Trends in outsourcing and services

Transcription

1 Trends in outsourcing and services Stuart Ravens Ed Thomas 1 May

2 Global contract volume and TCV up in 2013 Despite an underwhelming fourth quarter, 2013 surpassed the previous year in terms of both global contract volume and total contract value (TCV). The total number of contracts tracked by Ovum during the course of the year was the highest since Annual TCV was up 12% on the previous year. The increase in contract volume was largely due to the increase in private sector activity. The number of contracts awarded by European enterprises was up 41% in 2013, and the annual total was the highest since Contract volume increased by 39% in the North American private sector, but the number of awards was half that recorded in Europe. 2

3 TCV and number of deals, 2009 to ,000 Total contract value ($bn) ,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 Number of deals ,000 TCV Number of deals 3

4 UK TCV was up 51% on the previous year In the UK, TCV was up 51% on the previous year, hitting its highest level since The number of contracts tracked was also up 31%. Over half of UK TCV in 2013 was derived from the public sector. Large central government contracts were awarded by the Cabinet Office, the Department of Energy and Climate Change, and National Savings and Investments. In the private sector, there was notable activity in the insurance industry. In the utilities market, the likes of Centrica, DCC, Npower, SSE, and Southern Water all awarded IT services contracts. 4

5 Move away from large contracts picks up pace In recent years, the IT services industry has slowly begun to move away from large outsourcing contracts, valued at upwards of $100m. In the second half of 2013, this shift gathered significant momentum among enterprises. In the first six months of 2013, approximately three-quarters of all private sector contracts were valued at less than $50m. In 3Q13, this figure increased to just under 81% while, in 4Q13, 86% of all contracts awarded by businesses were worth under $50m. Many companies, particularly in mature markets such as the US, are looking for more choice from vendors, in terms of how services are delivered and priced. At the same time, technology trends such as cloud are increasing the number of options available to clients. 5

6 Private sector contracts by price band, 3Q12 to 4Q13 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 $10m >$10m, <$50m $50m, <$100m $100m 6

7 BPO activity hit eight-year high in 2013 In 2013, the number of BPO contracts announced was the highest since In the UK, the number of contracts with a BPO component was the highest ever recorded in a single year by Ovum. Some 30% of the UK BPO contracts announced in 2013 were awarded by public sector agencies. For both central and local government agencies, cost reduction is the main driver behind the decision to outsource back-office processes. The most active private sector verticals were manufacturing and insurance. 7

8 Trends in outsourcing and services Stuart Ravens Ed Thomas 1 May

9 IT solution area utilities are turning to service providers for more industry-specific work Worldwide utilities services contracts 9

10 While ITO still dominates, we are seeing an uptick in both BPO and SI work Worldwide utilities services contracts 10

11 No mega-deals have been signed in the last two years worldwide utilities contracts worldwide utilities contracts EOn/HP Annual Contract Value (US$m) EOn/T-Systems Hydro One/Capgemini Annual Contract Value (US$m) Centrica/HP Contract Length (months) Contract Length (months) 11

12 However, contracts are lengthening and values are increasing worldwide utilities contracts worldwide utilities contracts Average contract length: 43.3m Average annual value: $5.5m Average total value: $21.1m Average contract length: 45.6m Average annual value: $6.3m Average total value: $26.4m

13 UK utilities contracts in 2013 Application services: Centrica/Capgemini management and support of SAP services BPO: Npower/Capita and TCS - call centre and back-office services. British Gas/Itron customer services. Scottish Power/Itron support electricity prepayment customers. Data services: Data Communications Company/CGI support delivery of data services for smart meters. Infrastructure services: United Utilities/Fujitsu - infrastructure design, build, and management. SSE/Alcatel-Lucent network services. Systems integration SSE/Accenture implementing Oracle applications. Southern Water/TCS deploying CRM system. 13

14 CX dominates utility IT projects worldwide in 2014 Source: Ovum 14

15 Innovation I would rank business model innovation as the single most important challenge to utilities today. We need to get away from the old model, where utilities sell just megawatt hours, to one where they also sell a much more differentiated set of products for example, energy services, e-mobility and generation capacities, as well as megawatt hours. Dr Susanne Nies, Eurelectric The old utility business model is dead Sam Laidlaw, Centrica

16 16 Transformation in supply and services

17 17 Transformation in customer satisfaction

18 18 #AskBG: social media has to be managed carefully

19 19 And utilities have to learn from their mistakes

20 Npower recently outsourced its entire CX capability RWE net loss 2.76bn for 2013 (first loss since 1949) 5bn write-down, mainly on fossil fuel plants Cost savings across the value chain are critical Apart from closing or mothballing gas fired power stations, RWE Npower in UK pursuing dramatic BPO Onshore provider to run all frontline customer services customer experience from specialist providers, with financial incentives based on customer satisfaction All back office retail functions outsourced to India 1,500 redundancies 20

21 Network transformation drives adoption of new services Past Future Source: EY 21

22 European smart meter and smart grid services contracts in 2012 and 2013 EOn Sweden/Capgemini and Ericsson smart meter deployment; AMI data analytics GrDF/Capgemini and Atos System architecture design and implementation Endesa/Accenture smart meter data integration British Gas/Itron support electricity prepayment customers Scottish Power/Itron prepayment managed service Data Communications Company/CGI support delivery of data services for smart meters Elektrilevi/Ericsson AMI managed service Thames Water/Accenture IT-OT integration pilot 22

23 23 Analytics becomes the cornerstone of the digital utility

24 Summary Unprecedented pressures are transforming the industry, the way utilities do business, the way they interact with their customers Technology-led innovation is at the forefront of managing this disruption In many cases the industry lacks the requisite skills to manage this transition We expect the industry to further outsource CX and elements of smart meter/smart grid services As data analytics matures, utilities will be faced with a global shortage of data scientists. Analytics services will become an important growth area in the coming years

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