are traditional ito revenue streams making way for cloud?
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TBR
T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .
TBR’s Professional Services Business QuarterlySM
Research Highlights and Outlook
Are traditional ITO revenue streams making way for cloud? Technology Business Research (TBR) Quarterly Webinar Series
Feb. 13, 2014
TBR
2 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
Professional Services Business Quarterly Research Highlights and Outlook: Webinar Presenters
Ramunas Svarcas
Senior Analyst and Engagement Manager, Professional Services Practice
Email: ramunas.svarcas@tbri.com
Twitter: @rjsTBR
Telephone: 603.758.1833
Elitsa Bakalova
Analyst, Professional Services Practice
Email: elitsa.bakalova@tbri.com
Twitter: @ElitsaBakalova
Telephone: 603.929.1166
Patrick Heffernan
Senior Analyst and Engagement Manager, Professional Services Practice
Email: patrick.heffernan@tbri.com
Twitter: @TBR_PatrickH
Telephone: 603.758.1833
TBR
3 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
• The Professional Services Practice publishes quarterly and semiannual reports, continually covering 33 vendors.
• Of those vendors, 31 are included in our IT Services Vendor Benchmark.
o TBR reports are unique for their deep holistic analysis of leading vendor businesses.
o Financial modeling and TBR insights help customers gain a better understanding of vendor business models.
o TBR reports and webinars are responsive to client timelines, clear and concise, and provide insights across multiple layers of a vendor’s organization and infrastructure.
o TBR’s strategic assessment provides an impartial check on a vendor’s progress in its strategic objectives.
Clients are gaining advantages and better understanding revenue opportunities through our
reports and their personal relationships with TBR.
Professional Services Business Quarterly Research Highlights and Outlook: Webinar Overview
TBR’s IT Services Vendor Benchmark delivers unique insight and value through in-depth analysis in a concise, consumable format
TBR Professional Services Business Quarterly (PSBQ) Portfolio
TBR
4 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 3Q13
Cloud Adoption: Vendors embrace cloud-centric
business models as managed cloud eats into
traditional ITO opportunities.
Industry Change: IT services leaders invest in cloud,
analytics, mobility and social media to retain
industry-leading market positions.
ITO Performance: IT services growth decelerates to
low single digits as clients invest in shorter-term
tactical projects and migrate legacy IT to cloud.
Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth
SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
TBR
5 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 3Q13
Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth
Cloud Adoption: Vendors embrace cloud-centric
business models as managed cloud eats into
traditional ITO opportunities.
Industry Change: IT services leaders invest in cloud,
analytics, mobility and social media to retain
industry-leading market positions.
ITO Performance: IT services growth decelerates to
low single digits as clients invest in shorter-term
tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
TBR
6 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
While technology- and analytics-enabled solutions supported BPO’s leading average trailing 12-month growth in 3Q13, cloud, mobility and analytics technologies stemmed the rate of C&SI revenue growth deceleration relative to outsourcing services.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance
ITO growth will continue to trail behind other service lines and decelerate to an estimated 0.6% average trailing 12-month growth in 4Q13
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
NOTE: Includes total trailing 12-month service line revenues from TBR’s IT Services Vendor Benchmark, not representative of a total global
market view. Dots indicate year-to-year growth and arrows indicate directional change relative to the year-ago quarter.
TBR
7 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance
The ongoing shift to lower-priced cloud computing pressured traditional ITO revenue streams in 3Q13
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
NOTE: Includes total trailing 12-month ITO revenue from TBR’s IT Services Vendor Benchmark; not representative of a total global market view.
Average trailing 12-month ITO growth decelerated since 1Q12, as deal completions, price pressures, demand for shorter-term tactical projects in place of traditional ITO deals and an ongoing shift to cloud computing slowed ITO revenue performance.
TBR
8 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
HP’s ITO revenue decline followed a shift in demand from outsourcing to cloud hosting engagements with lower initial spend
PSBQ 3Q13 Research Highlights and 2014 Outlook: Performance
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
Bringing HP’s Technology Services segment into its Enterprise Group better aligns support and IT outsourcing services with the technologies they manage and support. However, customer demand is shifting to shorter-cycle, smaller contracts to manage IT spending, driving down ITO revenue.
TBR
9 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 3Q13
Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth
Cloud Adoption: Vendors embrace cloud-centric
business models as managed cloud eats into
traditional ITO opportunities.
Industry Change: IT services leaders invest in cloud,
analytics, mobility and social media to retain
industry-leading market positions.
ITO Performance: IT services growth decelerates to
low single digits as clients invest in shorter-term
tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
TBR
10 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
Managed private cloud and cloud professional services are rapidly gaining popularity in the market. The initial influx of cloud drove consulting engagements that then informed and educated customers on the benefits of cloud on IT operations and business outcomes.
“If it is a new application, we would much rather have
someone else host it and manage it.”
— IT Director of a U.S.-based, higher-education organization
Cloud environments offer cost-effective, secure alternatives to investments in on-premises or traditionally hosted and managed IT, driving fundamental changes in vendors’ legacy outsourcing business models.
Professional Services Vendor Trends for 3Q13 — Cloud Adption
Cloud computing overlaps vendors’ traditional outsourcing portfolios and revenues, forcing vendors to adjust business models to the new era
PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption
SOURCE: TBR 3Q13 MANAGED PRIVATE & PROFESSIONAL SERVICES CLOUD BENCHMARK
TBR
11 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
IT outsourcing revenues are increasingly turning into managed cloud revenue dollars as vendors adjust to cloud-driven business models
IT outsourcing revenue growth fluctuated between 0% and -5% year-to-year over the past five quarters, while managed private cloud revenue growth ranged between 30% and 35% over the same period, indicating a real threat to traditional ITO vendors.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption
SOURCE: TBR 3Q13 MANAGED PRIVATE & PROFESSIONAL SERVICES CLOUD BENCHMARK
NOTE: Graph is based on data for 22 vendors: Accenture, Atos, Capgemini, Cisco, Cognizant, CSC, Dell, Deloitte, Dimension Data, EMC, Fujitsu, HCLT, HP,
IBM, Infosys, Oracle, SAP, TCS, T-Systems, Wipro, Xerox and Unisys.
TBR
12 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
Expertise and comprehensive portfolios outweigh lower costs when customers evaluate and decide between cloud vendors
Attributes Driving Cloud Professional Services Vendor Selection
SOURCE: TBR’S 2013 CLOUD PROFESSIONAL SERVICES STUDY
PSBQ 3Q13 Research Highlights and 2014 Outlook: Cloud Adoption
Most Popular Cloud Professional
Services Vendors in 2013
according to TBR’s 2013 Cloud
Professional Services Study:
1. IBM
2. Microsoft
3. SAP
4. HP
5. Oracle
6. Accenture
TBR
13 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends
Professional Services Vendor Trends for 3Q13
Adoption of cloud-centric business models and emerging technologies will help vendors offset decelerating ITO revenue growth
Cloud Adoption: Vendors embrace cloud-centric
business models as managed cloud eats into
traditional ITO opportunities.
Industry Change: IT services leaders invest in cloud,
analytics, mobility and social media to retain
industry-leading market positions.
ITO Performance: IT services growth decelerates to
low single digits as clients invest in shorter-term
tactical projects and migrate legacy IT to cloud. SOURCE: WWW.PPTBACKGROUNDS.NET
SOURCE: WWW.FREEICONSVECTOR.COM
SOURCE: WWW.HSCI2012.ORG
TBR
14 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
To invest in emerging technologies, IT services vendors have:
Client demand for analytics, cloud, mobility and digital fueled 3 main strategies: Acquire, hire and consolidate
SOURCE: TBR RESEARCH AND COMPANY DATA
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
New technologies require vendors keep pace with ever-accelerating changes. With business models built on low-cost delivery and/or differentiated IP, vendors that adjusted fastest lead the pack.
Hired experienced
professionals and/or
expanded the low-cost
resource base
Consolidated offerings around
emerging technologies, either
through new delivery centers
or wholesale corporate
reorganization around digital
Acquired companies,
pulling in new talent,
expanding offerings and
gaining new IP
SOURCE: WWW.STATICFLICKR.COM SOURCE: WWW.MOMENTUMNI.COM SOURCE: WWW.STANFORD.EDU
TBR
15 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
SOURCE: TBR RESEARCH AND COMPANY DATA
Acquisitions enable vendors to expand their industry expertise and bring solutions to market faster than through internal R&D activity, though these avenues require concessions such as revenue sharing, reduced control and integration costs.
Acquisitions provide an immediate boost to revenues, expand offerings and create a platform for new IP
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
Vendor Target Description
IBM Xtify (4Q13) Xtify provides cloud-based mobile messaging tools that help organizations improve mobile sales, drive in-store traffic and engage customers with personalized offers.
IBM The Now Factory (4Q13)
The Now Factory specializes in analytics software that helps communications service providers deliver better customer experiences and drive revenue opportunities.
IBM CSL Int’l (2Q13) CSL International’s CSL-Wave software enables clients to monitor and manage z/VM and Linux on IBM System z environments; facilitates setting up and managing clouds on the mainframe, enabling companies to provide enhanced services and support around big data, analytics and mobility.
CSC ServiceMesh (4Q13) The ServiceMesh Agility Platform automates the deployment and management of applications across the private, public and hybrid clouds.
CSC Infochimps (3Q13) Infochimps provides PaaS related to big data, enhancing CSC’s presence in the cloud and big data market.
Accenture Acquity Group (3Q13) As a digital marketing company, Acquity provides strategy, digital marketing and technical services to help companies enhance their brand experiences and e-commerce performance.
TBR
16 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
All IT services vendors face challenges recruiting and retaining talented staff with skills in emerging technologies
Leading vendors set aggressive hiring targets and looked for mature professionals (with experience in emerging technologies or industry expertise) and talented “freshers.”
SOURCE: TBR RESEARCH AND ESTIMATES; COMPANY DATA AND ESTIMATES
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
TCS announced plans to increase its FY14 hiring target from 45,000 to 50,000.
Cognizant will increase hiring of experienced, client-facing professionals to upsell social, mobile, analytics and cloud solutions in 2014.
16.0%
15.5%
22.4%
19.5%
10.9%
109.4%
0% 20% 40% 60% 80% 100% 120%
3Q12
3Q13
3Q12
3Q13
3Q12
3Q13
TCS
CO
GN
IZA
NT
CG
I
YTY Growth
TOP THREE TTM REVENUE GROWTH
SOURCE: TBR AND COMPANIES
TBR
Vendors struggle to find low-cost talent with necessary skills in emerging technologies, as well as experienced hires capable of blending industry expertise and digital, analytics, or cloud capabilities. With all vendors seeking the best talent, competitive pressures lead to higher attrition rates across nearly the entire sector.
TBR
17 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
Digital, cloud computing and strategy services pave the way for new routes to market for IBM and Accenture
PSBQ 3Q13 Research Highlights and 2014 Outlook: Industry Change
Leading companies make investments concrete by opening delivery centers and changing organizations and portfolios to meet new digital demand.
IBM Digital Front Office Pulls together mobile, social, business analytics; integrates IBM Global Business Services with IBM Software and IBM Research to drive holistic transformation for clients IBM Interactive Experience Fuses strategy, data and design from IBM Interactive and 100+ IBM Researchers from the Customer Experience Lab to drive personalization and business model redesign
Accenture Digital
Pulls digital marketing, mobility and analytics services into one organization
Accenture Strategy
Combines business, technology, and operations strategy services into one organization
IBM Global Cloud Footprint IBM is investing $1.2 billion in 2014 to expand its global cloud footprint to deliver cloud services from 40 data centers in 15 countries and five continents. IBM will open 15 new data centers adding to its 13 global data centers from SoftLayer and 12 from IBM.
Accenture IBM
TBR
18 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSBQ 3Q13 Research Highlights and 2014 Outlook: Key Trends
Vendors will convert technologies and analytics outputs into client business value to succeed
Building
Capabilities Increasing Value
IT Services Key Trends and 2014 Outlook
2012 2013 2014
In 2012 it was about building capabilities — through acquisitions, alliances and innovations — in technology trends such as cloud, digital, mobility and analytics.
In 2013 vendors continue acquiring and partnering for technology-centric services to bring scale to their offerings. Clients are shifting from learning about emerging technologies to understanding exactly how those technologies disrupt business models, creating opportunities for IT services vendors.
In 2014 increased customer awareness and vendor capabilities will fuel rapidly expanding demand for emerging technologies, pressuring vendors to get to scale quickly.
TBR
19 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSP Research Current Topics 4Q13 Report Key Themes
• Select Vendor Reports: o Accenture o Atos o Capgemini o Cisco Services o Cognizant o CSC o Dell Services o Fujitsu o HP Services o IBM Global Services o Infosys o TCS o T-Systems o Wipro ITS o Xerox
• Benchmarks: Management Consulting, Healthcare IT Services, Public Sector, Global Delivery Market Landscape, Managed Private & Professional Services Cloud
Analyze leading and lagging performers and the go-to-market strategies and investments made by vendors to craft industry-specific solutions.
Analyze how IT services vendors position to take advantage of the changing security landscape. Assess vendors’ security offerings and how offerings are scaled.
Assess how vendors distinguish digital offerings from mobility and social consulting services and if vendors pair analytics with digital solutions. Compare and contrast industries that vendors target most for digital.
Vertical Strategy: Financial Services
Security
Digital
PSBQ 3Q13 Research Highlights and 2014 Outlook: 3Q13 Key Topics
TBR will analyze IT services vendors’ investments and strategies to expand capabilities in financial services, security and digital technology
TBR
20 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
Questions?
PSBQ 3Q13 Research Highlights and 2014 Outlook
TBR
21 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
Patrick Heffernan Senior Analyst and Engagement Manager, Professional Services Practice Email: Patrick.heffernan@tbri.com Twitter: @TBR_PatrickH Telephone: 603.758.1834
Ramunas Svarcas Senior Analyst and Engagement Manager, Professional Services Practice Email: ramunas.svarcas@tbri.com Twitter: @rjsTBR Telephone: 603.758.1833
James McIlroy Vice President of Sales Email: mcilroy@tbri.com Telephone: 603.929.1166
Elitsa Bakalova Analyst, Professional Services Practice Email: elitsa.bakalova@tbri.com Twitter: @ElitsaBakalova Telephone: 603.929.1166
TBR IT Services Vendor Benchmark Webinar Contact Information
Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel
TBR
22 TBR Quarterly Webinar Series | 2.13.14 | www.tbri.com | ©2014 Technology Business Research Inc.
PSP Syndicated Research Coverage IT Services Vendors Public Sector Vendors Benchmarks
(Benchmark XLS data also available)
• Accenture • Atos • Capgemini • CGI* • Cisco Services • Cognizant • CSC • Dell Services • Fujitsu • Genpact* • HCL Technologies • HP Services • IBM Global Services • Infosys • KPN Corporate Market* • Tata Consultancy Services • T-Systems • Unisys • Wipro IT Services • Xerox Services
• Booz Allen Hamilton* • CACI International* • General Dynamics IS&T* • L3 Communications* • Lockheed Martin IS&GS* • ManTech* • Northrop Grumman IS&TS* • Raytheon Intelligence, Information &
Services*
• Global Delivery Market Landscape • Healthcare IT Services Vendor
Benchmark • IT Services Vendor Benchmark • Management Consulting
Benchmark • Public Sector IT Services Vendor
Benchmark • Software Alliance Benchmark
Healthcare IT Services Vendors
• Accenture HITS* • CSC HITS* • Dell HITS* • HP HITS* • IBM HITS*
Management Consulting Vendors
• Bain & Company* • Booz & Company* • Boston Consulting Group* • Deloitte Consulting* • McKinsey & Co.*
TBR Professional Services Practice Syndicated Coverage
*Semiannual publication
TBR
T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .
About TBR Technology Business Research, Inc. is a leading independent technology
market research and consulting firm specializing in the business and financial
analyses of hardware, software, professional services, telecom and
enterprise network vendors, and operators.
Serving a global clientele, TBR provides timely and actionable market
research and business intelligence in formats that are tailored to clients’
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To learn how our analysts can address your unique business needs, please
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This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.
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