semiannual global delivery benchmark update: how is cloud disrupting vendors’ hiring strategies?

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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 Global Delivery Benchmark Research Highlights and Outlook

Technology Business Research (TBR) Quarterly Webinar Series

Nov. 18, 2014

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2 TBR Quarterly Webinar Series | 11.18.14 | www.tbri.com | ©2014 Technology Business Research Inc.

Boz Hristov

Professional Services Analyst

Email: [email protected]

Twitter: @boztbr

Ramunas Svarcas

Professional Services Principal Analyst


Twitter: @rjstbr

Global Delivery Benchmark: Webinar Presenters

Patrick Heffernan

IT Services Practice Manager

and Principal Analyst


Twitter: @TBR_PatrickH

Jacob Gordon

Professional Services Research Analyst


Twitter: @TBRJacob

mailto:[email protected]




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• TBR reports are unique for their deep, holistic analysis of leading vendor businesses.

• Financial modeling and TBR insights help customers gain a better understanding of vendor business models.

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• Vendors covered in the GDBM include:

Global Delivery Benchmark Research Highlights and Outlook

TBR Global Delivery Benchmark Semiannual Report

TBR’s Global Delivery Benchmark (GDBM) delivers insight and value through in-depth analysis in a concise, consumable format

Accenture Dell Services TCS

Atos HCL Technologies T-Systems

Capgemini HP Services Wipro ITS

Cognizant IBM Global Services Xerox

CSC Infosys

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Global Delivery Key Takeaways

What happened to headcount growth in 2Q14?

How are vendors improving profitability?

What opportunities do nearshore Americas delivery hubs present?


TBR’s Global Delivery Benchmark covers total, onshore and low-cost headcount trends, delivery support investments and profitability drivers

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What happened to headcount in 2Q14?

IT Services’ overall headcount growth continues to decelerate.


Profitability improvement depends on vendors’ ability to attain laterals and/or to train freshers at or ahead of the pace of IT services market evolution.


While Canada remains the core market for delivering C&SI services, markets such as Guatemala and Costa Rica will gain popularity offering services beyond traditional outsourcing.


Headcount growth continues at a slower pace as vendors adjust staffing levels to prepare for high-value transformation services demand

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Automation and cloud dictate vendors’ hiring strategies; cultivating freshers’ skills faster than the IT services market evolves will boost profits

Accelerated adoption of cloud and automation begins to dictate vendors’ talent management strategies

Year-to-Year Headcount and Revenue Changes in 2Q14

Note: Graph reflects a weighted average growth rate for the 14 IT Services vendors covered in the GDBM.

SOU

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Automation drives

nonlinearity

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India-centric Vendors • Cognizant, HCLT, Infosys, TCS, Wipro ITS • High low-cost leverage, onshore local hiring,

platform BPO, reliance on freshers

SIs • Accenture, Atos, Capgemini,

CSC, Xerox Services Vertical expertise, domestic

lower-cost labor, freshers onshore, pyramid management

SIs with Support and Maintenance • Dell Services, HP Services,

IBM GS, T-Systems • Cross-company

capabilities, global integration, consulting

2Q14 YTY low-cost headcount up 9.4% Onshore headcount down 1.1%

2Q14 YTY low-cost headcount down 14.7% Onshore headcount down 8.5%

2Q14 YTY low-cost headcount up 6.9% Onshore headcount up 9.4%

Legacy players are rebalancing headcounts to manage costs, while India-centric vendors are expanding onshore to increase client face time


TBR Vendor Segments

Vendors’ current goals center on revenue expansion in emerging markets and on global

growth of cloud computing and cloud computing professional services.

Low-cost leverage, industrialization, IP

assets, emerging market expansion, cloud computing

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Vendors are divesting headcount in service lines with weak demand and adding staff to support new offerings requiring different skill sets


Year-to-Year Headcount Changes by Region

• Vendors continue to augment their global delivery capacity.

• Investments in IP-based solutions enable vendors to bundle industry-

oriented applications and infrastructure services, helping them capture IT

transformational opportunities without additional hiring.

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APAC markets remain attractive, but lucrative opportunities are emerging in nearshore LATAM and countries with abundant skilled workers


KEY Less than -10% Between -10% and 0% Between 0% and 10% Between 10% and 20% Greater than 20%

Focus Country 2Q13 3Q13 4Q13 1Q14 2Q14

Mexico 8.2% 5.4% 2.5% 1.3% 2.9%

Argentina 2.2% -0.8% -1.5% -2.2% -1.2%

Brazil 5.3% 4.1% 3.9% 5.1% 7.6%

Other Low-cost 4.2% 2.4% 1.3% 2.0% 3.8%

Onshore 0.1% -1.0% -1.1% -2.1% -2.0%

Total Americas 1.1% -0.1% -0.5% -1.1% -0.5%

China 9.0% 8.6% 10.0% 9.7% 10.4%

India 6.3% 5.6% 4.5% 3.0% 2.0%

The Philippines 11.2% 8.7% 5.1% 4.5% 4.9%

Other Low-cost 6.2% 11.4% 13.7% 18.1% 19.7%**

Onshore 2.8% -0.8% 1.9% 11.8% 7.9%

Total APAC 6.6% 5.8% 4.9% 4.0% 3.1%

Czech Republic 5.2% 2.4% 2.6% 0.4% 0.0%

Poland 11.8% 11.0% 6.9% 6.6% 6.2%

Romania 9.4% 4.9% 3.9% 2.4% 0.9%

Hungary 8.6% 8.3% 7.2% 4.9% 2.5%

Other Low-cost 6.3% 1.0% -3.3% -3.3% -1.2%

Onshore -4.2% -5.2% -5.4% -3.2% -1.9%

Total EMEA -2.0% -3.3% -4.1% -2.4% -1.3%SOURCE: TBR * Aggregate data for 14 profiled vendors ** Double-digit growth was impacted due to investment activity of one of the vendors (Accenture) in Other Low-cost country (Bangladesh). Otherwise APAC Other Low-cost headhcount growth would be 0.9%.

**Accenture's investment activity in Bangladesh inflated APAC Other Low-cost headcount growth.

Otherwise the growth would be 7%.

Am

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PA

CEM

EA

YEAR-TO-YEAR HEADCOUNT GROWTH OF FOCUS COUNTRIES* TBR

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Differences in vendor maturity around automation and cloud services delivery are impacting profitability

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Vendors leverage industrialized delivery models to improve profits by automation and offset the cost to retain highly skilled talent


Vendors must balance low-cost resource leverage, industrialized delivery methods

and higher-margin offerings to expand profitability.

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Operating income per employee improves as better use of existing talent minimizes hiring expenses


2Q13 TTM 2Q13 TTM 2Q13 TTM Positive Growth

2Q14 TTM 2Q14 TTM 2Q14 TTM Negative Growth

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Profit Results and Correlating Changes in Headcount Metrics

Attrition is emerging as the biggest threat to vendors’ profits as a better economic climate and demand for cloud talent allow staff to switch jobs


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Access to skilled workers at relatively lower cost and availability of technical and business graduates make nearshore hubs a preferred choice

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Vendors in Canada derive most of their services revenues from C&SI; the remaining nearshore hubs provide predominantly outsourcing revenues

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Lateral hires are important to providing high-value services to meet client needs; freshers are used predominately for engagement support

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Headcount growth continues at a slower pace as vendors adjust staffing levels to prepare for high-value transformation services demand

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Questions?

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James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166

TBR Global Delivery Benchmark Research Highlights Webinar Contact Information

Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel LinkedIn: www.linkedin.com/company/technology-business-research

Ramunas Svarcas

Professional Services Principal Analyst


Twitter: @rjstbr

Boz Hristov

Professional Services Analyst


Twitter: @boztbr

Patrick Heffernan

IT Services Practice Manager

and Principal Analyst


Twitter: @TBR_PatrickH

Jacob Gordon

Professional Services Research Analyst


Twitter: @TBRJacob


https://twitter.com/TBRinc

http://www.slideshare.net/TBR_Market_Insight

http://www.youtube.com/user/TBRIChannel

https://www.linkedin.com/company/technology-business-research









TBR


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 • EMC Services* • Fujitsu • HCL Technologies • HP Services • IBM Global Services • Infosys • T-Systems • Tata Consultancy Services • Unisys • Wipro IT Services • Xerox

• Booz Allen Hamilton* • CACI International* • General Dynamics IS&T* • L-3 Communications* • Leidos* • Lockheed Martin IS&GS* • ManTech* • Northrop Grumman IS&TS* • Raytheon Intelligence, Information &

Services* • SAIC*

• Business Intelligence Services Vendor Benchmark*

• Global Delivery Benchmark* • Healthcare IT Services Benchmark • IT Services Addressable Market Forecast • IT Services Vendor Benchmark • Management Consulting Benchmark* • Public Sector IT Services Benchmark

Healthcare IT Services Vendors

• Accenture HITS* • CSC HITS* • Dell HITS* • HP HITS* • IBM HITS*

Management Consulting Vendors

• Bain & Co.* • Boston Consulting Group* • Deloitte Consulting* • McKinsey & Co.* • PwC*

TBR Professional Services Practice Syndicated Coverage

*Semiannual publication

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semiannual global delivery benchmark update: how is cloud disrupting vendors’ hiring strategies?

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