Global IT-BPO Outsourcing Deals Analysis Annual Analysis for 2013

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Global IT-BPO

Outsourcing Deals

Analysis

Annual Analysis for

2013

(2)

1

© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

About

Global

IT-BPO

Outsourcing

Deals

Analysis

Global IT-BPO Outsourcing Deals Analysis

is a quarterly analysis of IT-BPO outsourcing contracts

signed across industries and geographies, with a total contract value (TCV) of USD 5 million and above

per deal. The KPMG Shared Services and Outsourcing Advisory (SSOA) publishes this analysis every

quarter.

Methodology:

The analysis and findings presented in this report are based on select third party market research and

publicly available outsourcing data as identified throughout this presentation. It does not include contract

information gathered from KPMG Sourcing Advisory business engagements.

For more information on this market research please get in touch with Shailesh Narwaiye

(

Disclaimer: The information contained here in is of a general nature and is not intended to address the circumstances of any

particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such

information without appropriate professional advice after a thorough examination of the particular situation.

(3)

Foreword

We wish you a very happy new year. We are at the beginning of the year 2014 and it is worthwhile

looking back at the achievements and roadblocks for past year and plan for a better future.

It gives us great pleasure to bring to you the year-end 2013 edition of the KPMG Global IT-BPO

Outsourcing Deals Analysis.

The current edition looks at IT-BPO outsourcing contracts signed in the last four years, from 2010 to

2013, and identifies the major trends influencing the market. This report also includes our regular

analysis feature for the latest quarter Q4-2013 (October – December).

The IT-BPO market was somewhat weaker in 2013 compared to 2012, as represented by a marginal

drop with total deal value decreasing by 3 percent and the total number of deals decreasing by 7

percent. ASPAC results suffered the most from a lack of large deals in the market.

Smaller deal sizes have become the new normal in the market with average contract size across all

bands continuing to drift downwards. The Unites States “fiscal cliff” negotiations could add to complexity

in the outsourcing sector of the region, especially in the public sector and in the aerospace and defense

industry. Buyers seeking greater access to Social media, Mobility, Analytics, and Cloud services will

increasingly drive growth in the market though to the benefit of a broader and more diverse range of

providers than with traditional outsourcing.

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Section 1:

Global Deals – Overview of last 4 years

Section 4:

4Q13 Deal Analysis

Section 5:

IT-BPO Outsourcing Outlook

Section 3:

Deals by Geography

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Section 1 Global Deals –

Overview of

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5 4Q13

KPMG

Global

Shared Services and Outsourcing Pulse Survey

Market Overview

Download KPMG’s Shared Services and Outsourcing Pulse Surveys at:

Macro trends

Current market trends

Negative global economic conditions continue to weigh heavily

on organizations’ decisions on how, where, and why they

source services globally, though

few firms are pulling back

from global sourcing of services’ globalization

.

Global business services (GBS), combining onshore,

nearshore, and offshore shared services and outsourcing, has

become the

predominant means through which

organizations support global operations

.

Many organizations’ GBS remain fragmented across functions,

geographies, and business units, complicating governance

and detracting from potential business benefits.

Defined

efforts to drive GBS maturity

are the norm among more

experienced and sophisticated GBS users.

Traditional generic and transactional outsourcing

continues to commoditize

.

Cloud and client maturity are

major drivers for this, especially in IT. Buyers are seeking

geographic, and regulatory needs.

There is a

growing bifurcation between “leaders” and

“laggards”

in the service provider market based on industry

and business process experience and diversity of services

mix, including cloud and analytics.

Talent shortages and talent management challenges

have

supplanted negative global economic conditions and weak

demand for goods and services as the top challenge facing

organizations. This is one driving factor for ongoing increased

adoption of global service delivery models.

The clear top initiative cited for organizations in 2014 remains

continuing to

drive down operating costs, though many

firms face diminishing returns from these efforts

.

Enhancing global service delivery chains and excelling at GBS

as well as finding,

attracting, and retaining talent globally

are also top priorities for 2014

Overall, buyer organizations’

appetites to undertake change

efforts fell in the quarter

after several quarters of

improvement. Cautious buyers and the

increased focus on

process automation

, often delivered via cloud services, will

create

growing challenges for third-party services

providers

that have relied on high-skilled yet lower-cost labor

as a differentiator.

There is a general

sense of pessimism about general

market conditions

with mixed expectations on global

economic growth and growing concerns over inflation and the

rising cost of living, especially in Asia Pacific.

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Of the four years

(2010 - 2013) analyzed, the

year 2010 was the strongest year for outsourcing demand

.

Deals signed in 2010 had an average total contract value (TCV) of USD 115 million compared to USD 83

million, USD 95 million and USD 99 million in 2011, 2012 and 2013 respectively

IT Bundled Services

and

KPO (Knowledge Process Outsourcing) Services

contributed

USD 35.1

billion

and

USD 6.3 billion

respectively and were the largest procured services globally within ITO

and BPO outsourced services respectively, in 2013

Worldwide in 2013,

1,075 ITO contracts

worth

USD 111.6 billion

and

246 BPO

contracts

worth

USD 20.3 billion

were signed

Globally,

152 IT-BPO Bundled

deals were signed in 2013 with aggregate contract value of

USD 13.7

billion

Defense and Government

were the top two consumers of IT-BPO services contributing

42 percent, and 25

percent

respectively of the total deal value signed in 2013. Telecom and Banking & Financial Services were

the next biggest contributors by deal value

Average deal tenure

for contracts in 2013 was

4 years 7 months

which is almost same as the

previous three years, indicating the continuity of the market’s proclivity towards smaller tenure

deals

Source: IDC (www.idc.com), Contract Database, Jan 2014, Research & Analysis based on the IDC contract database

Average annualized contract value

in 2013 was

USD 21.7 million

as compared to

USD 19.5 million

during

2012 showing an increase

of around 11 percent

The Summary

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7

54.9

49.3

37.7

65.0

32.4

21.3

39.1

28.2

22.7

36.5

35.3

55.9

20.3

43.9

53.3

28.0

397

506

431

471

430

325

368

341

292

354

428

516

299

426

422

326 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2010

2011

2012

2013

Value (USD billion)

No. of deals

Global Quarterly Deal Movements

Snapshot

Quarterly movements of global IT-BPO deals*

• 4Q13 witnessed an unexpected fall in deal volume with total deal value reducing to nearly one-half and

total number of deals decreasing by 37 percent as compared to 4Q12

• The average deal value decreased by 21 percent compared to 4Q12

• Despite weak performance in the last quarter, the overall deal activity for the year 2013 showed only a

marginal decline with total deal value decreasing by 3 percent and number of deals decreasing by 7

percent

Deal Value

No. of deals

4Q13

4Q12

4Q13

4Q12

-37%

-50%

Total Deal Value

USD 206.8 billion

Total Deal Value

USD 150.4 billion

Total Deal Value

USD 120.9 billion

-41%

+24%

Number of deals

1,805

Number of Deals

1,590

Number of Deals

1,464

-19%

+9%

Total Deal Value

USD 145.5 billion

-3%

Number of Deals

1,473

-7%

*

The term deals is interchangeably used with contracts throughout the analysis unless otherwise specified. Deals analyzed are global sourcing contracts of size USD 5.0 million and above only. Source: IDC (www.idc.com), Contract Database, Jan 2014, Research & Analysis based on the IDC contract database

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40,901

24,117

30,974

32,000

3,500

13,500

23,500

33,500

43,500

2010

2011

2012

2013

Total Annualized Contract Value (USD million)

Annualized Contract Value

Y-o-Y Comparison

**Annualized* contract value comparison 2010-2013**

• There was a nominal increase of 3 percent in total annualized contract value in 2013 as compared to 2012

• There was an 11 percent increase in average annualized contract value in 2013 as against 2012, while the

average deal tenure remained constant at 4 years 7 months

* Annualized contract value = ( total value of a contract / tenure in months ) x 12

Contract value for contracts having tenure less than 1 year is considered as annualized value for the analysis. Graph is not to scale and only represents the division across different parameters

Source: IDC (www.idc.com), Contract Database, Jan 2014, Research & Analysis based on the IDC contract database

28%

increase

3%

increase

Average annualized contract value (USD million)

Average tenure per contract

Minimum annualized

contract value

Maximum annualized

contract value

Note: All values in USD million unless otherwise specified

11% increase

657

740

0.50

0.78 4 years 7 months

19.49

16.47 2012

2011

1724

0.86 2013

21.72 4 years 7 months

4 years 6 months

41%

decrease

1042

0.55

22.66 2010

4 years 7 months

(10)

9 Sector

2009->2010 2010->2011 2011->2012 2012->2013 2009->2010 2010->2011 2011->2012 2012->2013 2009->2010 2010->2011 2011->2012 2012->2013

Automotive & Aerospace

762%

-41%

-48%

5%

80%

44%

-15%

5%

379%

-59%

-38%

1%

Banking & Financial Services

44.2%

-24.6%

-39%

40%

-12%

-14%

-19%

24%

63%

-12%

-25%

13%

Defense

15%

-56%

118%

31%

8%

-34%

78%

10%

7%

-33%

22%

19%

Energy & Utilities

-6%

-47%

46%

10%

-21%

-16%

-12%

29%

18%

-37%

66%

-15%

Government

34%

-41%

8%

-33%

13%

-13%

-10%

-22%

19%

-32%

20%

-14%

Insurance

-67%

44%

39%

-72%

-33%

-37%

39%

-41%

-51%

126%

0%

-52%

Manufacturing

-14%

-63%

28%

-48%

-36%

-38%

-6%

-5%

34%

-39%

36%

-45%

Pharma & Healthcare

-71%

88%

-12%

-3%

-34%

12%

-13%

-51%

-56%

68%

1%

99%

Publishing, Media & Entertainment

181%

-66%

-69%

105%

117%

-57%

-61%

109%

30%

-22%

-21%

-2%

Retail

-61%

-9%

24%

-40%

-33%

13%

-22%

-18%

-41%

-20%

58%

-27%

Telecom

-90%

307%

85%

26%

-71%

30%

170%

-23%

-66%

212%

-31%

63%

Travel & Logistics

-9%

-25%

-29%

-15%

-45%

-25%

-5%

0%

66%

0%

-25%

-15%

Others*

73%

-59%

-34%

22%

-10%

-12%

-29%

-12%

92%

-53%

-7%

39%

Total Contract Value

Total Num ber of Contracts

Average Contract Value

*Others: Construction, Consumer & Recreational Services, Education, Professional services, Securities and investment services, Social services, Trade unions, Technology, Wholesale Source: IDC (www.idc.com), Contract Database, Jan 2014, Research & Analysis based on the IDC contract database

Sector Analysis

Y-o-Y Comparison

Trends in deal movement from 2009 to 2013

• Banking & Financial Services, Defense, Publishing, Media & Entertainment and Telecom exhibited > 25

percent growth in terms of value over 2012 while Government, Insurance, Manufacturing and Retail

sectors had a >25 percent decrease in total contract value

• Continuous growth in the total contract value was observed across Defense, Energy & Utilities and

Telecom since 2010

• Insurance and Pharma & Healthcare displayed >25 percent decrease in number of contracts in 2013 over

2012

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Deal Type

2009->2010 2010->2011 2011->2012 2012->2013 2009->2010 2010->2011 2011->2012 2012->2013 2009->2010 2010->2011 2011->2012 2012->2013

ITO

4%

-46%

25%

-6%

-11%

-20%

5%

-14%

18%

-32%

19%

9%

BPO

23.1%

-19.9%

9%

4%

-21%

-13%

6%

9%

55%

-8%

3%

-4%

Bundled

64%

-10%

50%

8%

27%

-15%

69%

27%

29%

6%

-11%

-15%

Less than USD 100 MN

-11%

-16%

17%

-7%

-13%

4%

-10%

2%

-3%

13%

3%

Betw een USD 100- 500 MN

4%

-46%

65%

2%

-7%

-38%

41%

5%

12%

-12%

17%

-3%

More than USD 500 MN

21%

-48%

-3%

-7%

10%

-38%

-4%

-2%

10%

-15%

1%

-6%

Less than 1-year

-56%

163%

45%

123%

-56%

78%

92%

11%

0%

48%

-24%

102%

Betw een 1 to 5-years

43%

-43%

54%

-29%

-8%

-21%

7%

-14%

56%

-28%

44%

-17%

More than 5-years

-15%

-40%

-9%

40%

-19%

-18%

1%

15%

4%

-27%

-10%

22%

Total Contract Value

Total Num ber of Contracts

Average Contract Value

Deal Analysis

Y-o-Y Comparison

Trends in deal movement from 2009 to 2013

• BPO and bundled deals have grown steadily over the last 2 years in terms of both total contract value

and number of contracts but ITO deals declined in 2013 in TCV and numbers over the previous year with

decrease being < 25 percent

• While deals with TCV between USD 100-500 MN grew, deals less than USD 100 MN and deals more than

USD 500 MN decreased in 2013 as compared to 2012

• Both deals more than 5-years long and less than 1-year long grew by > 25 percent but deals with tenure

between 1 to 5-years had poor deal activity with a decrease > 25 percent in TCV in 2013 over 2012

(12)

Section 2

(13)

Deal Value

Global sourcing snapshot – 2013

* Deals analyzed are USD 5.0 million and above only, throughout the analysis. Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off # Hybrid pricing includes a combination of various pricing mechanisms

**IT-BPO deals* signed in 2013 (Total Contract Value = USD 145.5 billion)**

Total

contract

value

USD 145.5

billion

ITO

111.6 BPO

20.3 Bundled

13.7 Americas

97.6 EMA

39.1 ASPAC

8.8 Less than USD 100 MN

32.9 Between USD 100- 500 MN

66.3 More than USD 500 MN

46.3 Less than 1-year

3.3 Between 1 to 5-years

69.2 More than 5-years

73.0 Fixed Price

82.2 Hybrid

57.2

2.8

3.3 Services

Region

Contract Value

Tenure

Pricing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

• ITO deals contributed 77 percent of the total deal value in 2013, a 6 percent drop from 2012

• Organizations from the AMERICAS region continue to contribute to the majority of the deals, followed by

EMA. Contribution of ASPAC has decreased from 12 percent in 2012 to 6 percent in 2013

• 32 percent value was contributed by 3 percent of deals of sizes USD 500 MN and above. Deals between

USD 100 – 500 MN continue to be the majority in 2013 as was the case in 2012

#

Others

(14)

13 Number of Deals

Global sourcing snapshot – 2013

**IT-BPO deals* signed in 2013 (Total Number of Contracts = 1,473)**

Total

contracts

1,473

ITO

1,075

BPO

246 Bundled

152 Americas

887 EMA

452 ASPAC

134 Less than USD 100 MN

1,132

Between USD 100- 500 MN

291 More than USD 500 MN

50 Less than 1-year

102 Between 1 to 5-years

1,048

More than 5-years

323 Fixed Price

895 Hybrid

522

15

41 Services

Region

Contract Value

Tenure

Pricing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

• Bundled deals grew the fastest with a 27 percent increase in number of deals in 2013 over 2012

• Shorter tenure deals (Less than 1-year) were a minority of overall deals but exhibited an 11 percent

increase in contract numbers as compared to 2012

• 96 percent share by volume was contributed by deals having either Hybrid or Fixed price model

#

Others

(15)

1.9

0.6

0.1

0.6

0.04

2.4

1.2

0.04

0.3

3.4

0.4

2.9

6.4

0.9

0.4

0.1

1.2

1.4 _1.1

0.2

4.2

2.1

27.8

4.1

4.2

0.03

0.1

0.3

0.8

0.5

0.5 _0.1

0.5

3.8

0.9

21.0

20.5

2.4

0.8

1.1

0.3

1.8

0.9

0.1

1.3

0.1

4.0

0.5

9.4

5.3 Sector Analysis

IT-BPO deals across sectors by value and numbers

Sector-wise break-up of deals in 2013

D

e

a

l

V

a

lu

e

(

U

S

D

b

ill

io

n

)

Banking &

Financial

Services

Insurance

Automotive

&

Aerospace

Travel &

Logistics

Manufacturing

Energy &

Utilities

Pharma &

Healthcare

Publishing,

Media &

Entertainment

Retail

Telecom

Others *

Defense

Government

No. of contracts

Q1-2013 Q2-2013 Q3-2013 * Others: Business federation, Construction, Education, Lottery company, Professional services, Securities and investment services, Social services, Trade unions, Technology, Wholesale

Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off Source: IDC (www.idc.com), Contract Database, Jan 2014, Research & Analysis based on the IDC contract database

TCV : USD 145.5 billion

No. of contracts: 1,473

Q4-2013

• Insurance, Automotive & Aerospace and Publishing, Media & Entertainment sectors exhibited multifold

growth in deal values in 4Q13 as compared to 3Q13

• While the Defense and Government sectors continue to lead deal activity contributing to 67 percent of the

total deal value in 2013, 4Q13 witnessed a sharp drop in their deal activity with 55 percent and 74 percent

decrease respectively in total deal value

25

22

20

38

8 9 9

1

5

8

14

35

16

4

6

46

13

18

4

1

6

30

21

19

20

14

3

12

9

26

12

13

18

9

6

12

23 ₂₂

2

20

74

70

98

192

71

118

145

66

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Section 3

(17)

70.8

45.4

35.9

39.1

608

597

508

452 2010

2011

2012

2013

125.8

68.6

95.7

97.6

996

720

916

887 2010

2011

2012

2013

Geography Analysis

IT-BPO deals across geographies: Y-o-Y Comparison

Geography-wise break-up of deals*

* Deals originating from the geography

AMERICAS

EMA

ASPAC

• AMERICAS continued to be the major outsourcing region contributing 57 percent of the total deal value

in 4Q13. However, the value of deals in the quarter decreased by 59 percent as compared to 4Q12

• EMA was the strongest market this quarter in terms of growth with 25 percent increase in deal value as

compared to 4Q12, though the number of deals decreased marginally by 9 percent

• ASPAC was the worst hit market this quarter with a decrease of 75 percent in value of deals as compared

to 4Q12, but number of deals increased by 10 percent over the same period. It was the only region that

observed a significant drop in deal value in the year 2013 with a decrease of 53 percent as compared to

the year 2012

Total Contract Value (USD billion)

No. of Contracts

TCV (%)

5%

6%

12%

6%

10.2

7.0

18.8

8.8

201

147

166

134 2010

2011

2012

2013

TCV (%)

61%

57%

64%

67%

TCV (%)

34%

38%

24%

27%

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(19)

Geography Analysis

IT-BPO deals in AMERICAS: Value & Number of deals

Geography-wise break-up of deals*

• While BPO and bundled deals showed a

substantial increase in deal value in 4Q13 over

3Q13, a sharp drop of 69 percent was observed in

deal activity of ITO deals

• The region showed a slight growth of 2 percent in

2013 over 2012

• After a sharp dip in 1Q13, the IT-BPO market

recovered in 2Q13 and 3Q13, but slowed

significantly in 4Q13

Number of Contracts

Total Contract Value (USD billion)

188

139

177

69

97

184

162

293

121

202 ₁₉₁

132

28

13 29 42

21

23

35 ₃₆

37

35

56

30

11 ₅

11 8

12

8

22

23

17

53

6

7 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011

2012

2013

ITO

BPO

Bundled

($68.6 billion)

($95.7 billion)

($97.6 billion)

(720)

(916)

(887)

17.1

11.5

27.2

4.1

7.7

23.2

13.1

34.8

6.2

28.0

33.0

10.2

1.2

0.7

1.4

3.0

1.9

2.0

3.1

3.5

2.5

3.2

4.6

0.9

0.5

0.6

0.7

2.0

3.9

1.3

2.5

2.1

0.6

1.2 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011

2012

2013

(20)

19 Geography Analysis

IT-BPO deals in AMERICAS: Sector-wise break-up

Sector-wise break-up of deals

* Others: Business federation, Construction, Education, Lottery company, Professional services, Securities and investment services, Social services, Trade unions, Technology, Wholesale Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off

No. of deals

2011

2012

2013

• Government and Defense sector of AMERICAS region remain the strongest users of outsourcing in 2013

• Despite 38 percent growth in deal value in Defense in 2013, which was the largest contributing sector, the

region exhibited a nominal growth of 2 percent in TCV in 2013 over 2012

All figures in USD billion

2.4

2.1

0.3

1.4

2.2

0.4

1.0

1.1

0.2

1.7

3.3

2.3

0.2

1.3

3.1

1.4

1.1

0.7

0.2

1.6

0.8

2.2

0.3

0.1

0.2

0.9

1.9

0.6

1.3

0.5

1.7

1.5

61

318

299

35.9

215

19.7

Banking & Financial Services Insurance Automotive & Aerospace Travel & Logistics

Manufacturing Energy & Utilities Pharma & Healthcare Publishing, Media & Entertainment

Retail Telecom Others* Defense Government

32

25

19

31

12

8

6

36

23

11

22

27

11

17

27

18

7

29

40

14

6

13

25

19

14

4

16

28

395

60.5

35.9

7

10

6

35

444

243

43.7

25.8

(21)

(22)

21 Geography Analysis

IT-BPO deals in EMA: Value & Number of deals

Geography-wise break-up of deals*

• The deal movement by category (ITO, BPO,

Bundled) in EMA was similar to AMERICAS in

4Q13 as compared to 3Q13 with 41 percent

drop in ITO deal value

• Deal values in EMA showed better growth

than AMERICAS with an increase of 9 percent

in 2013 as compared to 2012

• While bundled deals exhibited multifold growth

(although low in numbers), both ITO and BPO

deals declined in 4Q13 over 3Q13

Total Contract Value (USD billion)

Number of Contracts

128

97

90

161

103

73

123

65

51

65

107

89

20

24 ₁₇

30 ₁₈

₁₇

38

26 ₁₆

20

28

15

10

5

7

8

3

5

4

33

32

18

2

9 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011

2012

2013

ITO

BPO

Bundled

(597)

(508)

(452)

($45.4 billion)

($35.9 billion)

($39.1 billion)

8.0

4.1

5.0

11.1

6.6

3.9

8.7

3.1 _1.9

4.4

12.4

7.3

3.1

2.0

0.8

5.3

2.1

2.0

3.2

2.0

0.4

2.7

1.4

1.8

1.2

0.9

3.0

0.3

0.8

0.6

2.7

3.2

2.4

0.5

0.6 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011

2012

2013

(23)

Geography Analysis

IT-BPO deals in EMA: Sector-wise break-up

Sector-wise break-up of deals

• The Government continues to be the dominant consumer of IT-BPO services in the EMA region, however,

2013 saw the bounce back of the Telecom and the Banking & Financial Services sectors

• Banking & Financial Services, Publishing, Media & Entertainment and Telecom exhibited >100 percent

growth in deal value over 2012

No. of deals

All figures in USD billion

2011

2012

2013

12.4

201

9.9

1.1

2.3

11

Retail Telecom Others* Defense Government

11

136

7.9

2.5 _2.2

_2.2

3.6

2.5

1.1

1.3

1.2

4.8

2.6

2.1

4.1

1.2

1.1

4.4

2.8

0.9

0.1

1.5

3.6

2.0

6.5

1.4 _1.2

1.7

2.7

2.9

1.4

0.3

0.6

8.6

2.1

61

18

37

39

16 13 13

28

14

33

55

86

36

40

26

15

32

45

27

21

6

21

67 ₆₁

67

18

13

33

40

38

8

43

2

108

0.2

9.4

(24)

(25)

Geography Analysis

IT-BPO deals in ASPAC: Value & Number of deals

Geography-wise break-up of deals*

Total Contract Value (USD billion)

Number of Contracts

• ASPAC has been worst hit in 2013 with a

decrease of 53 percent in overall deal value

as compared to 2012

• Unlike other regions, ITO deals in ASPAC

showed a marginal growth of 3 percent in

deal value in 4Q13 over 3Q13

• ASPAC was the only region where the volume of

IT-BPO contracts increased in 4Q13 as compared to

3Q13

• With TCV of contracts signed in the region

remaining nearly same in last two quarters of 2013

and volumes increasing by 38 percent between

same quarters, small value contracts are a key

trend in 4Q13 as compared to 3Q13

41

37

33

20

34

39

41

30

18

30 ₂₉

40

4

1

3

2

4

5

1

2

3

0

4

1

0

2

8

5

1

1 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011

2012

2013

ITO

BPO

Bundled

(147)

(166)

(134)

($7.0 billion)

($18.8 billion)

($8.8 billion)

0.9

1.5

2.9

1.2

3.0

2.1

3.6

8.5

2.5

1.4

2.1

2.2

0.05

0.01

0.2

0.04

0.3

0.5

0.2

0.01

0.1

0.03

0.02

0.1

0.2

0.2 Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2011

2012

2013

(26)

25

805

35

178 ₄₀₀

69

148

356

219 ₇₈

1,675

565

479 1,969

1,239

20 ₁₆

426

63

154

157

62

220 7,079

448

467 8,423

580

7

169

590

305

55

10

59 ₂₁

5,115

341

341 1,237

Geography Analysis

IT-BPO deals in ASPAC: Sector-wise break-up

Sector-wise break-up of deals

• The Government and Telecom are the top outsourcing sectors in the ASPAC region Y-o-Y. In 2013 these

sectors together contributed 72 percent of the TCV for the region

• Automotive & Aerospace and Manufacturing Sectors demonstrated multifold increase in TCV in 2013 over

2012. Travel & Logistics sector exhibited a growth of 39 percent over same period while all other sectors

showed a drop

_{No. of deals}

All figures in USD million

2011

2012

2013

19

13

7

3 ₁

1

2

13

15

6

7

8

6

4

6

1

4

1

4

6 ₃

1

20

68

41

16

3

11

5

43

1

4

5

12

6

33

8

29

(27)

Section 4

(28)

27 ITO

19.7 BPO

6.4 Bundled

1.9 Americas

16.0 EMA

9.7 ASPAC

2.2 Less than USD 100 MN

7.3 Between USD 100- 500 MN

14.1 More than USD 500 MN

6.6 Less than 1-year

1.9 Between 1 to 5-years

15.4 More than 5-years

10.6 Fixed Price

21.6 Hybrid

5.3

1.0

0.2 Services

Region

Contract Value

Tenure

Pricing

**IT-BPO deals* signed in 4Q13 (Total Contract Value = USD 28.0 billion)**

Total

contract

value

USD 28.0

billion

• While ITO deals continue to dominate the outsourcing space, the total ITO deal value has declined by 59

percent in 4Q13 over 3Q13. Contribution of BPO deals have increased from 9 percent in 3Q13 to 23

percent in 4Q13

• Though AMERICAS is the largest outsourcing region contributing 57 percent of the total deal value in

4Q13, the deal value has declined 56 percent as compared to 3Q13

• 4Q13 saw the continued dominance of Fixed Price contracting model, contributing 77 percent of the deal

value, followed by Hybrid model, contributing 19 percent

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Deal

Value

Global sourcing snapshot – Oct to Dec 2013

Others Transactional

(29)

ITO

261 BPO

48 Bundled

17 Americas

169 EMA

113 ASPAC

44 Less than USD 100 MN

254 Between USD 100- 500 MN

62 More than USD 500 MN

10 Less than 1-year

34 Between 1 to 5-years

246 More than 5-years

46 Fixed Price

231 Hybrid

85

4

6 Services

Region

Contract Value

Tenure

Pricing

**IT-BPO deals* signed in 4Q13 (Total Number of Contracts = 326)**

Total

contracts

326

• Though the contracts under USD 100 million in size have decreased by 15 percent in volume in 4Q13 over

3Q13, their contribution has increased to 78 percent from 71 percent in 3Q13

• While both longer tenure deals (tenure more than 5 years) and deals with tenure between 1 to 5 years

have exhibited substantial decrease in deal count as compared to 3Q13, shorter deals with tenure less

than 1 year have increased by 26 percent during the same period

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Number

of

Deals

Global sourcing snapshot – Oct to Dec 2013

Others Transactional

(30)

29

3.9

0.2

4.7

4.3

0.1

5.2

0.4

0.6

0.1 ADM

13.4%

ERP

2.7%

ICT Services

25.3%

IT Bundled services

26.8%

IT Consulting

1.9%

IT Infrastructure

17.6%

IT Products

3.1%

Other IT Services

3.1%

SI

6.1%

0

1

2

3

4

5

6

0

10

20

30

40

50

60

70

80 Analysis of ITO deals 4Q13

T

o

ta

l

V

a

lu

e

o

f c

o

n

tr

a

c

ts

(

U

S

D

B

illio

n

)

Number of Deals

Note: Size of bubble indicates percentage share of the total number of ITO deals

SI – System Integration, Other IT services – Software testing, IT helpdesk support services, Cyber security Source: IDC (www.idc.com), Contract Database, Jan 2014, Research & Analysis based on the IDC contract database

• IT Bundled services, ICT Services, IT Infrastructure and ADM together contributed 92 percent of all ITO

deals in terms of value during 4Q13

• Despite the multifold increase of deal values in ADM and IT Products, the overall ITO deal value

decreased by 59 percent in 4Q13 as compared to 3Q13

• A 20 percent decline in deal count over the 3Q13 was observed with maximum drop of 73 percent

occurring across System Integration contracts

Value of contracts (USD Billion)

Note: All values in USD billion. Scale of graph is just representative to illustrate the division across different parameters. Figures may not add up to 100 percent due to rounding off. Refer L.H.S. figure for legend

19.7 ADM ERP

Total

ITO

ICT

IT

Bundled

IT

Infra.

IT

Products

Other IT

Services

SI

IT

Conslt.

Services

Segmentation

ITO Services

(31)

575

112

64

163

25 4,253

215 1,011

6,419

BPO

Bundled

Services

Content

Mgmt.

CRM

Total

BPO

HRO

KPO

Transac-tional

Services

Other

BPO

Services

F&A

Analysis of BPO deals 4Q13

T

o

ta

l

V

a

lu

e

o

f c

o

n

tr

a

c

ts

(

U

S

D

M

illio

n

)

Number of Deals

Value of contracts (USD Million)

Note: Size of bubble indicates percentage share of the total number of BPO deals Other BPO services – Service desk monitoring services, Procurement

Note: All values in USD million. Scale of graph is just representative to illustrate the division across different parameters. Figures may not add up to 100 percent due to rounding off. Refer L.H.S. figure for legend

• Although the overall IT-BPO market performance was poor in 4Q13 as against 3Q13, BPO activity

managed to grow with 38 percent increase in total deal value

• KPO and Transactional Services are the BPO services which have exhibited multi-fold growth in terms of

value as well as average deal size over 3Q13

Services

Segmentation

BPO Services

BPO Bundled

services

10.4%

Content

Management

2.1%

CRM

8.3%

F&A

4.2%

HRO

2.1%

KPO

35.4%

Transactional

Services

12.5%

Other BPO

Services

25.0%

0

500 1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

0

4

8

12

16

20

(32)

Section 5

(33)

Outlook

Global Outsourcing Industry

■

Global IT-BPO deals showed a sharp upturn in 2Q13 with a 116 percent increase over 1Q13 and

a double digit increase in 3Q13. However, 4Q13 witnessed a decline in deal movements with total

deal value reducing to nearly half as compared to 3Q13.

Next year will be one of continued

challenge for the market with an expected growth between 4 to 6 percent

■

Government and Defense sectors are expected to continue being the largest outsourcers in 2014

compared to other industries

■

Buyers are still cautious on models that include outcome based pricing while hybrid and fixed*

pricing model remain preferred, contributing to more than 95 percent of the deal value over the

last two years. 2014 is likely to continue in the same trend

■

AMERICAS continue to lead the global outsourcing scene in 2013 with ~ 67 percent contribution

to total deal value, though the traditionally strong market observed nominal growth over 2012

■

Talent shortages and talent management challenges have supplanted negative global economic

conditions and weak demand for goods and services as the top challenge facing organizations,

despite high unemployment rates in most Western markets. Emerging market competitors to

Western firms is an ongoing concern in the AMERICAS and in EMEA while in the United States

concern over the negative impact of political and economic gridlock continues to grow

■

Big data analytics, Engineering and R&D services and Cloud technologies are expected to fuel

the growth in upcoming quarters

* Hybrid pricing includes a combination of various pricing mechanisms

(34)

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Partner – Advisory Services

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(36)

KPMG Shared Services and

Outsourcing Advisory (SSOA)

Analyst Team Contact:

Shailesh Narwaiye

KPMG in India

+91 20 3050 4000

[email protected]

Analysts:

Harish Baliga

Swati Kumari

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Global IT-BPO Outsourcing Deals Analysis Annual Analysis for 2013

Global IT-BPO

Outsourcing Deals

Analysis

Annual Analysis for

2013

1

About

Global

IT-BPO

Outsourcing

Deals

Analysis

Global IT-BPO Outsourcing Deals Analysis

is a quarterly analysis of IT-BPO outsourcing contracts

signed across industries and geographies, with a total contract value (TCV) of USD 5 million and above

per deal. The KPMG Shared Services and Outsourcing Advisory (SSOA) publishes this analysis every

quarter.

Methodology:

The analysis and findings presented in this report are based on select third party market research and

publicly available outsourcing data as identified throughout this presentation. It does not include contract

information gathered from KPMG Sourcing Advisory business engagements.

For more information on this market research please get in touch with Shailesh Narwaiye

(

Disclaimer: The information contained here in is of a general nature and is not intended to address the circumstances of any

particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such

information without appropriate professional advice after a thorough examination of the particular situation.

Foreword

We wish you a very happy new year. We are at the beginning of the year 2014 and it is worthwhile

looking back at the achievements and roadblocks for past year and plan for a better future.

It gives us great pleasure to bring to you the year-end 2013 edition of the KPMG Global IT-BPO

Outsourcing Deals Analysis.

The current edition looks at IT-BPO outsourcing contracts signed in the last four years, from 2010 to

2013, and identifies the major trends influencing the market. This report also includes our regular

analysis feature for the latest quarter Q4-2013 (October – December).

The IT-BPO market was somewhat weaker in 2013 compared to 2012, as represented by a marginal

drop with total deal value decreasing by 3 percent and the total number of deals decreasing by 7

percent. ASPAC results suffered the most from a lack of large deals in the market.

Smaller deal sizes have become the new normal in the market with average contract size across all

bands continuing to drift downwards. The Unites States “fiscal cliff” negotiations could add to complexity

in the outsourcing sector of the region, especially in the public sector and in the aerospace and defense

industry. Buyers seeking greater access to Social media, Mobility, Analytics, and Cloud services will

increasingly drive growth in the market though to the benefit of a broader and more diverse range of

providers than with traditional outsourcing.

Contents

Section 1:

Global Deals – Overview of last 4 years

Section 4:

4Q13 Deal Analysis

Section 5:

IT-BPO Outsourcing Outlook

Section 3:

Deals by Geography

Section 1

Global Deals –

Overview of

5

4Q13

KPMG

Global

Shared Services and Outsourcing Pulse Survey

Market Overview

Macro trends

Current market trends

Negative global economic conditions continue to weigh heavily

on organizations’ decisions on how, where, and why they

source services globally, though

few firms are pulling back

from global sourcing of services’ globalization

.

Global business services (GBS), combining onshore,

nearshore, and offshore shared services and outsourcing, has

become the

predominant means through which

organizations support global operations

.

Many organizations’ GBS remain fragmented across functions,

geographies, and business units, complicating governance

and detracting from potential business benefits.