Managed Services and As-A-Service Market Insights HOSTED BY: SUMEET JAIN, GOLDMAN SACHS
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THIRD QUARTER 2020 Managed Services and As-a-Service Market Insights HOSTED BY: SUMEET JAIN, GOLDMAN SACHS October 8, 2020 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Information Services Group, Inc. Welcome nd Steve Hall Kathy Rudy to the 72 Quarterly Partner & Chief Data & President ISG Analytics Officer Stanton Jones David Lewis Director & Principal Partner, Manufacturing Analyst ISG Research Practice Lead Covering the State of the Managed Services & As-a-Service Industry for the Global Commercial Market At a Glance Global Sourcing Industry Slowly recovering from Q2 trough Scorecard 3Q20 3Q Y/Y 2020 YTD 2020 YTD ACV ($B) Change ACV ($B) Change Global Commercial Q3 Combined Market 14.6 3.0% 43.9 4.4% Combined Market Up 3%, to $14.6 billion, second-best quarter ever behind 1Q20 By Type Managed Services 6.6 -4.8% 19.5 -6.3% Managed Services up 10% As-a-Service 8.0 10.5% 24.4 14.8% Sequentially on increase in mega-deals, contract restructurings, banking demand By Region and industry-specific BPO Americas Combined 8.0 3.2% 23.2 9.2% As-a-Service up 10.5% Y/Y EMEA Combined 4.6 9.4% 14.3 2.6% On strong IaaS demand fueled by accelerated digital transformation Asia Pacific Combined 2.0 -10.0% 6.4 -6.9% 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 3 Global Commercial Sector Quarterly Trends Combined Market up 3% with its second-best quarterly result ever 4.4% 14.8% 56% ● 2020 YTD 2020 YTD 2020 YTD ● Despite COVID overhang, Managed Services surpassed Combined Managed As-a-Service As-a-Service expectations, up 10% Q/Q due to increased activity in mega-deals, Market ACV Services ACV ACV Market Ratio contract restructurings (up 50+%), BFSI (up 50+%) and industry- 2020 YTD specific BPO (up 90+%) -6.3% Combined Market Quarterly ACV ($B) Global Commercial Sector ACV by Function ($B) As-a-Service 15.65 Managed Services 15.3 ITO 15.92 14.6 14.1 13.7 14.2 14.1 14.0 16.25 13.4 12.9 13.4 12.3 3.82 BPO 4.87 8.5 2020 YTD 6.2 6.5 7.4 6.6 7.2 7.1 8.0 5.4 6.5 8.0 4.28 2019 YTD 6.65 2018 YTD SaaS 6.44 7.2 7.1 6.12 6.9 6.4 6.9 6.7 7.0 7.0 6.8 6.0 6.6 17.77 IaaS 14.83 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 11.96 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 4 the Service & Technology Provider Standouts – GLOBAL ISG15 Our Contracts Knowledgebase™ is used to determine placements based on the annual value of commercial contracts awarded in the past 12 months. The Big 15 The Building 15 The Breakthrough 15 The Booming 15 Revenues > $10B Revenues $3B-$10B Revenues $1B-$3B Revenues <$1B Managed Services Market Accenture IBM Global Services Amdocs HCL Digital China * Mphasis Birlasoft EXL Atos Infosys Bechtle OptumInsight EPAM Systems Sutherland CSG Systems HGS * Capgemini NTT Data Computacenter Tech Mahindra JLL TietoEvry Ensono Persistent Systems Cognizant TCS Concentrix * T-Systems LTI Unisys DXC Technology Genpact Wipro Mindtree Virtusa As-a-Service Market Alibaba Microsoft Adobe Systems ServiceNow Allscripts Digital Realty Atlassian RingCentral Amazon Web Services Salesforce Equinix VMware * Autodesk Palo Alto Networks * Coresite * Slack * Google Tencent Workday Rackspace * Crowdstrike * Veeva Systems CyrusOne Zoom Video * DocuSign * New to leaderboard in 3Q20 Providers in alphabetical order; no rankings implied. Revenues sourced from D&B and individual company financial fillings. 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 5 Americas Commercial Sector Quarterly Trends ● 3Q20 Combined Market posted best quarterly result ever, up 3.2% 9.2% 17.7% 57% Y/Y due to strong marks in IaaS and SaaS 2020 YTD 2020 YTD 2020 YTD ● Managed Services declined 7% Y/Y versus a very difficult Combined Managed As-a-Service As-a-Service Market ACV Services ACV ACV Market Ratio comparison to 3Q19 but was up 26% sequentially due to strength in BFSI and industry-specific BPO awards 2020 YTD -0.4% Combined Market Quarterly ACV ($B) Americas Commercial Sector ACV by Service Type ($B) As-a-Service 7.53 Managed Services 8.0 8.0 7.8 ITO 7.56 7.1 7.1 7.2 6.7 6.9 7.69 6.4 6.5 6.4 2.42 3.9 4.6 4.4 BPO 2.44 2.9 3.4 2020 YTD 3.9 3.9 4.3 3.3 3.4 3.5 2.39 2019 YTD 4.32 2018 YTD SaaS 3.98 3.8 3.7 3.9 3.6 3.81 3.1 3.1 3.2 2.9 3.0 3.4 2.9 8.94 IaaS 7.29 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 5.67 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 6 Asia Pacific Commercial Sector Quarterly Trends ● Combined Market ACV fell 10% Y/Y due to continued soft results 11.0% 78% in Managed Services 2020 YTD 2020 YTD ● Managed Services ACV declined over 40% due to lack of large Combined Managed As-a-Service As-a-Service Market ACV Services ACV ACV Market Ratio transactions across the region 2020 YTD 2020 YTD -6.9% -41.2% Combined Market Quarterly ACV ($B) Asia Pacific Commercial Sector ACV by Service Type ($B) As-a-Service 1.19 ITO 1.98 Managed Services 2.48 2.29 1.44 2.13 2.21 2.19 2.14 2.02 1.89 1.97 0.20 1.80 BPO 0.38 1.55 1.48 2020 YTD 0.39 1.29 1.50 1.32 1.54 1.77 2019 YTD 1.61 0.70 1.32 1.48 1.63 2018 YTD 1.05 SaaS 0.74 0.67 1.00 0.84 0.70 0.71 0.65 0.52 0.53 4.33 0.50 0.48 0.41 0.34 IaaS 3.79 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 3.00 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 7 EMEA Commercial Sector Quarterly Trends ● Combined Market ACV was up over 9% Y/Y with equal contributions 2.6% 12.1% 43% by both Managed Services and As-a-Service domains 2020 YTD 2020 YTD 2020 YTD Combined Managed Services As-a-Service ● 3Q20 Managed Services up both Q/Q and Y/Y as most major As-a-Service ACV Market ACV ACV Market Ratio markets accelerated led by U.K. 2020 YTD -3.6% Combined Market Quarterly ACV ($B) EMEA Commercial Sector ACV by Service Type ($B) As-a-Service 6.93 Managed Services ITO 6.38 5.3 5.0 4.9 4.8 4.9 7.12 4.6 4.6 4.6 4.1 4.2 4.2 1.21 1.8 1.7 1.6 BPO 2.05 2.0 2.1 2020 YTD 1.8 2.0 2.0 1.5 1.7 1.49 1.8 2019 YTD 1.64 2018 YTD SaaS 1.73 3.2 3.3 3.5 2.8 2.8 2.9 1.65 2.6 2.5 2.4 2.6 2.6 4.50 IaaS 3.75 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 3.29 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 8 Global Commercial Sector Industry Award Trends Retail & Travel, Business Financial Healthcare Telecom Consumer Energy Manufacturing Transport 2020 Services Services & Pharma & Media Packaged Goods Leisure YTD Growth $8.3 ACV $5.4B ACV $2.8B ACV $9.1B ACV $4.1B ACV $6.5B ACV $4.0B ACV $3.8B ACV Combined Market 12% 11% 12% 6% 5% 1% -16% 4% Managed Services -6% 2% 14% -3% -3% -4% -34% -8% As-a-Service 17% 16% 8% 21% 14% 6% 13% 14% Americas 6% 10% 10% 30% 5% 7% -22% 25% EMEA 24% 13% 11% -13% 5% 13% -6% -5% Asia Pacific 19% 11% 24% -19% -3% -34% -17% -23% 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 9 3Q20 ISG Index™ “COVID-19 will accelerate investment THIRD QUARTER 2020 in smart manufacturing technology and services.“ Trends in Smart Manufacturing David Lewis Partner, Manufacturing Practice Lead ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from Information Services Group, Inc. COVID-19 Impact on Smart Manufacturing Disruptive Trends to Operations and Technology Impact of Pandemic Aligned Applied Analytics Digital Twins Post Pandemic Recovery Digital Production & Supply To optimize Acceleration of smart manufacturing Chain Transformation the product lifecycle and supply chain technology COVID-19 Pandemic Virtual & Augmented Reality LTE/5G Applied in Maintenance Near-real-time Networks & Employee Training for Connected Factories People Manufacturing Unmade/ Losing Jobs Shutdowns Unshipped Products 3Q20 ISG Confidential. © 2020 Information Services Group, Inc. All Rights Reserved. 11 Post-COVID Trends Location Dependent Solutions Business Resiliency, Flexibility and Efficiency Shifting to cloud & As-a-Service solutions Alternative Sources Supply Chains Reconfigure Cybersecurity Products & raw Back to U.S., materials to avoid European shortages & other regional models Cloud Internet of Things (IoT) Cybersecurity Smart Manufacturing Is essential as hackers continue to try to Reduced Costs, Improved Operations access Manufacturing Technology and Customer Experience Machine Vision IOT Platforms 3Q20 ISG Confidential.