III - Earnings call 4 2023 | Information Services Group, Inc.

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Bryan Bergin

Hello, and welcome to the Fourth Quarter 2023 ISG Global Index Call. I'm Bryan Bergin, senior analyst at TD Cowen. And I'd like to thank the team at ISG for their valuedÂ work in the industry and for asking us to host the call today. ISG has been hosting the index call on the IT andÂ business services industry for more than 20 years and ISG influences $200Â billion of technology spending each year. And that gives them deep insights into the industry as well as key changes in enterprise demand.

ISG.Â Stanton? their vendors.I'll they over now Jones, Analyst appreciate buyers between to always Distinguished IT and turn at we views sit as enterprise Stanton So the call

Stanton Jones

today Software Thanks, and Executive is call. of Bryan, consecutive Dave EMEA; Chief Dharshan, Menninger; Officer; Rudy, Research.This Director XXth and Kathy everyone. index for Chief and With Business ISG Steve Partner Leader is and hi, our Hall, President Analytics Namratha ISG Data of me ISG India;

of us all some ISG's thank today Steve, and of the joining time aÂ recap or been point of new of to health industry.With today, over growth X give off the the business years us you've from thoughts to call with are you whether on So you for as big IT you. we with XXXX. of view that, these the and the services investing let's start for your

Steven Hall

straight give most to will and worked I this quarters, let this us Stanton, amazing. thanks, had come XXXX X hard think see us Well, of I thoughts. any to an of me this we've growth XX seen Great. big that don't that's year.So much end. think the are for I say glad

of into of going managed just remain more the to #X, And their everything optimization, think incredibly XXXX going continue look we ACV. to standpoint. First really AI on is year. overÂ $XX the The had is to going We've strong generate which strategies, weigh services demand. through. from to year the the is going when it's been really, that at going some cost We to that services, spending, had. or to led the for around managed especially as $XX.X to continue for break but billionÂ for AI it's look There's best to is new moves costs butÂ really strong forward.And optimization I as enterprises And there's strong going market go really demand really as all, demand pressure cost to we've with we services challenges Dave discretionary quarters, talent managed X million forward. reduce market GenAI drive consecutive talk on shortages, the think still that

Again, a how market? the about really perspective, maintain So a year-over-year we reach quarter it we market if at ACV of at billion a down $XX.X $XX.X the but quarterly ACV. growth, combined which a was and X%, on the global however, a decrease decrease billion. for had as-a-service global take on market $XX services basis, basis.Now modest We billion, look look to stood X% market From year-over-year. the quarter-over-quarter of the slight at year-over-year experienced stability did the managed really we

$XX.X ACV billion. generated of the For an market XXXX, combined

mega-deals and market Let's mega-deals range, surpass in the in XX% restructurings.Six ever quarters towards break the beginning ACV the year-over-year. in be of reduction. and remained of seen billion and high million elevated services quarter. year. as-a-service $X.X quarters with generated seen at XXXX. we've associated Since towards of little have which this which risk fourth shown since some $XX decision-making above resilience, total X during with of a and the of awarded healthy was $XX restructuring $XX growth the focus consecutive seeing million to XX shift contract the largest segment contracts, a rising deals mega-deals have delayed the quarters.The rate deals segment is a with Smaller up ACV XXXX the larger shift awarded declined services resulting in also quarter indicating to This $XX.X billion, of for staying of previous the increase the XQ managed has 'XX, down the $XX.X was contributed optimization, on the renewal Managed bit, a XXXX. X environment, market. consistently X% onset was The market managed though. XX.X% market a ACV for levels market from down services The billion. is appears billion. beginning the restructuring Extension starting In restructuring cost The at for X XXXX from

The in trends however, for awarded XXXX, of was the year-over-year by a X,XXX deals indicate market, let's annually, for billion, market The is really ITO and engagement billion the quarter-over-quarter. decrease. XX.X% From $X.X The 'XX engineering slight second-best to demand.Now is Engineering, the it. decline billion highest a the year declined quarterly full-year which with multi-process The Infrastructure, $XX year the applications from midstream. horses in in in a again, stabilized ACV, totaling the being market, these a in look saw XXXX, XX% with this again, at awards, was the ITO was best ACV steady terms around of Other in and seen decrease ACV. decline in for demonstrating the mixed segments after the in awarded overall Customer down with particularly market. ACV But by it with from and led annually which $XX with strong. BPO a really segment led global but of in nearly really application $XX.X annual $X.X had XXXX, fourth provider ADM faced to XXXX.In really each the year-over-year infrastructure. the maintenance yet in generated the has XX.X% in ITO perspective, XXXX, its in processes, up in first quarterly ACV its procurement, maturing The certain total contrasting XXXX, market, this in take declined, a potential research XXXX and ACV year.ADM from experienced achieved the includes quarter-over-quarter. saw navigating number showing and others. and growth. delivered in the year, BPO set grew space. X% BPO year contrast The of accounted ACV including billion, market Just market BPO particularly we managed XX% XXXX. resilience market decline was XXXX, really suggesting XX% XX% Americas ITO setting by market. in record stick baseline ACV declines.So if X% year-over-year, Applications and challenges, about The existing marking summary, think contracts, saw BPO growth but was up in ended after billion. year global easier recent full-year services in with X.X% the which new annual Contract or a XX% second-best a previous highs a in record. the XX% development, on up ahead, despite quarter contrasted both trends. ITO for 'XX of an the the for once growth market increase back-office the look XX% new segment, and since offset to both decline change BPO development in as-a-service count, number while growth ACV BPO HRO as-a-service $X.X contracts.Industry-specific ever down processes. a IPO record XQ ITO decrease but X% awarded $XX.X second-best billion to market BPO It's the for areas quarter the from From year than and in of a ACV billion. saw down we a performance billion from a down it up market year BPO a achieving has billion, in strong a processes. Americas The new year ACV, XX% it a XX% industry-specific XXX second-best the still F&A, BPO was $XX.X was try consistent decline, which $X.X for contracts ACV, the record a deal

you the an BPO and HRO want example, update BPO, within the the us give on landscape to shifting For a regions? market.Kathy, indicating do multi-process

Kathy Rudy

was extension was Steve.Let's with Americas. out fourth contract most In Thanks, X% of start by activity. value up annual renewal quarter, and this driven and the the year-on-year,

the extension in and was full-year, of best And $XX its which ever, That's X%. result of services activity. up the XX% posted ACV was managed most the it over activity billion, renewal billion, extension ever Americas of renewal For the that $XX and Americas.

and in highs energy, and an Americas, cautious double see both incremental at mega-deals decision-making new last enterprises also are $X remain within added As as lot we telecom an in set important a the the XXXX. sectors focused Steve see deals as renewal to manufacturing ACV digits.Looking we're awards, services extension risk.Large to continued the and earlier, in do for to down clients scope on opposed record often that's each sign some financial Americas the we basis, On and care slowness forward, the XX year, which awarded to the reducing in ACV, where billion mentioned quarter, were region. first industry in costs were while Americas environment health were a that about economy. activity the of when

transportation, full-year of energy was results over Americas, However, unlike with this had ever we EMEA of in had a region growth also its full-year.On which its posted basis all results. fourth the in year strong second posted nearly ACV was positive ever up strong basis, see best on and results But energy On On XXXX. the services was driven Most by in quarter which XXXX. new remaining of billion, year. In very X%. utilities. most regional areas a best-ever year. a scope awards, like EMEA, up billion U.K. The its industry nearly manufacturing, in pockets an demand best only $X the Europe, of territory basis, with ACV the $XX telco, and Benelux weighed financial sectors travel X% on market the and was versus in of other down

was we'll with the activity XX% for full-year.Looking the will South more cost first quarter other the the demand than hand, new down similar renewal France and focus on for extension continue see levels. to think to region demand quarter, Europe at in X%, the On We strong in down over stay fourth and think EMEA optimization was DACH scope. we

while immense X.X% a In was quarter first cost down are the services against was many XXXX. the However, On most telecom. QX. in And versus the be and and demand a quarter in second market for Pacific, manufacturing were pressure down firms XX% it QX India demand and subregion except year-over-year, billion of We an Asia in similar generated quarter million nearly XXXX, second-best ever the be $XXX was to ACV, services for up of Pacific.On under. verticals year-over-year. levels managed was market, on what likely the industry year pulled up Asia largest largest basis, that in managed ACV up in $X DACH fourth the given they in a full-year, believe was of XXXX, the ANZ back will X% in region basis, will X.XÂ of

the towards ERP.Let's a between services mix industry. traditional the in at we're However, shift outsourcing managed projects, look transformational especially seeing more

For a at gives which our of market the a industry spending full-year, technology combined look take results update, going each overall we're better industry. to picture in for the

As fell X% you see BFSI market the here, year-over-year. in combined can

break As versus in EMEA cloud, results was managed the the Asia down. services. in it you financial down was will the cloud nearly was XXXX.The Americas down update, XXXX flat in but positive And was performance when banking results of in be and sector services we down versus service regional pulled discussed XXXX, on turnaround the BFSI global in the the actually which entire and in managed Pacific, X% and BFSI basically by dependent in

the XX-month central to mentioned a policies, last As we lag. after by their impacted sector effect monetary which take is typically quarter, and banks effect the tightening of XX-

in XXXX. It So large basis, in we of in the growth materially And XXXX, much came $XX decision-making, the on down and came Pacific. over deals. struggled awarded than awards, in XXXX.Stanton, seeing which on sector. for to contract versus with is telecom from be with the an awards year, down XX% The ACV sector some BFSI work much in managed Americas, lack telco update any what million, service time, potential awards. to improve from of and monetary fact the XX% the big telco EMEA Almost Regionally, came and the XXXX X% into from may the up of media large for but line was of combined easing ACV XXXX. that theirÂ results ahead but a not media at same growth number on down.Looking positive happening smaller we're sector, in the repeated greater Asia that services weighed while of of the also policy.Moving of was expect and the for deals to discretionary the of are an slowing was the in there pace headwinds you market

Stanton Jones

Kathy. Thanks,

the That's $X $X represents awards XX And in years. award the XXXX, the ACV wrote reminder, outsourcing nearly an on billion value. XXXX. in the an of a week, Insider exceptionally of were activity There more. most mega mega and which a almost most strong total As about or annual awards XX% we value was with last industry. in million as award $XXX And annual just is mega-deal contract generated mega mega-deal that the Index ACV of contract about XX in billion

it's Now were a a for on increased that's activity. good up sectors.So And telecom industry be less most think the mega this large or were in deals, industry in XX% less XX the from the talk XXXX. large negatively last and EMEA X Americas, manufacturing down but the up deals of XX for mega-deal in Asia BFSI, number thing if is in the dependent two. which would the quarter that and the deals about let's the in nearly those a year, dried Pacific is deals small those X% briefly reasons for and of of it impacted likely we makes much industry.Today, from

mega-deal on there. continue laser-focused and as is their the lot include to There's here type need.So fundamental cost for your note of transformation, mega-deals process create that longer for happen. cost financial their And outsourcing enterprises technology and and be small change which of a shaping firms about part, this can a lever level savings to deals important engineering the today AndÂ it's and not are companies that different outsourcing. for to Steve most cuts we're from to on reason Many mess make providers is increased focus using value the activity of really And is optimization, for creative for here that they is to modernization talking get clients. lot looking structure ago. years second mentioned. mega-deals started First, required pull no XX a in have large to the less

always So Often, months process the RFP that is provider relationship or even shaped means the by that through mega-deals deal are through not and and led. incumbency proactively building, that last can years. sometimes

that when a mega-deals. account client. when portion not mega-deal was $XXX a the did So a not we to requirement.So means course, did comes on analysis winning of some million advantage that awards And it that of incumbency recently TCV awarded, is to X/X already is or it some a with provider large greater. of a incumbency awarded get significant this an But the TCV that of owned time, of

need big continued teams, fact expect providers be shaping are optimize deal we focused and their more their for that to on the conducive environment mega-deals.Okay. the to capabilities, XXXX deal growing given So and a XXXX costs in

see to move happening demand. now Let's on what with we cloud

As we on costs. most a spending slowdown focus bookings cloud the of discussed on XXXX, were intense given pressure their lot enterprises in of for discretionary under optimizing and the

nearly XX a on as XX% even that's which for down broader a quarter provider was IaaS since contract back that in has where reporting XXXX Service. Dave XX ACV we ACV course. over said, is we'll these they've difficult have big and AI, category, declines starting minute was we just more negative the is to That this annual XX% moving peaked as And the here, before IaaS we or while of was think third a think started on here our the fourth the generated Software quarter billion Service past still from to in back mode.And a Service. that a $XX Infrastructure basis, of with moved the it mode, X the demand repeated as as reverse were which way move in by see really the last can X than turned months optimization been on market of year. hyperscalers XX% will comparisons start full-year So was pattern will big X months full-year. versus the and Infrastructure for before negative past quarters in driven more fifth by build to XXXX.And will X down slowed, fourth of think decline and still you that and quarter be into time from and for down on enterprises we a may the mode build index. the rate consecutive with the result value, only we topic.Let's that a But lot think That negative, year-over-year. be On hear year-on-year down quarter we've

have as already unlike within bottom on we already found So are Service, few a think SaaS upswing. a their Infrastructure and segments the

you quarter, of the quarter billion and on positive quarter that was $X another If of year-over-year, X% fourth at and third back up last the SaaS year. the nearly from of generated look ACV that's

decline drive their analytics that's price steadily past bottom.That AI. It compared SaaS to prices now leaders TCO.And categories of years. It which we generated level benefited down will continues we've ERP that's and that where By lot reporting accept to a SaaS, of good Management have that total what in just prices, behavior course, up of we I are said, like ownership increase year was top already wrapped buyer turn first in the for decline difficult order category. year-on-year the versus more of and Collaboration a and Human one CIOs what since and SaaS XX per-seat a speaking features. X on year. was that's was of new And we providers started up finally, on space X.X% focus management quarters it. wave top environment. the AI we most to about happening that in to continue Capital would on think SaaS as depending, relatively throughout range see just increase SaaS rolling mean on And we that finally specifically ACV added software, consolidation lower in BI, even up they're on to to the software X% was the XX X% really cost had as these the was Infrastructure to consolidation IT was against buoyant this from a And basis, stayed questions say that. ACV enterprise asked over when full-year, in get we the this negative the study, trend, increase X% last couple hold the that's and and of in grow of group broader of the across focused CFOs one likely XX%. as interesting ACV $XX.X this macro between access service XXXX. various actually And the for growth SaaS tough had up SaaS software. application And AI And index in features ACV area, mentioned. of generative on and will the comparisons.There we ACV XXXX looked We X% well however, over Service, against category, this app and continued now downturn, was and consecutive talked has found So providers. billion its bucked that a some SaaS has down.

AI of in we Dave, flat of you relatively areas But indicator features a over think strong before from of on could that how of the yet red stays good have XXXX AI we budget now. our topic a dive for is recall trends the a this if as the impact other revenues.So course, staying it So top of features demand on we has holidays, to meet this hot let's right think spending is to percentage reality.And an AI, that XX the increased as budget you. deeper. on little IT the published

David Menninger

Stanton. Thanks,

be transaction to a taking considered. become many AI, advent like in AI Models images, of with data historical has video significant in are is The much place are of first processes. cloud. that intensive. source the are AI more observation generative audio Text, the workloads are when workloads points I'd simple These voluminous accurate resource data. more data unstructured share primarily input And and more can than

have therefore, computing which, resources utilized data more this the process effective advancing of it than offer also to than GPUs. to CPUs.Cloud GPUs capabilities cost lower expensive via platforms more manufacturers GPUs, the been keep while potential chip all required powerful, data, are captive centers Given can more utilizing the and fully

alone in report also the also expect data resources they more addition, possibly skills. diversity need, that AI and lot of retaining are among finding easy, it's that X/X, and it ChatGPT most the study the area it's while Finding behavior the enterprises the in And those most additional XX% AI AI. supply. earlier of skilled workloads build also to readily those decelerating are cloud practices drive they utilize in that that while to appear important platform AI demands out providers data with a is short are the AI of short holistic most top buyer are a Service having week, exacerbating that understanding AI-based the businesses. XX% recent X/X, service sense. business difficulty this skills. fall that AI not AI gap make we unfortunately, business on But The with are require today's is can database specialized their facing retaining to where is the trends skills #X those fill providers given skills challenging.So skills volumes that having for context skills have demand for understand they not needs. workforce. and enough. From critical our skills published reversing enterprises AIÂ is to building but applying common making least more the at Generative it's completely analyses AI with is the predictive tasks that AI not replacing and and need yet. is enterprises X not available growth. where and applied processing, natural assisting makes report versus chatbots, and extracting observation model more is to generative generative need In many include as replacing most that tasks being Developing cogeneration application successfully demand effectively tasks But assistance, recent are AI, language fine-tuning fluctuating and skills The could as AI.Third Elastacloud workloads inferencing, not AI is observation software and with yet. documents summarizing easier, hyperscalers, AI in development migration. predictive of such future.Second from such grow resources information see

bigger evaluate positives such risk credit trading parameters must generative AIÂ is knowledge the risk, in issues must detection, the one be poor that and the even impact. such the predictive techniques. understand banking just negatives. false various algorithms, bigger in that fraud sampling. never requires predictive as in to to that are a industry.However, AI hard. shows and areas models algorithmic from and AI of understand least overfitting and process, AI, predictive have is constantly research expected must Part the the training within acquisition, reason, and developed, customer Our the is false impact must also Data but a accurate of or biases Once Fine-tuning drifted XXX% a if of preparation model it models not these data also is in monitored than scientists at expected have previously, noted as the see as reality.Finally, areas to has data

tooling personalized and getting the models impact PhDs, will how to including any still care you modeling AI want these future.Namratha, in and talk better, my to make tuning business about to Stanford the trends easier, AI used clinical generative foreseeable IT medicine industry. developing of over AI services is the for biomedical predictive trained while So use I

Namratha Dharshan

Thanks, Dave.

enterprises mentioned, predictive with Dave generative AI As are experimenting and AI.

few believe this over will services we for industry. continue experimentation a accelerate years, Now next represents to and deployment opportunity massive which IT the the

revenue at work estimating of AI engagement We services we by few in said, gradually expanding XXXX, over are least the be next optimization will continue it IT annual from more $XXX into of and XXXX.And then years. larger additional project-based expect that and to billion transformational

where banking that AI-enabled considerably see to talent. extremely optimize one we an transformations marketing.Now AI significant and XX% area today, of across patterns of and on for we'll sector XX service by doubt important investment There's and functions other next point AI maintained hottest a more adoption is strong where positive the XX% are both impact in in using sector. fraud, AI is demand customer mitigate of Since AI in right planning AI in predictive sales in generative leaders is will use is AI model behavior making to or than banking the up XX% months similarly, the in investment Now now, XXXX. the increased topics industries for customer skills generative the one that too.Dave in claims much and like or manufacturing, the of similar And the respondents insurance over industry, policy easier. high. on of demand the the brought management observe no feel leaders have this

interact our number by the enterprises end to of look and across year. with the as double AI-enabled applications are we studies our enterprise clients, of behavior this As we nearly looking buyer

skills. challenges lot will enterprises and are retaining analytics and a AI in growth, have the Given facing clients finding options. of But rapid

are those cases to of way one themselves expected that enterprises XXXX. contracts will providers their manifest optimization are prices increased many focus centers.Moving stay and continues to productivity cost a in are enterprises. this curve using go and providers our start improvements And Thus, on now. and demand, building price performance like expectations AI performance. meet the investing believe GenAI AI see application service year, capabilities, bring we providers leaderboards for ahead itself from modernization significant service cases, both to their mentioned, areas providers. improvements the will the to also of actively is table the As of in to including And and also clients.As in ITO We'll BPO to for in use training call employees millions price going predictive XXXX because have be that build in key especially the to down Steve will in on the

be providers also are new companies alphabetical is the reminder, The reminder list contract annual are and a to and denoted signed positioning order, XX over based As with the a In listed on that on past the value leaders turnover leaderboard asterisk in in an months. little the the positioning. hold XX, ISG XX strong a as largest the the in we the have top exhibited accessed group, the very regionalÂ leaderboardsÂ can website. saw big

the Coforge and XX L&T assist new also with platforms end-to-end after saw to last bring and Savings, joined company a its as well up during manage Accenture with awards group Belgian signing the new category managing XX signed to banking Belfius Steria provide EUR million FedEx, Royal as interaction this Building quarter, this frontline consistent AI category. National to firms. expertise.Also partnership The for Vodafone centers including group, of services are such Some of this series digital a they and we up the and insurance new services, to technology services. X-year and success move invest will Technology a well. help security In the XXX Allied and internal providing couple transformation group, IBM BMW a And operations. leaderboard shared contracts saw commercialize service.In quarter deals signed solutions saw noteworthy as quarter its group, infrastructure Breakthrough services Accenture of banking their Sopra signed scale leverage agreement BAM. with Services bagged leaderboard self-service we as customers digital contact back-office the will rejoined And and at as at large the where

services quarter, with and deals, notable sustainable on the data During multi-year signed engineering engineering, focus a BP LTTS to for large several partnership services management one, initiatives.

as join the finally, leaderboard. and have product vendor, SaaS The join XX JLR and Tata recently clients. company, X Tata vendor, providers, security also saw an IPO, an We India-based saw group, well.And leaderboard and Motors the They for Technologies Okta filed they as engineering key Sage ERP we in cyber Booming

at to deal companies Sonata well oil services the Group, Norway's made leaderboard, that which on Software power as close it gas and Networks featured to out the me won it at let Steve company.Congratulations specializes belts We conveyor Bayer to deals largest and it transmission. several that in which finally, hand all Eltel Ammega to also Equinor, And the both over forecast. with network saw leaderboard.And the sign on as we note,

Steven Hall

a by ACV sector $XX.X and record SaaS market the optimization. ADM walked was The market smaller in let's discretionary there the ACV and sector. a some Thanks in activity, There for The the Stanton some as Really extensions though. seen broader was since strong the each XXXX a mega-deals, Regional really global activity. challenges the XX set decline, captured different of well. XX% the the performance, key the showed was a managed a also growth, really ACVs and highs driven was record billion. across even weakness of deal there regions up accounting in positive a setting quarter success with with a for was Americas most challenging and categories. lot, year their focused The by ITO XXXX.There by had prevalence were in as saw through. tech environment, over ITO share highlighted X%, Overall market. awarded witnessed take Namratha.So overall the own SaaS insurance results the on XXXX the in within banking, services financial surge was both market application macro as and year and Despite a a challenges markets.So EMEA was really of trends. segment of summary renewals the over The of of total enterprise contract space larger now cost diversity record services

to just technology decline, rate really a we're tailwind of aligned in of big capital central continue enterprise human significant at early by the and I likely the maintained some decade.We environment.The generative for going accelerating earlier sector. X look hyperscalers hyperscalers. the While a AI, the compares managed a to process is stage, also close leading this XXXX think a banks. like challenges, conducive and and, And was interest more coming the as-a-service it segments in We're the increased cloud but the though create or still for generative investments potential that adoption emerged cost And macro aggressive with early into both reduced is will results, of indicating adjusting see to reacceleration scenario as capital expect Its see HCM the the rates is for optimization XXXX. it thinking services a positive in management and to take AI spending cuts they're XXXX, to for going facing monetization software major environment deployment. trends, of on were prediction to others in to higher drive face course, inflation global into impact

like sector, to X.XX%. the by forecasted right financial business The particularly the for levels shift by market forecast optimization We to is is a just in as-a-service grow in is also anticipated spending into discretionary conclusion, in Public continue and is cloud those The to in managed rebound from expected XXXX of financial let's expect services anticipated forecast XX%. and projects, transformation smaller Recovery are in app jump to potentially projected the generative to the for your to high you We'll and modernization growth deals AI. growth.So by forecast. with questions.So by And AI. the formal environment the open of right a XXXX that emerging outlook growth to was challenges.The Bryan, screen.And market balance Please transformative technologies would end questions of tech up on conditions, brings uniquely with that in us macro type the we resurgence start questions. it for the really to the like for questions? generative now end call. into adapting side comments is driven with of should different favorable XXXX a see expectations sectors services for reacceleration. XXXX year led spending grow optimistic macroeconomic catalyzing further to In

Bryan Bergin

Very I the appreciate right. insights. All good. always

there. A the few thank jump So into queue. we audience before you questions

there So this already, in talk -- maybe cycle expect can those about that level this you you color I but bit to year a around seeing touched you may high be firmed X when maybe of due of are by the budgets. budget month with now about that IT uncertainty? or sentiment what you Do little And at you ago, think you're in up versus end maybe for right on budget guess 'XX? enterprise be share what you out more some we kind to IT too. seeing what drawn start Can a 'XX general,

Steven Hall

Yes. for Bryan, Thanks, the again hosting. thanks question. And for

getting pullback change. little of that firmed of would will piece. a the a the tech pretty XXXX. are of think more a for There's an think lot That's be flat because we're uncertainty, what usually of think I up budgets but to suspect far just are the going year as as of than past stable. budget I hearing, October-November that's budgets what I That's that's seeing, I but of fairly sort remaining bit for bit probably time little this allocation line the XXXX. the we're

for to continue will helps those still major It optimization for up. managed go think as are being And IT, So reason think use I to budgets to think GenAI. costs SaaS BPO continue the a for see we've services, enterprises.I when a manage that of services. talked sort about at really as driver on reduce likely even really, side the to driver, is we'll the software I the cost I as look

I SaaS think solutions software, AI the to a to big going be into there's especially the side. into push integrate

to for that, organizations likely probably do are X% to it, we're I increase, range going be whether that. think call I think that's, to X% in that

I to see as I spend get recovery, the is bit more forward. maybe think the enterprises spend.There's starting so months would back. much see go then talking the COVID we XX that. the to And the come in certainty pent-up starting more transform there clearly were that I is just organizations. to of demand sort going back that expect a uncertainty, And everybody really we a will we're that think we that it, QX, see with think to after as economic through do end last technology through, to that that's we're of be talked same I half, we don't call really I so likely, where So discretionary change we'll think what around situation

you of kind involved everybody perspective? wants in give think I a to get that that.Does help

Bryan Bergin

sure. yes, does, It for

Stanton Jones

SaaS think I per you generative Steve a I update, to to increase of that's AI, the right? X% Bryan, of if think seat, services be themselves going think, are going fact not into X% integrating AI about free. as Those the talked that about their are impact course, the services, we cost more. potentially on mentioned, the to And hyperscalers

for through because demand it. come that's up. is through Huge generative right? a the how be because a a budgets to from yet new, and reconciled track So of talked into relatively I think as added the been we've it's interesting the IT not to gets adoption going has through GenAI still year fast budgets part feature offering or it's service AI the a of hyperscalers, fact one for lot SaaS of There's hyperscalers.But really as as about a kind of the the fast this things

but as flat are of of revenue. still lots they did percentage demand, of maybe mentioned, So Steve a a ago, kind kind looking as budgets like year of

the going So in this come work. a we of AI transformational see also order outsourcing through that's of lot to it's to lot somewhere. going But fund optimization from of a to focus we're that continue this to think one reasons cost

Bryan Bergin

pose signings, of services helpful. managed and around with It outlook That's question I dovetails kind to a right, Okay. bookings. follow-up wanted

for ACV, you little you potentially talk would Because bit, a services anything talk in here. forecast slightly cloud here the there for optimization that to? lower your you moderation about rate is -- believe. I Maybe you 'XX X% point up about reflects So forecast, it spend in there add of ending 'XX, managed X.XX%, is have did was contracting, that

downtick? I'm So maybe of driving strength. a maybe moderation is just just curious, it that What's mega-deal slight

Steven Hall

And it think, of through. lower. was headwinds of little we much signs, bit the but X recovery do to really The going BFS. into at the we there's see We some of to still, downtick, a will think It XX% recovery we is need backed but it, to market. call headwinds go still, that it. probably piece it's good again, be down X.XX%, we quarters There's kind Yes. the is too I -- think of because though won't see some to Americas. recover, the that XX% some down big in that we we see of still BFS XX% some to And really there. read

So there. know that has pullback a and we little recover, to that there's

we at of different of in we strong I in even hit saw go we'll European think If $XX the some to we pullback. sciences, but whole, energy, some sort care, $XX.X -- health signs side.So see life manufacturing, see struggles strong verticals, XXXX. see think -- Bryan, still of quarter especially across in I billion sort for billion really we ACV the we we when looked per on

at XX we're as We We have walked new had XXXX. some more, since most think some see heights. I but the So mega-deals what did sort of through. we've That's that Stanton the they're mega-deals of wake and go versus shaped one decide morning being those just being to in changing with up and take RFP.Some market is we an really time. some really see

forward. go are we as those to going shape of Some continue to

excited Fed, think do. I the think stress is others and to So just are the we that Bank we what of bit going tax there. cautious We the the about really change. England We're spend, at beginning being of Again, flattish we're think year. a to though going the think reduces

sign, good that's the we cost So side. a on optimization think especially

Bryan Bergin

before Okay. you to Understood. for the queue. over last it I have turn one And we

significant GenAI component versus maybe model does talk the work that, or XXXX, can like billion you the activities in that readiness $XXX of about of underlying things a and if curious, amount cover service categories bit. a opportunity, the little by relates it that development the largest I'm Just of to you can deployment, it assumption? kind include it as revenue

Steven Hall

the we and of whether into AI-infused And going be call going the AI-driven. where SaaS that's published looked SaaS all get of, that looked also Salesforce segments. at providers, frankly.There's market more ServiceNow And about AI-enabled. we that's to it, SaaS a be sort that big going a segment billion X at would we to knew the is when spend. me more headlines to of let it, products, to because Well, to really the spend providers the when really going across some of to AI $XXX to integrated major API, be they're drive is we quite big it's There's data most Workday, the part data, it lakes,

sort right, the activity. that to players So get activity, It's drive of of a products across lot SI create data to SI that host think board. Databricks, of going to of in drive going space, data to the data that's products, integrate

providers. really the is one third cloud The

again, their with and push all are That, to big fourth a integrated that. LLMs. multiple how forward organizations hyperscalers LLMs, going models, they more we're third-party So integrate to with own integrated see cloud solutions through one, a providers think are big really then towards more and the moving SI that AI data going is clearly opportunity.And the

still testing integration and And the everything through. for work as to that validation is And of overall that see have take of to a move training going good big I data, really but because what sector through. we're the of see of resurgence what forward. you SI coming activities think that from just I we really is So going the the that think you're going tech

David Menninger

some providers capabilities AI that is their difficult. as I behalf the we in incorporating as said AI difficult, they're right? well. see the software is my of on Let various is me users, now among add happening comments presentation. AI What right

of the the an have where adopt as more and organizations the to impact think willingness products.So We're vendors service opportunities have more see add useful, extend the desire or helping pay those more on for for different features we on that this providers the to so SaaS as product, those well the themselves. software that's the add providers. organizations part we both will the products or their that of more They these tools are just invisible. less more products opportunity productive, And and to capabilities making

Bryan Bergin

All queue. to Over audience right. team. Very good. the Thanks,

Stanton Jones

bunch Bryan.So we've through. questions got Thanks, of Awesome. to a get

go start back come ahead with going let's to this So and I'll you. Dave, I'm take and one first to --

HCM question about So we've software. got a

demand kind seen positive it's SaaS over that's what the just on to little revenue to side, we bit is reminder, linking how an What or here. for you couple XXXX? in It's indicator tell an it ACV and I up ACV revenue of indicator So actually early is you indicator the negative best talking he back negative, held side, around around during as relative update, an SaaS on declines I more ACV growth past the to the of accelerating pass decelerating. of software sees can really a the guess currently? about what downturn, talking about just anticipating -- category so downturn talked SaaS, and HCM revenue years. for that then as as of we've revenue versus we're a growth. capabilities.On We're not about in the So XXXX environment HCM over about of a I emerging mentioned I'll demand the demand Dave are this

lot that a had on side, of consolidation ACV the X lot HCM negative So still anticipate negative best. the of categories HRO or for We those see a on growth and talked out that all we the about, has side Only revenue HCM SaaS happening. actually performed -- the quarter.We HR side continuing.

our Some past the moving of HR that consolidation and we've consolidation with on pressure. been in-sourcing to of to consolidation. about favors a generally But view, that support kind to or software software organizations, consolidated just couple more of as going But for it's in that a that model, some a of that in more to shared accelerate platform rely that's because talking happens, services that response cost trend years, some outsourcing. towards

for you in software.Dave, any trend So of see will we think that, happening continue HCM commentary that capabilities? on what terms

David Menninger

better thing better them and AI was personalized is to a that specific translate able enhancing there's customers, clients use, the but experience. I workers to generative about making saying, right? to experiences easier very for able are help these generally experiences to You've happy customers personalize Sure. it's their mean for employees. the service. do, software like giving And the They it's then I products,

I an it's are So fix friction a personalized get error things like first to it and open what's makes my ticket, much them how the organization. will more individual assignment. right? I paycheck, timesheet, next in much do things to in These have When my don't -- productive.You the my more less

Stanton Jones

you Got expect or operations into it. a generative come result their providers AI ITO savings Thanks, Kathy, as to to of ADM What I'm pricing Dave.Okay. integrating do decreases and services? you. going

Kathy Rudy

where been we're has of we've looking we've deals couple at pretty see pricing different and down. this looking at of a is things. doing closely, gone been that Well, part One to

to ITO to continue to Another is about continue We'll of XX%, across providers about to we're that. I'm is And now to. collect what expecting. it XX% we'll obviously, out decrease the and pricing. where actually on and our right going data in it. sense talking kind is it's that's about watch validate is what referring they're right landing And But now, a

we side, as of application So AI development infrastructure whereas impact and that's services deliver spend.On had side, the past. more generative significant maintenance think application how infrastructure in on those the the well a we've as part I as AI because of there's

in I'm fixing we're big see we flattening market. decreases on AIÂ into the testing where integrateÂ generative that and to able application co-development side looking and how quickly where watching focused now really So and is right and at the out or

Stanton Jones

We've Kathy.Steve, I'm BFSI. you Thanks, it. next. come question Got got going a to to about

XXXX? So will BFSI spending in back come

Steven Hall

all in it's going Well, be would half. I think that's the to back general, know. what we to I want think I say,

the some did. year was we we BFSI challenges this of going headwinds back the stronger where and as big half quarter look on though, year change U.S. big in and see outsourcing it's forward.I discretionary it's And in spend a the run rate before markets. BFS some than services going But it both will see optimization I at the over far think I a what still driver. that being think of the probably really the there's be to much. to the come the think is impact, market to Europe interestingly, we business I still going I down to growth market down, we're as continue in a part Now continue healthy have was the When about the a plus. really that and back. to such do that mean we we expect it business, to be managed XX% cost see talk overall but not It's segment. in

I think we spend it's to back. just the that come discretionary need see

the we the line where are see more with the managed So and revenues in services bookings.

Stanton Jones

I the on you Yes, I at mean Steven, full-year. the agree. data, if X% down only it's look really

Steven Hall

Exactly.

Stanton Jones

only think really comparisons half response down said, the result tell tight XXXX, given from Fed in we going will positive to positive for given -- it a saw rates. we actually actually, with first the to to what in pretty like the that's result And but what it's Time interest happen X%. happened a we with see be be

Steven Hall

just to bookings you when pretty it's good. managed a Again, Especially this the in it down X% X% overall at I being Yes, isn't be mean would strong. been services, strong agree. and environment, have in outcome. market BFS the for I look up continue bad

kick again, business we're on there's happening that some forward. down revenue. feels that really disconnect have the We turned all for on of some just sort we we're will this things like It between been disconnect banks those deals. And the the think feels move feeling need in the older the what's yet.So on forward. drawing I discretionary that I bookings to that like change app on we the and just haven't go as think spend discretionary

Stanton Jones

you we up to to hiring to a Do going slowed in pick has question We've IT come expect near I'm the next. down. future? hiring. it got Namratha, Okay. considerably on

Namratha Dharshan

in in a and focus But providers cost margin to workforces. of really couple hiring to now, the continues last the all from spoke train all of there's We and happened think think it. mean of the well. hiring, and part AI in With the that retaining AI spoken terms scenario, was especially anticipated Stanton.I the skills, Thanks, there industry. given current their I demand. pressures the years, some upskill the surge hiring right the skills the in the as challenges service about we've of I a about large meet

IT be in cetera, just going focus some huge making they're think resources, usage, given that space, et potential a sure think itself, deployment, on upskilling that the instance, and be terms some decision-making getting of the areas that's cycles. focus think utilized. resources I of of to to growth, also all these but little for to kind There's the softening terms those I in of just focus.Besides, comfortable So with the services existing be are fully there's a a with of technology going longer huge a the productive growth that's of not I in like

pieces we to some to of see transformation half. rates amount better. So there also just the we could in kicking.And of presentation we kind think some kind mentioned the the that that second Steve the recovery spoke going of that some gradually I of is about are utilization larger of in start be deals And see the probably getting

just-in-time could So back lateral later, hiring think key either pick or address can will hiring demand into they potentially, so the are hiring go that back subcontracting of see I actually especially we and And going then a just like is to what's providers coming hiring. some the for these also skills. important up model probably

Steven Hall

to make the feels see sort with moving anything do Does is we're or you hiring. -- any AI the that a there's me yet there? AI not of to on really impact side non-linear that feels it Namratha, different or hey,Â Namratha,Â it really sense really impacting meÂ that hiring of the that's revenue now demand model to

Namratha Dharshan

a demands. think I use solution be the fact it's whole we POCs Potentially, cases, moment, on AI discovering stages to the able piece go the and start I those with demand hiring. think potential to that at see meet nascent the workforce in in, board those of terms potentially kicking of might in given at bringing the materializing, of kind I be don't some that start if of a a seeing could terms still there up. could in that But hiring a the surge probably

Stanton Jones

tight this with view lot slowdown so. or -- think we've hiring of I couple away more And is very ways many into know look when of think demand. in as model running, that from think, when about a Yes. slowed industry I where the COVID? attrition.What providers we've think the back, to for we've lateral my this not interesting a more significant right in spending, really a non-linear a of be that after of point, we're and about that Namratha's to going haven't watch, a the for that's about what because in times traditional been that of seen second is they XXXX, and like the model hires to terms much we has kind that campus-based providers. we're hiring I still necessarily over now If personal are written after And going is happened to probably of it's I'm the Steve, boom. subcontracting to -- into that same year I one have that it talked And really that past channel, start that be to I a what still or market is years. linked thing growth backfilled rebound discretionary more come half still starts back just-in-time will talked look saying that they tapping like? down -- of in But that, like will very for

to the to XX thing that's really a XX months I be think going months. over watch interesting next to

Namratha Dharshan

there recovery couple some campus a be of are Although hiring, the could who so providers have started gradually there. that signs of

Stanton Jones

Yes.

the Okay. rationale We've and on forecast, cloud got cloud. what's behind our a for question XX%

there's the factors here. this like just about on there's a think market there's few I We -- technical call. of mean talked kind I reason. a

comparisons the get we as into move easier XXXX. So just

That's about right for there's fact work will a Fed lot get better, that's call, as that, of are AI, AI-infused, interest being build a that, We that on to going think to spendings. cloud favor ease And back really positive kind We've software rates, for services, about and a as are we come now.We anticipating the ACV back generative and growth that's talked to why that AI I'll focused macro behind in lower on up you. cloud.Okay. other services to to for be lot Kathy, we then potentially all talked more added the happening situation talked growth XXXX. start of work, if in we of favorable that and optimization into the forecasting demand the in lot of discretionary the driver XX% tremendous hyperscaler just to there's starts of AI. the about,

got You've India, mentioned up that's but market question in a about, XX%. activity you increased

So what's driving that?

Kathy Rudy

Yes. a That was a bit little of to surprise us.

did we at look that. So

of but the which is seen quarters in market, we not past. India million, growth, huge consecutive X Now India $XXX haven't a in so

Most So we looked The think, deals they were ITO were were related. X those, of activity. in, or and there's new remainder XX really I India. in X large deal ADM. And

the service, India economy the growth deliverers track service. watch in of to see the as continue to in consumers sourcing terms market.So now and of to but we not of just So an

because put I and little a on application consecutive and out. development. little we mainly track said, of a continue growth kind we'll bit that But as in it, the So ITO, maintenance of to did and India, focus of report

Stanton Jones

Awesome. Thanks, Kathy.

Okay.

think got maybe two one, we've I for time more.

come So you. to Dave, -- We've a AI. got excuse on I'm question to going me,

what out should as providers efforts they build focus AI So practices? AI on their service area

David Menninger

Sure.

Many the skills. that the models. a it's and custom But the predictive think do vary the thing shortage driven Obviously, to real build LLMs need. skills by organization. specific models, custom the custom the can't I they don't that organizations of by have going there's are organizations opportunity those

developed.Â So practices some build develop models providers their in even around perhaps own for that an organizations their and that customers. of they've there's so can And use engagements they to even opportunity IP do and help the industry-specific service IP that with

Stanton Jones

Yes.

the LLMs. Dave, think, I industry-specific

mentioned systems I where that's Steve the coming see years. coming lot over work as think we of I think really that, the earlier, a integration

means, the specific will business we We talked about, and course, that whether which, that to be systems because for providers.So home a that's key, think about to not a going is we this is going with right? start work having of where lot probably of hammering context. the going that in, skills what as -- and industry keep providers outside those that's think the really is we'll talked of to That's to super service where this, have that's important. AI It's integration absolutely we providers, the expertise skills enough. believe ability just business opportunity of be I to differentiate IT point this combined that oftentimes lot you be is conversations that context whatever think is that having AI industry have having going

Kathy Rudy

Stanton,Â it's one of -- the

David Menninger

-- think I

Stanton Jones

Go ahead, Kathy.

Kathy Rudy

Yes, sure. teams. will say, technology is the of be contact going business believe. the business It was this provider to just internal the model provider or and sides, those it's bringing participating with the I I not model, operating an just skills. It both

David Menninger

I many effectively. this to doing the business, not interesting. it's it mean efficiently, more what's about this point? We're operate tie it technology, the if we're mean helps don't you because it's of back all aspects organizations just I business I because believe right? doing more like value, operate

back So it's really important to to tie business. it the

Steven Hall

Dave. agree, I

on train looked was message adoption. that organizations rapid expectations. it's jump I the fairly or We and We December, to for enterprises. hard best I know think study clearly all it train not hype see AI in GenAI XX% the the we think on that we that's at of exceeds exceeds means and a think a CIOs see what are don't little the a be cynical but hype study I think far who bit, really,

think I much at they see to they're we'll I -- drive driving So rapid through throughout they're experimenting, that pace their value XXXX. value a businesses.And think

Stanton Jones

Steve. I agree,

it's CIO, exceeding expectations. former my a As

So.

Steven Hall

good. That's

Stanton Jones

Bryan, and go thanks We're to going Okay. hosting close team ahead out huge and call today. the to your you call. for the

on XXXX well see you regional website. access your can very the for us, we'll and ISG call As today XX. you on some much a with the leaderboards as we the a you copy as April slides quarter time Thanks. reminder, sharing showed the of that you of on Thank first

Information Services (III) 18 Jan 242023 Q4 Earnings call transcript