Trends in outsourcing and services - Stuart Ravens Ed Thomas 1 May 2014 - CGI UK
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Trends in outsourcing and services
Stuart Ravens
Ed Thomas
stuart.ravens@ovum.com
ed.thomas@ovum.com
1 May 2014
1
Global contract volume and TCV up in 2013
Despite an underwhelming fourth quarter, 2013 surpassed the
previous year in terms of both global contract volume and total
contract value (TCV).
The total number of contracts tracked by Ovum during the course of the
year was the highest since 2010.
Annual TCV was up 12% on the previous year.
The increase in contract volume was largely due to the increase in
private sector activity.
The number of contracts awarded by European enterprises was up 41%
in 2013, and the annual total was the highest since 2009.
Contract volume increased by 39% in the North American private sector,
but the number of awards was half that recorded in Europe.
2
TCV and number of deals, 2009 to 2013
160 2,000
140 1,900
Total contract value ($bn)
1,800
120
Number of deals
1,700
100 1,600
80 1,500
60 1,400
1,300
40
1,200
20 1,100
0 1,000
2009 2010 2011 2012 2013
TCV Number of deals
3
UK TCV was up 51% on the previous year
In the UK, TCV was up 51% on the previous year, hitting its highest
level since 2008. The number of contracts tracked was also up 31%.
Over half of UK TCV in 2013 was derived from the public sector.
Large central government contracts were awarded by the Cabinet Office,
the Department of Energy and Climate Change, and National Savings
and Investments.
In the private sector, there was notable activity in the insurance
industry.
In the utilities market, the likes of Centrica, DCC, Npower, SSE, and
Southern Water all awarded IT services contracts.
4
Move away from large contracts picks up pace
In recent years, the IT services industry has slowly begun to move
away from large outsourcing contracts, valued at upwards of $100m.
In the second half of 2013, this shift gathered significant momentum
among enterprises.
In the first six months of 2013, approximately three-quarters of all private
sector contracts were valued at less than $50m.
In 3Q13, this figure increased to just under 81% while, in 4Q13, 86% of
all contracts awarded by businesses were worth under $50m.
Many companies, particularly in mature markets such as the US, are
looking for more choice from vendors, in terms of how services are
delivered and priced. At the same time, technology trends such as
cloud are increasing the number of options available to clients.
5Private sector contracts by price band, 3Q12 to
4Q13
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13
≤$10m >$10m,BPO activity hit eight-year high in 2013
In 2013, the number of BPO contracts announced was the highest
since 2005.
In the UK, the number of contracts with a BPO component was the
highest ever recorded in a single year by Ovum.
Some 30% of the UK BPO contracts announced in 2013 were
awarded by public sector agencies.
For both central and local government agencies, cost reduction is the
main driver behind the decision to outsource back-office processes.
The most active private sector verticals were manufacturing and
insurance.
7Trends in outsourcing and services
Stuart Ravens
Ed Thomas
stuart.ravens@ovum.com
ed.thomas@ovum.com
1 May 2014
8IT solution area – utilities are turning to service
providers for more industry-specific work
Worldwide utilities services contracts
9While ITO still dominates, we are seeing an
uptick in both BPO and SI work
Worldwide utilities services contracts
10No mega-deals have been signed in the last two
years
2010 – 2011 worldwide utilities contracts 2012 – 2013 worldwide utilities contracts
300 300
EOn/HP
250 250
Annual Contract Value (US$m)
Annual Contract Value (US$m)
200 200
EOn/T-Systems
150 150
Hydro One/Capgemini
100 100
Centrica/HP
50 50
0 0
0 50 100 150 0 50 100 150
Contract Length (months) Contract Length (months)
11However, contracts are lengthening and values
are increasing
2010 – 2011 worldwide utilities contracts 2012 – 2013 worldwide utilities contracts
40 40
Average contract length: 43.3m Average contract length: 45.6m
Average annual value: $5.5m Average annual value: $6.3m
Average total value: $21.1m Average total value: $26.4m
30 30
20 20
10 10
0 0
0 20 40 60 80 100 120 140 0 20 40 60 80 100 120 140
12UK utilities contracts in 2013
Application services:
Centrica/Capgemini – management and support of SAP services
BPO:
Npower/Capita and TCS - call centre and back-office services.
British Gas/Itron – customer services.
Scottish Power/Itron – support electricity prepayment customers.
Data services:
Data Communications Company/CGI – support delivery of data services for smart meters.
Infrastructure services:
United Utilities/Fujitsu - infrastructure design, build, and management.
SSE/Alcatel-Lucent – network services.
Systems integration
SSE/Accenture – implementing Oracle applications.
Southern Water/TCS – deploying CRM system.
13CX dominates utility IT projects worldwide in 2014
Source: Ovum
14Innovation
“I would rank business model innovation as the single most
important challenge to utilities today. We need to get away
from the old model, where utilities sell just megawatt hours, to
one where they also sell a much more differentiated set of
products — for example, energy services, e-mobility and
generation capacities, as well as megawatt hours.”
Dr Susanne Nies, Eurelectric
“The old utility business model is dead“
Sam Laidlaw, Centrica 2010
15Transformation in supply and services 16
Transformation in customer satisfaction 17
#AskBG: social media has to be managed
carefully
18And utilities have to learn from their mistakes 19
Npower recently outsourced its entire CX
capability
RWE net loss €2.76bn for 2013 (first loss since 1949)
€5bn write-down, mainly on fossil fuel plants
Cost savings across the value chain are critical
Apart from closing or mothballing gas fired power stations, RWE
Npower in UK pursuing dramatic BPO
Onshore provider to run all frontline customer services – customer
experience from specialist providers, with financial incentives based
on customer satisfaction
All back office retail functions outsourced to India
1,500 redundancies
20Network transformation drives adoption of new
services
Past Future
Source:
EY
21European smart meter and smart grid services
contracts in 2012 and 2013
EOn Sweden/Capgemini and Ericsson – smart meter deployment; AMI data analytics
GrDF/Capgemini and Atos – System architecture design and implementation
Endesa/Accenture – smart meter data integration
British Gas/Itron – support electricity prepayment customers
Scottish Power/Itron – prepayment managed service
Data Communications Company/CGI – support delivery of data services for smart
meters
Elektrilevi/Ericsson – AMI managed service
Thames Water/Accenture – IT-OT integration pilot
22Analytics becomes the cornerstone of the digital
utility
23Summary
Unprecedented pressures are transforming the industry, the way
utilities do business, the way they interact with their customers
Technology-led innovation is at the forefront of managing this
disruption
In many cases the industry lacks the requisite skills to manage this
transition
We expect the industry to further outsource CX and elements of
smart meter/smart grid services
As data analytics matures, utilities will be faced with a global shortage
of data scientists. Analytics services will become an important growth
area in the coming years.
2
24 4Disclaimer
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(an Informa business).
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cannot be guaranteed. Please note that the findings, conclusions and
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incorrect.
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