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IT Services Vendor Benchmark

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1 IT Services Vendor Benchmark
PROFESSIONAL SERVICES BUSINESS QUARTERLYSM IT Services Vendor Benchmark First Calendar Quarter 2014 Publish Date: June 27, 2014 Authors: John Caucis, Professional Services Senior Analyst; Stephanie Artigliere, Elitsa Bakalova, Jennifer Hamel, Boz Hristov, Sebastian Lagana, Cassandra Mooshian and Joseph Walent, Professional Services Analysts; Jacob Gordon, Harry Norton, Kevin Collupy, Deleon Narcisse, Meaghan McGrath, and Kelsey Mason, Research Analysts Content Editors: Patrick Heffernan IT Services Practice Manager/Principal Analyst Ramunas Svarcas, Professional Services Principal Analyst

2 Table of Contents Executive Summary Financial Metrics Segment Views
3 Key Findings 4 Market Overview and Market Leaders 11 Other Market Trends 21 Future Outlook Segment Views 22 Consulting and Systems Integration (C&SI) 26 Information Technology Outsourcing (ITO) 29 Business Process Outsourcing (BPO) 32 Applications Outsourcing (AO) Geographic Views 35 Americas 38 EMEA 41 APAC Financial Metrics 44 Key Metrics 46 Cost Metrics 48 Productivity/Resource Metrics 54 Operations/Investment Metrics Appendix 60 IT Services Segment Definitions 61 IT Services Vendor Benchmark Coverage 62 TBR Coverage 64 About TBR TBR offers this benchmark data in an Excel format. For further information, contact your TBR account executive.

3 Executive Summary: Key Findings
Vendors invest in vertical-specific and next-generation IT services; however, commoditization exerts downward pressure on revenue growth IT Services* Vendor Trends for 1Q14 Performance: Average trailing 12-month (TTM) IT services revenue grew 1.1% year- to-year in 1Q14, lower than the 1.5% year-to-year growth in 4Q13 and the 3.5% year- to-year growth in 1Q13. To counter slowing IT services growth, firms are investing in sales initiatives and transforming their portfolios to provide vertical-specific solutions and emerging technologies that encompass developed or acquired IP. SOURCE: PPTBACKGROUNDS.NET Service lines: Vendor emphasis on embedding growth offerings such as cloud, mobility, big data and analytics, security, and social media into their core consulting and systems integration (C&SI) offerings accelerated C&SI TTM revenue growth from 1.5% year-to-year in 1Q13 to 2.1% year-to-year in 1Q14. Commoditization of traditional IT services and businesses shifting to cloud environments continue to hinder legacy IT outsourcing (ITO) revenue streams. In 1Q14 ITO TTM revenue declined 1.1% year-to-year in contrast to 0.8% growth year-to-year in 1Q13. SOURCE: BLOG.ENTREPENUERARTS.COM Geographies: India-centric vendors’ regional expansion in EMEA through investments in resources, offerings and alliances helped improve revenue share in EMEA. Average EMEA TTM revenue shifted from a 2.1% year-to-year decline in 1Q13 to 2.5% year-to-year growth in 1Q14. APAC average TTM revenue declined by 4.8% year-to-year in 1Q14, down from 4.4% year-to-year growth in 1Q13, due to slowing economic growth in China, India and Australia. SOURCE: FREEWORLDMAPS.NET *IT services include consulting and systems integration (C&SI), applications outsourcing (AO), IT outsourcing (ITO) and business process outsourcing (BPO). IT services market growth is determined on the basis of the 30 vendors included in TBR’s Professional Services Business Quarterly coverage. The growth rates represent trailing 12-month comparisons and compare 1Q12-4Q12 and 1Q13-4Q13 periods.

4 Executive Summary: Market Overview and Market Leaders
TCS’ emphasis on digital offerings and a rebound in spending in Europe led the firm to the most revenue growth among benchmark services vendors Note: Bubbles indicate YTY revenue growth and arrows indicate directional change relative to the year-ago quarter (accelerating or decelerating growth). TCS’ investments in R&D and strategic partnerships such as those with Microsoft Business Solutions ramp up the firm’s capabilities to meet the supply-side demand for digital transformation solutions spanning cloud, mobility and big data. However, to sustain its double-digit revenue growth in FY15, TCS will need to hire and acquire more tech- savvy consultants to help competitively tout its portfolio across mature and emerging markets. As TCS increases its focus on these opportunities, adding consultants will help it capture multiple digital-focused deals that support overall sales. Fujitsu, despite its announcement of a Global Delivery Organization, continues to report TTM revenue declines, still challenged by its long-standing inability to build and expand revenue streams outside Japan. Fujitsu’s business is more seasonal than its peers’ due to its reliance on hardware and IT to sell accompanying IT services, thus affecting its TTM growth.

5 Executive Summary: Market Overview and Market Leaders
India-centric firms lead peers in growth and profitability by meeting the need of clients in Europe to reduce costs using nearshore delivery centers Growth and Profit Leaders CGI continued to register the positive revenue impact of its 2012 acquisition of professional services peer Logica, putting it in the lead position in 1Q14 TTM services revenue growth, despite posting its second consecutive quarter of sequential revenue contraction. TBR expects CGI will slip further in growth rankings in 2Q14. Cognizant registered strong year-to-year revenue growth, benefiting from 2013 large-scale outsourcing wins and recent consulting acquisitions that accelerated expansion in Europe. Cognizant adhered to its strategy of reinvesting profits over its target 19% to 20% margin range in growth initiatives such as cloud and analytics technologies, global delivery expansion, and niche acquisitions such as Itaas Inc., a digital video solutions company headquartered in the U.S.

6 Executive Summary: Market Overview and Market Leaders
Revenue growth and profitability laggards are investing in automation and improved productivity to reduce service delivery costs Growth and Profit Laggards To improve profitability, Fujitsu needs to better automate its processes and delivery and further consolidate its workforce while better utilizing offshore labor. TBR expects the tasks will take at least one year to pay off as the company struggles with shifting to a global delivery model. CSC’s high level of exposure to contracting federal IT services budgets combined with its migration of commercial clients to lower-cost, higher-value cloud-based infrastructure yielded four quarters of revenue contraction. Improved activity from CSC’s commercial business will help mitigate revenue declines in the government business in 2Q14. IBM GS’ revenue remains challenged by declining global sales and competitive pressures brought on by low-cost firms. The company identifies and invests in industry disruptors and technologies to realign its business to grow revenue and profit. IBM accelerated investments in 1Q14 to build out technology initiatives such as BlueMix, MobileFirst and Smarter Commerce.

7 Executive Summary: Market Overview and Market Leaders
India-centric vendors gain market share by leveraging low-cost global service delivery capabilities to offer competitively priced IT solutions Note: Bubbles indicate YTY revenue growth and arrows indicate directional change relative to the year-ago quarter (accelerating or decelerating growth). The positive effect of CGI’s acquisition of Logica diminished during 1Q14, leading to a drop of 5,910 basis points in TTM revenue growth from the year-ago quarter. However, CGI still led all IT services firms in the benchmark as the acquisition still impacts TTM revenue growth. TCS had a strong close to its fiscal year, delivering robust, broad-based revenue growth of 15.2% year-to-year in 1Q14 and 16.2% for FY14 against the year-ago compare. The firm gained momentum in continental Europe, where it registered 36.1% year-to-year growth in FY14 as the demand for cost-saving transformational solutions from budget-conscious clients in Germany, France and Nordic countries drove regional signings.

8 Executive Summary: Market Overview and Market Leaders
Revenue and growth leaders are leveraging next-generation IT offerings and investments in European expansion to solidify their top positions IBM GS: IBM drives its service business through its Global Business Services unit due to the demand for digital transformation via next-generation applications and IT environments. Conversely, IBM’s Global Technology Services unit poses challenges for overall services revenues owing to the erosion of legacy ITO due to cloud. HP Services: HP Services ranks second in TTM revenue as a result of its sheer size and global footprint. Revenue decline is decelerating, however, as the company builds out its portfolio to better align with market trends. Accenture: Maintaining its lead in the market will depend on the firm’s ability to leverage and synchronize growth platforms such as digital, strategy, technology and BPO at a pace faster than the converging IT services market. CGI: Industry-leading TTM revenue growth reflects the addition of Logica’s revenues to CGI financials, providing favorable year-to-year compares. Western Europe, particularly the U.K., served as an engine for organic growth as higher-value service offerings resonated with clients in the region. Cognizant: Growth was broad-based across industries and service lines, primarily driven by Europe, aided by recent onshore consulting acquisitions and large-scale outsourcing contracts won in 2H13. TBR expects growth will decelerate in 2Q14 as longer decision cycles for new deals in the pipeline delay revenue recognition until 2H14. Capita: Capita delivered double-digit revenue growth thanks to its market focus in the U.K. and enhanced capabilities gained through integration of the slew of M&As the firm pursued over the past three years. The firm won deals with public and private sector clients for a total of £1.1 billion in 1Q14.

9 Executive Summary: Market Overview and Market Leaders
Client migration to cloud-based IT systems drives growth for consulting and AO but leads to ITO revenue declines due to cannibalization C&SI Top Revenue: IBM GS, $20.4B Top Growth: CGI, 48.2% year-to-year* Client migration to cloud-based ecosystems and mobile platforms will continue to drive consulting and integration services. Vendors will look to embed growth technologies such as cloud, mobility, analytics and social media into core C&SI offerings. Enterprises will continue to build onshore delivery resources and invest in training programs to enhance their global delivery models and better compete. BPO Top Revenue: Xerox, $10.5B Top Growth: Cognizant, 25% year-to-year Demand for BPO and services that support cost takeout and improve operational efficiency will drive outsourcing growth. Vendors will expand core BPO (horizontal — F&A, HR, etc.) and industry-specific BPO, and focus on growing in emerging markets in 2014. AO Top Revenue: Accenture, $7.8B Top Growth: SAP Services, 21.7% year-to-year Increasing demand for application modernization services will expand AO revenue as clients seek to move traditional applications to cloud and mobility IT environments. The combination of cloud, industry capabilities, geographic reach, and internal IP and tools will help AO vendors maximize revenue and profits. ITO Top Revenue: IBM GS, $23.4B Top Growth: Capita, 544.6% year-to-year* Evolving ITO delivery models, economic conditions and businesses shifting to cloud environments continue to hinder legacy ITO revenue streams. Vendors will establish data centers in APAC and LATAM to capture the increasing demand. Note: Bubbles indicate YTY revenue growth and arrows indicate directional change relative to the year-ago quarter (accelerating or decelerating growth). *The inclusion of acquired Logica and Northgate Managed Services revenues skews CGI’s and Capita’s year-to-year growth figures, respectively, bringing the firms to top spots in TTM revenue growth. 9

10 Executive Summary: Market Overview and Market Leaders
Economic recovery in Europe drives higher IT services spending in EMEA, while the economic slowdown in China hurts APAC growth Americas Top Revenue: IBM GS, $25.2B Top Growth: Genpact, 24.7% year-to-year Revenue from healthcare and financial services industries continues to increase in the Americas but not enough to yield growth in 1Q14. Despite an uptick in public sector signings, the small value of those contracts outweighs the growth in healthcare and financial services. Vendors will look to capitalize on the increased healthcare spending spurred by the Affordable Care Act, while others, including some India-centric firms and Cisco and Fujitsu, invest in Canada to diversify their revenues in the Americas. EMEA Top Revenue: IBM GS, $18.2B Top Growth: CGI, 56.6% year-to-year* Vendors will leverage their established footprints and capabilities in faster-recovering central European countries and developed MEA markets to drive revenues and offset pricing challenges across EMEA. Europe-based vendors are increasing investments in big data and analytics, cloud, digital innovation, mobility, and particularly security due to increased demand from clients as they shift from legacy application and IT systems to the cloud. APAC Top Revenue: Fujitsu, $18.7B Top Growth: WNS, 58.8% year-to-year Persistent challenges in China’s business environment will continue to impact IT vendors’ expansion plans in low-cost markets in APAC. Vendors will selectively target M&As that will boost their global footprints in underpenetrated regions such as Australia, New Zealand and the Philippines, where firms such as Cognizant and Atos continue to leverage acquisitions Medicall and WindowLogic, respectively, to expand in APAC. Note: Bubbles indicate YTY revenue growth and arrows indicate directional change relative to the year-ago quarter (accelerating or decelerating growth). *The inclusion of acquired Logica revenue skews CGI’s year-to-year growth figures, bringing the firm to the top spot in TTM revenue growth. 10

11 Executive Summary: Other Market Trends
Operating margin leaders are bolstering profitability by emphasizing sales of higher-margin, next-generation IT and optimizing their services mix Wipro continues to hone its delivery efficiency and quality through the use of platform-based managed services offerings such as ServiceNXT, increasing the firm’s profitability despite smaller deal sizes. Gross profit jumped 20.6% year-to-year to $626 million, and operating margin expanded 430 basis points year-to-year in 1Q14 to 24.5% on the strength of productivity improvements and increased employee utilization. Dell Services’ TTM operating margin benefits from the firm’s emphasis on shifting its work mix from commoditized services to high-value application development and maintenance (ADM) and BPO engagements providing industry knowledge and expertise. TBR expects increased spending on training to educate direct and channel sales staff on the full portfolio of Dell Services solutions will exert downward pressure on the firm’s operating margin in 2014.

12 Executive Summary: Other Market Trends
Operating margin leaders are investing in automation, efficiency-enhancing tools and training to drive productivity gains Cisco Services: Cisco Services’ peer-leading margins continued to expand during the quarter, indicating improved efficiency in service delivery as a result of reorganization, automation, leverage of channel partners and reduced variable compensation expenses. TBR expects Cisco Services’ margins will be among the highest in the IT services industry over the next couple of years. Oracle Services: TBR estimates that Oracle Services’ operating margin grew 240 basis points year-to-year in 1Q14, driven by a 54% operating margin in hardware systems support, which was 42.4% of Oracle services revenue. TBR believes that reported 10% annual growth in hardware system product revenue initiated almost 5% annual growth in hardware systems support and, coupled with increased efficiencies, led to an increase of 450 basis points in hardware systems support operating margin year-to-year. Oracle’s position in TBR’s IT Services Vendor Benchmark will continue to improve as the company monetizes investments in hardware and drives increased profitability from hardware support. TCS: TCS remained a leader in TTM operating margin, expanding 200 basis points against the year-ago compare to 29% in 1Q14. Robust margin performance was due to TCS’ ability to successfully manage operational costs and reinvest in its portfolio, arming it with tools and IP that enable the company to stay ahead of its competition. TCS noted in its earnings call that it will give wage hikes as high as 14% to top performers for FY15, and promotions are planned in FY2Q15, but the effect on margins will not be significant. Please contact TBR if you are interested in company-specific go-to-market views, including M&A analyses, alliance analyses, deal analyses or other GTM-related information.

13 Executive Summary: Other Market Trends
Vendors build industry-specific IP portfolios to differentiate, reduce reliance on labor-based services and boost revenues and profits IP-rich industry-related solutions help vendors to differentiate, capture growth and increase margins TBR Assessment Vendors continue ramping up internal investment in IP-based solutions while purchasing or partnering with niche firms to fill portfolio gaps. Industry-related solutions help IT firms address specific client needs and support growth across service areas such as C&SI and BPO. IP-related solutions enhance vendors’ brand recognition and market differentiation; however, it takes several quarters after its release before new IP contributes revenue. Examples of vendors’ recent investments in industry-specific IP: Accenture and SAP partnered to develop the Business Solutions Group and launch the Upstream Production Operation solution. The Business Solutions Group will coinnovate intellectual-property-driven technology solutions centered on specific industries and in collaboration with select clients. Accenture’s continual investments in its IP assets coupled with the firm’s decision to automate parts of IT infrastructure management services through implementation of IPsoft’s IPcenter solution, will enable Accenture to deliver transformation services and solutions converging business processes and IT. Capgemini is experiencing client interest in its IP-based products and solutions under the Ready2Series brand. The Ready2Series includes industry-specific solutions that provide the firm with opportunities to accelerate long-term revenue growth across verticals and services such as C&SI and BPO. Infosys’ efforts to improve sales efficiency were highlighted by its success in capturing large-scale outsourcing engagements. The firm continued to invest in IP tools such as Process Progression Model, an end-to-end BPO platform, to address the shift in client demand from BPO to Business Process Services. Cognizant looks to expand its presence in the healthcare industry. IP-based solutions enable the firm to differentiate from peers. The firm builds industry-specific IP for the healthcare vertical through a combination of internal R&D and customer cocreation. Cognizant codeveloped an online quoting tool, QuoteNow, with U.S.-based health insurance provider Fallon Community Health Plan. The firm also offers the CareSERV Medical Management Platform, which combines cloud and analytics technologies with Cognizant’s clinical staff to optimize care and utilization management, and the iAlign analytics platform that assists life sciences clients with sales planning. SOURCE: BLOGS.ADOBE.COM 13

14 Executive Summary: Other Market Trends
IT service providers remain focused on providing solutions to the evolving security needs of their global clients Vendors invest in security services and capabilities to meet the demand for mobile and cloud security TBR Assessment Security is increasing in importance for clients, driven by the shift of legacy applications and IT systems to the cloud, coupled with enterprise mobility, the Bring-Your-Own-Device trend and public awareness of security breaches. Less visibility of security capabilities positions firms such as Capgemini and Atos at a competitive disadvantage, which they attempt to overcome with new alliances, offerings and security service delivery announcements. At the same time IT service providers such as IBM, HP and Accenture are continually expanding their security practices to attract clients across the IT services life cycle. Examples of vendors’ recent investments in security: Security services emerged as a key interest area for partnering in 1Q14, as IBM looks to shore up managed security offerings that complement its cloud and on-premises infrastructure management portfolios. IBM and CrowdStrike Inc. will launch Advanced Cyber Threat Intelligence Service in 1H14. Xerox’s alliance efforts in 1Q14 were centered around enhancing its offerings by adding new capabilities to security (Authentix) and automation (LabTech, DocuSign) solutions. HP opened a 130,000-square-foot Security Operations Center in Sydney, which will join HP’s U.S. and U.K. security centers. In February CSC released an incident response offering for commercial clients enabling uninterrupted access to CSC’s cybersecurity professionals in case of a cybersecurity incident. In April CSC unveiled a new cybersecurity offering, AppSEC on Demand, which enables organizations to test the security of their software applications in a hosted secure environment that meets U.S. federal and commercial regulatory requirements. Atos plans to make its managed security and cybersecurity services more visible to the market in Atos launched a Security Service Delivery unit at the end of 2013 with a global reach and 24/7 availability. In 2014 the firm is enhancing its cybersecurity offerings and launching services such as Next Generation Endpoint Protection, Cyber Threat Management Dashboard, Cloud Data Loss Prevention and Identity & Access Management as a Service. Capgemini partnered with Unisys in March to resell Unisys’ Stealth cybersecurity software. Capgemini’s security offerings are not visible to clients, with the exception of Sogeti, which has an IT security offerings group. The firm embeds security across consulting, technology services and outsourcing. SOURCE: CFO.COM 14

15 Executive Summary: Other Market Trends
Canada emerges as a key focus for IT services growth through alliances, acquisitions and organic investments for several IT services firms Vendors’ strategic investments in Canada will position the IT service companies to benefit from the growing need for IT solutions from expanding financial and oil & gas companies in the region TBR Assessment Faced with challenging prospects in emerging LATAM and APAC countries such as difficult business environments in Brazil and China, vendors are intensifying their expansion efforts in Canada. Vendors seek growth opportunities from the vast amounts of natural resource companies and continued growth in the financial services industry in the region. TBR expects the pace of investments in Canada will continue to increase through 2014. Examples of vendors’ recent investments in Canada: Cognizant acquired Itaas Inc., a digital video solutions firm headquartered in the U.S. Cognizant will onboard an estimated 200 employees across Canada, the U.S. and India. Cognizant adds next-wave technology capabilities including connected device application development and strengthens its position in the underpenetrated media and communications market. As part of its plan to invest $4 billion over the next 10 years in Ontario, Canada, and create 1,700 new jobs, Cisco is investing $100 million in Toronto, which will be a site for one of four Internet of Everything Innovation Centers. The move signals Cisco’s transition toward becoming a Services-led business, as Toronto will be the North American hub for thought leadership and innovation, facilitating adoption of Cisco technologies and Smart+Connected solutions. Fujitsu is combining alliances, joint ventures and niche applications to increase its global sales and marketing reach. The company extended its Westcon marketing agreement to cover the U.S. and Canada, whereby Westcon will sell Fujitsu’s integrated data center solutions in the region. TBR believes this approach will boost sales, but that larger acquisitions in the U.S. and Europe may be necessary for significant market gains. Wipro’s chairman, Azim Premji, noted in 1Q13 that Wipro planned to hire locally in Canada to pursue opportunities in the oil and gas industry. In 1Q14 the firm highlighted Canada’s financial services vertical as a key growth area as declining natural resource prices are pressuring banks to cut operational costs. Wipro faces competition from top India-centric peers such as TCS and Cognizant, and from up-and-coming players such as Tech Mahindra, which has a broader delivery footprint in Canada and offers similar services. SOURCE: WIKIPEDIA.ORG 15

16 Executive Summary: Other Market Trends
IT services vendors focus on improving client relationships — best accomplished with client proximity and use of channel partners Vendors invest in sales initiatives to improve client relationships, expand wallet share with key accounts and support revenue growth TBR Assessment Vendors such as Cisco, Unisys and Xerox emphasize channel sales due to the superior margins attributed to shared sales and marketing costs as well as low fixed costs. Capgemini’s culture change to foster client relationships, coordinate efforts globally, offer all dimensions of the firm’s portfolio and leverage its consulting business to generate sales will help it catch up with competitors such as Accenture and IBM, which, in TBR’s view, have stronger relationships with clients. Examples of vendors’ recent investments in sales: Unisys expands channel-led sales to keep sales costs under control and expand coverage of its addressable market. The company generates less than 5% of total revenue from the reseller channel currently, and is partnered with over 60 value-added resellers (VARs). The latest announced channel partnerships, with Hotelogix for the hospitality sector in Kuwait and with Capgemini to expand cybersecurity sales, are indicative of solution areas Unisys will target in 2014. Xerox is attempting to emulate Cisco’s and HP’s channel programs by offering enhanced training and incentives for its partners through a modified Global Partner Program, which provides partners access to Xerox’s tools and expertise. Infosys’ sales strategy will continue to focus on increasing mindshare of end-to-end services capabilities spanning clients’ operational, transformation and innovation needs. Investments in its onshore sales force will enable the firm to tout its IT transformational capabilities and help Infosys regain its status as a premium professional services vendor during FY15. Infosys will seek to adopt a more holistic selling approach by marketing its expertise in delivering high-value, vertical-specific business solutions and developing a market-competitive portfolio as the IT services market evolves. Capgemini’s Account Management Strategic Initiative (AMSI) helps the firm accelerate and diversify its portfolio growth, improve the win rate on big deals, generate more sole-sourcing deals and improve cost effectiveness of its business development efforts. AMSI follows a “One Group” approach, which is to sell the entire Capgemini portfolio and expand wallet share with clients, and offer the Rightshore global delivery model. SOURCE: FOTOSEARCH.COM

17 Executive Summary: Other Market Trends
Application outsourcing signings coupled with multiple smaller deals for cloud migration fuel revenue expansion Key Deals in 1Q14 Vendor/Client Deal Value Years TBR Insights CGI/Trafikverket $220 million (CAD) 4, with two 1-year options The Swedish Transport Administration signed CGI to provide application development services by coordinating its IT systems. Accenture/ Washington Metro $184 million N/A Accenture will implement a new electronic fare payment system based on Accenture Fare Management Solution to expand fare payment options, adding chip-enabled credit cards, federal government ID cards and mobile phones that use near-field communications. Wipro/Deutsche Bank Germany $125 million Multiyear Deutsche Bank selected Wipro to provide ADM services. Unisys/Extraordinary Security Department for Large-scale Events (SESGE) $110 Million Unisys Brazil and a few other companies won a contract from the SESGE to provide IT services such as infrastructure solutions for the 2014 FIFA World Cup. Unisys Brazil will support the integrated command and control centers that will monitor and manage communications for security purposes. Infosys/TNT Express $100 Million The contract is part of TNT Express’ $200 million IT modernization initiative. Infosys will provide ADM outsourcing services helping the logistics provider streamline its supply-chain tracking system. HCLT/Student Loans Company (SLC) £50 million ($69.1 million) 1 The U.K.-based education lender selected HCLT, in collaboration with software vendor Misys and implementation partner Deloitte, to upgrade SLC’s core banking and payment system. Please contact TBR if you are interested in company-specific go-to-market views, including M&A analyses, alliance analyses, deal analyses or other GTM-related information. 17

18 Executive Summary: Other Market Trends
Partnerships enable IT services vendors to offer end-to-end solution packages for cloud migration and IT infrastructure security improvement Key Acquisitions in 1Q14 Companies People Impact IBM GS/ Cloudant Inc. 65 The acquisition will be merged into IBM’s recently formed Information and Analytics Group to enhance the firm’s portfolio in big data, analytics, cloud and mobility. Accenture/ ClientHouse (Est.) ClientHouse expanded Accenture’s and Veeva Systems implementation capabilities and expertise. The ClientHouse office in Jena, Germany, will be a Center of Excellence and training facility for Accenture clients, which will help Accenture gain SaaS traction in Europe. Atos/ Bull 9,200 On May 26 Atos announced its intent to acquire France-based IT services firm Bull to expand in cloud, cybersecurity and big data; support its expansion outside Europe and solidify its core C&SI and Managed Services capabilities in the region. Key Alliance Additions/Changes in 1Q14 Companies Scope of Alliance/Impact Accenture/ SAP Accenture expanded its collaboration with longtime partner SAP, forming the joint venture Business Solutions Group, to develop and implement industry-specific solutions that are based on the SAP HANA Cloud Platform and other cloud, analytics, digital and mobility technologies. Accenture and SAP introduced the Upstream Production Operations solution, and Accenture opened its 12th Innovation Center for SAP Solutions. Accenture will gain consulting and implementation business opportunities around its collaboration with SAP. IBM/ CrowdStrike Inc. IBM and CrowdStrike Inc., a security solutions and services provider, will develop a new managed security service, Advanced Cyber Threat Intelligence Service. The service will provide proactive monitoring capabilities to minimize and mitigate threats before they become an issue. Wipro/Agnik Wipro partnered with connected vehicle software company Agnik to utilize Agnik’s cloud-based big data and analytics technology to augment Wipro’s machine-to-machine solutions for the automotive industry. The partnership will strengthen Wipro’s capabilities for the manufacturing and high-tech industries. Please contact TBR if you are interested in company-specific go-to-market views, including M&A analyses, alliance analyses, deal analyses or other GTM-related information. 18

19 Executive Summary: Other Market Trends
Vendors continue reorganization efforts and hire industry-specific experts to address growing demand in cloud and analytics Trends and Strategy Changes Hiring levels will continue to fluctuate across IT services vendors. Vendors such as IBM, Xerox and CSC reduced or stabilized headcount in 1H14, and the firms will shift hiring focus to lower-cost labor pools in the latter half of 2014 in addition to hiring people with industry-specific expertise and in growth areas such as cloud and analytics. Vendors hire across the globe to diversify global revenues and increase leverage of low-cost resources for service delivery. Accenture will recruit in APAC, Africa and LATAM to support its growth strategy, while Capgemini’s strategy is to increase its India headcount from 37.3% of total headcount, or 50,000 employees, to 50% in the next three years. Management Changes Capgemini is grouping its APAC operations in one unit to expand in the local market, and appointed Luc-François Salvador, formerly the CEO of Sogeti, to chair of the new APAC entity. Fujitsu appointed Michael Keegan to lead its business in the U.K. and Ireland, taking over for Duncan Tait, who was recently promoted to head of EMEIA, CSVP, Fujitsu Ltd. In early 2014 Fujitsu announced a restructuring initiative to improve operational efficiency and communication across divisions, which led to nine top management resignations. Infosys’ C-level exits continued, with Senior VP Chandrashekar Kakal, head of the Indian Business Unit, and Chief Compliance Officer Nithyanandan Radhakrishnan resigning in April. In June Infosys appointed Vishal Sikka, former CTO of SAP, as CEO and managing director.

20 Executive Summary: Other Market Trends
HCLT’s and TCS’ R&D investments position them to overtake Cognizant, which continued to lead IT services vendors in organic growth HCLT: HCLT has not made an acquisition since 1Q11, instead focusing on expanding its IP through alliances and R&D. The firm targets large-scale transformational deals to maintain double-digit organic revenue growth, winning several infrastructure management and Digital Systems Integration deals in 1Q14. Ericsson: While Ericsson did not make any acquisitions that would impact services revenue in 1Q14, the company’s top line fell 8.7% year-to-year partially due to unfavorable compares with large deals won in 1H13. *ORGANIC REVENUE GROWTH IS ESTIMATED WHEN NOT REPORTED. GROWTH IS IN U.S. DOLLARS. REVENUE GROWTH IS MEASURED ON A YEAR-TO-YEAR BASIS FROM 1Q13 TO 1Q14.

21 Executive Summary: Future Outlook
Vendors are building out cloud, analytics and mobility portfolios and expanding low-cost headcount to position for profitable growth Key: Bubble = 1Q14 Vendor Position; Arrow = 2Q14 Expected Vendor Position According to TBR estimates, IT services’ average TTM revenue growth year-to-year will accelerate slightly from 1.1% in 1Q14 to 1.3% in 2Q14. Demand in Europe and North America is gradually improving; however, clients’ hesitancy to invest in transformational projects is hampering growth. IT services growth in 2014 will be driven by companies focusing on incorporating vertical-specific solutions into their operations to boost performance and efficiency. Vendors take advantage of the growing verticalization trend by adding vertical-specific consulting headcount as well as acquiring and developing industry-specific IP. Vendors turn to small niche acquisitions to broaden portfolios, develop unique capabilities and receive immediate revenue boosts; however, some acquisitions take time to engineer, thus challenging revenue growth.

22 Segment Views: C&SI India-centric firms are expanding consulting headcount in Europe and the U.S. to capture high-value consulting-led engagements Leaders The positive impact of CGI more that doubling its C&SI revenue stream when it purchased Logica in 3Q12 continues to project the company to the front of the pack with 48.2% year-to-year growth of TTM C&SI revenue. Infosys’ expanding sales forces in the U.S. and Europe will drive CS&I revenue growth. However, long-term sales success depends on the firm’s ability to tout its services as a unified entity rather than separate subsidiaries. Consulting, package implementation & systems integration (C&PI&SI) revenue growth decelerated to 7.3% year-to-year in 1Q14 from 12.6% and 27.6% year-to-year expansion in 4Q13 and 3Q13, respectively, due to reportedly muted discretionary spending from mature- market clients. In 1Q14 Infosys won a large-scale engagement to implement an Oracle-based finance ERP transformation platform for SITA, a global air transport IT services vendor, which we expect will fuel segment sales during FY1H15. EMC ended the quarter with a year-to-year TTM growth rate of 16.4%, which was led by the shift in software license orders to subscription-based services within Pivotal. EMC is also realizing an increase in C&SI engagements driven by customer adoption of cloud-related services realized in Pivotal implementation services.

23 Segment Views: C&SI Public sector spending declines and continued hesitancy by firms to spend on transformational engagements weigh on laggards’ C&SI revenues Laggards CSC’s TTM C&SI revenue was down 12.6% year-to-year in 1Q14, as defense and civilian U.S. government agencies continued to pull back on discretionary IT project spending. TBR expects CSC’s shift to a partner-oriented consulting organization within its commercial operations will serve as a partial counterweight to expected contraction of nonoperational federal IT spend in 2014. Convergys aggressively reshaped its portfolio over the past two years to concentrate on its core customer management business. In 1Q12 the firm sold its information management business, which Convergys generated most of its C&SI revenues from, resulting in weaker C&SI capabilities and deteriorating C&SI revenues for 1Q14. TBR believes that although Convergys is focused on scaling its customer management business, evidenced by its acquisition of Stream Global, the recently acquired company will boost its exposure to C&SI, leading to a recovery in C&SI revenue growth in 2Q14.

24 Segment Views: C&SI C&SI revenue leaders leverage vertical-specific capabilities and next-generation IT expertise to consult and deliver desired business outcomes IBM GS: IBM will drive low-single-digit C&SI growth in 2014 anchored by its end-to-end solution packages, which leverage cross-service-line offerings. The newly established Interactive Experience consulting practice will help fuel service line growth as clients seek more data-driven strategy development. Accenture: The firm uses its vertical expertise and will target C-Suite executives by pairing the consulting expertise of the Accenture Strategy Growth platform with the technology capabilities of the recently formed Business Solution Group in collaboration with SAP. Fujitsu: Increased IT services spend stemming from public sectors in more mature markets in APAC enabled Fujitsu to drive solutions/SI revenue growth year-to-year in local currency during 1Q14. CGI: Adjusting for the impact of the Logica acquisition, CGI’s systems integration projects in the U.S. and Europe expanded C&SI revenue 48.2% year-to-year in 1Q14 as public and private sector engagement teams fielded additional demand. TCS: Consulting growth was driven by advisory demand around implementation and managed services, secure application developments, and the adoption of cloud, analytics and social media. Cognizant: Cognizant continues to invest in cloud, analytics and mobility offerings to address growing demand for transformational IT solutions, led by domain-specific consulting. TBR believes Cognizant will leverage its “Code Halo” thought leadership approach to build mindshare around its business intelligence (BI) and analytics strategy consulting services.

25 Segment Views: C&SI To overcome hesitancy, vendors provide narrow, niche C&SI solutions as a stepping stone for larger future engagements with clients Key M&As 1Q14 Company TBR Insights Xerox/ Smart Data Consulting Xerox acquired Smart Data to expand its e-discovery capabilities and consulting services. The firm’s consulting focus and e-discovery managed services will help fill gaps in Xerox’s Litigation Services portfolio. Portfolio and Go-to-Market Changes Demand for C&SI will be driven by system integration services as clients seek to transform infrastructures. Firms will look to leverage expertise to capture C&SI in other verticals to help broaden pipelines. Consulting revenues will be driven by digital engagements in cloud, mobility, security, social media and analytics as clients look to modernize their infrastructure, especially in regions such as North America and Europe. Key Deals 1Q14 Company TBR Insights Accenture/ Government of Canary Islands Accenture will deliver technology services and management consulting to modernize the client’s judicial information system and improve information sharing. IBM/ Bank of China IBM provided end-to-end consulting and implementation services to aid the Bank of China in the development and launch of a new global online banking platform that coordinates and centralizes customer information from the bank’s 30 countries. Capgemini/ HEMA In an ongoing collaboration with HEMA, Capgemini will provide IT services including business consulting, SAP application management, application development, e-commerce hosting and ITO services. Trends and Outlook Vendors will look to fuel growth in the C&SI segment by focusing on disruptive and innovative solutions such as cloud, big data and analytics, mobility and security. Xerox took restructuring actions in April to sharpen the strategic focus of its HR consultancy, splitting Buck Consultants’ retirement business into two separate divisions, Corporate Solutions and Trustee Services. David Piltz, a veteran of Buck Consultants, will run Buck Trustee Services, and John Deacon, recruited from Helm Godfrey, will lead Buck Corporate Solutions. 25

26 Segment Views: ITO Vendors are developing cloud-based ITO offerings — replacing traditional engagements with lower-revenue-stream deals, but at a higher margin Leaders EMC’s ITO TTM year-to-year revenue growth of 41.8% was driven by the company’s converged infrastructure capabilities within VCE Vblocks, which enables customers to harness the power of on-premises IaaS. Solutions such as EMC Unified Infrastructure Manager for VCE Vblock Systems provide customers with life cycle management and integrated compliance services. Laggards Pricing pressures in IT and telecommunications services coupled with strict profitability criteria for new business and cancellation of unprofitable deals negatively impacted T-Systems’ ITO revenue growth. T-Systems continues to focus on higher-growth opportunities such as cloud instead of traditional IT systems management. In April the firm sold its subsidiary Individual Desktop Solutions GmbH (IDS), which provides on-site desktop services and solutions, to the Aurelius group.

27 Segment Views: ITO ITO revenue and growth leaders are transitioning their ITO sales capabilities to capture more small deals IBM GS: IBM continues to expand SoftLayer to capture large-scale engagements that counter ITO runoff. In 1Q14 IBM committed $1 billion to develop PaaS and hybrid cloud infrastructure to support cloud-based applications and environments. HP Services: Smaller, more tactical and frequent cloud deals replace large-scale transformations, eroding traditional revenues but improving profitability. HP reported double-digit growth in cloud-related revenue in 1Q14 due to the wider adoption of cloud. Fujitsu: In March Fujitsu developed advanced cloud optimization services that enable end users to automate services and more efficiently manage operations. Capita: In 1Q14 Capita fully integrated IT managed services vendor Northgate Managed Services, which it had purchased in 1Q13, under the name of Capita Managed IT Services (CMITS), impacting the spike in ITO revenue growth. We expect the subsidiary to become Capita’s key ITO revenue contributor and will grow revenues at a pace mirroring or surpassing corporate growth because demand from regional clients for data center managed services is on the rise. EMC Services: EMC relies on the federation and its partner program, which provides EMC customers with partners’ “as a Service” offerings, to continue to drive EMC Services’ revenue growth. HCLT: HCLT maintains double-digit year-to-year ITO expansion by capitalizing on ITO vendor churn in the U.S., Europe and Australia. The firm recently won a cloud contract with a telecom client in the Middle East for SaaS and IaaS.

28 Segment Views: ITO Capital investments, M&As and alliances will expand as vendors look to build capabilities in cloud to supplement ITO revenues Key M&As 1Q14 Company TBR Insights TCS/ Mitsubishi TCS merged TCS Japan with Mitsubishi’s IT Frontier subsidiary, generating a combined $600 million in annual revenue. With 51% ownership, TCS will maintain control of the merger, which will expand TCS’ footprint in Japan and add 1,400 employees from IT Frontier for a total of 2,400 employees in the country. Portfolio and Go-to-Market Changes Capital investments, acquisitions and strategic partnerships will remain a key point for global vendors as they attempt to build out their capabilities in cloud and offset declining revenues in their traditional ITO business. In addition to IBM’s announced $1.2 billion investment in cloud data centers, the firm recently acquired Database as a Service (DBaaS) provider Cloudant and SaaS vendor Silverpop to enhance its cloud-based application offerings. Vendors are reorganizing portfolios around high-growth managed service offerings such as cloud, specifically in IaaS and in regions such as France and North America. CSC will leverage its BizCloud and managed security services to reduce pricing pressures in ITO. Vendors will also bundle ITO with C&SI, AO and BPO offerings to differentiate from peers as traditional ITO services progressively become commoditized. Key Deals 1Q14 Company TBR Insights Infosys/ UL Infosys modernized and transformed UL’s technology infrastructure, uniting disparate business units, technology operations and platforms in a connected structure. Wipro/ Carillion Plc. Wipro will deliver ITO, AO and BPO services to the U.K.-based construction services company through the integrated transformation and outsourcing deal. TCS/ Cargill TCS was chosen by the U.S. firm to act as an outsourcing partner for IT operations, which will impact 900 employees at Cargill. As part of the deal some of these employees will transfer to TCS. Trends and Outlook Vendors will strengthen their positions by integrating new capabilities in cloud, security and mobility to exploit the increasing demand for cost-reducing digital solutions. Migration of clients from traditional ITO to cloud architectures will continue to impact revenues through Vendors will selectively engage in partnerships to optimize ITO offerings as cloud continues to revolutionize the segment. 28

29 Segment Views: BPO BPO leaders are expanding their vertical-specific offerings, while laggards struggle with price competitiveness due to a lack of low-cost headcount Leaders Cognizant continues to develop industry expertise within its global delivery model to enhance its domain expertise while still leveraging its global delivery capabilities to provide services that are cost-competitive against IBM and Accenture. We expect Cognizant will leverage its rapidly expanding footprint in the Philippines to capture BPO opportunities in the U.S. healthcare vertical. Laggards HP’s TTM BPO revenue declined 13.4% year-to-year, partly due to account runoffs and the industry shift to a la carte adoption of Business Process as a Service (BPaaS) cloud solutions, driving down traditional BPO opportunities and shrinking the length and size of contracts.

30 Segment Views: BPO BPO leaders build scale through acquisitions and platforms for quick delivery and drive revenue expansion by adding analytics to increase value Xerox: Xerox continued to dominate in BPO despite the runoff of its government student loan business, which slowed its growth. Xerox’s acquisition of Invoco will help grow BPO in Europe in 1H14. Accenture: Accenture will benefit from the acquisitions of Europe-based ClientHouse and Evopro Group, which targeted capabilities in cloud and embedded software and will transform labor-intensive BPO to BPaaS offerings. Capita: Capita continues to win new business by leveraging M&As that add industry-specific BPO services. In 1Q14 Capita acquired U.K.-based residential mortgage administration services vendor Crown Mortgage Management, which we believe will expand Capita’s offerings within the commercial sector’s financial services vertical. Cognizant: Cognizant leverages Horizon 2 and large-scale, vertical-specific deals in BPO, generating approximately 20% of the firm’s total sales through deals that package BPO with consulting, AO and ITO. The firm also builds platform-based BusinessCloud solutions to enrich its BPO offerings. TCS: TCS supports nonlinear growth in BPO by leveraging partnerships such as the one with Microsoft Business Solutions to expand industry-specific, platform-based BPaaS offerings. New offerings from the Digital Software and Solutions Group will augment its other vertical solutions. Infosys: Infosys will expand and leverage its portfolio of cloud-based BPO platforms such as DigitizeEdge to support opportunities in high-growth verticals and markets. Infosys’ deal with Orange Business Services showcases its expanding reach in the communications vertical within continental Europe.

31 Segment Views: BPO BPO portfolios will be augmented by acquisitions and alliances in high-growth areas such as mobility, cloud and big data Key M&As 1Q14 Company TBR Insights Xerox/ ISG Holdings Xerox’s purchase of ISG Holdings adds 700 people and vertical-specific BPO capabilities for the insurance and commercial healthcare industries, building out the firm’s higher-margin vertical services. Portfolio and Go-to-Market Changes Vendors will continue to seek tuck-in acquisitions that will enhance their BPO offerings and help differentiate against peers. Xerox’s acquisitions provide it with vertical-specific capabilities in the insurance and commercial healthcare industry (ISG Holdings) as well as the legal services segment (Smart Data Consulting), which will position the firm to improve its margins through increased sales of higher-margin vertical-specific offerings, specifically in the BPO segment. Firms will expand core BPO (horizontal — F&A, HR, etc.) and industry-specific BPO and increase focus on vertically oriented BPO to bring in analytics and platform-driven BPO. Capgemini shifted from a horizontal- and F&A-centric structure to a vertically oriented BPO structure to bring analytics- and platform-driven BPO. Key Deals 1Q14 Company TBR Insights Accenture/ Statoil ASA Accenture will provide finance and control services that will improve cost-effectiveness and expand the global organization. Infosys/ Royal Philips Infosys was awarded a five-year contract extension by the European company to continue to provide financial and actuarial services, as well as procurement solutions. TCS/ AMP AMP outsourced back-office functions to TCS to enhance efficiency and reduce employee costs. AMP will cut jobs as a result of the outsourced work. Xerox/ BBVA Compass Xerox signed an outsourcing deal with BBVA Compass to take over mortgage servicing, loan processing and various back-office tasks. Trends and Outlook Acquisitions and alliances will expand BPO portfolios in high-growth areas such as mobility, analytics, social, cloud and big data. Enterprises will augment their BPO platforms and invest in platforms to capture the growing demand in high-growth verticals such as healthcare, retail and energy in the U.S. and Europe. 31

32 Segment Views: AO AO leaders benefit from cloud application modernization capabilities, while laggards’ lack of low-cost resources hurt their competitiveness Leaders SAP Services will transition to a strategic advisory role to differentiate itself by focusing on providing outcomes to its customers. Application development services will remain a core driver of the company’s AO revenue as it tailors offerings to customers’ industry- or role-specific needs through codevelopment efforts. SAP leverages its Co-Innovation Labs (COILs) to collaborate with partners on industry-specific solutions. Laggards BT remains challenged in the AO segment due to India-based competitors such as Wipro and HCLT, which have flooded the European market, taking market share from Europe-based vendors such as Capgemini, T-Systems and Atos. The India-based companies can provide low-cost solutions by comparison.

33 Segment Views: AO Leading AO vendors are ramping up alliances and developing cloud and vertical-specific AO offerings to bolster their portfolios Accenture: Competition within the application services market and clients’ shifts toward multisourcing contracts have pressured pricing, forcing Accenture to increase use of its Global Delivery Network. The firm will continue to bundle AO with C&SI and ITO. TCS: Applications consolidation and rationalization are driving opportunities in AO. Development and management of mobile applications will remain a main focus of TCS. Infosys: Infosys will strengthen key partnerships with Microsoft, SAP and Oracle to capture end-to-end applications engagements as clients move enterprise workloads to cloud environments. Infosys was employed to deploy Oracle Business Suite and integrate a Strategic Financial Systems system for global technology airline company SITA, enabling it to improve operational efficiency. SAP: SAP Custom Development drives SAP’s AO revenue as the company helps customers streamline the application development process. SAP is interested in expanding in the financial services industry, customizing SAP for Banking to meet banks’ specific needs while providing seamless integration with existing SAP applications. Cognizant: The firm benefits from clients seeking to reduce IT costs and increase flexibility by outsourcing applications management. The fastest BusinessCloud platform builds on Cognizant’s AO strengths by providing clients with instant access to the firm’s testing resources. Genpact: Through its strategy to concentrate on select verticals such as banking, financial services and insurance (BFSI), healthcare and retail, Genpact leverages its institutional domain expertise to deliver industry-focused application and database managed services to accelerate AO growth.

34 Segment Views: AO AO providers will expand revenue pipelines by offering end-to-end solutions that bundle AO with C&SI and ITO services Key Deals 4Q13 Company TBR Insights TCS/ Qantas This contract is part of a larger deal awarded to IBM in which TCS will provide application, transformation and maintenance solutions for Qantas. Over time the contract value will be reduced, and 200 employees will be transferred to IBM. Atos/ LCH.Clearnet Atos will provide systems integration, managed services, application hosting, and application and production management. IBM/ BP IBM was selected by BP to provide application management and integration services for the firm’s global enterprise systems as well as provide service desk support for BP’s employees across the Americas and Europe. Accenture/ Tryg Accenture will provide application and maintenance services for the client’s noncore insurance applications such as finance and accounting (F&A), CRM and Web solutions that support Denmark and Norway operations. Infosys/ Lansforsakringar AB Infosys provides development and management support services for the client’s application infrastructure. Portfolio and Go-to-Market Changes Application modernization will be a primary growth driver in 2014 as demand continues to increase from enterprises looking to migrate applications to the cloud, to cut IT costs and allow for outsourcing management for enterprise applications. TBR anticipates cloud opportunities will help companies broaden revenue streams in 2014 as firms increasingly adopt SaaS applications, in turn weakening demand for traditional AO services. Vendors such as Capgemini, Xerox, Fujitsu and Wipro will win repeat business and augment value by bundling ITO, BPO and C&SI with AO into end-to-end solutions to generate revenues. Trends and Outlook Application consolidation and rationalization will help drive revenue opportunities in AO. Vendors will seek partnerships to couple solutions and services to provide clients end-to-end cloud application solutions. Infosys will strengthen key partnerships with Microsoft, SAP and Oracle to capture end-to-end applications engagements as clients move enterprise workloads to cloud environments. 34

35 Geographic Views: Americas
Americas revenue growth leaders leverage vertical-specific expertise to win engagements in healthcare and financial services Leaders The U.S. healthcare and financial services industries continue to generate opportunities for Cognizant, though hesitant spending due in part to recent regulatory shifts caused North America year-to-year revenue growth to decelerate compared to 4Q13 and 1Q13. We believe Cognizant’s acquisition of Itaas, Inc. will enable the firm to broaden its vertical reach in the U.S. to the cable industry. In North America, Genpact expands its onshore sales and delivery presence and targets underpenetrated verticals such as capital markets and healthcare with solutions that aid with regulatory compliance and process transformation. EXL has recently won a transformation project that embeds analytics technology with a U.S. bank. We expect EXL to continue to leverage its industry-specific solutions to differentiate in the marketplace, including successfully deploying EXL Landa’s CareRadius medical management suite for two leading BlueCross BlueShield health plans.

36 Geographic Views: Americas
Constrained public sector spending in the Americas negatively affected revenue growth laggards Laggards CSC derives approximately one-third of its revenue from its North American Public Sector segment, making up roughly half of its Americas business. CSC will continue to be a laggard in Americas revenue through due to continued headwinds in the federal IT sector. TBR estimates HP Services experienced a 6.9% year-to-year revenue decline in the Americas in 1Q14 despite winning large deals with DMDC and the Colorado Department of Health Care Policy and Financing, and a high-profile win with the U.S. Department of Homeland Security. We believe HP’s embrace of OpenStack will aid the company in rebounding within the Americas to improve interoperability of what were previously disparate customer infrastructures. IBM invests in niche IP-focused acquisitions in the U.S. to bolster the company’s cloud portfolio and entice legacy infrastructure services clients to become cloud clients. The firm recently acquired Massachusetts-based DBaaS provider Cloudant and Atlanta-based marketing automation vendor Silverpop.

37 Geographic Views: Americas
Leaders are leveraging vertical-specific capabilities and expertise in cloud-based services to drive revenue growth IBM GS: IBM’s Americas performance will hinge on the firm’s success in the cloud market space. It continues to bet big on its cloud capabilities. In 1Q14 the firm announced plans to open cloud data centers in Washington, D.C.; Toronto, Dallas and Mexico City, among other global locations, as part of its SoftLayer expansion. HP Services: HP’s growth in the healthcare industry will continue, driven by demand for HP’s healthcare solutions. HP won a $116 million contract to support the implementation of a new Medicaid management system for the Colorado Department of Health Care Policy and Financing. Accenture: TBR expects the firm will utilize the managed service contract to improve as a lever to pursue payer and provider opportunities in Canada, where patient demand for access to electronic health records is on the rise. Genpact: The acquisition of healthcare IT services firm Jawood in 1Q13 continued to boost Genpact’s TTM Americas revenue growth in 1Q14 as the company leverages cross-selling opportunities within its expanded client base. Cognizant: Cognizant continues to build onshore delivery resources in the U.S. to drive Americas growth. Following the firm’s 4Q13 announcement of plans to hire 10,000 U.S. employees over the next three years, Cognizant expanded its delivery center in Tampa, Fla., by opening a new 500-seat facility in 1Q14. TCS: TBR believes TCS’ recent onshore hiring efforts in the U.S. and Canada to offset potential visa reform are generating higher-value, longer-term signings opportunities, particularly in the BFSI and healthcare verticals.

38 Geographic Views: EMEA
EMEA revenue growth leaders make local acquisitions to inorganically improve exposure to new clients and expand revenues in the region Leaders Actively shifting its revenue mix in Europe on the heels of acquiring Europe-based Logica provided CGI with a solid platform to capture a lead position in growth and revenue. Like its India-centric peers, Cognizant continues to target opportunities in Europe, where clients are increasingly open to outsourcing. Recent consulting acquisitions position the firm well in continental European countries such as Germany and France, where language and cultural customs have made onshore, client-facing resources a prerequisite to serving those regions. WNS is benefiting from the South Africa-based Fusion Outsourcing acquisition in 2Q12. The firm expands headcount in South Africa to meet local market demand and uses its locations in the country to deliver global contracts. In the South African market the firm is doing customer service work, but identifies insurance as an area of future opportunity.

39 Geographic Views: EMEA
EMEA laggards invest in cloud, analytics and mobility offerings to capture high-value deals that encompass C&SI and outsourcing components Laggards Atos experienced growth challenges in EMEA in 1Q14, but this performance is in line with Atos’ expectations, and the growth pressures will likely remain in 2Q14. However, TBR expects Atos’ growth to gradually recover in 2H14. Atos’ investments in higher-value services with an emphasis on cloud, security and vertical specialization, largely in C&SI but also starting in ITO, will help the firm ramp up revenue growth through 2016. TBR estimates CSC’s business in Europe was down 9.8% year-to-year on a TTM basis in 1Q14 as overall demand remains soft. Early signs of expansion of IT services spending in Europe toward the end of 1Q14 indicate an improving market for CSC’s operations in the region in 2H14. Aon Hewitt’s U.K. pension consulting and administration business supports marginal EMEA growth, but demand remains weak in continental Europe. We believe the acquisition of U.K.-based consultancy Lorica Employee Benefits in March enhances Aon Hewitt’s HR consulting portfolio and removes a local competitor in one of the firm’s key markets.

40 Geographic Views: EMEA
Vendors in EMEA benefit from increasing client interest in outsourcing to reduce costs and demand for IT modernization and cloud services IBM GS: IBM GS drives revenue performance in Europe through large-scale transformation and outsourcing deals as demand grows in the region for cost reduction and transitioning to cloud and mobile IT environments. The firm also seeks to diversify EMEA revenue over the long term through “Project Lucy,” IBM’s 10-year, $100 million innovation investment initiative in Africa. Accenture: Demand for outsourcing services from budget-conscious clients in central and northern Europe supported regional sales. The firm won a five-year ADM services contract with insurance vendor Tryg and a BPO services agreement with energy firm Statoil. T-Systems: The firm transforms its portfolio to support digital innovation, but offerings such as cloud are small in revenue share and will not offset revenue declines in the firm’s core Information and Communications Technology business. CGI: The company’s TTM revenue growth in EMEA is a result of integrating U.K.-based Logica, which enhanced the firm’s capabilities, footprint and revenue in Europe. Demand for CGI’s SI and modernization services remained healthy in 1Q14, leading TBR to expect further expansion for the company in the region. Cognizant: Cognizant continues to target opportunities in Europe, where clients are opening up to outsourcing. Recent consulting acquisitions position the firm well in Germany and France, where language and cultural customs have made onshore, client-facing resources a prerequisite to serving those regions. Convergys: The acquisition of peer Stream Global in January expanded the firm’s capabilities in Europe. Rising European outsourcing spending and the Stream Global acquisition contributed to the firm’s 25.1% year-to-year TTM revenue growth in 1Q14.

41 Geographic Views: APAC
To compete with local APAC firms, vendors expand local market resources through acquisitions and increase their global delivery staff Leaders Convergys accelerated its APAC revenue growth to 27.6% in 1Q14 by leveraging an aggressive M&A strategy, evidenced by its acquisition of Datacom’s Philippines and Malaysian operations in 2Q13 as well as its purchase of Stream Global in 1Q14. We believe Convergys will continue to expand its headcount and operations in the region, leading to further growth in 2Q14. WNS made improvements to its sales team structure by expanding the team across geographies, including APAC, and verticals, strengthening industry-specific expertise. This structure better positions WNS to win business in geographies where the firm was previously underpenetrating the market. Capgemini’s emphasis on strengthening its leadership outside Europe will help diversify its global revenue. Salvador, formerly the CEO of Sogeti, became head of Capgemini in APAC and will group the company’s operations in the region into one unit to facilitate local market expansion.

42 Geographic Views: APAC
Slowing growth in China and reduced APAC public sector spending negatively impact laggards Laggards Unisys’ growth in APAC was negatively affected due to weakness in public sector spend in the region, particularly in Australia and New Zealand. Ericsson will continue to suffer from poor comparisons to 2Q13 due to network completions in Japan and lower spend on 2G in China. The scaling up of LTE deployments in China offers deployment and integration opportunities for the vendor. TBR sees an opportunity for SAP to return to growth in CY14 by capitalizing on newer partnerships, including its work with China Telecom, to galvanize revenue growth in high-opportunity countries and regions such as China. Weak demand in Japan resulted in SAP’s APAC revenue contracting in the quarter.

43 Geographic Views: APAC
Firms are investing in APAC delivery centers in Malaysia, Australia and the Philippines to offer cost-competitive IT solutions Fujitsu: Outside of its core geography in Japan, Fujitsu uses its virtualization and transformational data center services to win favor in emerging economies. The company pursues business in Australia and New Zealand in 2Q14 to diversify its existing APAC client base. IBM GS: IBM will continue to invest in its service delivery capabilities in APAC, evidenced by its new delivery center in Malaysia. IBM looks to capture multiyear deals in growth markets that are centered on cloud-centric IT modernization. Deals won in 1Q14 indicate traction in India for run-the-business and change-the-business projects. HP Services: The company expands in APAC, targeting Australia as a strategic pivot point to serving the region. In April HP opened a 130,000-square-foot Security Operations Center in Sydney, which will join HP’s U.S. and U.K. security centers. The investment in Australia follows HP’s partnership with the state of South Australia in February and helps support its desired growth in APAC. WNS: WNS relies on its service delivery capabilities in the Philippines, Sri Lanka and India to meet outsourcing demand from clients with an APAC presence. WNS has invested in centers in special economic zones in India, enabling the firm to improve its delivery capabilities. Convergys: The firm is scaling its APAC operations through M&A, evidenced by its acquisition of Datacom’s Malaysian and Philippines operations as well as its purchase of Stream Global in 1Q14. Convergys invests in APAC business to expand its presence in the region and capture demand for customer management outsourcing. Cognizant: Cognizant’s APAC revenue expansion was led by increasing demand for large-scale outsourcing engagements supporting IT modernization, including the firm’s recent application development deal with Infocomm Development Authority of Singapore.

44 Key Metrics (Revenue and Growth)
Financial Metrics Key Metrics (Revenue and Growth) Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

45 Key Metrics (Revenue and Growth)
Financial Metrics Key Metrics (Revenue and Growth) Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

46 Cost Metrics Financial Metrics
Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

47 Cost Metrics Financial Metrics
Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

48 Productivity/Resource Metrics
Financial Metrics Productivity/Resource Metrics Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

49 Productivity/Resource Metrics
Financial Metrics Productivity/Resource Metrics Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

50 Productivity/Resource Metrics
Financial Metrics Productivity/Resource Metrics Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR. TBR estimates utilization rates or uses reported utilization rates by the vendors based on their own definitions, which can vary across the vendors.

51 Productivity/Resource Metrics
Financial Metrics Productivity/Resource Metrics Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR. TBR estimates turnover rates or uses reported turnover rates by the vendors based on their own definitions, which can vary across the vendors.

52 Productivity/Resource Metrics
Financial Metrics Productivity/Resource Metrics Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

53 Productivity/Resource Metrics — Delivery
Financial Metrics Productivity/Resource Metrics — Delivery Convergys expanded its headcount 64.5% year-to-year in 1Q14 due to its acquisition of Stream Global, which added more than 42,000 employees to its operations, and the acquisition of Datacom’s Malaysian and Philippines locations, which added 1,000 employees. TBR believes Convergys will continue to expand its headcount in 2Q14 as it scales its operations as part of its ambition to become the leading customer management services provider globally. Capita continued to add resources through inorganic investments. The firm has added roughly 1,000 people since January, expanding its capabilities in fields such as IT security, residential mortgage services and legal services, and verticals such as transportation. We expect Capita will continue to scout for strategic fit discounted opportunities throughout the U.K., further expanding its resource base. In addition, the firm will pursue organic investments to strengthen its capabilities in IT managed services, as the recently launched CMITS entity announced plans to hire 400 professionals in Northern Ireland.

54 Operations/Investment Metrics
Financial Metrics Operations/Investment Metrics Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR.

55 Operations/Investment Metrics
Financial Metrics Operations/Investment Metrics *Indicates metrics for corporate parents. Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR and the firm is removed from the Operations/Investment Metrics graphs.

56 Operations/Investment Metrics
Financial Metrics Operations/Investment Metrics *Indicates metrics for corporate parents. Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR and the firm is removed from the Operations/Investment Metrics graphs.

57 Operations/Investment Metrics
Financial Metrics Operations/Investment Metrics *Indicates metrics for corporate parents. Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR and the firm is removed from the Operations/Investment Metrics graphs.

58 Operations/Investment Metrics
Financial Metrics Operations/Investment Metrics *Indicates metrics for corporate parents. Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR and the firm is removed from the Operations/Investment Metrics graphs.

59 Operations/Investment Metrics
Financial Metrics Operations/Investment Metrics *Indicates metrics for corporate parents. Note: Metrics for Dell Services are TBR estimates due to Dell's move to a private organization. As a result, Dell's performance is not scored by TBR and the firm is removed from the Operations/Investment Metrics graphs.

60 IT Services Definitions
Appendix: IT Services Segment Definitions IT Services Definitions Category TBR Definition Consulting and Systems Integration (C&SI) Business Consulting Advisory services such as strategy consulting, M&A, process improvements, change management, capacity planning, ops assessments, etc. IT Consulting Advisory services around information technology, applications portfolio optimization, package (SAP, Oracle) consulting and IT governance consulting, systems engineering and technical assistance, digital, mobile, analytics and cloud Systems Integration Processes that include planning, design, implementation and project management of a solution; these may involve development of systems and custom apps, as well as integration of enterprise packaged software (SAP, Oracle, Siebel, etc.) Outsourcing Business Process Outsourcing (BPO) BPO involves the transfer of management and execution of one or more complete business processes or entire business functions to an external service provider. This can be further segmented into HR, F&A, SCM, CRM, etc. Information Technology Outsourcing (ITO) Server, network, desktop outsourcing (either on-site or remote), cloud computing, infrastructure management, security, compliance and continuity; this can be further segmented into server and data center, network, desktop, disaster recovery, hosting, etc. Applications Outsourcing (AO) AO includes support and maintenance of enterprise applications.

61 Vendor Coverage in the 1Q14 IT Services Vendor Benchmark
Appendix: IT Services Vendor Benchmark Coverage Vendor Coverage in the 1Q14 IT Services Vendor Benchmark Accenture Aon Hewitt Atos BT Services Capgemini Capita CGI Ciber Cisco Services Cognizant Convergys CSC Dell Services EMC Services Ericsson EXL Fujitsu Genpact HCLT HP Services IBM GS Infosys Oracle Services SAP Services TCS T-Systems Unisys Wipro WNS Xerox

62 *Semiannual publication
TBR Quarterly and Semiannual Industry Coverage Computing, Storage & Devices Software Professional IT Services Networking & Mobility 12 Vendors Covered 11 Vendors Covered CA Technologies Dell Software* HP Software IBM Software Microsoft Oracle Red Hat SAP AG SAS Institute* Symantec VMware Accenture Atos Bain & Co.* Booz & Co.* Boston Consulting Group* Capgemini CGI* Cisco Services Cognizant CSC Dell Services Deloitte Consulting* Fujitsu HCL Technologies HP Services IBM Global Services Infosys McKinsey & Co.* PwC* T-Systems Tata Consultancy Services Unisys Wipro IT Services Xerox Public Sector IT Services 10 Vendors Covered Booz Allen Hamilton* CACI International* General Dynamics IS&T* L-3 Communications* Leidos* Lockheed Martin IS&GS* ManTech* Northrop Grumman IS&TS* Raytheon Intelligence, Information & Services* SAIC* Healthcare IT Services 5 Vendors Covered Accenture HITS* CSC HITS* Dell HITS* HP HITS* IBM HITS* Alcatel-Lucent Cisco Systems Ericsson Google Hewlett-Packard Telecom & Mobility* Huawei* IBM Telecom & Mobility* Juniper Networks Microsoft Telecom & Internet* Nokia Networks Samsung Networks* ZTE* 5 Enterprise Operators Covered AT&T Business Solutions* BT Global Services* Orange Business Services* Verizon Enterprise Solutions* Vodafone Enterprise Services* 6 Operators Covered AT&T T-Mobile USA Comcast* Time Warner Cable* Sprint Verizon 23 Vendors Covered Acer* HP Apple IBM Asus* Intel Dell Lenovo EMC NetApp Fujitsu Samsung* Corporate IT Buying Behavior & Satisfaction Studies Apple Enterprise Notebooks PCs* Services & Support Cisco UCS* x86-based Servers Desktops Accenture Cloud* Infosys Cloud* Amazon Web Services Microsoft Cloud* Atos Cloud* Oracle Cloud* Capgemini Cloud* Rackspace* Cognizant Cloud* CSC Cloud* SAP Cloud* Dell Cloud* ServiceNow* Deloitte Cloud* TCS Cloud* Fujitsu Cloud* Verizon Cloud* Google Cloud* Wipro Cloud* HP Cloud* Workday IBM Cloud* Cloud 23 Vendors Covered SourceIT SourceIT Business Applications 4 Segment Views Covered SourceIT Consulting and Systems Integration for Business Applications *Semiannual publication ©2014 Technology Business Research, Inc.

63 *Semiannual publication
TBR Quarterly and Semiannual Industry Benchmark Coverage Computing, Storage & Devices Professional IT Services Networking & Mobility IT Services Vendor Benchmark — Benchmark XLS Data 30 Vendors Covered Public Sector IT Services Benchmark 21 Vendors Covered Healthcare IT Services Benchmark 18 Vendors Covered Management Consulting Benchmark* 16 Vendors Covered Global Delivery Benchmark* 14 Vendors Covered Business Intelligence Services Vendor Benchmark* IT Services Addressable Market Forecast — XLS Data Telecom Vendor Telecom Vendor Benchmark — Benchmark XLS Data 11 Vendors Covered Telecom Infrastructure Services Benchmark 39 Vendors Covered Expanded Telecom Infrastructure Services Benchmark Telecom Infrastructure Services Margin Benchmark 5 Vendors Covered Telecom Infrastructure Services Global Addressable Market Forecast — XLS Data Telecom Infrastructure Services North America Addressable Market Forecast Enterprise Networking Enterprise Network Vendor Benchmark* 15 Vendors Covered Enterprise Networking Addressable Market Forecast Network Infrastructure Services Addressable Market Forecast Network Infrastructure Services Benchmark 13 Vendors Covered Operator U.S. & Canada Mobile Operator Benchmark 10 Vendors Covered Computing Devices Benchmark — Benchmark XLS Data 19 Vendors Covered Data Center Benchmark 17 Vendors Covered Data Center Addressable Market Forecast — XLS Data Devices Addressable Market Forecast Cloud Carrier Cloud Benchmark* — Benchmark XLS Data Cloud Benchmark 50 Vendors Covered Managed Private & Professional Services Cloud Benchmark* 29 Vendors Covered Cloud Components Benchmark* 11 Vendors Covered Cloud Addressable Market Forecast — XLS Data Software Software Vendor Benchmark — Benchmark XLS Data 30 Vendors Covered Business Intelligence Software Vendor Benchmark* 31 Vendors Covered Business Intelligence Addressable Market Forecast — XLS Data Customer Research Program Business Intelligence Software Customer Research* Business Intelligence Services Customer Research* Private Cloud Customer Research* Hybrid Cloud Customer Research* Professional Services Cloud Customer Research* *Semiannual publication ©2014 Technology Business Research, Inc.


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