Global Sourcing: State of the Market and Future Trends

Global Sourcing: State of the Market and Future Trends Frances Karamouzis General Rules for Usage: Personnel in attendance at the meeting can use thi...
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Global Sourcing: State of the Market and Future Trends Frances Karamouzis

General Rules for Usage: Personnel in attendance at the meeting can use this internally for analysis. It may be not be circulated or shared outside with non-meeting attendees. Any information utilized in a presentation must be appropriately attributed to Gartner research per the Gartner policy posted on Gartner.com. 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.

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.

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