supplant on-premises, fixed-pricing models? $3 to $4 dollars in hardware/software revenue is $4 replaced with only $1 of cloud-based revenue Significant Provider Challenge $1

19 ISG Outsourcing Index - Global Summary and Outlook 19 market summary As we forecast, Global Market ACV fell short Y/Y even as smaller deal flow remained constant Americas results stayed consistent as the U.S. and Canada and several industries (Energy and Healthcare/Pharmaceuticals) saw stepped-up activity EMEA and Asia-Pacific fell back Y/Y as they struggled with difficult comparisons against a more robust quarter a year ago Positive results in selected geographic markets like India and DACH and Financial Services in Europe were not enough to counterbalance declines in larger, more established sourcing markets like the U.K. and ANZ market outlook We expect a difficult comparison in 2Q15 as markets such as France and Japan have tough targets to match ACV should remain muted through the first half but we expect will turn more positive in 2H15 especially with strength in verticals like Energy and Transportation, coupled with solid results in the larger sourcing markets like the U.S. and DACH

20 Learn More Please contact us with your questions and comments. 20 Dr. David Howie Partner www. Denise Colgan EMEA and AP Media Contact Rob Arnott Cohn & Wolfe for ISG +44 (0) Paul Reynolds Partner ISG insights serving providers and market analysts

21 21 APPENDIX: SCORE CARD FOR TCV First Quarter 2015

22 First Quarter 2015 TCV Scorecard The ISG Outsourcing Index has moved to ACV as the primary measure of the Broader Market. We will continue to provide a high-level TCV view of the market via a Scorecard analysis. 22 Scorecard 1Q Y/Y 1Q Q/Q 1Q Y/Y 1Q Q/Q TCV ( B)* Change Change Counts Change Change Global Market % -25% 305-7% -16% New Scope % 13% 213 0% -11% Restructurings % -60% 92-20% -26% Mega-deals % -61% 8-27% -11% ITO % -23% % -21% BPO % -32% % -4% Americas % -29% % -8% EMEA % -26% % -23% Asia Pacific % -11% 34-24% -15% *Contracts with TCV 25M from the ISG Contracts Knowledgebase

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