英语课件 Outsourcing Market Outlook

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1、BusinessIntelligenceGroupNovember2002OutsourcingMarketOutlook-ITManagedServices-BusinessProcess/TransactionManagementBUSINESSINTELLIGENCEGROUP-1ContentsOutsourcingMarketExecutive SummaryMarket Size and Growth Growth DriversEvolvingserviceofferingsApplicationsmanagementBPOOffshoredevelopmentPublicsec

2、tordemandInternationalregionsMiddlemarketnCompetitive LandscapeSourcesBUSINESSINTELLIGENCEGROUP-2ExecutiveSummaryOutsourcedservicesspendinghasremainedrelativelyhealthyinananemiceconomyin2002nTheprolongeddifficulteconomicenvironmenthasboostedinterestinoutsourcingasameansofreducingcosts,creatingavaria

3、blecoststructure,andtransferringcapitalrisks.nTheglobalmarketforoutsourcedITservicesispredictedtogrowfrom$190billionin2001to$270billionin2005,ataCAGRof9.2%,whichismuchstrongerthanconsultingandsystemsintegrationgrowthforthesameperiod.Nevertheless,giventhecurrentITenvironment,theoutlookforoutsourcingh

4、asbeenreducedfromtheJanuary2002forecastfor2001-5CAGRof14.8%.nManagedservicesarepredictedtogrowfrom$100.3billionin2001to$140billionin2005,ataCAGRof8.8%.NorthAmericaaccountsforroughly44%ofthismarket.nTheBPOmarketispredictedtogrowfrom$89.7billionin2001to$129billionin2005,a9.6%CAGR.NorthAmericaaccountsf

5、ornearly60%ofthismarket.nAstheeconomyimproves,IToutsourcingspendingisexpectedtopickup,althoughspendingwillbedrivenlessbycostsavingsandmorebytheneedtoaccessadvancedtechnologyandskilledhumanresources,andtofocusontoplinerevenuegrowth.nThedrivetoreducecorporatecostsandcreateamorevariablecoststructureisf

6、uelinghealthymarketgrowth.However,difficulteconomicconditionshaveslowedsalescyclesandmadesomecompanieshesitatetocommittolong-term,large-scaleoutsourcingprojects.nWhiletheeconomyiscertainlyafactorintheslowinggrowth,thereisalsosomedegreeofindustrymaturation,especiallyintheITinfrastructureoutsourcingma

7、rket.LehmanBrothersestimatesthatroughly50%oftheGlobal2000nowoutsourceatleastaportionoftheirITinfrastructure.Asvendorshavestartedpursuingsecondtierclientswhoarelessfamiliarwiththeoutsourcingvalueproposition,salescycleshavelengthened.BUSINESSINTELLIGENCEGROUP-3ExecutiveSummaryKeygrowthdriversfortheout

8、sourcingmarketinclude:ContinuedfocusoncostcuttingImprovedoutsourcingserviceofferingsGrowthinapplicationsmanagementIncreasedadoptionofBPOMoreacceptanceofoffshoreservicesSteadygovernmentdemandIncreasingdemandoutsideUSTargetingthemiddlemarketIncreasinglycompetitiveoutsourcingmarketplaceMarketislarge,fr

9、agmented,andgrowingfast,providingabundantopportunityforserviceproviders.Thetop10managedservicesvendorsworldwidetotaled$45.6billionin2001revenue,or44%percentofthemarket.Thetop10USmanagedservicesvendorsin2001accountedfor55%ofthemarket.IBM,EDS,andCSCdominate,controllingonethirdoftheglobalthemanagedserv

10、icesmarket.ThereissomeconcernthatproblemsatEDSmayscarecustomersaway,althoughtodatethishasnotbeenevident.Increasingcompetitionandtheeconomicslowdownhaveprolongedsalescyclesandslowedgrowth.CustomersunderearningspressureorwithexcessITcapacityaregrantingfeweradd-onchangeordersorarereducingdiscretionaryc

11、onsultingspend.nSomecustomersarereducingthescopeofexistingdealsorrestructuringcontractsbeforethestatedmaturity.nSpecialtyandnichevendorsaredoingverywellintheBPOmarket.BUSINESSINTELLIGENCEGROUP-4OutsourcingAccountsforNearlyHalfoftheITProfessionalServicesMarketnTheworldwideITprofessionalservicesmarket

12、ispredictedtogrowfrom$412billionin2001to$548billionin2005,ataCAGRof7.4%.nOutsourcing(ITmanagedservices,BPO/Transactionmanagement)accountsfornearlyhalfofthismarket,andisexpectedtogrowatanaverageof9.2%through2005.nOutsourcedservicesaregrowingatfasterratesthantraditionalconsultingandsystemsintegrations

13、ervices(9.2%vs.5.8%),andarepredictedtocompriseanincreasingshareofthetotalITprofessionalservicesmarketoverthenextfiveyears.2002WorldwideITProfessionalServicesMarketTotalMarketSize:$426BOutsourcingMarketSize:$203BSource:Gartner,May2002nEconomicconditionshavegreatlyincreasedoverallinterestinoutsourcing

14、versusproject-basedconsultingandsystemsintegration.Outsourcingallowscompaniestoreducecostsandexposuretorisk.nOutsourcingrelationshipscanactasareferralstreamforintegrationconsultingwork.Estimatesarethatthecross-sellrateforintegrationconsultingis30%.Systemsintegrationworkespeciallyhelpsresolvetechnica

15、ladoptionchallenges.Consulting$47BSystemsIntegration$159.1BITManagement$106.9BBPO/TransactionMgt$94.9BEdu/Training$17.8BSource:Gartner,May2002BUSINESSINTELLIGENCEGROUP-5OutsourcingMarketSegmentationOutsourcingservicesareproductsupportandprofessionalservicesthatprovideclientswiththeITinfrastructure,a

16、pplications,andbusinessprocessestoachievebusinessobjectives.Gartnerdividesoutsourcingintotwocategories:ITmanagedservicesandBusinessprocessandtransactionmanagementservicesnITmanagedservicesaretypicallymulti-yearcontractsforthepurchaseofITservicessuchasrunningtheITinfrastructureofagivenapplication,bus

17、inessprocess,orentirecompany.Managedservicescanbefurthersegmentedintooperationalservices,applicationsmanagement,andhelpdeskmanagementservices.nBusinessProcessOutsourcing/TransactionManagement(BPTM)differsfromtraditionalIToutsourcingbecausetheserviceprovidertakesoveranentirebusinessfunctionorsetoftra

18、nsactionsratherthansimplyrunningthecomputinginfrastructure.Examplesofoutsourcedprocessesincludeadministration,HR,finance,procurement,paymentservices,supplychainmanagement,andcustomercare.BPOispartofanaturalevolutionfromtraditionalITmanagedservices.Source:GartnerDataquest,May2002BUSINESSINTELLIGENCEG

19、ROUP-6ITOutsourcingvs.BPOThetwodifferentprojecttypesalsofavordifferenttypesofserviceproviders.ScaleisnecessaryfortraditionalIToutsourcingprojects,whileintellectualcapitalismoreimportantforBPO.TraditionalOutsourcingBPOGrossMargin:15-25%ContractLength:3-7yearsClientExpansionOpportunity:Moderate/HighPa

20、rtnershipAttitude:ModeratePricingMetricsinclude:1)Resourcesused,2)Servicelevelagreementincentive,and3)minimumsTypicalfunctionsinclude:1)Datacenteroperations,2)LAN/WANoperations,3)Helpdesk,4)applicationmaintenance,and5)applicationdevelopmentGrossMargin:20-40%ContractLength:3-7yearsClientExpansionOppo

21、rtunity:HighPartnershipAttitude:HighPricingMetricsinclude:Volumeofthroughput,servicelevelagreementincentive,andminimumsTypicalfunctionsinclude:1)HR,2)Sales,marketing,andcustomercare,3)Paymentservicing,4)financeandadministration,and5)logisticsExample:DataCentersExample:ClaimsProcessing-ITonly-Keytosu

22、ccessisscale-Biggestchallengeisinfrastructureoptimization-50%ofthetimecompetitionisinternal-Whenthereiscompetitionthefocusisonpriceandservicelevelagreements-ITandProcess-Keytosuccessisstandardizedworkflow,processautomation,andselfservice-Biggestchallengeisre-engineeringtobestpractices-100%ofthetimec

23、ompetitionisinternal-WinningthebusinessisbasedonbestpracticesandcostreductionSource:GoldmanSachs,January2002BUSINESSINTELLIGENCEGROUP-7ManagedServicesMarketSegmentationWithintheoutsourcingmarket,managedservicescanbefurthersegmentedintooperationsservices,applicationmanagement,andhelpdeskservices.Sour

24、ce: Gartner Dataquest, January 2002nOperationsservices(largelydatacenter)accountsforfourfifthsoftheworldwidemanagedservicesmarket,whileapplicationmanagementandhelpdeskservicesaccountforonefifth.nApplicationmanagementisshowingthestrongestgrowth,largelybecauseitisalesssaturatedmarket.Customersareparti

25、cularlykeentosqueezemoreproductivityfromtheirERPimplementationsbyoutsourcingthem.nTheworldwideandUSmarketsareverysimilarintheirmanagedservicesmarketsegmentation,althoughtheUShasalargermarketforhelpdeskserviceswhereithasbeenadoptedfirst.BUSINESSINTELLIGENCEGROUP-8OutsourcingMarketGrowth-WorldwidenGar

26、tnerpredictsthattheworldwideIToutsourcingmarketwillgrowfrom$190billionin2001to$270billionin2005,ataCAGRof9.2%.ThisoutlookhasbeensignificantlyreviseddownwardsinceJanuary2002,from14.8%to9.2%duetothegreaterthananticipatedimpactoftheslowdowninITservicesspending.nManagedservicesarepredictedtogrowfrom$100

27、.3billionin2001to$140.6billionin2005,andBPTMfrom$90billionin2001to$129billionin2005.nBPTMisgrowingatafasterrate(9.6%)thantraditionalITmanagedservices(8.8%)asthelistofavailableservicesisexpandingfrommoretraditionalfunctions(callcenter,paymentprocessing,payablesprocessing,etc.)tomorecomplexservices(ge

28、neralfinanceandaccounting,administrative,HR).Source:GartnerDataquest,May2002BUSINESSINTELLIGENCEGROUP-9OutsourcingMarketGrowthNorthAmericaSource:GartnerDataquest,January2002nTheNorthAmericanIToutsourcingmarketwillgrowfromanestimated$88billionin2001to$123billionin2005,ataCAGRofapproximately9%.*nNorth

29、AmericanmarketgrowthismoreheavilyinfluencedbyBPOthanworldwidemarketgrowth.nManagedservicesinNorthAmerica,afairlymaturemarket,isgrowingslowerthantherestoftheworld.Alternatively,BPOisgrowingfasterasmoreNorthAmericancompaniesseemtobewillingtoconsiderthisexpandedsetofservices.* Business Intelligence Gro

30、up estimate, actual North America market data not yet available. Based on estimation that North America accounts for 44% of the managed services market and 50% of the BPO market* Actual North America growth rates not yet available. Based on worldwide growth rates.BUSINESSINTELLIGENCEGROUP-10Outsourc

31、ingMarketRegionalBreakdownnNorthAmericaisthelargestregionalmarketforbothtraditionalmanagedservicesandBPO,followedbyWesternEurope.nIneveryregion,BPOsubstantiallyexpandstheaddressabletechnologyservicesmarket,andregionsaretakingequaladvantageoftheopportunity.InEurope,applicationoutsourcingandBPOaretheh

32、ottestgrowthareas.nAccordingtoGoldmanSachs,Europeancompaniesareintheearlystagesofasubstantialoutsourcinggrowthcycle.Powerfuldemanddriversincludecost,productivity,andcorecompetency.Source:GartnerDataquest,January2002.*RegionalbreakdownsarebasedonJanuary2002data.Revisedregionalgrowthratesnotyetavailab

33、le.*OtherregionsnotavailableBUSINESSINTELLIGENCEGROUP-11OutsourcingMarketVerticalIndustriesVaryinTheirUseofOutsourcingSource:YankeeGroup,2002BUSINESSINTELLIGENCEGROUP-12GrowthForecastsforOutsourcingWereReducedin2002InhibitorExplanationEconomicdownturnUncertaintyanddoubthaveslowedsalescycles,delayedd

34、ecisionmakingandslowedITspending.Manycompaniesincrisislookforquicksolutions(layoffs)ratherthanlonger-term,strategicremedies.Assuch,manycompaniesarenotreadytofocusonoutsourcingoptionswhentheyareincrisismode.Financialstabilityandviability,delayedpurchasingThecontinuedcorporatescandalsandmisbehaviorill

35、ustratedbyWorldComandQwesthasraisedconcernamongcustomerslookingtooutsource.Customersareprobingdeeperintooutsourcingvendorfinancialstabilityandviability,whichisslowingsalescycles.DownwardpricepressureTheslowdowninoutsourcingrevenuecanalsobeattributedtodownwardpricepressures,causedbycustomerslookingto

36、reduceoutsourcingcosts.IndustryconsolidationIndustryconsolidation(IBMandPwC,HPandCompaq)isleadingtoincreasedcommoditizationofservicesofferings,whichaddstodownwardpricepressure.Agrowingnumberofnewserviceofferingsareleadingtomarketplaceconfusion,whichisprolongingdecisionmakingandhavinganimpactonpricin

37、g.CostOutsourcingcanbeexpensiveintheshorttermbecauseoftheamountofresearchittakesfortheserviceprovidertoanalyzetheagingprocessesandtechnologyofprospectiveclients.Theremayalsobereluctancetorelinquishprocessesandoutsourceemployeesalongwiththeirwork.Whilethemarketformanagedserviceshasshownremarkableresi

38、lienceinthefaceoftheeconomicdownturn,severalmarketforcesareinhibitinggrowthpotential.BUSINESSINTELLIGENCEGROUP-13OutsourcingMarketGrowthDriversInrecentyears,growthdriversforoutsourcingserviceshaveshifteddramatically.Duringthedotcomboom,outsourcingwasfueledlargelybyclientsneedstodevelope-businessinfr

39、astructuresandfocusoncorecompetencies.Inthecurrenteconomicenvironment,companiesturntooutsourcinglargelyasameansofreducingcostsandrisk.Evolving service offeringsApplications management growthBPO growthOffshore developmentGrowing government demand Growing international demandStronger middle market dem

40、andBUSINESSINTELLIGENCEGROUP-14ManagedServicesDemandSurveyAccordingtoarecentGartnersurveyonITmanagedservicesdemand:nThemosthighlyoutsourcedservicestodayareWebhosting,hardwareandsoftwaretechnicalsupport(oftenbundledwithotherservicesinoutsourcingcontracts)andserveroutsourcing.nOfthoserespondentswhoare

41、outsourcing,thegreatestincreaseinlevelofoutsourcingwillbeforapplications/solutionsmanagement,serverhosting(viaInternetdatacenters)andapplicationshosting(ASPmodel).nAcrossallservices,54%ofrespondentsexpectcostsavingsasaresultofoutsourcinginitiatives.77%ofrespondentsexpectsavingsfromoutsourcingserverh

42、osting(datacenters),and71%expectcostsavingsfromdesktopoperations/managementoutsourcing.Themediancostreductiongoal(asapercentageoftotaloutsourcingcost)is23.2%.nTheaveragemeansatisfactionratingforall15managementservicesis4.9(ona7-pointscale,with7beingextremelysatisfied).Usersreporthighestsatisfactionl

43、evelswithdatacentermainframe/supercomputerandnetworkoperations/management,bothhavingameansatisfactionratingof5.3.nAccesstocriticaltechnicalskillsetsisidentifiedasthetopdrivertooutsource,followedbyenhancingbusinessperformanceorcompetitiveness.Higherthanexpectedcostsandlossofin-houseITexpertisewereind

44、icatedasthegreatestinhibitorstooutsourcing.nThemostimportantoverallattributeinthevendorselectionprocessisthevendorsabilitytodeliveron-time/on-budgetserviceinnovation;thesecondmostimportantattributeistheabilitytodeliverbusiness-basedresults.Source:Gartner,September2002BUSINESSINTELLIGENCEGROUP-15CIOR

45、esearchonOutsourcingInApril2002,CIOmagazineinterviewed119CIOs,CTOs,VPsandDirectorsofITabouttheirexperienceswithoutsourcing.Theexecutivesrepresentedarangeofindustries,withmorethanhalfofrespondentsfromcompanieswithmorethan$100millioninrevenue.Whileinternalstaffshortagesandcostconstraintsweretheprimary

46、driversofoutsourcingdecisions,CIOsfoundthattheycouldalsoimprovequalityanddeliverytimeofITprojectswiththerightoutsourceprovider.Bestpracticecompaniesspend3-12%oftheserviceprovidercontracttomanagethesourcingrelationship.BUSINESSINTELLIGENCEGROUP-16GrowthDriver:EvolvingOutsourcedServiceOfferingsnOutsou

47、rcinghasevolvedfromanexperimentalapproachtodeliveringITservicesintoamatureofferingwithsophisticatedservicelevelagreements,financingoptions,andpricingstructures.nEmphasishasmovedfromthesimpletransferofassetstocontractsthatareincreasinglyfocusedonachievingbusinessoutcomesandresults.nAdvancesinunderlyi

48、ngtechnologyhavealsohelpedfuelgrowthinthemarket,especiallyBPO.NowthatapplicationdeveloperssuchasPeopleSofthavereengineeredtheirsoftwaretobeweb-enabled,companiescanaccessoutsourcedapplicationswithminimaldisruptiontotheirITsystems.nImprovedstabilityandexecutionaremakingoutsourcedservicesanincreasingly

49、attractiveoptionforcompanies.OutsourcingbusinessmodelisbetterdefinedNarrowercontractscopesImprovedabilitytomeasureperformanceImprovedaccuracyinengagementpricingBettercustomerunderstandingoftheoutsourcingconceptMorerealisticcustomerexpectationsofoutsourcingoutcomesOutsourcedservicesgaininggreatercred

50、ibilityfromITmanagersBUSINESSINTELLIGENCEGROUP-17CIOsOutsourcingMoreServicesTheCIOresearchcitedearlieralsoshowedthatawiderangeofITservicesarebeingoutsourced.WhileITinfrastructurewasoutsourcedfirst,websitehostingisthemostpopulartechnologyoutsourcedtodate.BUSINESSINTELLIGENCEGROUP-18“OnDemand”Services

51、aKeyStrategicFocusAreanOn-demandorautilitypricingmodelforIToutsourcingisa“payasyougo”approachthatallowscompaniestopayforservercapacity,storagespace,applications,Webhosting,etc.astheyareneeded.Outsourcinghasalwaysbeenatrade-off,offeringfinancialpredictabilitybutnotoperationalflexibility.Usage-basedpr

52、icingofferstheoperationalflexibility,promptingrapidresponsefromcontractorsasITneedschange.IBMbettingbigonondemandcomputingnIBMismakinghugeinvestmentsintoutility-basedITandASPservices.Thegoaloftheseservicesistoenablecostreductionandhigherlevelsofservices.IBMisnowofferingGrid-basedservicesandLinuxutil

53、ities,andappearstobeleadingthemarketinthisdirection.nInOctober2002IBMCEOSamPalmisanoannouncedthatIBMisinvesting$10billioninabusinessstrategyaimedatutility-provisioned“ondemand”computing.IBMispursuingthisstrategythroughacquisitions,marketingandresearch.nIBMisaimingtofashionacomputinggridthatwouldallo

54、wservicestobeshiftedfromcompanytocompanyastheyareneeded.Forexample,anautocompanymightneedthecomputingpowerofasupercomputerforashortperiodasitdesignsanewmodel,butthenhavelittleneedforitonceproductionbegins.Otherservicescouldbedeliveredinmuchthesameway,assumingIBMcanpulltogetherthenetworks,computersan

55、dsoftwareneededtomanageandautomatethechore.nPalmisanobelievesthattheindustrywouldhavetoenhancestandardizationinorderforthisstrategicvisiontobecomeareality.nThisinitiativeisamajorinvestmentthathaspotentialtodramaticallyalterthemanagedservicesmarket.BUSINESSINTELLIGENCEGROUP-19OnDemandServices,Utility

56、-basedProvisioningnReasonsforitsproliferation:Usercompanieshavestandardizedoncomputingplatforms,adoptedMicrosoftproductsforthemostpart,andemployedTCP/IPasastandarddata-transportprotocol.Makesiteasierforoutsourcerstoruncustomersapplicationsonthesameserversandstoredataonthesametypeofhardware.IThasgott

57、enbiggerintermsofdatacentersandnetworksastelecommunicationscostshaveplummeted,creatingeconomiesofscalefortheoutsourcers.Non-ITbusinessexecutivessuchasCEOsandCFOsliketheideaofpayingonlyforwhatsused.nTotakeadvantageoftheeconomiesofscale,ITvendorsmustmaintainlargeinfrastructures,soCSC,EDS,andIBMarelike

58、lytodominateinutilitypricing.nAmericanExpressrecentlysigneda7year,$4billionoutsourcingcontractwithIBMinwhichAmericanExpresswillpayfortheuseofresourcessuchasCPUhours,megabytesofstorage,andhelpdeskservices.7-Elevensigneda7-year,$175millionoutsourcingcontractextensionwithEDSthatsstructuredmuchliketheAm

59、Ex-IBMagreementcoveringstorage,hostingandmaintenanceofOraclefinancials,projectmanagement,andothertasks.EDShasalsosignedutility-basedoutsourcingcontractswithSolutia,Inc.andCoorsBrewing.TowersPerrinandDal-TileInternationalInc.havesignedusage-basedcontractswithIBM.Source:Gartner,IDCBUSINESSINTELLIGENCE

60、GROUP-20GrowthDriver:ApplicationsManagementHealthydemandforapplicationsmanagement.nApplicationsmanagementremainsthefastestgrowingITservicessegment.IDC1estimatesthattheapplicationsmanagementmarketwillgrowfrom$11.2billionin2001to$18.8billionin2005,ataCAGRof13.8%.ThereisespeciallystrongdemandfromtheUSg

61、overnmentsector.nIntheUS,aslowereconomyfavorsoutsourcingwhilereducingdemandforcustomapplicationdevelopmentprojects.nEuropeisgrowingatamuchfasterratethantheUS,duetolargeplayerssuchasIBMandEDSmakingstridesinthearea.ISVsarealsoincreasingtheirappsmanagementplayintheregion.nEDS,IBMandCSCarestillmajorplay

62、ersinthissegment.LehmanestimatesthatEDSderivesroughly25-30%ofitsoutsourcingrevenuesfromappsmanagement.In1Q02,EDShighlightedan80%increaseinnewbookingsforsoftwaremaintenancedeals.1IDCworldwideapplicationsmanagementmarketdataproducedinAugust2002comparedtoGartnerforecastfromJanuary2002(p.7);IDCmarketsiz

63、efor2002isabout$1Bsmaller.Source:IDC,August2002RegionalgrowthratesBUSINESSINTELLIGENCEGROUP-21DemandVariesbyTypeofApplicationManagementProjectAccordingtoIDC,therearefivetypesofapplicationmanagementprojects,anddemandisheaviestforthosethatinvolveexistingITinvestments.TypeofengagementDescriptionCurrent

64、DemandCustomapplicationdevelopmentprojectsAcompanyasksaserviceprovidertodevelopacustomsystemandmanageit.Demandforthistypeofserviceiscurrentlyverylow,duetoreducedITbudgetsandthecancellationofallnon-essentialITprojectsImplementationofanewpackagedapplicationenvironmentCompaniesthathavepurchasedapackage

65、dapplicationmayseekaserviceprovidertohelpimplementandmanageit.Alsolimiteddemandsincethisinvolvesspendingonanew,ratherthanexisting,project.OutsourcingofalegacysystemCompaniesseekingtoreduceheadcountorreallocateresourcesmayaskaserviceprovidertoassumemanagementofexistinglegacysystemsThistypeofactivityi

66、sstilloccurring,althoughsalescycleshaveslowed.OutsourcingofexistingpackagedapplicationsystemsInrecentyearsmanycompaniesinvestedinlargeERPandCRMpackages(Siebel,SAP)withoutunderstandingtheassociatedsupportcosts.NowmanyareturningtoserviceproviderstomanagethesepackagesinordertocutcostsThereiscurrentlyhe

67、althydemandforthistypeofengagementintheUSUpgradesorenhancementstoexistingsystemsCustomersarelookingtomakethemostoftheirexistinginvestment.Aftertheupgradeiscomplete,theywillsometimeslooktooffloadthemanagementtoaserviceprovider.Moderatedemandforthesetypesofservices.Source:IDC,August2002BUSINESSINTELLI

68、GENCEGROUP-22ASPMarketisNowontheSlopeofEnlightenmentAlthoughstillmarginal,themarketforutility-basedofferingssuchasASPisanincreasinglypopularchoiceforapplicationsoutsourcing.IDCestimatesthatin2001,82%ofUSapplicationoutsourcingwasviaapplicationsmanagement,whiletheremaining18%wasthroughASP.By2006theyex

69、pectthatASPwillaccountfor53%ofallapplicationsoutsourcing,andapplicationsmanagementwillaccountfor47%.AccordingtoGartner,theASPmarketisnowinthe“SlopeofEnlightenment”andisdeliveringgenuinebusinessbenefitsagainstasetofrealisticexpectations.Source:Gartner,June2002ASPHypeCycleBUSINESSINTELLIGENCEGROUP-23L

70、inesAreBlurringBetweenASPandOtherOutsourcedServicesOfferingsLinesareblurringbetweenapplicationsmanagementandASPservicesnManytraditionalapplicationsmanagementprovidersareofferingmoreserviceswithcharacteristicsofscalableASPmodels,whileASPsarerollingoutapplicationsmanagementofferingswheretheapplication

71、resideswiththecustomerandismanagedremotely.nASPhasbecomearelativelymainstreamdeliverymodelthatvendorsofbothsoftwareproductsandbroader-basedsolutionsutilizeasoneofferingwithintheiroverallportfolio.MostlargeISVsareofferingsometypeofhostedapplicationsmanagementorASP-typeofferings,insearchofnewsourcesof

72、revenue.Source:Gartner,August2002nApplicationsbuyersgenerallyhavefourvendoroptionstoconsider:PureASPS,Employease,WebExSoftwareplusoutsourcingOracle,PeopleSoftOutsourcing/applicationmanagementAccenture,CSC,EDS,IBMandKeaneSoftwareMicrosoftnWhilesomevendorshaveASPbusinessmodels(S,WebEx),ASPhasnotestabl

73、isheditselfasastand-alonemarket.GartnerbelievesthatthetermASPwillbecomelessrelevantovertime,andthateventuallyASPvendorswillberegardedassoftwarevendorsorasoutsourcingvendors.BUSINESSINTELLIGENCEGROUP-24GrowthDriver:BPOnBPObecameadominantthemein2001,andwillremainaprimarydriverofoutsourcingmarketgrowth

74、intheyearstocome.BPOispartofanaturalevolutionfromoutsourcingofITprocessestootherbusinessprocessesincludingHR,finance/accounting,CRMandcertainverticalniches.nTheworldwideBPOservicesmarketisgrowingatroughly9%peryear,makingitoneofthefastestgrowingareasofITservices.nStrongestdemandforHR,secondstrongestd

75、emandforfinanceandaccounting.Toalesserdegreesales,marketing,customercare.nWhilegrowthhasslowedin2002duetothedrasticslowdowninITspending,analystsexpecttoseeawaveoflargerdealsandstrongermiddlemarketadoptionin2003.nTodateBPOhasmadethegreatestheadwayintheUS.ItisalsotakingholdinWesternEurope,withmajorwin

76、sbyAccentureandEDS,andtheemergenceoflocalpure-playcompanies.GartnerDataquestBPOModelSource:GartnerDataquest,Dec2001BUSINESSINTELLIGENCEGROUP-25BPODemandSurveyAccordingtoarecentGartnersurveyonBPOdemand:nNinety-sixpercentofrespondentsareeitherverysatisfiedorsatisfiedwiththeirBPOrelationship.nThemosthi

77、ghlyoutsourcedBPOservicestodayareHR,followedbyfinanceandaccounting.Ofthoserespondentscurrentlyoutsourcing,thegreatestincreaseinlevelofoutsourcingisforHRservices.nDemandforoutsourcedHRservicesisconcentratedinpayrollandbenefitsoutsourcing,butseveralcompaniesexpecttoincreasetheirlevelofoutsourcingfored

78、ucationandtraining.nFinanceandaccountingdemandisstrongestintaxmanagement,followedbymanagementaccountingandgeneralledger.nOthercommonlyoutsourcedprocessesincludelogistics,warehouse/inventorymanagement,campaigndesign/communicationplanning,marketsegmentation,customerdataanalyticsandtelesales/telemarket

79、ing.nClaimsprocessing,creditcardprocessingandticketcollectionsarethemostcommonlyoutsourcedprocessesinthestateandlocalgovernmentsector.nThestrongestpainpointsforcompaniespriortooutsourcingacrossallprocesseswerethetimespentondailyoperations,lackofintegrationacrossprocessesandthehighcostoftransactionpr

80、ocessing.nTheprimarydriversofBPOacrossallprocessesaretheneedtofocusoncorebusiness,improveservicelevelsandshortenimplementationtimebeforereducingtransactioncosts.nCustomerservice,processexpertise,financialstabilityandlowcostpertransactionaretheprimaryselectioncriteriaforBPOproviders.Source:Gartner,Oc

81、tober2002BUSINESSINTELLIGENCEGROUP-26BPODemandRemainsStrong,WithHealthyDemandandPricingTrendsnGoldmanSachsbelievesthatBPOpricingtrendsarerelativelystableandunchanged.Salescyclesarestabilizingsalescycleslengthenedformanydealsearlierthisyear,butoverthepastfewmonthsthesituationhasstabilizedandtherehasn

82、otbeenfurtherdeterioration.BPOcontractstendtobemuchlesspricecompetitivethantraditionalmanagedservices,asBPOisayoungermarketandtherearefewercompetitorswiththerelevantprocessspecificknowledge.GoldmanSachsbelievesthatthemostattractivecompanieswiththegreatestBPOexposureareAffiliatedComputerServices(ACS)

83、andAccenture.Renegotiationsgenerallyresultinbetterpricingforthecustomer,butgreaterscopeforthevendor.nBPOcontractsarelesscapitalintensivethantraditionalIToutsourcing,whichhashelpeddemandinacost-consciousmarket.InBPOtheoutsourcergenerallydoesnotassumerelatedassets,oriftheydo,therevenueunitperdollarofc

84、apitaldeployedishigherbecausetheoutsourcerassumescontrolofnotonlytheequipmentbutofallotheraspectsoftheoutsourcedfunction(labor,workflow,process,etc.)supportedbythetechnologyorganization.Capacity,scale,andsizearenotasimportantinBPOastheyareintraditionalmanagedservices.InBPOthekeywaytogeneratecostsavi

85、ngsforclientsisthroughknowledgeofthespecificfunction.Source:LehmanBrothers,GoldmanSachsOct2002BUSINESSINTELLIGENCEGROUP-27BPOSub-segmentsnTheBPOmarkethassevenkeysub-segments:HR,SupplyChainManagement,PaymentServices,CustomerCare,Finance,Administration,ProcurementnWhilethevastmajorityoftheBPOmarketisu

86、ntapped,somepocketssuchasHR,payrollprocessingandpaymentservices,arerelativelymature.nSomecompaniesarenowoutsourcingentiredepartments,ratherthanindividualprocesses,enablingthemtodevotemoreresourcestotheircorebusinesses,bringproductstomarketfaster,andreduceoverhead.HR/PayrollProcessingnHRislikelytogro

87、wslightlyfasterthanothersegments,becauseitismoreeasilysegmentedfromotherbusinessfunctions,andmanycorporationsarealreadyfamiliarwithHRoutsourcingthroughuseofpayrollprocessingservices.nAstudybyTheConferenceBoardandAccentureofFortune1000companiesrevealedthethreehumanresourceareasmostoftenoutsourcedare4

88、01(k)programs,healthbenefitsmanagement,andpensionbenefits.Employeecommunicationsisthearealeastoftenoutsourced.nGoldmanSachsconsiderstheHR/PayrollprocessingsectortobethemostappealingoftheITservicesindustry,duetoHighrevenuevisibility,recurringrevenue,and85-90%clientretention.Large,under-penetratedmark

89、etwithmultiplegrowthchannels.USmarketisstillonly30%penetrated.Increasingmixofhighmarginadd-onservices(corporateservices,recruitment,retirement)Highprofitability,returnoncapital,andcashflowgenerationnHR/Payrollprocessingsectorholdinguprelativelywellin2002,despitesharpdownturninUSeconomy.nGoldmanSachs

90、estimatesthatonly8%oftheUSHRmarketiscurrentlyoutsourced,butby2005thatpercentageshouldgrowto17%.nDominatedbyADP,Ceridian,andPaychex,witheachfocusingondifferentsegmentsofthemarket.Source:GoldmanSachs2002BUSINESSINTELLIGENCEGROUP-28BPOSub-segmentsFinanceandAdministrationnOutsourcingoffinancialandadmini

91、strativeprocessesisgenerallymorereadilyacceptedthanoutsourcingofoperationalprocesses,becausetheyarenotasintertwinedwithstrategicbusinessoperations.nBenefits,HR,andAccountsReceivablearecurrentlythemostpopularoutsourcedadministrativeprocesses.Travel,benefits,andpayrollarethemostpopularadministrativepr

92、ocessesthatcompaniesareplanningonoutsourcinginthefuture.PaymentProcessingnDebittransactionsrepresent30%ofoverallchargevolume,andgrowthisfastenoughtooffsetdecelerationincreditcardrevenue.nInternationalmarketsrepresentanimportantgrowthopportunityastheyarefarlesssaturatedthantheUSmarket.Consumermoneytr

93、ansfersalsogrowingrapidly.According to AMR, Benefits, HR, and Accounts Receivable are currently the most popular outsourced administrative processes Source:AMRresearchBUSINESSINTELLIGENCEGROUP-29BPOSub-segmentsSupplyChainandCRMOutsourcingnGartnerpredictsthatascompaniesgraduallybecomemorecomfortablew

94、ithmulti-processoutsourcing,demandforSupplyChainandCRMoutsourcingwillpickupsignificantlyoverthenextfiveyears.nCategoriesofCRMoutsourcinginclude:Customerselectionmarketsegmentation/dataanalysis,campaigndesign/communicationsplanningCustomeracquisitionleadandopportunitymanagement,FSA,telemarketing/webs

95、alesandmarketingCustomerretentionself-service,inquiryhandling/problemresolution,fieldserviceautomationCustomerextensioncustomerdataanalytics,upsell/crosssellnCompaniesoutsourceSCMinordertofocusonR&Dandtoimprovepricecompetitivenessandoverallmanufacturingefficiency.Outsourcedprocessesincludeinventorym

96、anagement,logistics,manufacturing,productdesign,andcustomerservice.CelesticaisexpandinganoutsourcingrelationshipwithNECandbuyingtwoplantsinJapanina$2.5billion,5yeardeal.CelesticawilltakeoverSCM,subassembly,finalassembly,integration,andtestingforabroadrangeofNECsopticalbackboneandbroadbandaccessequip

97、ment.NEC,likemanyothermanufacturersinJapan,isrealizingthatoutsourcingmanufacturingallowsthemtofocusonnewproductdevelopmentratherthaninvestinginnewplants.nAberdeenseesagrowingwaveofprocurementoutsourcing.Nearly20%oflargeenterprisescurrentlyoutsourcesomeportionoftheirprocurementalready,andAberdeensees

98、totalspendingonsuchservicesmorethandoublingfrom$4.8billionin2001to$9.7billionin2005.Procurementserviceprovidersoffereconomiesofscale,categoryexpertise,andinfrastructurethatmanyfirmslack.Advancesinanalyticstechnologyalsoprovidethevisibilityandcontroltomanagetheoutsourcedrelationships.Source:GoldmanSa

99、chsBUSINESSINTELLIGENCEGROUP-30BPOEmergingSub-segment:ProductLifecycleManagement(PLM)nPLMisanenterprisesoftwaresolutionthatintegratesfunctionsrequiredtodevelop,model,track,manage,andcontrolproductsthatcompaniesofferandtomanufacture,sell,maintain,andretiretheseproducts.nAMRestimatesthatthetotalPLMmar

100、ket(software,services,hardware,hosting)ispredictedtogrowfrom$2.02billionin2001to$7.54billionin2006,witha5yearCAGRof30%.PLMimplementationservicesarepredictedtogrowfrom$618millionin2001to$2.6billionin2006ata5yearCAGRof34%.NorthAmericaaccountsforroughlyhalfofthemarket,andEurope30%.nSectorhasevolvedinto

101、asmallBPOmarket,coveringCAD/CAMdesign,collaborativesoftware,andrelatedareasofproductdevelopment.nWhilethehostedPLMapplicationsmarketisstillverysmall($11millionin2001),itispredictedtoshowverystronggrowthto$996millionby2005,whichequatestoa2001-05CAGRof230%.nEDSrecentlyenteredthePLMmarketthroughacquisi

102、tionofSDRC.nLikelytobeanaturalcandidateforoutsourcing,becauseofitscomplexityandbecauseittouchessomanysegmentsofenterprisewidebusinessprocesses.nWhilemarketisstillindevelopmentstages,futureprospectsareverystrong.Source:AMRResearch,July2002BUSINESSINTELLIGENCEGROUP-31TransactionalBPOvs.StrategicBPOCur

103、rentlytransactionalBPOaccountsforthemajorityofBPOmarketactivity,howeverthemarketisundergoingagradualtransitiontowardmorestrategic,multi-processdealscoveringcorebusinessprocesses.TransactionalBPOStrategicBPOFocus:Non-core,commoditydrivenCompetency:ITandprocessefficienciesPricing:PertransactionSelecti

104、onCriteria:Low-costprovider,priceperformanceGoal:ImmediatecostreductionVendorCommitment:MeetservicelevelagreementsBuyer:IT,businessunitRelationship:Customer/supplierFocus:Core/non-core,businessimpactdrivenCompetency:BusinessprocessoptimizationPricing:Options(costbasedandincentives,fixed,transformati

105、on)SelectionCriteria:ProcessImprovement/performanceorbusinessenhancementGoal:CostreductionorrevenueorprofitgrowthVendorCommitment:BusinesstransformationBuyer:CEO,COO,presidentRelationship:PartnershipSource:Gartner,January2002BUSINESSINTELLIGENCEGROUP-32BPOandVerticalIndustriesnAccordingtoaMarch2002A

106、MRsurvey,theretailindustryisthemostlikelytoadoptBPOservices,followedbyfinancialservices.Thecombinationofcostpressuresandtargetedretailofferingsisdrivinggrowth.nAccordingtoGartner,BPOadoptionisgenerallystrongerinindustriesthatareundergoingmajorupheavalssuchasconsolidation,deregulation,globalization,o

107、rrecentlyemerging.Thesecriteriawouldmakedistribution,energy,transportation,professionalservices,telecom,andhigh-tech,alsopotentialgoodtargetsforBPOservices.nServiceindustriesarealsomorelikelytooutsourcecertainbusinessprocessesthatarelesstiedtophysicalplantsandequipment.nStrongdemandforBPOinthestateg

108、overnmentsector.nFinancialservicesverticalshowingsignificantdemandformortgageloanprocessing.nTelecomverticalstillshowingdemandforoutsourcedcustomercareandbilling.nOutsourcingintheinsuranceindustryisacceleratingbecausetheindustryisstillhighlylaborintensiveandalsofacesincreasedM&Aactivity.Halfoflife,h

109、ealth,andpropertyandcasualtyfirms(premiums$100million)outsourcedatleastonebusinessprocessin2001.Anadditional10%ofinsurersplantooutsourcesomebusinessprocessesthisyear.Callcenter,claimshandlingandsmalltransactionalprocessessuchasnameandaddressorbeneficiarychangesaresuitableforoutsourcing,evenoffshoreo

110、utsourcing.BUSINESSINTELLIGENCEGROUP-33RobustOutsourcingDemandinManufacturingnThevastmajorityofmanufacturershavehadexperiencewithoutsourcingatleastoneservicetoanESP.InaDecember2001Gartnersurveyof207companies,88%ofmanufacturingrespondentsusedsomeformofoutsourcingservices.Despitethefairlyhighpenetrati

111、onrate,themarketisfarfromsaturatedandhashighgrowthpotential.Gartnerresearchsuggeststhatcompanieswithoutsourcingexperiencearefarmorelikelytooutsourceanotherserviceorbusinessprocessthancompanieswithnoexperiencewithoutsourcing.ManufacturingIndustryOutsourcingInitiativesSource:Gartner,September2002nAcco

112、rdingtoGartner,thegreaterpopularityofBPOinmanufacturingcomparedtootherverticalmarketsisindicativeofthetrendtowardoutsourcingnon-corebusinessfunctionsandtheverticaldisintegrationoftheindustry.Theriseofthecontractmanufacturingindustryshowsashiftinfocustomorestrategicactivitiessuchassales,marketing,and

113、R&D,althoughsometimestheseactivitiesarealsobeingoutsourced.BUSINESSINTELLIGENCEGROUP-34RobustOutsourcingDemandinManufacturingnAMRResearchreportsthatoutsourcingisincreasingacrossallmanufacturingsectors.nInhightech,outsourcedmanufacturingisstillgrowingataround40%.MostbrandedOriginalEquipmentManufactur

114、ers(OEMs)doverylittleornoneoftheirownproductionorassembly.Hewlett-Packardmanufacturedabout90%ofitsproductsin-housein1980;by2001,thatpercentagehaddroppedto10%.nTheautomotivesectorcontinuestoallocatelargerchunksofengineering,manufacture,andassemblytoitstopsuppliers.nAerospaceanddefense,automotive,andh

115、igh-techelectronicsmanufacturersregularlydependontheircomponentsuppliersforbasicR&Dservicestodriveinnovationinproductdevelopment.Pharmaceuticalcompaniesusecontractsalesorganizationstosupplementtheirsalesforces,aswellascontractresearchorganizations.nInCPG,outsourcingisgrowingfast.IntheFoodandBeverage

116、industryprivatelabelproductionisofferedbymanufacturerslookingtoutilizesparecapacity.InApparelandFootwear,companiesareincreasinglyreliantonlow-costproducerslikePowChenforSolectron-likecontractmanufacturing.nThisrapidshifttowardoutsourcedmanufacturingplaceshugedemandsoninformationsystems,rangingfromth

117、eneedtospecifyandcontrolproductdefinitiondatafromComputer-AidedDesignmodelstoBillsofMaterials.BUSINESSINTELLIGENCEGROUP-35BPO:SharedServiceCentersManagementofsharedservicecentersisthenextmajorphaseofBPO.nAccordingtoLehmanBrothers,thenextphaseintheBPOmarketisthesaleoflargesharedservicecenters(central

118、izedback-officeoperationsforHR,financeandaccounting,orprocurementfunctions)byFortune100companiestoexternalservicesfirms.MostverylargeU.S.firmshavealreadycentralizedG&Afunctions,butthenextstepwillbetosellthemtoanoutsourcingfirmtodrivefurthercostsavingsandtoeffectivelycommercializetheseassetsviacontra

119、ctawardsfromthirdparties.nAcquisitionofamajorsharedservicecentercreatesfundingchallenges.IntherecentEDS-P&Gdeal(laterabandoned),up-frontcapitalrequirementswerenegotiateddowntoalleviatethecapitalburdenonEDS.nWithintheBPOsegment,mostrecentdealshavebeenforoutsourcedtransactionprocessingserviceswhilefew

120、erbutlargercontractshaverequiredmaterialup-frontsystemsandbusinessprocessredesign.Accentureistargetingthesetypesoftransformationaldeals.nEDS,IBM,CSCandnowACSarebestpositionedtowinthegiantsharedservicecenterdeals.BUSINESSINTELLIGENCEGROUP-36GrowthDriver:OffshoreDevelopmentnCompaniesareincreasinglytur

121、ningtooffshoreservicesprovidersforsoftwaredevelopmentandBPO.HalftheFortune500companiesoutsourcetoIndia,whocontrols85%ofthemarket.Thecostofatypicalprojectsourcedoffshoretodayis$25million,comparedto$1-4millionthreeyearsago.nDemandforinexpensiveyetcompetenttalentispushingtheoffshoreoutsourcingmodelbeyo

122、nditsrootsinIndiatoincludeChinaandRussia.Eachvendorcountryisspecializinginniches.ForIndia,itisapplicationoutsourcing,ITO,BPO,productdevelopment,networkmanagement,andcontactcenters.Chinasfocusisembeddedsoftware,hardwareservices,localizationandapplicationdevelopment.RussianITproswhohaveanexcellentrepu

123、tationinmathandengineering,wanttodoapplicationdevelopment.IrelandspecializesinpackagedapplicationsandsoftwarelocalizationforEuropeancountries.Philippinesisconcentratingonanimation.nHitachiandFujitsufeelChinawillbebiggerinoffshoreservicesthanIndia,asChinahasalargerdomesticmarkettoservice.Tataisopenin

124、gdevelopmentcentersinChina.nForresterResearchpredictsthatthedemandforoffshoreworkerswilloutstripIndiassupply.Indiahasabout445,000ITworkers,anumberthatispredictedtogrowto625,000by2005.Forresteralsopredictsthatdemandwillexceedonemillionby2005,comparedwithabout360,000in2002.TheITservicesexportmarketise

125、xpectedtobe$57billionby2008.BenefitsofOffshoreOutsourcingnCostsreducedby50-60%withoutaffectinggrowthdriversnFreeingupofresourcesforcoredevelopmentactivitiesnUseofdifferenttimezonestoestablisha24x7productioncyclenDeploymentofprojectsquickerthancompetitorsbyconservingthetimeandresourcesspenttorecruitt

126、he“right”personnelnAccesstoworldclassresourcesandproductioncapabilitiesSource:RossResearchnMicrosoftannouncedplanstomakeitsBangalorecenteritslargestcenteroutsidetheUS.TexasInstruments,Oracle,Adobe,Novell,ComputerAssociates,IntelandscoresofothercompanieshavesetuplargeR&Dcentersandsoftwaresupportcente

127、rsinIndia,someofwhichhavebeeninoperationforseveralyears,withtheheadcountgrowingrapidly.BUSINESSINTELLIGENCEGROUP-37IndiaBytheNumbers56%56%11%14%57%57%50%111%31%94%-6%ITServicesGrowth(RevenueinRscrore)ITEnabled-ServicesGrowth(RevenueinRscrore)Source: NASSCOM. Back-office operations includes revenue a

128、ccounting, data entry and conversion, and HR Services. Other services include remote education, data search, market research, network consultancy and management. BUSINESSINTELLIGENCEGROUP-38IndiabytheNumbers(Rs7,100cr)WhileIndianfirmscontinuetoattractglobalbusiness,multinationalcorporations(MNCs)are

129、alsobenefitingfromIndiasstrengths.(Rs29,400cr)Top10IndianThird-PartyIT-EnabledServicesCompanies(CallcenterandBPO)1.exlservices2.Spectramind3.GTLLtd.4.Daksh5.Tracmail6.Firstring7.Epicentre8.24x7C9.Customerasset(ICICIOnesource)10.BrigadeCorporationTop5IndianIT-EnabledServicesFirms(GIS,engineeringandde

130、sign,andmultimedia)1.PentamediaGraphics2.RoltaIndia3.InfotechEnterprises4.GeometricSoftware5.RMSI6.AllRankingsbasedon2002revenuesSource: NASSCOMBUSINESSINTELLIGENCEGROUP-39GrowthDriver:OffshoreDevelopmentLargeoutsourcersandsystemsintegratorsnotmovingfastenoughonoffshoreopportunitynLehmanBrothersargu

131、esthatthelargeoutsourcingvendorsandsystemsintegratorsarenotmovingfastenoughtotakeadvantageofoffshorecostadvantages.EDShasonly1,000employeesinIndia-lessthan1%ofitsworkforce.Accenturehasonly2,000employeesinthePhilippines,IndiaandChina-lessthan3%ofitsworkforce.Bycomparison,Infosys,Tata,WiproandSatyamha

132、vethemajorityoftheirworkforcesinIndiaandACSemploys20-25%ofitsworkforceinlow-costlaborzonessuchasMexico.MajorIndiancompanieshavealsoestablishedlargefrontofficeoperationsintheUSandhavebeguntobidonlarger,moresophisticateddealssuchasfullapplicationsdevelopmentandmaintenanceoutsourcing.Financialservicesf

133、irmsspendagreaterpercentageoftheiroutsourcingdollarswithoffshorevendorsthanotherindustriesSource:AberdeenGroupBUSINESSINTELLIGENCEGROUP-40RiskstoIndiasDominanceinOffshoreOutsourcingnTerrorism,religiousstrife,changinggovernments,thethreatofnuclearwar,andfailingnationaleconomieshavebecomemoreimportant

134、factorsinoffshoreoutsourcingpurchasedecisions,buthavenotslowedgrowth.Offshoreprovidershavebeenquicktosetupdisasterrecoverysystemsandback-updevelopmentcentersinlocationssuchasSingaporetomitigaterisks.nPerhapsinspiredbysuccessesinIndia,entrepreneursandgovernmentsinplacessuchasElSalvador,Fiji,Ghana,and

135、Jordanarealsoexploringtheideaofprovidingoutsourcingservices.nTier1vendorsfromclientcountriesareestablishingsubsidiariesinIndia,therebyneutralizingIndiaslocalplayeradvantagen“Near-shore”outsourcingservicesaretargetedatcustomerswhowantthecostsavingsofanoffshoremodelclosertohome.Favorablecurrencyexchan

136、geratesandthelowercostoflaborinCanadaallowssomeUS-basedcompaniestosave20-30%usingoffshoredevelopment.nCompaniescontractforoffshoreservicesinavarietyofways:direct,brokered,wholly-ownedoffshore/onshore;andhybridpartnerships.IndiaOffshoreSourcingStrengthsWeaknessesnLargeandversatilelaborpoolnWiderangeo

137、fexpertise(low-enddevelopmentprojectstocuttingedgeapplications)nHigh-levelunderstandingofEnglishnManydevelopmenthouseshaveCapabilityMaturityModelcertificationnGovernmentinitiativeshaveresultedinrelativelylowtelecommunicationscostsandincentivesforforeignfirmsestablishingoperationsinIndianInfrastructu

138、reisrelativelymature,relativetootheroffshoreopportunitiesnRisingcostsmeanIndiaisnolongercost-effectiveforsmaller-scaledevelopmentprojectsnShortageofglobalizationskillsnLackinginexpertiseinbusinessprocesses,systemsintegration,andverticalandoperationalsolutionsnIndia-centric;needtodecentralizedecision

139、-makingnGlobalpresencenHighlaborturnovernRestrictivelaborlawsnAntiquated,slowlegalsystemnFragilesecurityandpublicorderenvironmentnInfrastructureproblematicoutsidemajorcentersSource:ZDNetIndia;GartnerBUSINESSINTELLIGENCEGROUP-41OptionsforOutsourcinginAsiaStrengthsWeaknessesChinanChancetoestablishanop

140、erationsbaseinoneoftheworldsfastestgrowingeconomies.Domesticsoftwaresaleshaveclimbed30%annuallysince1999,andspendingonIThasalsoincreased20%ayear.NortelNetworks,SanyoElectric,IBMandComputerAssociatesareactiveinthecountry.nNear-bottomlesspooloftechnicallyskilledlaborkeepscostscompetitive.Boastsanestim

141、ated200,000professionalsinthesoftwareexportingindustry,withanother50,000graduatesenteringtheworkforceeachyearallofwhomcomeatsignificantlylowersalariesthantheirIndiancounterparts.Someconcernthateventhisfloodofnewprofessionalswillnotbesufficienttomeetdomesticdemandoverthenext5years.nGovernmentincentiv

142、estoattractforeignITfirms,includingtaxbreaksandrent-freeofficespacenProjectmanagementremainsproblematic;lackasoundmethodology.nLackofexperiencefunninghigh-end,fast-pacedprojects.nLackofEnglishdocumentationandlanguageskills,particularlyamongtheoldergenerationnCulturalbarrierstimeisneededtobuildarappo

143、rtwithlocalstaffnLackofinternationalbusinessacumen;jointmanagementteams,thatcanbecostlyandtime-consuming,arenecessary.PhilippinesnCompetitivecosts,althoughgapinpricingcomparedtoVietnamandChinaisgettingwider.nLargeandversatilelaborpool.Morethan100,000ITprofessionals,and350,000computerscience,engineer

144、ingandmathematicsgraduatesayear.nGenerallyhighlevelofEnglishandfamiliaritywithWesterncultureandbusinesspracticesnGovernmentincentivestosetupoperations,includingtaxcutsnPoliticalinstabilityandcorruption,althoughthoseonthegroundsaytheproblemsareexaggerated.nPatchyinfrastructureinsomeareasandhighbandwi

145、dthcostsnLackofregulationandrapidgrowthinthesoftwaresectormeansitcanbedifficulttochooseareliablepartner.Firmsthatoffercut-ratepricescanmeandelayed/derailedprojects.Source: MIS: Managing Information StrategiesBUSINESSINTELLIGENCEGROUP-42OptionsforOutsourcinginAsiaStrengthsWeaknessesVietnamnAsVietnams

146、ITindustryisinitsinfancy,itisperhapsthemostcost-competitivecountryintheregion(generallyhalfofIndiascosts).IBM,Cisco,NTT,NortelNetworkandUSgovernmenthavebeensuccessfullyoutsourcingtotheregion.IBMexpectstoopenitsowndevelopmentcenter.nLocalstafftendtobediligentandreceptivetotraining.nOpportunitiestofor

147、mlong-termalliancesinafast-growingmarket.VietnamsITindustryisworth$287million,a45%growthsince1998andisprojectedtogrowto$690millionby2003withsectorssuchassoftwareandtelecomssettogrowattwicethatrate.nSocialstabilityandrespectforcorporatehierarchies;lessconcernedwithemployeessettingupshop,dealsbeingren

148、egotiatedfromapositionofleverage,orimproperHRhandlingwhichcanoccurinIndiaandChina.nGovernmenttaxbreaksimplementedforsoftwareexports,andpersonalandenterpriseincomes.nInfrastructureispatchyinsomeareasandtelecommunicationscostsareamongthehighestintheregion,thoughtheyaresettofallincomingyears.nLackofEng

149、lishskillsamongthosebelowseniormanagementlevel.nLimitedcapacitytohandlecomplexprojectsnLackoflocalexperienceinprojectmanagementmeanscompaniesmustoftenappointtheirownmanagementteamsorinvestintraining.VeryfewcompanieshaveISO9000orCMMcertification.nCopyrightprotectionschemeforsoftwareisstillvague.nLoca

150、lcompanieslackadministrativeskillsandinternationalbusinessacumen.ThailandnAbundanceofwell-trainedITgraduatesavailableatlowcost.Has195,000developerscomparedto127,000inVietnamand74,000inMalaysia,butconcernthatThailandmaynotbeproducingsufficientgraduatestomeetdemand.nGovernmenttaxincentivesforITfirmsse

151、ttingupoperationsinthecountry.nStrategiclocation,relativestabilityandlongstandingtraderelationshipswiththedevelopedworld.nSolidinfrastructurenNotascheapasChina,notasconnectedasSingapore,notaspreparedtotacklehigh-endtasksasIndia.nApproximately8ofthecountrys500+softwarecompanieshaveachievedCMMLevel2or

152、abovenTelecommunicationstariffsarehighandunlikelytodropuntilsectorliberalizationin2006.nBusinessenvironmentnotsuitedtohigh-pressuretacticsthatcharacterizebusinesselsewhere.Source: MIS: Managing Information StrategiesBUSINESSINTELLIGENCEGROUP-43GartnerSurveysUsersonOffshoreServicesGartnerDataquestrec

153、entlyconductedanoffshoreITservicesdemandanalysis.Keyfindingsincluded:nThehighestusageofoffshoreservicesisinhightechmanufacturing,followedbycommunications,financialservices,andservices.nThetopopportunitiesforgrowthinoffshoreservicesduringthenext12monthsincludeEnterpriseApplicationIntegration(EAI)serv

154、ices,applicationsoutsourcing,packagedapplicationimplementation,andintegrationwithlegacyapplicationsinadditiontoapplicationsdevelopmentandmaintenanceservices.BPOservicesdonotappeartobehighpriorityservicesforthenext12monthsintheGartnersurveysample.nIndiaisthekeyoffshoreITservicesmarkettoday,with70%ofs

155、urveyedcompaniesacquiringoffshoreservicesthere.Duringthenext12months,Indiawillmaintainitsleadershipandwilllikelygrowitspresence,althoughmanycompaniesarealsoconsideringChinaandIreland.nLabor(cost,availabilityandqualityofspecializedskills)andsecurityarethetwokeycriteriaforcompaniesthatareevaluatingoff

156、shoreservicesproviders.Companiesareoftenwillingtopaymoreforlaboriftheycanensuresecurityofpeopleanddata.WhenU.S.enterpriseschooseanoffshoreserviceprovider,theirprimaryselectionfactorsarecost,expertiseinoffshoredeliveryprocesses,qualityofresourcesavailable,andspeedtodeliver.nThetopchallengesthatU.S.bu

157、yersexperienceinoffshoresourcingarethemanagementofcommunications,themanagementofbudgetandprojecttimelines,theintegrationwithinternalapplications,andthemanagementofchangeinrequestsandscopeofwork. Source:Gartner,August2002BUSINESSINTELLIGENCEGROUP-44GrowthinOffshoreManagedServicesnApplicationdesign,de

158、velopment,andmaintenancearethemostlikelyservicestobeoutsourcedoffshore.Softwaretesting,ITconsulting/solutiondesign,legacytransformation,andEAIwillbethenextmostlikelyservicestobeoutsourced.nRemotemanagedservices(applicationmanagement,infrastructuremanagement,datacenteroutsourcing,transactionprocessin

159、g,BPOandcontactcenteroutsourcing)havethelowestrateofoffshoresourcingtoday.nAsITinfrastructuredeploymentmaturesoverthenext12-24months,allowingremotemanagementofapplications,infrastructureandprocesses,GartnerDataquestexpectstoseestrongergrowthinthisarea.CurrentandPlannedOffshoreITServicesInitiativesby

160、ServiceLine Source:Gartner,August2002BUSINESSINTELLIGENCEGROUP-45OffshoreBPOServicesMarketinIndianLookingtocashinonthestrongBPOmarket,IndiassoftwareservicescompaniesaredevelopingBPOofferingseitherontheirownorthroughJVsandpartnerships.GoingitaloneischallengingsinceIndianservicescompaniesdonttendtohav

161、estrongrelationshipswithfunctionalmanagementoutsideIT.Asaresult,anumberofIndiansoftwareservicescompaniesareofferingBPOservicesthroughsubsidiariesorpartnerships.TatahasaJVwithHousingDevelopmentFinanceCorptooperatecallcentersandofferBPOservices.nBPOservicesinIndiastartedwithcallcentersandCRMservices,b

162、utnowrangefromaccountingtoHRfunctionssuchaspayrollmanagementandtransactionprocessing.Theclaimsprocessingbusinessisestimatedtobeworth$400millionby2005forIndianBPOvendors.BPOBenefitsnCostsavingsnVariablecoststructurenFocusoncorebusinessnInformationsecuritynAbilitytoexecutenBusinesscontinuitynAccording

163、totheIndiasNationalAssnofSoftwareandServiceCompanies,IndiasBPOmarketgrew107%to$583millionand35,000peoplein2001.Inthesameperiod,softwareservicesexportsgrewabout30%,andareexpectedtogrow20-25%in2002.nForresterpredictsthatIndiasBPOmarketwillgrowat30%peryearthroughthenextdecade.nThecurrentcapitalcostpers

164、eatinIndiaisbetween$7,000and$17,000,dependingonthenatureoftheBPOserviceoffered.ThecostofasimilarfacilityintheUScanbe2-3timesthatamount.nMultinationalcompanieshavealsoset-upback-endprocessingcentersinIndiatokeepatighterreinonoperationsandmaintainsecurityandconfidentiality.GECapitaloperates3centersinI

165、ndia,aswellasback-officeprocessingtasksforotherGEcompaniesworldwide.GECapitalhasalsosetupaJVcallediProcesswhichoffersBPOservicestobothGEandothercustomers.GEhasastaffof10,000doingBPOandCRMfunctions;thecompanycurrentlyoffshores$500millionor20%ofitsITservicesbudget.HPismovingkeyaccountingfunctionstoBan

166、galore-basedGlobale-BusinessOperations,awhollyownedsubsidiaryofHPEurope.DoingHPaccountsinIndiacostsone-sixthofthecostintheU.S.BUSINESSINTELLIGENCEGROUP-46GrowthDriver:StrongGovernmentDemandnDemandforoutsourcedservicesisincreasingfromalltypesofgovernmentclients-federal,state,andlocal.nIn2001,federal,

167、state,andlocalgovernmentsincreasedspendingonexternalITservices,forseveralreasons:SevereITlaborshortageDefensebudgetsareincreasingBroaderacceptanceofoutsourcingIncreasedemphasisonsecurityande-governmenthasdriventheneedforoutsourcingofIToperationsandmaintenancenDemandforoutsourcinginthefederalsectorha

168、sbeenboostedbylegislativechangesseveralyearsagothetransitiontooutsourcinghasbeenslow,butisnowrapidlygainingacceptancewithinfederalagencies.TopFederalAgenciesITOutsourcingSpend20012006Defense$1,500$3,000Treasury4451,000Transportation395880Army378741Navy365772NASA356638AirForce339667Justice266542HHS25

169、0594Agriculture221494Source:Input(January2002)nInthefederalgovernment,theOfficeofManagementandBudgethasgivenagenciesspecificoutsourcinggoals,andhasgivenagenciestheabilitytotransferassetsandpeoplefromthepublicsectorintotheprivatesectorthroughoutsourcingarrangements.nDespitetheoptimisticgrowthscenario

170、,ITcontractorscontinuallyfacelegislativeattemptstorestrictoutsourcing,whicharelikelytocontinue.BUSINESSINTELLIGENCEGROUP-47GrowthDriver:StrongGovernmentDemandStateandLocalGovernmentsnStateandlocalgovernmentsareincreasinglyoutsourcingasameanstoreducecostsandcompensateforlackofin-housecapabilities.The

171、yarewatchingcloselytheprogressoffull-serviceoutsourcingprojectsatthefederallevelsuchastheNavyMarineCorpsIntranet(EDS)andNSAsGroundbreaker(CSC).nMetaGroupestimatesthat25%oflocalgovernmentsandahandfulofstateswilloutsourcetheirentireITbudgetsby2004/5.nBPOisalsogainingacceptanceasacostsavingmeasure.Gove

172、rnmentswillincreasinglyshareprocessessuchasprocurement,paymentprocessing,orcustomerrelationshipmanagement.BPOisespeciallyacceptedamongstateMedicaidagenciestoprocessclaimsandalsoticketcollections.nCSC,EDS,andACSarepredictedtobethebiggestbeneficiariesofgrowthinBPO.Retiringfederalemployeesarefuelinggov

173、ernmentoutsourcingdemandnManyfederalemployeesretiringfromprogrammanagementandtechnicalpositionsoverthenextfiveyearsnAbouthalfofallfederalworkerswillbeeligibleforretirementorcouldqualifyforearlyretirementby2004,accordingtoastudybySen.GeorgeV.Voinovich.nBy2005,nearly45%ofseniorcareerexecutivesinthefed

174、eralgovernmentarelikelytoleave.nFor2001,OfficeofManagementandBudgetreviewed108agenciesthataccountforabout1millionjobs,ofwhich556,000wereidentifiedaspossibleoutsourcingcandidates.BUSINESSINTELLIGENCEGROUP-48GrowthDriver:OpportunityOutsidetheUSWhiletheUSisstillthelargestmarket,otherworldregionswillsho

175、wstronggrowthintheyearstocome.nIneveryregion,BPOsubstantiallyexpandstheaddressabletechnologyservicesmarket,andregionsaretakingequaladvantageoftheopportunity.InEurope,applicationoutsourcingandBPOarethehottestgrowthareas.LargeWesternEuropeanmarketnTheITmanagedservicesmarketinWesternEuropeispredictedto

176、growfrom$32billionin2001to$42.5billionin2005,ataCAGRof7.2%(reviseddownwardfrom13.8%).Europeanmarkethasbeenslowertodevelopthananticipated.Obstaclesincludelackoffamiliarityandacceptance,andVATandlaborlawsthatmakeitmoredifficulttoextractcostsavings.nTheBPTMmarketispredictedtogrowfrom$23.2billionin2001t

177、o$34.1billionin2005,ataCAGRof10.2%(revisedfrom14.7%)nAccordingtoGartner,themajoroutsourcingdriversinWesternEuropearecostcontainment,focusoncorecompetencies,removalofassetsfromthebalancesheet,accesstonewtechnologies,improvedefficiencies,andtheincreasingimportanceofstrategicoutsourcing.nTheUKmarketist

178、hemostmatureforIToutsourcing,whiletheScandinaviancountriesareaclosesecond.TheGermanoutsourcingmarketisstillemerging,asisFrance,Italy,andSpain.nGermanandFrenchcompaniestendtoselectivelyoutsourceratherthancompletelyoutsourceoperationstoathird-partyprovider.UKcompaniesaremorelikelytooutsourcetheirentir

179、eIToperationstooneortwoproviders;todatetheyhavenotfollowedtheUStrendseveralyearsagoofhavingmultipleproviders.nMarketresearchfirmGigaclaimsthatoutsourcingcontractsinEuropetendtobelongerengagementsthanintheUS,andEuropeancompaniestendtobuyoutsourcingfromtrustedproviderstheyhavedonebusinesswithinthepast

180、.nCompetitioninEuropeisintensifying.KeyEuropeantechnologyservicesbeneficiariesincludeCGEYY,AtosOrigin,Xansa,andTietroEnator.BUSINESSINTELLIGENCEGROUP-49BPOandOffshoreServicesIncreasinglyAppealingtoEuropeansBPODemandnGartnerfoundhumanresources,paymentsystems,andwarehouse/inventorymanagementtobethethr

181、eelargestBPOmarketsinEuropein2002.WithhumanresourcesBPO,theprimaryprocessesoutsourcedarepayroll,hiringandrecruiting,aswellaseducationandtraining.nMostmajorBPOcontractshavebeensignedintheUK,IrelandandtheNetherlands.TheUKisshowingespeciallystronggrowthinBPO,bothinthepublicandcommercialsectors.nIn2001,

182、centralandeasternEuropeancountriesbecamelocationsfornotonlyoffshoreoutsourcing,butalsofordomesticBPOopportunities.MultinationalenterprisesarealsousingBPOasanalternativetobuildingtheirowninfrastructures,orasanalternativetoamergeroracquisitionwhenenteringnewcountriesornewmarkets.nAdoptionoftheeurowill

183、drivedemandforpan-EuropeanBPOservices,asmorepan-Europeancorporateeurocompliancerulesareenforced.Therewillbefewerindividualcountryunitspursuingtheirownfinance,procurementandsourcingpractices.BPOwillbeanattractiveoptionforstreamliningtheseprocesses.nVenturecapitalistsarebeginningtoinvestsignificantfun

184、dsinnew“pure-play”EuropeanBPOcompanieswhohavesignedmajordealsintheEuropeanmarket.Insomecases,thepure-playswillactuallysubcontractregularITservicesouttootherIToutsourcingcompaniesinordertohelpthemstayfocusedonthedeliveryofexternalizedbusinessprocesses.GoingOffshorenOffshoreservicescompaniesaretargeti

185、ngEuropeanenterprisesasgrowthslowsinNorthAmerica.Gartnerexpects75%ofEuropeanenterprisestoevaluateoffshoreservicesinthenexttwoyears,andthatthegrowthinoffshoreserviceswillfaroutpacetheoverallITservicesmarketoverthenext2-5years.nThebulkofoffshoreservicesinEuropehavebeendeliveredtotheUK,bothbecausetheUK

186、isthemostmatureoutsourcingmarketinEuropeandbecausethecentralITmanagementformanylargeenterprisesinEuropeisoftenbasedintheUK.OffshoreserviceshavealsomadeinroadsintheNetherlands,France,GermanyandtheNordiccountries.BUSINESSINTELLIGENCEGROUP-50AsiaandLatinAmericaareLonger-TermOpportunitiesnWhileAsiaPacif

187、icisamuchsmallermarketthanEuropeandNorthAmerica,ithasverystronggrowthpotential.nTheAsiaPacific(excludingJapan)ITmanagedservicesmarketispredictedtogrowfrom$4.2billionin2001to$7.9billionin2005,ataCAGRof17.1%.nTheBPTMmarketispredictedtogrowfrom$7.4billionin2001to$12.2billionin2005,ataCAGRof13.2%.nAustr

188、aliaandNewZealandarethemostmatureoutsourcingmarketsinAsia,accountingformorethanhalfofthemarket.GreaterChina,KoreaandMalaysiaarekeytargetmarkets.nBPOisstillnewintheregion,butsavingsexpectationsarefuelinggrowth.WiprohasopenedofficesinHongKong,Korea,Singapore,Australia,Taiwan,andMalaysiatoaddressthedev

189、elopingmarketforBPO.nOveralltheAsianregionhasbeenlaggingbehindtheUSandEuropeinoutsourcingadoption,butgrowthisincreasingastheregiongainsgreateracceptanceofthetransferofownershipofbusinessprocesses.Thelong-termperspectiveandfamiliaritywithalliancesshouldhelpAsiancompaniesexcelinthisareaovertime.nIBMis

190、bringingitson-demandservicestomainlandChinesecitieslikeShenzhen,ShanghaiandBeijing.IBMsservicescenteraroundservers,storage,horizontalbusinessapplicationslikee-mail,calendaringandscheduling,aswellasenterpriseapplicationssuchasERPandlogistics.HPhasalsoenteredthemarketwithsixdifferentservicesbrandedChi

191、naLinkforestablishingandmaintainingIToperationsinChina.nWhileLatinAmericaisaverysmallmarket,itispredictedtoshowstronggrowthoverthenextfiveyears.nLatinAmericastillhasculturalchallengesinconvincingcorporationstorelinquishcontrolofapplications,butthereisgrowingacceptanceofthisbusinessmodel.Intheshortte

192、rm,interestincostcuttingwillfavorincreasedoutsourcinggrowth.Laterintheforecast,growthwillbefueledmorebyincreasingawarenessofthebenefitsofoutsourcing,andanimprovedtrackrecordamongproviders.BUSINESSINTELLIGENCEGROUP-51IncreasingDemandforOutsourcinginJapannTougheconomicconditionsinJapanarefuelingincrea

193、sedinterestinoutsourcingtocutcosts,aswellasindustryderegulationandconsolidation.Largefirmsinbankingandinsurancehaveshownthemostinterestinoutsourcing,butinthefuture,demandshouldshifttosmallandmediumsizecompanies.nMajorareasoffocusareamixtureofservicesthatincludeassetprocurementandmanagement,datacente

194、rmanagement,computeroperationsandtechnicalsupport,LANandWANservicesandapplicationdevelopmentandmaintenance.E-businessisfeaturedheavilyinmostbusinessplanssoWebdesign,InternetServiceProviders,InternetcontentandWebhostingarecomingintoplay.nInJapan,culturalissuessuchaslife-longemploymentandownershiptran

195、sfermustbeovercomebeforeBPOandmanagedservicesgrowthwilltrulyaccelerate.IBMhasbeenveryeffectiveatovercomingtheculturalissues,throughjointventuresinJapan.nAccordingtoanAugust2002IDCsurvey,8%ofJapanesecompaniesareusingdatacenterserviceswhichincludesco-location(60%),ITservices(30%),andhosting(10%).Hosti

196、ngservices,althoughasmallpartofthemarketat6billionyen,isgrowingat30%peryear.Hostingservicesareincreasingduetoimprovementinvalue-addedservicesbydatacenterproviders,thewidespreaduseofbroadband,andthegrowingneedamongusercompaniesforstableoperatingenvironments.Also,theuseofshare-basedhostingservices,att

197、heexpenseofexclusivehosting,isincreasingasthepriceadvantageimprovesandtheconcernsoversecuritydecrease.BUSINESSINTELLIGENCEGROUP-52GrowthDriver:MiddleMarketGrowth driver Increased middle market growthnVendorsareincreasinglyinterestedinsmallerandmid-sizedcustomers,duelargelytoslowingoutsourcinggrowthr

198、ates,fewerlargecontractsignings,andthebeliefthatpartsoftheoutsourcingmarketarestartingtobecomesaturated.nTheincreasingpopularityofutilityprovisioningofITwilleventuallydevelopintoserviceofferingsthataremoreattractiveandwellsuitedtothemiddlemarket.nITmanagedserviceofferingsarematuringtothepointofbecom

199、ingmoreacceptableandwithinthereachofsmallandmedium-sizedbusinesses.nOutsourcingprovidesyoungcompanieswithaquickertimetomarket,allowingthemtofocusonwaystogrowthebusinessratherthanonday-to-dayoperations.nAMRestimatesthatBPOisusedbymorethan75%ofcompanieswithgreaterthan$1billioninrevenues,andmorethantwo

200、thirdsofcompanieswithlessthan$1billioninrevenue.nMiddlemarketcompaniesaremorelikelytopurchaseBPOservicesfromsmallerornicheBPOvendors,whooftenhaveserviceofferingsthatcatertothemiddlemarket.Vendors/Competitors-ManagedServices-BusinessProcess/TransactionManagementBUSINESSINTELLIGENCEGROUP-54Outsourcing

201、IndustryPlayersandKeyServiceStrengthsServiceProviderISOutsourcingDiscreteNetworkandDesktopOutsourcingAIP/ComplexWebHostingApplicationMgmtIBMGS/PWCXXXXEDSXXXXCSCXXXHPXXUnisysXXGetronicsXAT&TXPerotSystemsXXXSBSXXT-SystemsXXCable&WirelessXAccentureXCGE&YXXKeaneXWorldCom/DIGEXXACSXSAICXXXCGIXXBUSINESSIN

202、TELLIGENCEGROUP-55OutsourcersNeedtoWorkHarderforRevenueGrowthnThemarketforlargeITinfrastructureoutsourcingdealshasmatured,andnewbookingsandrevenuesforkeyoutsourcingplayerscouldremainflatorupjustmodestlyforsometime.CombinedbookingsofIBM,EDS,andCSCdownin2001nIn2000,thecombinednewbookingsofIBM,EDSandCS

203、Cwereup34%to$99billion.In2001,thecombinednewbookingsfellby5%to$93billion.nCombinedbookingsforthefirsthalfor2002aredown5%year-over-year.Fewerdealsover$1billionhavebeenawardedthisyearcomparedtolastyear.AveragerevenuegrowthrateforIBMGS,EDSandCSCwas1%in2Q02,downfrom9%in2Q01.EDS,IBMandCSChavenotleveraged

204、theirstrongmarketpositionstocaptureanearlyleadinBPO.nWhileEDSisamajorplayerintransaction-intensiveprocessingservicesforhealthcareclaims,callcenters,checkprocessing,mortgageloanprocessingandotherservices,ithashadhighleadershipturnoverinitsBPMunit,andonlyrecentlyhiredDanHendersen(ranHoneywellssharedse

205、rvicecenters)toleadBPOefforts.Furthermore,EDSisnotadequatelyleveragingitsATKearneyunittodoup-frontre-engineeringworkonBPOcontracts.nIBMexpressedcautionoverBPOforthepastfewyears,andonlyrecentlyhasbecomeenthusiasticaboutit.ManyviewtherecentacquisitionofPwCConsultingtobeanefforttoaddverticalandfunction

206、aldomainexpertisetobetterpenetratetheBPOopportunity.nAnecdotalevidencesuggeststhatthatEDS,IBMandCSCarenotmateriallydifferentiatedintheircoreITinfrastructureoutsourcingorBPOofferings.BUSINESSINTELLIGENCEGROUP-56PricingandProfitabilityUnderPressurefromCustomersandCompetitorsnThesluggisheconomyhasslowe

207、dsalescyclesandincreaseddownwardpricingpressureonallsegmentsofmanagedservices.AnalystsfromLehmanBrothersbelievethatthepricingenvironmentandcapitalintensitywilllikelygeteventougher.nOutsourcingcustomersarestartingtopushmorefinancialriskonsuppliers;expecttoseetheimpactinmarginsandcapitalexpendituresas

208、apercentageofrevenues.nMorecompetitorsareenteringthemarket,particularlyconsultingfirmsintheapplicationsmanagementspace,creatingmoreaggressivepricing.nOveremphasisoncostreductioncancreatehighlycompetitivesituationsinwhichvendorsacquiescetopricingpressurestowinthedeal,withthenetresultofslimmargins.nSa

209、lescostswillcontinuetoincreasewiththelengthandcomplexityofoutsourcingengagements,negativelyimpactingprofitability.nPricingofsomeofthemorematuremanagementservicesoutsourcingofmainframes,desktopsandservers-hasdecreasedandbecomecommodity-like,reducingthepotentialcostsavingsandmakingtheservicelessprofit

210、able.nInsomecases,third-partyconsultantscandirectcontractnegotiationsthatemphasizecost-reductiongoals(attheexpenseofenhancementgoals)andthusdrivemarginsdownnOnapositivenote,bundlingofservicesinfull-serviceoutsourcingcanblendlower-andhigher-marginservices,therebyachievingasatisfactoryprofitlevel.Sour

211、ce:LehmanBrothers,Oct2002,GartnerAugust2002BUSINESSINTELLIGENCEGROUP-57StrugglingOutsourcingClientsareImpactingServiceProvidersnEDSstopoutsourcingclientsincludeGM,theUSNavy,Worldcom,Delphi,Xerox,Bellsouth,CommonwealthBankofAustralia,theU.K.government,AmericanAirlines,Sabre,andContinentalAirlines.nIB

212、MstopclientsincludeAmEx,Lucent,AT&T,EastmanKodak,Fiat,Telstra,NTLCable,Cable&Wireless,Westpac,Boeing,andBancOne.IBMandLucentrecentlyrenegotiatedtheiroutsourcingarrangement.nCSCsleadingclientsincludetheU.S.DefenseDepartment,Nortel,DuPont,GeneralDynamics,UnitedTechnologies,BAESystems,HughesElectronics

213、,andAT&T.nLehmanBrothersbelievesthatEDSandIBMhavemorehighriskclientexposurethanCSC.nInordertoprotectthemselves,outsourcingvendorsarereviewinghowtheystructuretheirportfolioofcontracts,andarechangingindividualcontracts.Tobetterforecastrevenuetimingandrecognition,vendorsareshorteningcontractlengths,tig

214、hteningexitprovisions,andincludingcapsandtake-or-payprovisionsforservices.SharedServiceAgreementsnSharedserviceagreementsofferawayforcompaniestoextractvaluefromexistingITinvestments.Exultsigneda10-year,$660millionagreementwithInternationalPaperin2001toprovidearangeofHRservices.Therearedefinedcostpar

215、ametersinthecontract,butanyadditionalsavingsthatExultisabletoachievewillbesharedbetweenthetwopartners.nExultisprimarilyfocusedonlong-termagreements,whichcanprovideupsidethroughgainsharing.UnisyshasbeenmorefocusedintheareaofJVs,whileAccenture,CSCandEDShavegeneratedinterestinbothvehicles.Source:Gartne

216、r,August2002BUSINESSINTELLIGENCEGROUP-58NicheVendorsArrivenSpecialistoutsourcingfirmshaveemergedinrecentyearsandhaveincreasedthepopularityofsmaller,selectiveoutsourcingdealsversuslargecontractscoveringthefullbreadthofservices.nIntheapplicationsmanagementandBPOmarkets,Infosys,ACSandAccenturehaveemerg

217、edasmajorcompetitorsagainstEDS,IBMandCSC.ACSwasasolidcontenderforthe$8billionP&Goutsourcingdealshowingthatsmalleroutsourcingfirmshavearrived.ACSposted20%internalgrowth,reaffirmedguidanceandgrewitsfiscal2002newbookings(excludingacquisitions)byalmost20%RevenuesatInfosyswereup32%in3Q02,andthecompanyset

218、2003revenueguidanceaboveestimates(30-35%range)OutsourcingrevenuesatAccenturewereup38%inthequarterendingAugust2002,andnewoutsourcingbookingsmorethandoubledinthelastfiscalyear.nConvergys,ExultandUnisys,haveemergedasviablecompetitorsonsomeBPOdeals.BUSINESSINTELLIGENCEGROUP-59ManagedServicesVendors-Worl

219、dwideTop10WorldwideManagedServicesVendorsbyRevenue,2000-2001($m)Vendor2000Revenue2001RevenueGrowth2001MarketShareIBM14,831.516,173.79.0%16.1%EDS11,404.612,767.712.0%12.7%CSC4,299.94,677.68.8%4.7%Fujitsu2,368.92,215.2-6.5%2.2%Siemens1,611.52,139.932.8%2.1%T-Systems1,770.51,801.51.8%1.8%Xerox1,543.61,

220、547.00.2%1.5%AT&T1,027.51,089.56.0%1.1%Fiserv946.21,081.514.3%1.1%Hitachi989.31,067.47.9%1.1%TotalTop1041,67645,6209.2%44.4%Theworldwidemanagedservicesmarketisfragmented,withthetoptenvendorsaccountingfor44.4%ofthe2001market.TheBigThree(IBM,EDS,CSC)togethercontrolonethirdoftheglobalmarket.Source:Gart

221、ner,November2002BUSINESSINTELLIGENCEGROUP-60ManagedServicesVendors-USTop10USManagedServicesVendorsbyRevenue,2000-2001($m)Vendor2000Revenue2001RevenueGrowth2001MarketShareEDS6,454.77,385.614.4%18.1%IBM6,305.86,833.98.4%16.7%CSC2,820.33,058.48.4%7.5%AT&T919.8975.26.0%2.4%Fiserv813.4929.714.3%2.3%SAIC7

222、89.0915.716.1%2.2%Xerox803.3779.5-3.0%1.9%Genuity636.6683.87.4%1.7%Amdocs446.7673.450.7%1.6%ACS449.6554.323.3%1.4%TotalTop1020,439.222,789.511.5%55.7%TheUSmanagedservicesmarketislessfragmentedthantheworldwidemarket,withthetoptenvendorsaccountingfor56%ofthe2001market.TheBigThree(IBM,EDS,CSC)togetherc

223、ontrol42%ofthemarket.Amdocshadthestrongestgrowthin2001.Source:Gartner,November2002BUSINESSINTELLIGENCEGROUP-61BPTMVendorsWorldwidenTheBPO/TransactionManagementmarketishighlyfragmented,withthetoptenvendorsaccountingforonly13.6%ofthe2001market.(comparedto44%ofthetraditionalmanagedservicesmarket)nThehi

224、ghleveloffragmentationisduetomarketimmaturityandtothewiderangeofbusinessprocessesincludedinthesegment.SinceBPTMisbasedonprocessexpertiseandintellectualcapital,manyBPTMvendorsspecializeinonebusinessprocess.ItisnotascommonforonecompanytoofferBPTMservicesspanningawiderangeofbusinessprocesses.ACShadtheh

225、ighestgrowthratein2001(23.3%),followedbyAccenture(17.4%).Source:Gartner,November2002Top10WorldwideBPTMVendorsbyRevenue,2000-2001($m)Vendor2000Revenue2001Revenue2000-01Growth2001MarketShareEDS1,4731,6109.3%1.8%Accenture1,3531,58917.4%1.8%Hays1,3521,57216.3%1.8%ConvergysCorp.1,2961,3826.7%1.5%RyderInt

226、egratedLogistics1,3721,288-6.1%1.4%Experian1,1381,137-0.1%1.3%SunGardDataSystems77093221.1%1.0%TeleTech8649216.6%1.0%ACS73991123.3%1.0%ADP8339028.2%1.0%TotalTop1011,19012,2439.4%13.6%BUSINESSINTELLIGENCEGROUP-62BPTMVendorsUSTheUSBPO/TransactionManagementmarketishighlyfragmented,butlesssothantheworld

227、widemarket.ThetoptenUSvendorsbyrevenueaccountfor20.4%ofthe2001market,comparedto13.2%intheworldwidemarket.ThetoptenworldwideandUSvendorsgrewatroughlythesameratein2001(9.4%vs.9.2%).IntheUS,ACShadthehighestgrowthrate(23.3%),followedbySunGuardDataSystems(21.1%)Source:Gartner,November2002Top10USBusinessP

228、rocessManagementVendorsbyRevenue,$MVendor2000Revenue2001Revenue2000-01Growth2001MarketShareFirstData1,6501,91115.8%4.0%ConvergysCorp.1,1961,2766.7%2.7%EDS1,0311,14010.6%2.4%RyderIntegratedLogistics1,0691,004-6.1%2.1%ACS70086323.3%1.8%West7257807.6%1.6%ADP68377112.8%1.6%SunGardDataSystems63576921.1%1

229、.6%Experian726705-2.9%1.5%TotalSystemServices5465653.4%1.2%TotalTop108,9639,7849.2%20.4%BUSINESSINTELLIGENCEGROUP-63BPOVendorsTherearemanydifferentcategoriesofvendorsinvolvedintheBPOmarket.CategoryDescriptionExamplesBPOpureplaysFormedsolelyasBPOfirms,offerservicesaroundaspecificprocess.Derive100perc

230、entofrevenuesfromBPOservices.StrongfocusonHRBPOaggregatedofferings.Exult,Xchanging,e-PeopleServeIToutsourcersMostinitiallygotintothemarketthroughtransaction-basedprocessing(paymenttransactionprocessing,creditcardprocessingorclaimsprocessing)andarenowexpandingintootherareas.ACS,EDS,CSC,Unisys,CapitaC

231、onsultantsMostenteredBPOmarketthroughfinancialandaccountingbackgrounds.Primarilyofferservicesaroundfinanceandaccountingoutsourcing,HR,andsomeprocurement.Primarystrengthsareprocessexpertiseandbusinessconsulting.Accenture,Deloitte,PwC,ADP,BrassRing,ConvergysProcessspecialistsFormedaroundaBPOofferingfo

232、cusedonasingleprocess,suchaspayrollorbenefitsadministration.Spherion,ProBusiness,SynergyBusinessserviceproviders(BSPs)VariationonASPmodel-provideaccesstoapplicationsonaone-to-manymodel,andmanyprovideprocessownership.TodatenoneofferfullBPOservices.HR:Employease,AdministaffCRM:SOffshoreprovidersManyU.

233、S.-basedserviceprovidersexploittheoffshoremarketfortheirBPOprocessing,forinstance,ACSandConvergys.SeveralIndianserviceprovidersofferBPOservices,primarilyincontactcenteroutsourcing.India-Life,RCS,TransworksBUSINESSINTELLIGENCEGROUP-64LeadingOutsourcingVendorsWesternEuropeSource:Gartner,November2002To

234、p10WesternEuropeManagedServicesVendors,By2001Revenue,$M2000Revenue2001Revenue2000-01Growth2001MarketShareIBM4,5225,23715.8%16.4%EDS3,1893,76518.1%11.8%Siemens1,4051,78927.4%5.6%T-Systems1,6861,7151.7%5.4%CSC1,1131,27915.0%4.0%Fujitsu1,089974-10.5%3.0%SchlumbergerSema80893315.5%2.9%BT8048566.4%2.7%At

235、osOrigin7508239.6%2.6%TelecomItalia869798-8.2%2.5%TotalTop1016,23518,16911.9%56.8%Vendor2000Revenue2001Revenue2000-01Growth2001MarketShareCapitaGroup52175645.2%3.3%ADP754566-24.9%2.5%Amdocs37743214.7%1.9%Siemens641385-39.9%1.7%EDS31937417.1%1.6%Misys30535817.7%1.6%AtosOrigin3153438.8%1.5%Accenture28

236、932914.0%1.4%T-Systems2822871.7%1.2%Datev267259-3.0%1.1%TotalTop104,069.44,089.90.5%17.7%Top10WesternEuropeBPTMVendors,By2001Revenue,$MSeveralEuropean-basedservicesprovidershaveconsiderablestrengthintheEuropeanmarketplace(SiemensBusinessServices,AtosOrigin,TelecomItalia,T-systems).BUSINESSINTELLIGEN

237、CEGROUP-65Full-ServiceOutsourcingMagicQuadrantFullServiceoutsourcingisthedeliveryofthefullspectrumofinfrastructureservices(datacenter,network,PC,applicationdevelopmentandmaintenance,andcentralprocessor/LANsupport).Fullserviceoutsourcingusuallyinvolvesthetransferofpeople,hardware,andsoftwarefromtheen

238、terprisetothevendor.SAICisthesolevisionaryandisexpectedtomovetotheleadersquadrantinthenearfuture.Challengershavealess-definedmarketdirectionandmaynotbepreparingaswellforthefuture.BUSINESSINTELLIGENCEGROUP-66AccenturenAccentureismakingaverystrongstrategicpushintooutsourcing,andishighlyfocusedonincrea

239、singrecurringrevenues.ThedifficulteconomicenvironmentishelpingAccenturetogrowitsoutsourcingbusiness.nAccenturesBPOrevenuetotaled$1.6billionin2001,up17.4%from$1.4%in2000.TotalFY01outsourcingrevenuewas$2billion.nOutsourcingandmanagedservicesaccountforanincreasingpercentageofAccenturesservicesmix,from1

240、5%in2001to20-22%thisyear.Managementexpectstoincreaseoutsourcingrevenueto25%oftotalrevenue.nAccenturesoutsourcingpipelineisverystrong,andaccordingtoAMRResearch,themixofAccenturesincomingbusinessis55%consulting,45%outsourcing.nStronggrowthinBPO-inthefirstquarterofthisyear,58%ofnewbookingswereinBPO,ase

241、quentialincreaseof20%.nBPOisthemostimportantdriverforAccenturesoutsourcingbusinessandisgrowing30%annually.AccentureisverystronginBPOduetoitsabilitytomergeconsultingandtraditionaloutsourcingskills.nAccentureispositionedverywellinthecurrentoutsourcingmarket,duetostrongofferingsinbothBPOandapplications

242、management,andstrongverticalexpertise.nTheaverageBPOcontractisvaluedbetween$200-700millionandlastsforabout7years(operatingmarginat6-14%).Typicalsalescycleis6-12months.BUSINESSINTELLIGENCEGROUP-67AccenturenShifttowardoutsourcingmarksadistinctivechangeincompanyculture.Accenturehasletgoroughly1-2%ofthe

243、employeebasetomakewayformanagedservicesemployees.BytheendofFY03(October2003)Accentureexpectstohaveroughly8000managedservicesemployees.nRedeployinganumberofconsultingexecutivestooutsourcingcontractstobuildaleadershipbenchforupcomingcontracts.Willalsohireafew,veryseniorexecutiveswhohaveprovensalesandd

244、eal-shapingexperience.nMarketsoutsourcingservicesas“transformationaloutsourcing.”WorkingtoprovideabroaderrangeofITinfrastructurecapabilitiesforclientswhowantend-to-endproviders.Relyingoncurrentdealsaswellasalliancepartnerstoimproveinfrastructureofferings.nRecentpushintoe-learningandoutsourcedlearnin

245、g.SelectedclientsandalliancesnOver350outsourcingclients(over10years)nInJanuary2002,Accentureannouncedaconsultingandsix-yearapplicationsoutsourcingagreementwithDuPont,toprovideongoingmaintenanceandsupportforaglobalERPsolutionthough2007.About35-40%ofthisworkwillbeprovisionedbyoffshoredevelopmentcenter

246、sinIndiaandSpain.Atpeakneedperiods,about300Accentureemployeeswillbeengagedonthisproject.nSelectedoutsourcingclientsincludeAT&T,JPMorgan,BritishPetroleum,DowChemical,LondonStockExchange,TexasInstrumentsnOutsourcingallianceswithEMC,HPnASPallianceswithAlnovaSystems integrators are expanding their servi

247、ces footprints.BUSINESSINTELLIGENCEGROUP-68CapGeminiErnst&YoungnCGEYEuropeanmanagedservicesrevenuegrewfrom$755millionin2000to$767millionin2001,at1.7%growth.nOutsourcing(includesappsmanagement,infrastructuremanagement,andbusinessprocessmanagement)accountedfor22%of2001revenues.AsofOctober2002,thisperc

248、entagehadincreasedto27%ofrevenues.nRoughlyonethirdoftotalrevenueisfromNorthAmerica.nCEOPaulHermelinsayshespushingtoboostoutsourcingandexpectsittoaccountfor30%ofallbusinessinthreeyears.Thismaydilutethetraditionallyhighermarginsofthecompanysprojectsbusiness(11-13%comparedto8-10%inoutsourcing).Thisnewf

249、ocusonoutsourcingwillrequiresignificantcapitaloutlaysinanincreasinglycompetitiveenvironment.nInabidtolurecostconsciousclients,CGEYissettingupanaffiliatethatwillrentoutengineersatdailyrates.Someanalystsfeelthisisariskymove,sincelong-termconsultingrelationshipsyieldthehighestprofits.nCGE&Yisbuildingou

250、titsoffshorecapabilitiesinIndiabyacquiringsecondrungIndiansoftwareservicescompanies,increasingitsIndia-basedheadcount,andsettingupanewfacilityinIndiabytheendof2002.Thedecisiontoincreaseheadcountcomesinresponsetoariseindemandforoutsourcingservices.CGEYisalsopursuingplanstoenterintonon-exclusiveallian

251、ceswithmid-sizedcompanies.nSelectedoutsourcingclientsincludeWelchAllyn,NASDAQEurope,HydroOneNetworksBUSINESSINTELLIGENCEGROUP-69CSCnThirdlargestworldwidemanagedservicesproviderwith4.7%marketshare.2001managedservicesrevenuestotaled$4.67billion,up8.8%from$4.2billionin2000.nCSCisalsothethirdlargestmana

252、gedservicesproviderintheUS,with2001revenuesof$3.1billion,up8.4%from$2.8billionin2000.nOutsourcingServicessegmentsinclude:ApplicationOutsourcing,BPO,ITInfrastructureOutsourcing,HostingServices,ITSecurity.nInFY2002,outsourcingaccountedfor51%ofrevenues,upfrom44%in2001.BPOaccountsforroughly15%ofCSCsouts

253、ourcingrevenues.GlobalcommercialIToutsourcingcontinuestogrow,inthemostrecentquarteritaccountedfor55%ofCSCrevenues,up23%year-over-yearfrom2001.nCSCderives$850-900millioninannualrevenuefromBPO.PrimaryBPOcompetitorsareAccentureandCGEY.nPushintoEuropehasbeenlargelysuccessful,especiallyintheUK.Roughly26%

254、ofCSCsrevenueisfromEurope,and63%fromtheUS.Europeanrevenuesareexpectedtorise12%thisyear,mostlyoutsourcing.nSince2001,Streetestimatesforfiscal2003EPSforCSChavemovedfromabout$3.73tothecurrent$2.68pershare(a28%downwardrevision).nStrongexpertiseinbanking,insurance,chemicals/energy,healthcare,government.n

255、Verystronggovernmentpractice,federalsectorbusinesscontinuestogrow,withaverystrongpipeline.nCSCearns$2.9billioninannualsalesfromtheU.S.government(roughly25%ofrevenues).CSCoftensellsitsofferingsviaVARstocustomerssuchastheDepartmentofDefense,theDepartmentofJusticeandothers.CSCpaysforVARstogetinthemixea

256、rlywithCSC:oneongoingprojectinwhichCSCanditspartnersprovidecomputer-investigationtrainingforfederal,stateandlocallaw-enforcementofficialshasmorethandoubledinvaluefrom$40milliontomorethan$86.8millionBUSINESSINTELLIGENCEGROUP-70CSCnOutsideofPublicServicesandAerospaceandDefense,thereareveryfewnewprojec

257、ts/wins.nNotasstronginenterpriseapplicationsmanagementasothercompetitors.nTwooffshoredevelopmentcentersoperatedbySatyamCorporationinHydrabadandChennai,India.Shouldaccountfor250professionalsoverthenext3years.nStrongcustomerreputationforflexibility.nRecentlynamedasaTop6OracleGlobalPartner.SelectedClie

258、ntsnCSCismakingheadwayinnegotiationsfora$6billiondesktopoutsourcingcontractwiththeGermanarmy,andhasbeeninexclusivecontractnegotiationswiththegovernmentforthepastseveralmonths.nTwotroubledcommercialoutsourcingcontractsNortelNetworksandPratt&Whitneyhavebeenrenegotiatedandseemtobeontherecoverypath.nIn2

259、002signeda$560million,10yeardealwithDun&BradstreetnTheU.K.PostOfficehasdown-selectedCSCfora$2.3billiondealnCSCwonasevenyear$80millioncontractwithManulifeUSAnCurrentclientsincludeAmeritrade,BHP,UnitedTechnologies,BankOne,e-Steel,Raytheon,Siemens,DOD,NASA.BUSINESSINTELLIGENCEGROUP-71DeloitteConsulting

260、/BraxtonMarketPositionnEstimated$244millionin2001outsourcingrevenues,orroughly7%oftotalrevenues.nRoughlytwothirdsofrevenuefromNorthAmerica,19%fromEurope.nConflictingmessagesfrommanagementontheroleofoutsourcingatBraxton.Whiletopmanagementde-emphasizesit,Deloittehassignedsomesignificantoutsourcingcont

261、ractsinthepastyear(BrotherInternational,Telstra)nConsideredaleaderintheGartnerbusinessprocesstransformationmagicquadrant.nWhileotherfirmsaretargetingmultiyear,bigticketoutsourcingcontracts,DCcontinuestotargethighermarginenterpriseextensionworkandperformancemanagement.nOftenteamswithIBMGlobalServices

262、forinfrastructureoperations.nJVwithMastekforoffshoredevelopment.nThreemajoroutsourcingsegments:ITOutsourcing,BPO,ClientSupportCenters.nVarietyofoutsourcingofferings,includingincludingFullInformationTechnologyOutsourcing,ApplicationManagement,Hosting,Remote/OffshoreDevelopment,ApplicationServiceProvi

263、der(ASP),andBusinessProcessOutsourcing.BUSINESSINTELLIGENCEGROUP-72ElectronicDataSystems-EDSnEDSisthesecondlargestworldwidemanagedservicesvendor,with12.7%oftheglobalmarket.2001managedservicesrevenuestotaled$12.8billion,up12%from$11.4billionin2000.nMarketleaderinUSmanagedservices,with$7.3billionin200

264、1revenue,up14.4%from$6.5billionin2000.nEDSshugeinfrastructureoutsourcingbusinessformsthecoreofthebusiness.In2001,73%ofEDSrevenuecamefromitsoutsourcingarm,and13%frombusinessprocessmanagement.n25%of2001revenuefrommanufacturingsector,21%fromgovernment,16%financialservices.nInoutsourcingandhostingEDScom

265、petesmainlywithIBMGlobalServices,HP,Siemens,andFujitsunInBusinessProcessoutsourcing,EDScompetesmostlywithAccenture,CSC,andCGEY.nEuropeanrevenuegrew20%in2001,inpartthroughacquisitionofGermanoutsourcingfirmin2001.EDShashadatoughyear,withseveralnotableandhighlypublicmissteps.nSinceearly2001,Streetestim

266、atesfor2002EPSforEDShavemovedfrom$3.25tothecurrent$2.04pershare(a37%downwardrevision),nInSeptember2002earningsestimatesfor3Q02wereslashedfrom74centspershareto12-15centspershare,andEDSmarketcapitalizationfell75%afteritannouncedthatabadwageronthefirmsfuturestockpricewouldforcethemtopay$225milliontoset

267、tleassociatedderivativestransactions.nEDShasbeenhithardbyWorldcomscandal,asWCOMwasamajorEDScustomer.BUSINESSINTELLIGENCEGROUP-73EDSnEDShasrecentlydissolveditspartnershipwithPwCConsulting,afteritwasacquiredbyIBMGlobalServices.EDSpreviouslyhadaverystrongpartnershipwith10,000professionalsassignedtojoin

268、tprojects.EDSworkedcloselywithPwCConsultingonBPOprojectswheretheycombinedconsultingandtraditionaloutsourcingskills.Recentrealignments,restructuringsnReorganizedattheendof1Q02intoOperationsSolutions(traditionalITinfrastructureoutsourcingandBPO)andSolutionsConsulting(E-Solutionsandapplicationservices)

269、.Underthisstructure,2001OperationsSolutionsrevenuetotaled$13.2billion;SolutionsConsulting$7.2billion,andA.T.Kearney$1.2billion.nEDShasrealigneditsoutsourcingbusinesstofocusonBPO,whichwasseparatedintoitsownlineofbusiness.ExpectedtoleverageATKearneyforBPOgrowth.nExpandedsalesforceby50%in4Q01tolockinla

270、rgecontractsandrenewalsandtargetthemiddlemarket.nAggressiveinternalcampaignforthepast3yearstostreamlinebusinessprocesseshasresultedinroughly$3.5billionincostsavings.LowercoststructureallowedEDStoreducepricesinordertolockincontractrenewals.ThesepricedecreasesarenowslowingEDSgrowth.nInJune2002EDSannou

271、ncedplanstoacquiredLoudcloudsmanagedhostingbusinessfor$63.5millionincash,alongwith50enterprisewebhostingclientsoncethedealfinalized.Loudcloudprojectedanestimatedrevenuestreamof$75millionin2002.ThisacquisitiongivesEDSincreasedexpertiseinwebinfrastructure,whichwillhelpitcompetemoreeffectivelywithIBMGS

272、.BUSINESSINTELLIGENCEGROUP-74EDSnInthelastfourquarters,renewalsrepresented40-45%ofthetotalbookingsforEDS,muchhigherthanthehistoricalaverageof15-20%.nBasedonannounceddealsin3Q02,LehmanBrothersexpectsEDStopost3Q02bookingsofabout$5billion(down25%year-over-year),andCSCtopost$1billion(down25%year-over-ye

273、ar).KeyalliancesandclientsnEDSstopoutsourcingclientsincludeGM,theUSNavy,Worldcom,Delphi,Xerox,Bellsouth,CommonwealthBankofAustralia,theU.K.government,AmericanAirlines,SabreandContinentalAirlines.nSelectedadditionalclientsincludetheBBC,Dow,Chevron,UKRevenueDepartment,USArmy,CIGNA,7-Eleven,FutureShop,

274、SonynEDSexpectstoreceiveatwoyearextensionontheNavyNMCIcontractbecauseofdelaysitexperiencedduetoadditionaltestingrequirementsmandatedbythefederalgovernment.nABNAmrohasrecentlyselectedEDSfora$1.5billiondeal.nSelectedstrategicalliancesincludeCisco,Franklin-Covey,SAP,Oracle,PeopleSoft,JDEdwards.BUSINESS

275、INTELLIGENCEGROUP-75IBMGlobalServicesnIBMistheundisputedleaderoftheworldwideITmanagedservicesmarket,with16%worldwidemarketshare.Worldwidemanagedservicesrevenueswere$16.2billionin2001,up9%from$14.8billionin2000.n#2intheNorthAmericamanagedservicesmarketwith$6.8billionin2001revenue,up8.4%from2000.nOuts

276、ourcingrevenuesaccountforroughly40%ofIBMservicesrevenues.Total2001IBMrevenue$86billion,withroughly$35billioninservicesrevenue.nIBMGSandEDSdominatetheapplicationinfrastructureprovidermarket.In2001IBMGSsigned$2.5billionworthofwebhosting/applicationinfrastructureprovisioncontracts(5%oftotalsignings)nIB

277、MGlobalServiceshasbeenstrugglingthisyear,withrevenuesdownyear-over-year,mainlyduetoadeclineinconsultingrevenues.Strategicoutsourcingrevenuehasslowed,duetoslowersalescyclesandincreasedhesitancytosignlarge-scalemulti-yearoutsourcingcontracts.nIBMhastraditionallybeenverystrongindatacentermanagementandh

278、osting.Applicationmanagementisanevolvingoffering,butIBMisaformidableplayerinthismarketaswell.nIBMismakinghugeinvestmentsintoutility-basedITandASPservices.Thegoaloftheseservicesistoenablecostreductionandhigherlevelsofservices.IBMisnowofferingGrid-basedservicesandLinuxutilities,andappearstobeleadingth

279、emarketinthisdirection.nThe3Q02reportingseasonhasshownsignificantlydiminishedoptimism.IBMs3Q02bookingswere$9billion,down10%year-over-year.Long-termoutsourcingsigningswereroughly$5billioninthequarter,downfromroughly$7billionin2Q02and$11billionin1Q02.nClientsurveysindicateasenseofunwillingnessonthepar

280、tofIBMGStogetclosetoclientsituations.IBMisconsideredtobebestsuitedforclientswiththeirownroadmapforfutureplanning.BUSINESSINTELLIGENCEGROUP-76IBMGlobalServicesPwCConsultingAcquisitionnIn2001StrategicOutsourcing(SoftwareServices)accountedfor40%ofIBMGSrevenue,BusinessInnovationServices(nowBusinessConsu

281、ltingServices)for25%,andTechnologyIntegrationservices30%.Thereisafairamountofcustomerconfusionoverthedifferentiationofthethreesegments.nApplicationmanagementandBPOengagementsaccountedforjust8%ofPwCrevenues,butthispercentagehadgrownsteadilyforyearsandhashadsignificantmomentum.nAcquisitionofPwCshoulds

282、ignificantlyfortifyIBMspositionintheBPOmarket.nPwChadbuiltasolidtrackrecordandreputationinBPO,withabout$600millioninannualBPOrevenue.nCoreBPOserviceofferingsinfinanceandaccounting,procurement,HR,andrealestatemanagement.n30BPOclients,including14inEurope(BPAmoco,NortelNetworks,Safeway,ANXaBank,GrupoAl

283、gar)About5000BPOemployees(1,800inEurope),29servicedeliverycentersnIBMhadBPOcapabilitiesinCRM,Procurement,andHR.ThesecapabilitieswereformalizedunderBusinessProcessManagementuntil2002,whentheywerereallocatedtoIBMsverticalandsolutionpractices.nThestrongestareaofconvergencebetweenIBMandPwCisintheprocure

284、mentprocess.nSomeBPOclientsmaynotwanttoworkwithIBM,whichcouldresultinthedefectionofsomeclientstoAccenture,ACS,oranotherspecialistserviceproviders.nEDSandHPhavebrokenofftheirallianceswithPwCasaresultoftheacquisition.Source:Gartner,August2002BUSINESSINTELLIGENCEGROUP-77IBMGlobalServicesIBMbettingbigon

285、“ondemand”computingnInOctober2002IBMCEOSamPalmisanoannouncedthatIBMisinvesting$10billioninabusinessstrategyaimedatutility-provisioned“ondemand”computing.IBMispursuingthisstrategythroughacquisitions,marketingandresearch.nIBMisaimingtofashionacomputinggridthatwouldallowservicestobeshiftedfromcompanyto

286、companyastheyareneeded.Forexample,anautocompanymightneedthecomputingpowerofasupercomputerforashortperiodasitdesignsanewmodel,butthenhavelittleneedforitonceproductionbegins.Otherservicescouldbedeliveredinmuchthesameway,assumingIBMcanpulltogetherthenetworks,computersandsoftwareneededtomanageandautomat

287、ethechore.nPalmisanobelievesthattheindustrywouldhavetoenhancestandardizationinorderforthisstrategicvisiontobecomeareality.nThisinitiativeisamajorinvestmentthathaspotentialtodramaticallyalterthemanagedservicesmarket.SelectedOutsourcingClientsnIBMstopoutsourcingclientsincludeAmEx,Lucent,AT&T,EastmanKo

288、dak,Fiat,Telstra,NTLCable,Cable&Wireless,Westpac,BoeingandBancOne.nChosentonegotiatetermsofa7-year$5+billioncontractwithJPMorganChase.nIBMandLucentrecentlyrenegotiatedtheiroutsourcingarrangement.nIn2002signedasevenyear$4billionagreementwithAmericanExpressnAldoGroup,CendantCorporation,InvensysnDeutsc

289、heBankhasrecentlymovedforwardwitha$2.5billiondealwithIBM.Source:WashTech,October2002BUSINESSINTELLIGENCEGROUP-78OraclenInApril2002OracleannouncedthatitwouldbeofferingOracle9iasanoutsourcedservice,thusextendingOraclesofferingsbeyondoutsourcingapplicationstodatabaseandapplicationserveroutsourcing.Ever

290、ysoftwaresolutionthecompanyoffersisavailableviathehostedmodel.EarlyadoptersareoutsourcingfinancialssincethatisOracleslargestinstalledbase.nOffersitscustomersthechoiceofthreemodelsofsoftwaredeliveryandmanagementinitsone-yearcontracts:AtOracle:OracleinstallsandmanagesthesoftwareinitsdatacenterintheUS,

291、andcustomersaccessthesoftwareviaasecureInternetconnection.AtCustomer:Customerinstallsthesoftwareonitspremises,butitismanagedremotelybyOracleprofessionalsAtPartner:Customerchoosestohouseitssoftwareinalocaldatacenterrunbyathirdpartyorganization.Thethirdpartymanagesthehardwareandnetworkconnections,whil

292、eOraclemanagesthesoftware.nTodate,Oraclehasgrownitsoutsourcingbusinessto500customersand$100millioninrevenues.nOraclesoutsourcingcustomersintheUShaveseentheirsoftwaremanagementcostsdecreasebyasmuchas50%.nOracleismakingsignificantinvestmentsinthisbusiness,includingEstablishingincentivesforitsentiresal

293、esforcetoselloutsourcingdealsHiringadditionalsalesrepresentativestofocusonsellingoutsourcingsolutions,andinstallingsalesmanagerschargedspecificallywithdevelopingoutsourcingbusinessintheUS,EuropeandAsia-Pacific.Investing$60millioninadditionalhostingfacilities.InvitingasmanyISVsaspossibletoinstallthei

294、rapplicationsatOraclesdatacenters.nOraclesCFOexpectstobuildtheiroutsourcingbusinesstoa$1-billion-per-yearrunrateinfiveyears.Source:YankeeGroup,April2002BUSINESSINTELLIGENCEGROUP-79OraclenPlanstouseitscentersinBangaloreandHyderabadinSouthIndiafortheremotemanagementofcustomersIToperations.Thetwocenter

295、salreadyemploy2,500people,doproductdevelopment,andofferproductsupporttoOraclecustomersworldwide.nPlanstoworkwithdatacenteroperatorsinAsiaPacific,ratherthansetupitsowndatacentersintheregion.AsAsiancustomersdonothaveasmuchexperiencewithfacilityoutsourcingasdocustomersinNorthAmerica,Oracleexpectsthatmo

296、stAsiancustomerwillprefertohavethefacilityontheirpremises,choosingthe“AtCustomer”model.Expectsthataboutone-thirdofitsnewcustomersinAsia-PacificforitsE-businesssuitewilloptforoutsourcingservicesalongwiththesoftware.nOracleischangingitsmethodofwriting,revising,anddeployingsoftware.Bymakingrevisionsand

297、additionsinvisibletotheuserandeasierforthevendor,Oracleispositioningitselftobecomeanaggregatorofsoftwarecomponentsforitsuserssolutions;aproviderofsoftwareasWebservices.EnablingitscustomerstoincreasethevolumeofbusinessamongeachotherbasedonOracleactingasacommoninfrastructurehub.Oracleinitscapacityasou

298、tsourcertomanywillbeabletoenableinterbusinessapplicationintegration.ChangingthesalesandpricingmodeltoreflecttherealityofWeb-deliveredsoftware.Enablingverylimitedpoolsofqualifiedtechnicalstafftobuild,maintain,andsupportWeb-basedsoftware.SoftwarevendorsthatdonotretooltheirbusinessmodelaroundWeb-delive

299、redapplicationswillbefacedwithadisintegratingbusiness.DevelopWeb-basedapplicationoutsourcingmodelsforyourbusiness.Donotbuildthebusinessaroundlargestaffs;builditaroundWebservicesandinterbusinessintegration.Thisnewbusinessrequiresbothachangedtechnologymodelandachangedbusinessmodel.Source:YankeeGroup,A

300、pril2002BUSINESSINTELLIGENCEGROUP-80SourcesnAMRResearchnBusinessWeeknCapGeminiErnst&YoungnCIOMagazinenCompetitorwebsitesnGartnerGroupnGoldmanSachsnIDCResearchnIndiaTimesnInformationWeeknInsurance&TechnologynLehmanBrothersnMetaGroupnMIS:ManagingInformationStrategiesnMorganStanleynNASSCOMnRossResearchnSourcinginterests.orgnWallStreetJournalnWashingtonTechnologynYankeeGroupBUSINESSINTELLIGENCEGROUP-81ForMoreInformationPlease Contact: MarybethK