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Global IT-BPOoutsourcingdeals analysisAnnual analysis for 2016

KPMG.com

February 2017


About global IT-BPO outsourcing deals analysis

KPMG’s Shared Services and Outsourcing Advisory (SSOA) practice publishes a quarterly analysis on Information Technology and Business Process Outsourcing (IT-BPO) contracts signed across industries and geographies, with a Total Contract Value (TCV) of USD5 million and above per deal.

Methodology and limitations of the study: The analysis and findings presented in this report are based on select third party deals database including, publicly available outsourcing data as identified throughout this presentation. It does not include contract information gathered from KPMG member firms business engagements.

The count and value of the deals may vary notably in reality and is only indicative of market movements and trends in the IT-BPO space. Readers are requested to use their discretion while assessing the global IT-BPO market accordingly.

For more information on this market research, please get in touch with Kartik Ramakrishnan ([email protected]).


Foreword

At the dawn of 2017, an analysis of the achievements and challenges of 2016 could help us plan a better future.

The SSOA practice is pleased to bring to you the year-end 2016 edition of the KPMG Global IT-BPO Outsourcing Deals Analysis.

The current edition looks at IT-BPO outsourcing contracts signed in the last three years, from 2014 to 2016, and identifies the major trends influencing the market, across geographies. This report also includes the regular analysis feature for the latest quarter Q4-2016 (October – December).

In 2016, the number of deals signed globally in the IT-BPO space were 1077 with a total contract value (TCV) of USD115 billion. Of the three years (2014 - 16) analyzed in this report, the year 2015 is the strongest year for outsourcing. Both 2014 and 2016 had similar deal activity.

With a shift in focus on cost cutting to value addition, client and service providers are laying importance on value-added services and innovation.

Hope you will find this market trends study on the IT-BPO deals useful. Happy reading!

Table of contentsSection 1: Global deals: An overview

Section 2: Deal analysis: 2016

Section 3: Deals by geography

Section 4: 4Q16 deal analysis

Section 5: IT-BPO outsourcing outlook


Section 1Global deals: An overview


A summary

In 2016, 951 ITO contracts worth USD102.4 billion and 81 BPO contracts worth USD8.7 billion were signed, worldwide

IT Bundled Services and SCM contributed approximately USD63.2 billion and USD3.6 billion respectively and were the largest procured services globally within ITO and BPO services, respectively

Globally 45 IT-BPO bundled deals were signed in 2016 with aggregate contract value worth USD3.9 billion

In terms of value, approximately 64.7 percent of deals originated from the United States, followed by theUnited Kingdom at 9.2 percent. Australia and France were two other key outsourcing markets

Government and Defense sectors were the top consumers of IT-BPO services contributing to 55 percent and 13 percent in terms of value of outsourcing deals signed in 2016. Telecom sector was the next big contributor in terms of deal value

Average annualized contract value in 2016 was USD21.3 million as compared to USD43.5 million in 2015 showing a decrease of 51 percent between the two years.

The average deal tenure increased to 4 years 7 months in 2016 from 4 years 1 month in 2015

Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database


SnapshotQuarterly deal movements

Quarterly movements of global IT-BPO deals*

• 2016 witnessed a drop in deal activity as compared to 2015. There was a decrease of 28 percent in total contract value but a 21 percent increase in total number of deals in 2016 as compared to 2015

• Deal activity in 4Q16 was almost similar to 3Q16, though there was a 15 percent decrease in number of deals• The average contract value also increased by 27 percent in 4Q16 as compared to 3Q16

*The term deals is interchangeably used with contracts throughout the analysis unless otherwise specified. Deals analyzed are global sourcing contracts of size USD5 million and above only. Source: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database

25.2 29.139.8

26.421.8

75.9

38.8

22.8

39.9 41.3

16.3 17.6

270316

324

245

192

334

253

112

228

340

275234

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016Value (USD billion) No. of deals

Total deal valueUSD120.4 billion

Number of deals1,144

Total deal valueUSD159.1 billion

32%

Number of deals891

-22%

Deal value

4Q16

4Q15

23%

No. of deals

4Q15

4Q16

109%Total deal valueUSD115.0 billion

Number of deals107721%

-28%


Y-o-Y comparison Annualized Contract Value (ACV)

Annualized* contract value comparison 2014-16

• Total annualized contract value in 2016 decreased by 41 percent as compared to 2015. The average annualized contract value also decreased by 51 percent during the same period

• The average contract tenure increased by 6 months to 4 years 7 months in 2016 as compared to 2015

41% decrease

26,796

38,723

22,936

- 10,000 20,000 30,000 40,000 50,000

2014

2015

2016

Total Annualized Contract Value (USD million)

45% increase

Average annualized contract value (USD million)

Average tenure per contract

Note: All values in USD million unless otherwise specified

Minimum annualized contract value

Maximum annualized contract value

51% decrease

5,271.4

1,211.4

0.78

0.40

4 years 1 month

43.5

23.4

2015

2014

1,532.40.36

2016

21.3

4 years 7 months

4 years 4 months

* Annualized contract value = ( Total value of a contract / Tenure in months ) x 12Contract value for contracts having tenure less than 1 year is considered as annualized value for the analysis. Graph is not to scale and only represents the division across different parametersSource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database


SectorTotal Contract Value Total Number of Contracts Average Contract Value2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016

Automotive & Aerospace

Banking & Financial Services

Defense

Energy & Utilities

Government

Insurance

Manufacturing

Pharma & Healthcare

Publishing, Media & Entertainment

Retail

Telecom

Travel & Logistics

Others*

Y-o-Y comparisonDeals analysis by sector

Trends in deal movement from 2013 to 2016

• In 2016, Government and Publishing, Media and Entertainment sectors have shown an increase in total contract value of more than 25 percent as compared to 2015. Most other sectors have had a decrease of more than 25 percent in total contract value during the same period

• Defense, Automotive and Aerospace, Energy and Utilities, Publishing, Media and Entertainment and Telecom sectors have shown a decrease in total number of contracts in 2016. All other sectors have increased the number of contracts signed in the year as compared to 2015

*Others: Construction, Consumer and Recreational Services, Education, Professional services, Securities and investment services, Social services, Trade unions, Technology, WholesaleSource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database

183% 86% -85% -39% 50% -14% 365% 24% -82%

25% -18% -39% -21% -45% 98% 58% 48% -69%

-53% 192% -82% -49% 17% -39% -8% 150% -70%

21% -46% -55% -24% -24% -18% 60% -29% -45%

-15% -58% 394% -11% -55% 103% -5% -8% 143%

-6% 173% -60% -19% 5% 9% 16% 161% -63%

42% 5% -27% 11% -33% 29% 27% 57% -43%

15% -8% -4% 35% -26% 45% -15% 24% -34%

-63% -52% 67% -35% -13% -23% -43% -44% 117%

-46% 197% -29% -15% 0% 46% -36% 197% -51%

28% -18% -26% 2% -23% -9% 26% 6% -18%

65% -4% -49% -14% -16% 2% 91% 15% -50%

10% 62% -45% -13% 10% 82% 27% 47% -70%

Decrease >=25% Decrease <25% Increase <25% Increase >=25%No change


Y-o-Y comparisonDeals analysis by category

• Both BPO deals and Bundled deals have experienced continuous decrease over the last two years in terms of both, numbers and total contact value

• Whilst ITO deals showed over 25 percent increase in total number of deals, their total contract value has decreased in 2016 over 2015, thus decreasing the average contract value over the period

• While total number of deals with a tenure of less than one year has decreased by more than 25 percent in 2016 over 2015, total number of deals with a tenure of more than one year has increased by more than 25 percent during the period


Decrease >=25% Decrease <25% Increase <25% Increase >=25%No change

Trends in deal movement from 2013 to 2016

Deal TypeTotal Contract Value Total Number of Contracts Average Contract Value2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016 2013->2014 2014->2015 2015->2016

ITO

BPO

Bundled

Less than USD100 mn

Between USD100- 500 mn

More than USD500 mn

Less than 1 year

Between 1 to 5 years

More than 5 years

-22% 57% -25% -17% -19% 32% -6% 94% -43%

17% -37% -41% -23% -40% -29% 52% 4% -18%

-27% -19% -52% -57% -15% -20% 67% -4% -40%

-25% -20% 5% -25% -23% 27% 0% 4% -17%

-23% -4% -13% -11% -22% -2% -13% 22% -11%

-3% 103% -43% -20% -5% 39% 21% 113% -59%

-27% -13% -46% 15% -28% -48% -36% 21% 3%

-1% 6% -32% -24% -19% 26% 31% 31% -46%

-32% 71% -23% -27% -28% 34% -6% 137% -43%


Section 2Deals analysis: 2016


Deal valueIT-BPO deals* signed in 2016 (Total contract value: USD115 billion)

• ITO deals continue to dominate the outsourcing space with a contribution of 89 percent to the total deal value signed in 2016

• AMERICAS continue to be the major outsourcing region contributing 67 percent of the total deal value signed in 2016. EMA and ASPAC contribute 23 percent and 10 percent respectively

• Fixed price contracting model showed dominance, contributing over 67 percent of the deal value in 2016, followed by Hybrid model with contribution of 28 percent of total deal value

ITO102.4

BPO8.7

Bundled3.9

AMERICAS76.7

EMA26.8

ASPAC11.5

Less than USD 100 mn

20.7

Between USD 100- 500 mn

42.3

More than USD 500 mn

52.0

Less than 1 year1.1

Between 1 to 5 years48.9

More than 5 years65.0

Fixed price76.8

Hybrid32.1

Services Region Contract value Tenure Pricing

Time & Material,5.3

Total contract

value

USD115 billion

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

#

* Deals analyzed are USD5 million and above only, throughout the analysis. Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off

# Hybrid pricing includes a combination of various pricing mechanisms


Others, 0.5


Number of dealsIT-BPO deals* signed in 2016 (Total number of contracts: 1077)

• ITO deals and BPO deals contribute to 88 percent and 8 percent respectively in terms of number of deals signed in 2016

• Clients preferred mid tenure deals that cover the span of one to five years, which contributed to 75 percent of the total number of deals signed in 2016

• 77 percent of the deals, in terms of number of deals signed in 2016, were of value less than USD100 million. 5 percent of total number deals signed in the year were of value more than USD500 million




ITO951

BPO81

Bundled45

AMERICAS504

EMA456

ASPAC117


826


198

More than USD 500 mn53

Less than 1 year44

Between 1 to 5 years806

More than 5 years227

Fixed price791

Hybrid137

125

Others, 24


Total contracts

1077

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

#

Time & Material


IT-BPO deals across sectors by value and numbers Sector analysis

Sector-wise break-up of deals in 2016

• The Government and Defense sector lead deal activity, contributing to 39 percent and 20 percent in terms of value of outsourcing deals signed in 4Q16

• Telecom sector is the next big contributor in terms of deal value, with a contribution of 12 percent to the total deal value of deals signed in 4Q16

2.6

0.7 0.1 0.4

0.9 0.1 0.2 0.1 0.2

1.1 0.7

6.9

26.0

1.0 0.2

0.8 1.0 1.3 0.8

0.5 0.1 0.5

4.9

1.4 2.1

26.9

1.0 0.6 0.2 0.5

1.1 0.2

1.4

0.1 0.2

3.9

0.6

2.8

3.5

1.4

0.4 0.1 0.2

1.0 0.3 0.1 0.2 0.4

2.1

1.1

3.5

6.9

Banking and

Financial Services

Insurance Automotive and

Aerospace

Travel and Logistics

Manufacturing Energy and Utilities

Pharma and Healthcare

Publishing, Media and

Entertainment

Retail Telecom Others * Defense Government

Q1-2016 Q2-2016 Q3-2016 Q4-2016

48

18

67

4

1

10

6 7

2

7

3

13

10

6

8

15

9

18

7 9

2

11

27

7 7

1424

36 40

2

18

86

21

26

11 10

4

26

4236

Dea

l val

ue (U

SD

bill

ion)

4

2225

* Others: Construction, Consumer and Recreational Services, Education, Professional services, Securities and investment services, Social services, Trade unions, Technology, Wholesale

Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding off


No. of contracts

TCV : USD115 billionNo. of contracts: 1077 116

70

49

59

4

54

82


Section 3Deals by geography


IT-BPO deals across geographies: Y-o-Y comparisonGeography analysis

Geography-wise break-up of deals*

• AMERICAS continue to be the major outsourcing region contributing 67 percent of the total deal value in 2016• AMERICAS experienced a drop of 21 percent in total contract value as compared to 2015. The decrease in

total contract value for EMA and ASPAC were 41 percent and 30 percent respectively during the same period

64.9

97.5 76.7

649

453

504

2014 2015 2016

8.0 16.5

11.5

97 122 117

2014 2015 2016

47.5 45.1

26.8

398 316

456

2014 2015 2016

* Deals originating from the geography


EMA

AMERICAS

ASPAC

Total contract value (USD billion) No. of contracts


AMERICAS


Geography analysis- IT-BPO deals in AMERICAS: Value and number of deals


• Total deal value of AMERICAS has decreased by 21 percent in 2016 as compared to 2015

• While quarters 1Q16 and 2Q16 were strong, quarters 3Q16 and 4Q16 were weak, which lowered the total deal value generated from the region

• IT outsourcing made 92 percent of the total contract value of 2016

• In terms of volume of deals signed, 2016 displayed similar quarterly movement as previous years

• 2Q16 had the largest number of ITO deals signed in the last three years

4.8 15.1 11.6

7.3 4.1

59.4

22.7

2.3

28.6 30.5

4.6 6.6 0.4

1.1 16.9

0.9 1.0

2.7

1.6

0.1

0.5 0.1

0.3 3.2

0.2

1.2

2.9

2.6 2.0

1.2

0.4

0.0

0.0 0.1

2.0 0.2

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

ITO BPO Bundled

89

169

108 95

72

147

109

29

95

202

93

63

6 26

93

21 5

53

82

5 4 3

146

11

10 15 22 4 1 1 2

3 16

4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

ITO BPO Bundled* Deals originating from the geographySource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database


Geography analysis- IT-BPO deals in AMERICAS

Sector-wise break-up of deals*

2.3

0.2 0.2 0.4

2.9

1.8

0.3 0.4 0.2

2.6

0.9

28.1 24.5

1.4

0.4 0.1 0.1

1.8 1.7

0.2 0.2 0.3

2.3

0.9

80.5

7.6

0.7 0.6 0.1 0.5

1.7

0.5

1.6

0.2 0.4 0.4 1.2

13.7

55.2

* Others: Consumer and recreational services, Construction, Education, Professional services, Securities and investment services, Technology, Wholesale

Graph is not to scale and only represents the division across different parameters. Figures may not add up to 100 percent due to rounding offSource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database

Bankingand

Financial Services


Aerospace



Pharma and

Healthcare


Entertainment

Retail Telecom Others* Defense Government

35

140

14

13

29

13

4

20

9

49

13

225222

29

62

16

37

16

8 6

17

36

29

14

7

4

9

22 18

6

9

1115

24

259

55

201

No. of dealsAll figures in USD billion

2014 2015 2016

• Government and Defense sectors of AMERICAS remain the strongest users of outsourcing in 2016 with total contribution of 90 percent to deal value

• Government, and Pharma and Healthcare sectors displayed multifold increase in the deal value in 2016 over 2015. Defense and Telecom sectors displayed significant decrease of over 80 percent in the deal value in 2016 over 2015

Dea

l val

ue (U

SD

bill

ion)


Geography analysis- IT-BPO deals country comparison: AMERICAS

Top five countries by TCV (USD million) in 2016

1. USA

2. Canada

3. Brazil5. Chile

4. Mexico

24

1

13

15

24

391

3

2

21

* Deals originating from the geographySource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database

No. of deals

ITOBPO Bundled

4,022 2,266

68,097

--

1,467

16 -

289

-

45

175

--

149


EMA


Geography analysis- IT-BPO deals in EMA: Value and number of deals


• Total deal value of EMA has decreased by 41 percent in 2016 as compared to 2015

• After a strong 4Q15, TCV has been continuously decreasing in EMA over each quarter of 2016

• ITO contributed 78 percent, BPO – 5 percent, and Bundled – 16 percent of the total contract value in 2016

• In EMA, though 2016 showcases lower TCV, it had greater number of deals signed as compared to 2015

• Also, though the quarters 3Q16 and 4Q16 had the lowest total deal values, the number of deals signed in the quarters were amongst the highest, in the last three years


15.3

8.4

3.6

13.1

9.6

5.1 4.8

13.0

7.0 5.8 4.5 3.8

1.4

1.1

0.9

0.9

0.8

4.8 2.8

1.0

2.4

0.6 0.6

0.7

0.7

0.0

1.7

0.2

0.2 0.5

0.3

2.2

0.6

0.3 0.1 0.4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

ITO BPO Bundled121

64 77

83

62 72 67

47

86 73

114111

10 15

4 6 4

18 148

16 16

10 11

1

2

12 3

12 3 6 3 9 5 2

3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

ITO BPO Bundled


Geography analysis- IT-BPO deals in EMA


8.3

1.5

4.0

3.3 2.5

4.0

1.6 0.2 0.4

12.7

3.2

0.04

5.9

7.6

3.5

7.7

3.5 3.6

0.2 1.9

0.1 1.4

5.0 5.6

0.9

4.1 4.9

1.2 1.1 1.3 1.5 0.9 0.5 0.3 0.9

4.8

1.9 0.8

6.8



Bankingand

Financial Services


Aerospace



Pharma and

Healthcare


Entertainment


No. of dealsAll figures in USD billion

2014 2015 2016

• Government, Telecom and Banking sectors continue to be the dominant consumers of IT-BPO services in the EMA region, with total contribution of 61 percent to the total deal value in 2016

• Automotive and Aerospace, and Banking sectors displayed a significant decrease of 86 percent and 36 percent in total deal value in 2016 over 2015

Dea

l val

ue (U

SD

bill

ion)

21

6

17

68

1312

22

29

13

46

15

38

16

10

26

3732

15

9 10

61

40

102

26

13

17

2426

8

11

4

14

4752

3

71

2

104

90


Geography analysis- IT-BPO deals country comparison: EMA



1. United Kingdom

3. Netherlands

2. France

5. Germany

4. Norway

No. of deals

ITOBPO Bundled

2,750

674 7,098

309

2,883

91

357

1,803

45 21

2,073

112

147

1,098

32

11143

3

52

11

21

11

10

24

1

3


ASPAC


Geography analysis- IT-BPO deals in ASPAC: Value and number of deals


• Total deal value of ASPAC has decreased by 30 percent in 2016 as compared to 2015

• The outsourcing market in ASPAC has shown a positive trend by maintaining its contribution at 10 percent in 2016 after a strong 2015

• 97 percent of the deals signed by volume in the ASPAC region in the year 2016 are ITO deals

• Both the BPO market and the bundled deals market have been stagnant in terms of number of deals signed in ASPAC


2.2 2.1 1.9 1.3

4.1

2.2

5.3

3.6

0.5

3.7 3.9 2.9

0.01 - 0.10

0.01

-

0.0

0.0

-

0.27

0.0 -

-0.08 - 0.22

0.07

0.02

0.0

0.8

0.42

-

- 0.2 -

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

ITO BPO Bundled

23

29

12

19 14

35

46

21

14

36 36

28

1 -6 1 - 1 1

-1

1 - -2

-

2 2 1 1 1 1 -- 1

-

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

ITO BPO Bundled


Geography analysis- IT-BPO deals in ASPAC


1,128

- 28 304

172 53

432

- 6

4,437

241

648 542 536

723

- 196

480

1,245

57 - 171

8,820

458

2,693

1,098

326 48 43 176

1,116

19 50 - 37

6,831

724 770

1,359



Bankingand

Financial Services


Aerospace



Pharma and

Healthcare


Entertainment


No. of dealsAll figures in USD million

2014 2015 2016

• Telecom was the top outsourcing sector in the ASPAC region for 2016, with contribution of 59 percent of the TCV. Government and Manufacturing sectors were other major outsourcing sectors contributing 12 percent and 10 percent of total deal value in 2016

• While the Manufacturing sector grew by 133 percent in terms of TCV in 2016, Energy and Utilities, and Defense sectors declined by 98 percent and 71 percent respectively

Dea

l val

ue (U

SD

mill

ion)

9

2

89

13

0

43

30

1612

16

0

2

8

4

2

4

0

1

30

89

13

6

3

0

9

4

12

3

0

3

36

910

2720


Geography analysis- IT-BPO deals country comparison: ASPAC



2. India

1. Australia

3. China

5. Indonesia

4. Japan

2

No. of deals

ITOBPO Bundled

292 169

3,609

- -

2,953

- -

2,367

- -

1,115

- -

259

9

26

5

10

43

21


Section 44Q16 deal analysis


Deal valueIT-BPO deals* signed in 4Q16 (Total contract value: USD17.6 billion)

• ITO deals continue to dominate the outsourcing space with a contribution of 75 percent to the total deal value signed in 4Q16

• AMERICAS continue to be the major outsourcing region contributing 56 percent of the total deal value signed in 4Q16. EMA and ASPAC contribute 28 percent and 16 percent respectively

• Mid tenure deals spanning across one to five years contributed to 52 percent of the total deal value, followed by long tenure deals of length more than five years, which contributed 45 percent to total deal value of deals signed in 4Q16

ITO13.2

BPO3.9

Bundled0.6

AMERICAS9.9

EMA4.9

ASPAC2.9


4.5


4.6

More than USD 500 mn

8.5

Less than 1 year0.5

Between 1 to 5 years

9.2

More than 5 years

7.9

Fixed price15.2

Hybrid1.9

0.6


Time & Material

Total contract

value

USD17.6 billion

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

#





Number of dealsIT-BPO deals* signed in 4Q16 (Total number of contracts: 234)

• ITO deals and BPO deals contribute to 86 percent and 11 percent respectively in terms of number of deals signed in 4Q16

• 86 percent of the deals, in terms of number of deals signed in 4Q16, were of value less than USD100 million. Four percent of the deals signed in 4Q16, were of value more than USD500 million

• Fixed price contracting model showed dominance, contributing over 88 percent of the total number of deals signed in 4Q16. Hybrid model and Time and material model, each made 6 percent of total number of deals signed in 4Q16




ITO202

BPO25

Bundled7

AMERICAS81

EMA125

ASPAC28


202


22

More than USD500 mn10

Less than 1 year8

Between 1 to 5 years199

More than 5 years

27

Fixed price205

Hybrid13

15Others, 1


Total contracts

234

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

#Time & Material


Services segmentationAnalysis of ITO deals 4Q16

• ICT Services contributed to 31 percent of all ITO deals in terms of value and 20 percent in terms of number of deals signed during 4Q16. ADM contributed to 22 percent of all ITO deals in terms of value and 39 percent in terms of number of deals signed in the quarter

• SMAC and IT Bundled services are other key contributors to the ITO deals in 4Q16

Note: Size of bubble indicates percentage share of the total number of ITO dealsSI – System Integration, Other IT services – Software testing, IT Education and TrainingSource: IDC (www.idc.com), Contract Database, January 2017, KPMG member firms research and analysis based on the IDC contract database

Number of deals

Tota

l Val

ue o

f con

tract

s (U

SD

billi

on)

Value of contracts (USD billion)Note: All values in USD billion. Scale of graph is just representative to illustrate the division across different parameters. Figures may not add up to 100 percent due to rounding off. Refer L.H.S. figure for legend


2.9

0.0

4.2

2.1

0.040.9

0.11.3

1.50.2

13.2

ADM ERP TotalITO

ICT IT Bundled

ITInfra.

ITProducts

SMACSIIT Conslt.

Other ITServices

ADM39%

ERP1%

ICT Services20%

IT Bundled services

11%

IT Consulting1%

IT Infrastructure4%

IT Products2%

Other IT Services, 1%

SI7% SMAC

12%

0

1

1

2

2

3

3

4

4

5

5

0 10 20 30 40 50 60 70 80 90


Services segmentationAnalysis of BPO deals 4Q16

• SCM deals contributed to the most deal activity amongst BPO deals – 78 percent of all BPO deals in terms of value and 28 percent in terms of number of deals during 4Q16

• KPO and BPO Bundled services are other key contributors to BPO deals in 4Q16

Note: Size of bubble indicates percentage share of the total number of BPO deals

Other BPO services – Data management, etc.


BPO Bundled services

16%

Content Management

4%

CRM8%

F&A8%

HRO4%

KPO28%

Other BPO Services

4%

SCM28%

0

100

200

300

400

500

600

0 1 2 3 4 5 6 7 8

Tota

l Val

ue o

f Con

tract

s (U

SD

milli

on)

Number of deals

327 43 36 61 63 134

187

2,999

3,851

BPO BundledServices

CRM TotalBPO

Value of contracts (USD million)

SCM

Note: All values in USD million. Scale of graph is just representative to illustrate the division across different parameters. Figures may not add up to 100 percent due to rounding off. Refer L.H.S. figure for legend


KPO

3,500

Content Mngt

F&A HRO Other BPO

Services


Section 5IT-BPO outsourcingoutlook


Global outsourcing industry Outlook

• The continued development of process automation and technologies have presented further opportunities for GBS. This has driven the rise in data and analytical services being embedded in GBS organizations

• Buyers seem cautious about models that include outcome-based pricing while hybrid and fixed pricing models are preferred, contributing to more than 95 percent of the deal value over the last three years. The same trend is most likely to continue in 2017

• Organizations are moving from a traditional silo-based and transactional outsourcing services, to more of a holistic end-to-end approach through bundled deals

• With increasing importance being placed on customer experience, clients are opting for outsourcing not just for cost reduction, but also to avail the value-added services provided by the service providers

• The finance function is more actively engaged in process automation than is the HR function and organizations overall are more active with basic process automation, following by enhanced process automation and cognitive automation

• A reduction in dominance of AMERICAS is observed in the global buyer market for outsourcing services although it continues to be the major outsourcing region contributing 67 percent of the total deal value in 2016. EMA is gaining momentum gradually with ASPAC fast catching up

• Telecom sector is continuously featuring amongst the top contributors to the outsourcing industry for the last three quarters. It is mostly leveraging ICT and SMAC services from service providers and is expected to continue so.


KPMG Global Insights Pulse, 3Q16, October 2016


KPMG Shared Services and Outsourcing Advisory (SSOA) research

To learn more, log on to http://www.kpmg-institutes.com/institutes/shared-services-outsourcing-institute.htmlAdvice Worth Keeping Blog: http://blog.equaterra.com/Advice Worth Keeping podcast series: http://www.kpmginstitutes.com/shared-services-outsourcing-institute/events/podcast_series/advice-worth-keeping-podcast-series.aspxGlobal IT-BPO Outsourcing Deals Analysis: http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/KPMG-Deal-Tracker/Pages/Default.aspx

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Glossary (1/2)

Terms Definition

ACV Annualized Contract Value = ( total value of a contract/tenure in months ) x 12

AMERICAS North America and South America

ASPAC Asia and Oceania

BPO Business Process Outsourcing

EMA Europe, Middle East and Africa

ITO Information Technology Outsourcing

TCV Total Contract Value


Glossary (2/2)Terms DefinitionITO ServicesADM Application Development and MaintenanceERP Enterprise Resource Planning implementation and support services

ICT Services Information and Communication Technology services (e.g. contact center technology, telecommunication, and related services)

IT Bundled Services Any combination of two or more IT services mentioned aboveIT Consulting Information Technology Consulting services

IT Infrastructure IT hardware deployment (e.g. data center outsourcing, network management, hardware deploy and support, hosting services, etc.)

IT Products Software products typically developed and branded by IT companies and sold as own Intellectual Property

Other IT Services Typically services that do not fall in other buckets (e.g. Software testing, IT helpdesk support services, Cyber security)

SMAC Social, Mobile, Analytics and Cloud services (i.e. Social Media, Mobility, Analytics and Cloud computing)

System Integration IT system integration services (application or enterprise system integration services)BPO ServicesBPO Bundled Services Any combination of two or more BPO services mentioned aboveContent Management Data management services (e.g. document management, print management, etc.)CRM Customer Relationship Management solutions and servicesF&A Finance and Accounting servicesHRO Human Resource Outsourcing servicesKPO Knowledge Process Outsourcing services

Other BPO Services Typically services that do not fall in other buckets (e.g. Industry specific processes, Facilities Management)

SCM Supply Chain Management services (including procurement, logistics, etc.)


KPMG contacts

Stan Lepeak Director – Global Research, Management ConsultingKPMG in the US+1 203 458 [email protected]

Arun NairPartner – Advisory ServicesKPMG in India+91 80 3065 [email protected]


Thank you

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International. This document is meant for e-communications only.

Kartik Ramakrishnan KPMG in IndiaT: +91 80 3065 4440E: [email protected]

Analysts (KPMG in India): Esther JaydeviSwati Kumari

Analyst team contacts:

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