Special Report

Shaping the Battleground for

GS100
Service Providers
The recession changed several rules in global sourcing. The GS100 is a study
in how service providers withstood the shocks and adapted.

by Ed Nair

GS100-2010 www. globalservicesmedia.com GlobalServices 5

W
hen the economy buckled down into
a recession in 2008, the global out-
sourcing industry still seemed very
robust. Slowly, but surely, the im-
pact of the recession was felt by the industry dur-
ing 2009. Companies clammed up on ambitious
technology projects that required huge outlays
in investment and CIOs were forced to operate
on constrained IT budgets which largely focused
on squeezing more bang from the
bucks that were spent in the earlier
years. Spending was guided by dis- The industry put
cretion into areas that were neces-
sary to ‘keep the lights on’ and sav- up an impressive
ing costs became the driving factor
in decisions. performance in the
Outsourcing’s potential to save
costs actually helped. Service provid-
last quarter (Q409)
ers (vendors) were forced to operate
in a new environment in which they
with market’s total
got paid for business outcomes rath- contract value (TCV)
er than effort. On the BPO side, a few
of the processes related to industries reaching $24.7
directly affected by the recession or
industries directly responsible for billion, an increase
recession (like mortgage process-
ing, title management, etc.) almost of 47 percent
vanished. In other areas, where
BPO partnerships were already un-
sequentially
der way, the service providers were
tasked with delivering business outcomes at lower
cost. There were very bright spots if at all in both IT
services and BPO.
The market reached a bottom in the first half
of 2009 and then started recovering in the second
half of 2009. In fact, the industry put up an impres-
sive performance in the last quarter (Q409) with
market’s total contract value (TCV) reaching $24.7
billion, an increase of 47 percent sequentially and
8 percent year-over-year and the best quarterly
performance since the second quarter of 2008, ac-
cording to figures from TPI. However, TPI’s report
stated: “Full-year 2009 results could not overcome
the market’s weak showing during first two quar-
ters. TCV for the year declined 13
percent to $74.5 billion, its lowest
point since 2001.”
Fruits of a Crisis
A monumental crisis like a historic re-
cession has a monumental impact on
the dynamics of the industry. So did
the recession change several rules
in global sourcing which led to new
behaviors both on the clients and on
the service providers end. In 2010,
we see the permanence of these be-
haviors, which in effect is about set-
ting the ‘new agenda’ or realizing the
‘new normal’, whatever you call it.
From an efficiency point of view,
buyers have been looking at consoli-
dating the number of vendors they
have to deal with. At the same time,
buyers have also started splitting
their scope and engaging with broader set of special-
ist vendors. This trend known as multisourcing has
given access and opportunity to many mid-tier ven-
dors but it has also led to reduction in value and du-
ration of outsourcing contracts. This has led to more

The Global Services 100 Survey

Significant Sample
Participants Spread
Revenue Range % Number of Companies
$1M to $10M 12
Global Coverage $10M to $100 M 30
$100M to $1B 45
Country % Number of Companies $1B + 13
US and Canada 37
Industry Size Coverage
India 33
Category Aggregate Revenue 2009 (in $M)
China 6 $1M to $10M 55
Europe 9 $10M to $100 M 1,393
$100M to $1B 12,917
Latin America 9
$1B + 58,999
Asia 5 Total 73,364

6 GlobalServices www. globalservicesmedia.com GS100-2010

competition amongst vendors. GS100: Recognizing and Celebrating
The recession also brought into focus many is- Service Provider Excellence
sues related to contracts, SLAs, performance man- The Global Services 100 is an effort to recognize and
agement, and pricing. Price renegotiations were celebrate service provider excellence. It enlists ser-
all too common. More importantly, most vendors vice providers who possess the maturity to deliver
had to deliver under outcome-based pricing. Along high standard services in IT and BPO using the glob-
with pricing, practices about risk management and al delivery model. The GS100 service providers pos-
governance were topics of interest. sess many other attributes that lead
These areas moved from being con- to market leadership and the study
cepts to practices. Other factors not The storms they is intended to take a closer look at
related to recession like the poten- these.
tial of cloud computing and its im- braved were far more This year we had over 150 com-
pact on delivery of services, integra- panies that participated in the study
tion or convergence of IT and BPO, severe than the ones and voluntarily shared lot of quan-
M&As between service providers,
maturing of service providers from
faced by the buyers. titative and qualitative information
about their companies. The absence
Central and Eastern Europe, Latin These are the of a few Tier1 companies like Ac-
America and China, threatened to centure, IBM, H-P, and Cognizant
change the landscape of the servic- Global Services 100 amongst others is explained either
es industry. by their unwillingness to share data
companies, the list
During this entire episode, the ser- due to policy or by their unwilling-
vice provider community was both ness to put in the effort required to
resilient and adaptive. The storms of 100 companies participate. From a statistical signifi-
they braved were far more severe cance point of view, the study rep-
than the ones faced by the buyers. that will released resents relevant samples across all
These are the Global Services 100
companies, the list of 100 companies
in the last phase of categories (revenue bands) of com-
panies. Therefore, the observations
that will released in the last phase of this study remain statistically significant and
this study. conclusive. GS

8 GlobalServices www. globalservicesmedia.com GS100-2010