THE Q3 HFS MARKET INDEX - WHERE IS THIS MARKET HEADING? SEPTEMBER 2017 - OCTOBER 2016
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The Services Research Company The Q3 HfS Market Index - where is this market heading? September 2017 October 2016
Agenda • Market Update • Infosys Leadership • Impact of Automation • Digital Service Providers © 2017 HfS Research Ltd.
Today’s Speakers
Phil Fersht Jamie Snowdon
CEO and Chief Analyst Chief Data Officer
HfS Research HfS Research
phil.fersht@hfsresearch.com jamie.snowdon@hfsresearch.com
© 2017 HfS Research Ltd.
Market Update
Key Activities for the Quarter
There were a number of significant events impacting the IT and business services
market for the quarter
Deals and M&A
⎻ Combined headcount of the big 5 offshore firms fell
sequentially for the first time this quarter. • Significant deals (May, June, July and August)
⎼ Atos: Northern Ireland Electricity Networks Limited ($77M)
⎻ Governments spending on IT services continues to be ⎼ Leidos (Lockheed Martin): Centers for Medicare & Medicaid
bullish specially in North America, almost 80% of large Services ($403M) and Department of Energy ($2.6B)
deals were from Public Sector, specially from defense, ⎼ IBM: Lloyds Banking ($1.3B) ; Helse Vest ($42M), NSW Police (
veteran affairs and energy departments $55M)
⎼ SAIC: General Services Administration (GSA) Federal Systems
⎻ Growth in markets other than North America showed Integration and Management Center (FEDSIM) ($320M)
some improvements, however not strong enough to ⎼ CGI: U.S. Army ($134M)
offset weakness and sluggishness in number of large ⎼ Northrop Grumman: US Air Force ($98M)
deals in corporate America.
• M&A Activity
⎻ Q3 2017 will see a number contract re-negotiations as
⎻ Accenture: LabAnswer, Solutions IQ, Phase One , Intrepid,
many of contracts signed in 2012 and 2013 are up for Verax Solutions, Wire Stone.
renewal in coming quarters ⎻ Cognizant: TMG Health
⎻ Restrictions on H1B Visas had marginal impact on the ⎻ CGI: Summa Technologies
overall market momentum. ⎻ Wipro: Drivestream
⎻ Demand for As-a-Services is on the rise and service ⎻ Deloitte: innoWake, Market Gravity
⎻ Microsoft: Cycle Computing
providers buying the niche providers focusing on Cloud,
⎻ Cisco: Observable Networks
Digital, Marketing, Agile and Design Thinking. HfS ⎻ SYNNEX: Datatec’s Westcon-Comstor
Research expects service providers to continue the
acquisition spree, specially when there is cash reserves
sitting idle for many.
© 2017 HfS Research Ltd.Average Quarterly Growth for 75 of the Leading IT and Business
Process Service Providers to Q2 2017
20,0%
18,0%
16,0% Average
Weighted average
14,0%
12,0%
10,0%
8,0%
6,0%
4,0%
2,0%
0,0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017
Source: HfS analysis of individual company financials (adjusted for acquisitions over half the revenue of original company)
The graph shows the average and weighted average revenue growth of these tracked providers, which represent 75 of the largest IT and business service
companies.
© 2017 HfS Research Ltd.Q2 2017 Provider Performance Overview - Zoom Out
30%
25%
Infosys
Syntel TCS
AWS
20%
HCL Technologies
Wipro Cognizant
Operating Margin (%)
NiiT Technologies
15% Hexaware
CGI
Tech Mahindra Luxoft
IBM GTS Genpact
Capgemini WNS
10%
MindtreeAccenture
Tieto EXL
IBM GBS
Atos
Conduent Virtusa
5%
NTT DATA
DXC
Fujitsu (Services)
0%
Unisys
-5%
-20% -10% 0% 10% 20% 30% 40% 50%
Revenue Growth (%)
This chart shows the full range of growth rates of the
© 2017 HfS Research Ltd. main service providers we track.Q2 2017 Provider Performance Overview
30%
25%
Infosys
Syntel TCS
20%
HCL Technologies
Wipro Cognizant
Operating Margin (%)
NiiT Technologies
15% Hexaware
CGI
Luxoft
IBM GTS Genpact
Capgemini Tech Mahindra
10% Accenture
Mindtree
Tieto EXL
IBM GBS
Atos
Conduent Virtusa
5%
DXC
Fujitsu (Services)
0%
Unisys
-5%
-10% -5% 0% 5% 10% 15% 20%
Revenue Growth (%)
© 2017 HfS Research Ltd.Infosys Leadership
Infosys Quarterly Performance
3.000,00 35,0%
S D Shibulal Vishal Sikka
30,0%
2.500,00
25,0%
2.000,00
20,0%
1.500,00
15,0%
1.000,00
10,0%
500,00
5,0%
- 0,0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017
Revenue $m Operating Margin (%) YoY Revenue Growth (%)
S Gopalakrishnan
© 2017 HfS Research Ltd.Global BPO and IT Services Market, 2017–2021 ($B)
IT Professional Services Other IT Services CAGR 2017 - 2021
IT Infrastructure Management Application Development & Management
Industry Specific BPO HRO Other IT
0,2%
F&A BPO Customer Care BPO Services
Professional
$1.200 Services
4,9%
$1.100
IT -2,3%
Annual Expenditure ($B)
$1.000 Infrastructure
$900
$800 ADM 5,7%
$700 Industry
$600 3,3%
Specific BPO
$500
HR BPO 5,0%
$400
$300
F&A BPO 5,6%
$200
$100
CRM BPO 3,3%
$0
2016 2017 2018 2019 2020 2021 -5% 0% 5% 10%
© 2017 HfS Research Ltd.Impact of Automation
Automation and AI: The Impact on Jobs in IT Services & BPO
Likely Scenario
• A more aggressive uptake of RPA and Autonomic plus adoption of Cognitive in second half 2017
• Leading stakeholders start to educate the market
• The adoption of RPA, Autonomics, but also Cognitive Computing, AI reaches exponential growth
• Visibility on impact through details in financial earnings calls and beyond
• Stronger impact on supply-side, more marginal on buy-side
• 20% Reskilling to medium and high skilled jobs
• Transactional roles will be most greatly impacted in 2021-2022 at the current pace of adoption
35% of Low skilled IT/BPO staff 15% of Medium skilled IT/BPO 5% of High skilled IT/BPO staff
have 50% likelihood of staff have 50% likelihood of have 40% likelihood of
automation in the next 4 years. automation in the next 5 years. automation in the next 5 years.
Underlying growth at -1.5% for Underlying growth at 5.0% for Underlying growth at 10.0% for
this category. this category. this category.
Low skilled jobs Medium skilled jobs High skilled jobs
falling by 31% increasing by 13% increasing by 57%
Total jobs falling by
7.5%
© 2017 HfS Research ProprietaryKey Findings – automation impact on jobs…
• The big narrative here isn't about what's going away, but more
about what is emerging in its place.
• We expect to see a more rapid impact on routine job roles in
2021-2022.
• RPA is merely accelerating the elimination of rote jobs.
• Time is on our side to manage the transition and train staff for
the future.
• We see this as a five year transition to the next phase in service
delivery.
© 2017 HfS Research ProprietaryTotal Impact of Automation and AI on IT/BPO Services Workers
across the Global Services Industry, 2015 - 2022
High Skilled Medium Skilled Low Skilled
10
Services Workers (Millions)
9
8
7
6
5
4
3
2
1
0
Low Skilled
2015
2016
2017 Medium Skilled
2018
2019 High Skilled
2020
2021
2022
© 2017 HfS Research ProprietaryTotal Impact of Automation and AI on IT/BPO Services Workers
By major country: likely scenario, low-skilled workers)
Low Skilled workers
2016 2022 % Change
3,0 -50%
2,5
-40%
% Decrease in Workforce
2,4
2,3
Services Workers
2,0
(Millions)
-30%
1,5 1,7
1,4 -20%
1,0
0,8 0,7 -10%
0,5 0,6
0,5
0,0 0%
Philippines UK India US
© 2017 HfS Research ProprietaryTotal Impact of Automation and AI on IT/BPO Services Workers
By major country: likely scenario, medium-skilled workers)
Medium Skilled Workers
2016 2022 % Change
2,5 40%
35%
2,0
% Increase in Workforce
2,0 30%
1,9
Services Workers
25%
(Millions)
1,5
20%
1,0 15%
1,0
0,9
10%
0,5 0,7
0,6
5%
0,2 0,3
0,0 0%
Philippines UK India US
© 2017 HfS Research ProprietaryTotal Impact of Automation and AI on IT/BPO Services Workers
By major country: likely scenario, high-skilled workers)
High Skilled Workers
2016 2022 % Change
1,2 120%
1,0 100%
1,00
% Increase in Workforce
Services Workers
0,8 80%
(Millions)
0,69
0,6 60%
0,51
0,4 40%
0,35
0,32
0,2 20%
0,22
0,16
0,08
0,0 0%
Philippines UK India US
© 2017 HfS Research ProprietaryTotal Impact of Automation and AI on IT/BPO Services Workers
By major country: likely scenario, all workers)
All Workers
2016 2022 % Change
6,0 -15%
5,0
4,88 -10%
% Decrease in Workforce
4,39
4,0
Services Workers
(Millions)
3,65
3,0 3,20 -5%
2,0
0%
1,55 1,53
1,0
1,05 1,07
0,0 5%
Philippines UK India US
© 2017 HfS Research ProprietaryTotal Impact of Automation and AI on IT/BPO Services Workers
across the Global Services Industry
High Skilled Medium Skilled Low Skilled
18
16
Services Workers (Millions)
14
12 6,24
9,09
10
8
6 5,64
4 5,00
2
1,85 2,90
0
2016 2022
© 2017 HfS Research ProprietaryKey Assumptions
HfS has taken the following assumptions to form this size and forecast for the services
industry:
• A more aggressive uptake of RPA and Autonomic plus adoption of Cognitive in second
half 2017
• Leading stakeholders start to educate the market more realistically
• The adoption of RPA, RDA, Cognitive Computing and AI reaches exponential growth
• Visibility on impact through details in financial earnings calls and beyond
• Stronger impact on supply-side, more marginal on buy-side
• 30% Reskilling to medium and high skilled jobs, with 2/3rd to medium and 1/3 to high
• Transactional roles will be most greatly impacted in 2021-2022 at the current pace of
adoption
© 2017 HfS Research ProprietaryFocus is on the Right-brain, not the Left!
What are the top three workforce requirements required now?
Creative, entrepreneurial spirit, Curiosity for innovation; 18% 22% 10% 50%
Exploring new ways of partnering across the services ecosystem 32% 9% 5% 46%
Commercial acumen (balance process, technology and innovation
6% 14% 21% 41%
decisions with sustainable cost model)
Vision and ability to drive change 10% 13% 11% 34%
Influencing senior executives 10% 13% 8% 31%
Defining business outcomes 14% 9% 5% 28%
Improving end-to-end processes across external and internal
2% 7% 13% 22%
delivery
Analytical prowess to improve operations / productivity 4% 8% 10% 22%
Understanding / using digital and cloud technology to improve
1%4% 9% 14%
business performance, drive change
Understanding business processes and using automation and AI to
3% 3% 6% 12%
improve business performance
First Second Third Source: “Real Time Enterprise 2017”
Sample: Enterprise Buyers = 460
© 2017 HfS Research ProprietaryDigital Providers
Disruption Overhyped? Opportunities trump threats!
How much do you agree or disagree with the following statements?
Our level of concern with disruption and
32% 46% 17% 4%
1%
competitive threats is driving our investments
We are very concerned about the level of
19% 46% 28% 6%1%
disruption in our market currently
We see more opportunities than threats now
42% 42% 12% 4%
0%
compared to 2 years ago
Strongly agree Agree Neutral Disagree Strongly disagree
Source: “Real Time Enterprise 2017”
Sample: Enterprise Buyers = 460
© 2017 HfS Research ProprietaryHfS Blueprint Grid: Digital Technology Strategy and Consultancy 2017
IBM
Wipro
Accenture
Cognizant KPMG
Genpact TCS
Tech Mahindra
Infosys Deloitte
PwC Atos
Syntel Fujitsu DXC Capgemini
HCL EY
Virtusa Corp NTT DATA
CGI Booz Allen
© 2017 HfS Research Ltd. Proprietary │Page 25Wrap-up
The digital fog is lifting… Traditions firms are finding their
digital path
Service providers need to be aggressive and embrace the
new model, or fade away
Automation has taken hold, but we have time to evolve
New jobs are evolving out of old jobs
The services industry is doing more with less!
© 2017 HfS Research Ltd. Proprietary │Page 26HfS: Revolutionizing the Industry
HfS’ mission is to provide visionary insight into the major innovations impacting business operations:
automation, artificial intelligence, blockchain, digital business models and smart analytics. We focus on
the future of operations across key industries. We influence the strategies of enterprise customers to
develop operational backbones to stay competitive and partner with capable services providers,
technology suppliers, and third party advisors.
HfS is the changing face of the analyst industry combining knowledge with impact:
• ThinkTank model to collaborate with enterprise customers and other industry stakeholders
• 3000 enterprise customer interviews annually across the Global 2000
• A highly experienced analyst team
• Unrivalled industry summits
• Comprehensive data products on the future of operations and IT services across industries
• A growing readership of over one million annually
The "As-a-Service Economy" and "OneOffice™" are revolutionizing the industry.
Read more on HfS and our initiatives here.
© 2017 HfS Research Ltd. Proprietary │Page 27You can also read
