Sourcing Market Update 2016

1. © 2016 Information Services Group, Inc. All Rights Reserved.

2. © 2016 Information Services Group, Inc. All Rights Reserved.
Harvey Gluckman
Market Update

3. © 2016 Information Services Group, Inc. All Rights Reserved 33
Recapping Past SIC Market Updates
Digital Disruption
Service Integration
Pivot to Industry Solutions
Changing Provider Landscape
2014
Automation
2013
Changing Sourcing Strategies
Global Business Services
Hybrid Data Center
2015
Think Like The Jetsons!
Rise of Bimodal IT
Operating Model Changes
Impact of Digital Enablement
Digital Services & Provider Maturity

4. © 2016 Information Services Group, Inc. All Rights Reserved 44
Recapping Past SIC Market Updates

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Digital Adoption is Accelerating
SaaS
IaaS
Legacy $26.1 $23.7 $22.3
$3.1 $3.6 $4.1
$3.5 $4.9 $6.9
2014 2015 2016E
95%
‘14-’16E
33%
-15%
% ChangeGlobal ACV $B
113%
Americas
34%
5%
51%
APAC
33%
-35%
90%
EMEA
31%
-25%

6. © 2016 Information Services Group, Inc. All Rights Reserved 66
Digital Adoption is Accelerating
Legacy 80% 74% 67%
SaaS 9% 11% 12%
IaaS 11% 15% 21%
2014 2015 2016E
Market Percentage Mix
(ACV Based)
Market Observations
 New skills are needed to manage As-A-Service
adoption and digital transformation.
 Clients lack capital to move entirely to new service
architectures for adopting broader As-A-
Service solutions.
 Incumbents are often challenged to transition from
labor-based to outcome-based models.
 Incumbents are not proactively redesigning “out
with the old, in with the new.”

7. © 2016 Information Services Group, Inc. All Rights Reserved 77
As-A-Service Market
The ISG IaaS
Market Basket
30
carrier
cloud firms
co-location
firms public cloud
infra providers
leading IaaS/PaaS
providers
550+
$100M+Co Revs
17% with
< $100MCo Revs
83% with
Across Functional
Domains
The ISG SaaS
Market Basket
leading SaaS
providers

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23%
19%
11%
11%
9%
8%
10%
7%
Vertical Industry Insights: SAAS Solutions
0%
Banking,
Financial Services
& Insurance
Manufacturing
Telco & Media
Energy
Retail & CPG
Health & Pharm
Business Services
10% 20% 30% 40% 50%
Travel &
Transportation
28%
28%
13%
20%
21%
28%
17%
10%
550+ SaaS Providers
Industry Market Share
(based on ACV ’15-’16 1H)
49%
35%
23%
28%
14%
49%
38%
23%
SaaS Providers > $50m

9. © 2016 Information Services Group, Inc. All Rights Reserved 99
Market Direction
Platform Economy
Platform-based business models will be a predominant core growth strategy within
the next three years.
Service Provider Competitive Positioning
Pure Play vs. as-a-Service Provider?
Clients will be indifferent when they want to buy outcomes and industry solutions.
Client Relationships
Ethics and trust will be heavily relied upon as digital enablement matures.
As digital adoption continues to expand, clients will continuously be in transition.
Managing relationships will become more complex.
PREDICTIONS

10. © 2016 Information Services Group, Inc. All Rights Reserved 1010
ISG Digital Enablement Framework
 65% of ISG’s transaction engagements
are RFS-led versus RFP-led.
 Companies in their 1st or 2nd generation
of Managed Services relationships are
aggressively seeking digital
enablement solutions.
Enterprise
Processes Cloud
Customer
Analytics
Collaborative
Product
Innovation
Business
Insights
Customer Experience
Product
Analytics IoT
Automation
Platforms
Access Channel
Social Media
Collaboration
@@
Customers
Suppliers
Partners
Employees

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ISG Survey Results
0%
10%
20%
30%
40%
50%
60%
70%
80%
1st Generation 2nd Generation 3rd Generation
Transactions including a digital component

12. © 2016 Information Services Group, Inc. All Rights Reserved 1212
ISG Clients: Digital Solution Composition
Cloud 72%
58%
Analytics/Social 31%
3%Robotics
19%
3%
Automation
Mobility/Social
IOT
8%Other
Internet of Things
Analytics
& Big Data
Social Media
Cloud
Mobility
Automation

13. © 2016 Information Services Group, Inc. All Rights Reserved 1313
What is Weighing Down Our Clients’ Success?
Digital Transformation
Digital Enablement  Provider experience
 Legacy complexity
 Solution complexity
 Operating model
 Transition disparity

14. © 2016 Information Services Group, Inc. All Rights Reserved 1414
Transition Performance
Delayed 4 or more months:
0%
36%
14%
50%
0%
33%
17%
All Lift & Shift Digital Projects
57%
14%
29%
0%
3%
33%
12%
* ISG Survey Response: 40% L&S, 40% Digital, 20% Projects
50%52%On Time:
Ahead of Schedule:
Delayed 1-3 months:

15. © 2016 Information Services Group, Inc. All Rights Reserved 1515
Top Reasons for Transition Delays
1-3 Month Delay
• Client experience
• Provider experience
• Client dedication
• Legacy complexity
4+ Month Delay
• Provider experience
• Client experience
• Legacy complexity
• Governance

16. © 2016 Information Services Group, Inc. All Rights Reserved 1616
Technology Led Consulting Led
Industry Solutions
Horizontal Solutions
Positioning For The Digital Economy

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