Global Sourcing: State of the Market and Future Trends Frances Karamouzis
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IT Services Continues to Play a Critical and Strategic Role Overall IT Market: Gartner Analysis of IT Forecasts Billions of Dollars
External IT Services Almost $1 Trillion by 2012
1,200
$1,015 Billion
1,000
$852 Billion
$882 Billion $991 Billion
800
$820 Billion
$827 Billion
600
400
$312 Billion
$333 Billion
$297 Billion
200
$172 Billion
$235 Billion
$184 Billion
0 2006
2007
2008 Software
Source: Gartner's Forecast Analysis, Worldwide
2009 IT Services
2010 Hardware
2011 Telecom
2012
High-Level Direction for Global Services
$820bn
Rate h t w Gro s f or e g n Ra ear: Y h c Ea 6.5% o t 1%
WW Totals for All Types of IT Services
30% o t % 10
~$70bn
2008 *Not a Gartner forecast
$991bn WW Totals for All Types of IT Services
~$120bn$150bn
Estimated IT Services Delivered via GDM*
2012
Dynamics of Professional Services: CIO Must Choose Wisely HP: $8.6 billion 9.8% AGR Northrop Grumman: $9.0 billion 11.5% AGR
SAIC: $8.4 billion 7.0% AGR
Important Facts Top 10 Providers = 27.8% Other Providers = 72.2%
Lockheed Martin: $10.1 billion 10.2% AGR Capgemini: $11.8 billion 18.9% AGR Fujitsu: $15.8 billion 4.5% AGR CSC: $16.1 billion 7.7% AGR Accenture: $19.9 billion 19.6% AGR
All Other Providers 72.2%
EDS: $21.7 billion 3.4% AGR IBM: $47.1 billion 12.7% AGR
2007 Worldwide Professional Services $589 billion — Five-Year CAGR: 8.0% Source: Gartner IT Services Market Share Analysis, IT Professional Services Only
Less than 100 companies worldwide exceed $1 billion in revenue. Top 6 India providers: • 2006 to 2007 AGR of top 6 India providers = 41.3%
A Glimpse of the Vast Global Sourcing "Solar System" of Vendors China
Russia/CEE
iSoftStone ChinaSoft Luxoft EPAM Neusoft Symbio Longtop Beyondsoft DataArt Reksoft Achievo Objectiva Auriga Exigen Augmentum Dextrys Artezio Softtek Asia IBA Latin VanceInfo Mera Networks America hiSoft Ness Stefanini Politec Ci&T CPM Braxis Tivit Softtek BRQ Illustrative lists only; not intended to be comprehensive
DBAccess Neoris Hildebrando
Vietnam
FPT Software LogiGear Global CyberSoft FCG Pyramid TMA VietSoftware
A Glimpse of the Vast Global Sourcing Solar System of Vendors Traditional Accenture Capgemini
India-Centric
IBM
Syntel Sapient Hexaware MindTree NIIT Virtusa Mascon iGate Intelligroup
HP(EDS)
Fujitsu Perot Atos Origin Logica CSC Deloitte Satyam India Majors TCS Infosys
Wipro
Tech Mahindra HCL Cognizant Illustrative List Only Not Intended to be Comprehensive
Satyam
Genpact
L&T Infotech US Tech. Mastek ITC Infotech Polaris Zensar RCG BlueAlly i-flex Birlasoft
Sampling of Countries Low "Wage" Rate
Asia/Pacific Region
India
Philippines
China
Vietnam
EMEA
Russia
Central & Eastern Europe
Ukraine
Americas Argentina & Chile Brazil
Mexico
City Choices: Different Phases of Evolution India 7 cities = 90% of delivery
1. Bangalore 2. Mumbai 3. Delhi 4. Chennai 5. Hyderabad 6. Pune 7. Kolkata
China 3 cities = 70% occupancy levels
1. Dalian 2. Chengdu 3. Shanghai 4. Xi'an 5. Shenzhen 6. Beijing 7. Hangzhou 8. Tianjin 9. Nanjing 10. Jinan 11. Wuhan 12. Suzhou
Market Events Economic Recession
Banking Crisis
Terrorist Attacks
Satyam Scandal Geopolitical Shifts
Operating Environment Labor Rate Increases
$$$
Attrition Rate Increases
Exchange Rates
Operating Environment Visa Issues
Increased Financial & Governance Vendor Scrutiny
Deal Flow & Price Pressure
Past Predictions (Published 4Q06) Yield Current Realities By 2010, 30% of Fortune 500 enterprises will source from three or more countries. By 2012, India's dominant position as an offshore location will be significantly diluted by effective alternative destinations. Footnote Footnote — — from from highs highs of of 90+% 90+% to to current current 54% 54% levels levels
Through 2012, GDM will be perfected in all major categories of IT (BPO, AO and ITO). Through 2012, service providers will "adapt or die" (relative position in Global Sourcing and Service category landscape).
Past Predictions (Published 4Q04) Still Looming Gartner predicts the following major shifts will take hold by 2015:
• Global sourcing will reach the top of the "food chain" because 30% of the most-influential CEOs will not hail from the United States. • Thirty percent of all traditional professional IT services jobs will be delivered by people who come from emerging markets rather than the First World. • More than 30% of total worldwide purchasing power will reside outside the United States. By 2015, service recipients will consider viable service providers as those that define their offerings through agilitybased pricing structures.
Major Trends and Issues for Offshore Services Supply Side
Demand Side
Country Options
Risk Management
Dynamics of Vendor Landscape
Cost or Value: What Do Buyers Really Want?
Range of Services (BPO, AO, Infrastructure)
How Do They Define Value? How Is It Measured?
Mergers and Acquisitions
Governance (Ongoing Mgmt.)
Alternative Delivery Models/Automation
Human Capital Management
Global Sourcing: State of the Market and Future Trends Frances Karamouzis
Notes accompany this presentation. Please select Notes Page view. These materials can be reproduced only with written approval from Gartner. Such approvals must be requested via e-mail:
[email protected]. Gartner is a registered trademark of Gartner, Inc. or its affiliates.