Information Services Group, Inc. · NASDAQ:III
Information Services — Q1 2024 Earnings Presentation
25 slides from Information Services's earnings presentation, Apr 11, 2024
Slide 1: IT & Business Services Industry Update 1Q 2024
IT & Business Services Industry Update April 11, 2024 1Q 2024 HOSTED BY Rishi Jhunjhunwala Senior Vice President IIFL - Securities © 2024 Information Services Group, Inc. All Rights Reserved. Proprietary and Confidential. No part of this document may be reproduced in any form or by any electronic or
Slide 2: Three Big Thoughts
Three Big Thoughts Managed services declines on weakness in Americas. Cloud growth returns on strength from big 3 hyperscalers. AI monetization accelerates but flat IT budgets require re-prioritization of spend. 1Q24 © 2024 Information Services Group, Inc. All Rights Reserved. 2
Slide 3: Global Broader Market
Global Broader Market ACV $B Quarterly Trends 23.8 23.6 24.6 First Y/Y increase for Combined Market since 4Q22; industry remains 13.7 13.5 14.6 10.1 10.1 10.0 resilient compared to other tech sectors 1Q 4Q 1Q 1Q 4Q 1Q 1Q 4Q 1Q 23 23 24 23 23 24 23 23 24 Managed Services declines on weakness in the A
Slide 4: Managed Services ITO Results
Managed Services ITO Results Quarterly Trends ACV $B 1Q23 1Q24 ACV of $6.8B was the lowest Standalone ADM -7% 4.3 quarterly output for the ITO market in two years 7.8 6.9 6.8 ADM Bundled 1.0 Standalone ADM pulled back from 130% w/Infra record setting pace in 2023, down -2% 7% Y/Y Y/Y Data Center 0.5
Slide 5: Managed Services BPO Results
Managed Services BPO Results Quarterly Trends ACV $B 1Q23 1Q24 ACV exceeded $3B; only the fourth 1.1 Industry-Specific -6% quarter ever to surpass that level 3.2 3.2 Industry-specific BPO surpassed $1B 1% 0.8 in ACV but declined 6% 2.3 ER&D 30% Y/Y ER&D had best quarter since 2022 driven by upside i
Slide 6: Managed Services Regional Results
Managed Services Regional Results ACV $B Quarterly Trends 5.5 5.4 5.1 3.8 3.8 3.9 Americas: Down 8% Y/Y driven lower by weakness in BFSI (down 18% Y/Y); 0.9 0.9 1.0 slow start will put pressure on industry 1Q 4Q 1Q 1Q 4Q 1Q 1Q 4Q 1Q 23 23 24 23 23 24 23 23 24 EMEA: Up 3% Y/Y due to strength in BFSI
Slide 7: Industry Verticals
Industry Verticals Consumer Travel, Quarterly Business Packaged Goods Financial Healthcare Telecom Transport Trends Services & Retail Energy Services & Pharma Manufacturing & Media Leisure Combined Market 6% 5% -5% 3% 8% -6% -2% 33% Managed Services -1% -1% -14% -1% 17% -12% -33% 50%+ As-a-Service 8
Slide 8: IaaS Results
IaaS Results Quarterly Trends IaaS Y/Y ACV Growth Rate, 1Q22-1Q24 Best result for IaaS ACV since 3Q22 60% 11% Y/Y reversed trend of five 40% straight quarterly declines, which had averaged -13% Optimization cycles 20% ending + strong demand for AI Big 3 hyperscalers will start to 0% experience much
Slide 9: SaaS Results
SaaS Results Quarterly Trends SaaS Y/Y ACV Growth Rate, 1Q22-1Q24 SaaS ACV down 2% on weakness in 60% Top 10 providers HCM continues to outperform the 40% broader index Weakness in top 10 SaaS 20% vendors kept ACV flat CRM continues to struggle; six straight negative quarterly Y/Y result 0% SaaS pro
Slide 10: Price and Rate Trends
Price and Rate Trends Managed Services T&M / Project Work Annual price performance of 2-4% is now Seeing a 2%-5% increase in base rates closer to flat. across the board. Areas where unit rates are increasing are Americas and Europe are on the lower labor intensive or rely on third-party end of the r
Slide 11: AI Market Acceleration
AI Market Acceleration Key Trends Providers rapidly scaling up Service Provider AI Projects Generative AI work Accenture 1,000 Primarily project-based work in the $1M range IBM 500 $6.1B DXC 350 TTM Revenue Training hundreds of thousands Capgemini 300 of IT services employees in AI skills Cognizant
Slide 12: AI in the Enterprise
AI in the Enterprise Enterprise IT Departments Enterprise Lines of Business Service Providers Must Balance ⬤ Focus: Near-term AI enablement ⬤ Focus: Long-term revenue ⬤ Departmental constituencies: CIO and cost savings generation and IT vs. CEO and lines of business ⬤ Investment: Primarily funded ⬤
Slide 13: Global Service & Technology Provider Standouts
Global Service & Technology Provider Standouts THE ISG 15 Our ISG Contract KnowledgeBase™ is used to determine The Big 15 placements based on the annual value of commercial contracts awarded in the past 12 months The Building 15 The Breakthrough 15 The Booming 15 1Q24 © 2024 Information Services Gro
Slide 14: Service & Technology Provider Standouts – Global
Service & Technology Provider Standouts – Global The ISG Contract KnowledgeBase™ is used to determine placements based on the annual value of commercial contracts awarded in the past 12 months. The Big 15 The Building 15 The Breakthrough 15 The Booming 15 Revenues > $10B Revenues $3B-$10B Revenues $
Slide 15: Summary and Outlook
Summary and Outlook Summary Market Outlook Managed Services Macro Recap l Managed Services experienced a slight decline of 1.4% Y/Y on l Interest rate environment may remain elevated longer than weaker results in the Americas anticipated l Americas’ decline was due to BFSI; EMEA up slightly driven b
Slide 16: Thank you!
The 86 Quarterly th Thank you! © 2024 Information Services Group, Inc. All Rights Reserved.
Slide 17: Index Insider Weekly Briefing
Index Insider Weekly Briefing Subscribe to the ISG Index Insider to stay on top of what's important in the IT & Stanton Jones Alex Bakker business services industry. Delivered to your inbox every Friday from the ISG Market Lens Team. Michael Dornan Sunder Sarangan https://isg-one.com/research/isg-in
Slide 18: Appendix
Appendix © 2024 Information Services Group, Inc. All Rights Reserved.
Slide 19: Americas Broader Market Results
Americas Broader Market Results ACV $B Quarterly Trends 12.5 11.9 12.1 Combined Market down 3% Y/Y, declining for fifth straight quarter. 5.5 7.0 6.5 7.0 5.4 5.1 Managed Services down 8% Y/Y led lower by BFSI (down 18%) 1Q 4Q 1Q 1Q 4Q 1Q 1Q 4Q 1Q 23 23 24 23 23 24 23 23 24 Small Deal Malaise not pre
Slide 20: Service & Technology Provider Standouts – Americas
Service & Technology Provider Standouts – Americas The ISG Contract KnowledgeBase™ is used to determine placements based on the annual value of commercial contracts awarded in the past 12 months. The Big 15 The Building 15 The Breakthrough 15 The Booming 15 Revenues > $10B Revenues $3B-$10B Revenues
Slide 21: EMEA Broader Market Results
EMEA Broader Market Results ACV $B Quarterly Trends 7.3 7.1 7.5 Combined Market up 2.5% Y/Y, breaking a four quarter decline 3.8 3.8 3.9 3.5 3.2 3.6 which averaged -4% Managed Services up 3% Y/Y 1Q 4Q 1Q 1Q 4Q 1Q 1Q 4Q 1Q 23 23 24 23 23 24 23 23 24 • Strength in BFSI (up 5% Y/Y) • Yet another $1B+ q
Slide 22: Service & Technology Provider Standouts – EMEA
Service & Technology Provider Standouts – EMEA The ISG Contract KnowledgeBase™ is used to determine placements based on the annual value of commercial contracts awarded in the past 12 months. The Big 15 The Building 15 The Breakthrough 15 The Booming 15 Revenues > $10B Revenues $3B-$10B Revenues $1B
Slide 23: Asia Pacific Broader Market Results
Asia Pacific Broader Market Results ACV $B Quarterly Trends 5.0 4.5 Combined Market ACV broke 4.0 3.7 4.0 3.2 above the $5B level for the first 0.9 0.9 1.0 time since 2Q22 1Q 4Q 1Q 1Q 4Q 1Q 1Q 4Q 1Q Managed Services up 18% Y/Y as 23 23 24 23 23 24 23 23 24 most major geographic markets outperformed
Slide 24: Service & Technology Provider Standouts – Asia Pacific
Service & Technology Provider Standouts – Asia Pacific The ISG Contract KnowledgeBase™ is used to determine placements based on the annual value of commercial contracts awarded in the past 12 months. The Big 15 The Building 15 The Breakthrough 15 The Booming 15 Revenues > $10B Revenues $3B-$10B Reve
Slide 25: About ISG
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service
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