Magic Quadrant for SAP Application Management Service Providers, Worldwide

Gartner evaluates service providers on their ability to execute and their completeness of vision in regard to worldwide SAP application management services. SAP application management services are defined as:

• All ongoing SAP application services provided as part of a multiyear-based agreement and managed against defined quality metrics.
• It includes:
  • All ongoing activities related to application development, implementation, integration, testing, maintenance and support (functional and/or technical), and help desk services delivered within the scope of a multiyear application services agreement.
• It excludes:
  • All business-process-outsourcing-related activities.
  • All project-related activities and assets without follow-up ongoing management responsibilities. These are covered by application implementation services.
  • All middleware and infrastructure activities and assets. These are application operations services.

We include SAP applications according to their primary product line:

• SAP application products (SAP Applications):
  • SCM, ERP, CRM, BI/Analytics, Mobility
  • All other SAP solutions will be required to be consolidated under "Other." This also includes PLM and SRM

We further evaluate the providers against:

• The capability to deliver a comprehensive set of SAP application management services (see below for Gartner's definition of "comprehensive") across the SAP product line
• The insights across industries for SAP application management services decisions
• The investments in industry-specific offerings
• The insights and investments in the SAP application product line

Comprehensive in this respect means:

• A distinct offering, consistent from a services component (what is included, roles and responsibilities, service metrics and levels, terms and conditions, pricing model) and delivery perspective across all industries for general services. These can also be specific per industry where applicable, in combination with a consistent internal delivery structure across all countries where such services are provided (through best practice processes, tools, technology and people).
• A consolidated set of distinct offerings to address industry-specific demand or cross-industry demand, where the set can be logically recognized as an integrated offering.

Gartner evaluates service providers on their ability to execute and their completeness of vision. Evaluation is informed by:

• A detailed survey addressing the provider's global SAP application management capabilities, covering revenue, staffing, geographic capabilities per SAP application platform, industry and process assets, partnerships, joint initiatives, investments and other relevant information. This provides us with numeric and qualitative data allowing us to compare providers and analyze them against the inclusion criteria.
• A detailed vendor briefing with each provider addressing the provider's capabilities in a format chosen by them, but at least addressing the inclusion criteria. Each briefing comprised material that the provider had prepared for and was discussed during a telephone conference.
• A detailed reference client list for each provider whereby all relevant information was provided regarding services, scope, type of engagement, included services and technologies, project description, executed work and delivered benefits.
• Of the 206 provided reference clients, 160 completed an online survey made up of questions regarding the services, scope, duration, size, selection criteria, good points and challenges in terms of the engagement and the provider (as well as multiple satisfaction questions), or else they provided verbal feedback in a 30-minute reference call.
• A service provider's representation of its organization through briefings, press releases, annual reports and other publicly available information, other than what was presented during the dedicated detailed briefing as described above.
• Gartner clients with whom Gartner analysts have discussions throughout the year.

For more information on Gartner's Magic Quadrant research methodology, refer to Gartner's "Resource Documents" and/or review "Magic Quadrants and MarketScopes: How Gartner Evaluates Vendors Within a Market."

Market Definition

Industries

This Magic Quadrant addresses the capabilities of the included vendors in the following 22 industries:

• Financial Services: Banking
• Financial Services: Insurance
• Financial Services: Other Financial Services
• Manufacturing: Oil and Gas, Chemicals, Process and Resource
• Manufacturing: Automotive
• Manufacturing: Aerospace and Defense
• Manufacturing: Industrial Discrete
• Manufacturing: High Tech
• Manufacturing: Consumer Goods
• Manufacturing: Other Manufacturing
• Manufacturing: Life Sciences
• Healthcare (Provider)
• Public Sector
• Communications
• Utilities and Energy
• Wholesale
• Retail
• Services
• Transportation
• Agriculture, Mining, Construction
• Education
• Not-for-Profit

Countries per Region

This Magic Quadrant will address worldwide capabilities of the included vendors in the following regions:

• North America (NAM): United States, Canada
• Latin America (LATAM): Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Panama, Peru, Uruguay, Venezuela
• Asia/Pacific and Japan (APJ): Australia, Bangladesh, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, Vietnam
• Europe, the Middle East and Africa (EMEA): Austria, Algeria, Azerbaijan, Bahrain, Belarus, Belgium, Bulgaria, Cameroon, Cote d'Ivoire, Croatia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Libya, Lithuania, Luxembourg, Morocco, Netherlands, Nigeria, Norway, Oman, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, Yemen

Full-Time Equivalents per Region

This Magic Quadrant includes references to the number of full-time equivalents (FTEs) per provider for all the SAP application services and for the SAP application management services. For the SAP application management services the FTEs are further split per region. The provided numbers represent the FTEs that are located in the respective regions and do not represent the allocated resources to clients per region. Client revenue can be consolidated in multiple ways across regions, dependent on the provider's internal account structure. FTEs can also support multiple clients in multiple regions, hence the only consistent factor is the registered base location for the FTEs.

Assets

This Magic Quadrant includes references to assets. Assets in this respect refer to industry specific (for example, retail solution, automotive solution), business process (for example, HR, finance), technology process (for example, ABAP [Advanced Business Application Programming] coding, SAP testing) or service specific (for example, implementation framework, operations framework) solutions, tools or processes. Assets are provider specific and represent the provider's intellectual property (IP) in the respective asset area.

Source: Gartner (October 2012)

Vendor Strengths and Cautions

Accenture

Accenture has more than 36,500 FTEs providing SAP application services worldwide, of which around 12,500 are involved in providing SAP application management services (with around 14% of its resources in NAM, 10% in LATAM, 20% in EMEA and 56% in APJ). Gartner estimates that Accenture generates approximately 70% of its SAP application services revenue from application implementation services and 30% from SAP application management services. Accenture services 15 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are oil and gas, consumer goods, energy and utilities, mining and construction. It should be noted that from a revenue perspective, even the smaller markets for Accenture still generate sufficient SAP application management revenue, according to estimates, to put it in first place for 11 of the industries it services.

Strengths

• Accenture offers comprehensive and mature SAP application life cycle services, with SAP application management services delivered from more than 50 Global Delivery centers around the world. In addition, Accenture's "Solution" factories offer clients shared services, creating a one-to-many model for greater efficiency and flexibility. Size matters in this respect, allowing a balanced spread and real global coverage of all SAP services for the supported industries, including among the highest amounts of — localized — industry and process assets.
• Accenture has a long-standing and strong relationship with SAP and currently has 14 dedicated Accenture Innovation Centers for SAP, focused on co-innovation with SAP, and building new offerings and providing delivery to Accenture's client base. Its strong relationship with SAP strengthens Accenture's ability to provide end-to-end SAP applications life cycle services to customers. This is supported by clients' appreciation for Accenture's thought leadership.
• Accenture has specifically created IP to deliver ongoing SAP optimization. While not distinct from its competitors, it is a strength in that it is aligned at the technology (Accenture Insight for Enterprise Systems [AIES], which provides multidimensional representations of SAP systems), process (process standardization, covering evaluation and simplification for 80 enterprise processes) and business impact levels (Business Optimization Seeker for SAP [BOSS] identifies business performance improvement potential).
• Accenture received high customer reference scores for relationship management, industry experience, business acumen and customer delivery, and the highest score for cultural fit. It should also be noted that Accenture's referenced clients represent the highest average contract value and longest contract relationships of the included vendors — most of these clients also indicated that they have extended the scope of the contract over the years.

Cautions

• Because many engagements are large scale, Accenture's size can make it difficult to maintain capabilities for its clients. Its referenced clients indicate that Accenture experiences higher than anticipated attrition, especially from India-based resources. SAP training and client environment learning efforts for new individuals are sometimes passed on to clients, rather than absorbed by Accenture.
• Even with its high number of industry and process assets, Accenture is challenged to implement its continuous improvement approach for its existing clients as, overall, its referenced clients score Accenture low for innovation in comparison to the majority of the included vendors. References believe that Accenture could do a better job of partnering with SAP to bring software advances to bear in order to deliver services more efficiently and effectively.
• While its clients recognize they receive value for money, Accenture is generally regarded as expensive, especially when continuous improvement is an added charge on top of current fees. While other providers also make separate charges for improvement, some Accenture client references cite this as a specific nuisance.

Atos

Atos has approximately 9,500 FTEs providing SAP application services worldwide, of which around 4,000 are involved in providing SAP application management services (with around 3% of its resources in NAM, 8% in LATAM, 38% in EMEA and 53% in APJ). Atos generates approximately 59% of its SAP application services revenue from application implementation services, and 41% from SAP application management services. Atos services 19 of the 22 industries included in this Magic Quadrant. Of these, the main markets for SAP application management services are manufacturing, public, and energy and utilities.

Strengths

• Atos has done well at integrating former Atos Origin and Siemens IT Solutions (SIS) SAP capabilities. The structure of its portfolio is based on extensive client interactions and has been in place since 2H11. The portfolio revolves around transformational capabilities based on a foundation of operational excellence, extending technology delivery with consulting and expanding its offshore delivery capability from a cost competitive perspective.
• Atos' strategy and its organizational and delivery structure for the NAM market is based on expanding its services portfolio to existing (large) accounts and globally structured midsize companies, with the majority of delivery support from India. This approach suits the size and capabilities of Atos in NAM and allows for sustainable services in the region.
• Atos' industry solutions approach is comparable to its competitors, but in the area of environmental, health and safety management it has created distinct sustainability solutions for the public, transport, and energy and utility markets.
• Atos clients appreciate its qualified technical resources, good cultural alignment and commitment to get the job done on time.

Cautions

• Atos improved its internal delivery model to ensure that its consulting and technical delivery capabilities were well integrated. However, in terms of the resulting industry solutions and assets, Atos is still clearly behind its major competitors. Both Atos Origin and SIS did not have strong consulting capabilities compared to the competition. There is still a need for investment; a view that is supported by its clients.
• While having a regional commercial approach and a global delivery approach, Atos still relies heavily on EMEA for revenue. Although Atos has integrated the Atos Origin and SIS capabilities globally, the combined capabilities still leave it challenged to compete for large deals in other regions.
• Atos has made aggressive strides in cloud with Canopy and Yunano, but both still need to deliver. In addition, Atos is investing in cloud transformation services based on Canopy and has just recently opened a High-Performance Analytical Appliance (Hana) and analytics center of excellence (COE), and signed its first SAP Hana in the cloud deal in June 2012. While these are positive investments and initial results are also positive, they are quite late and results are still limited.
• Clients primarily recommend Atos based on its technical capabilities, although they refer to the need to optimize delivery — mostly to further improve cost efficiency — and set directions for the future. This aligns with the overall challenge that Atos faces in that it needs to try and "talk the business language" of its clients.

Capgemini

Capgemini has approximately 11,500 FTEs providing SAP application services worldwide, of which around 3,500 are involved in providing SAP application management services (with around 13% of its resources in NAM, 9% in LATAM, 36% in EMEA and 43% in APJ). Capgemini generates approximately 66% of its SAP application services revenue from application implementation services, 29% from SAP application management services and 5% from other SAP-related services. Capgemini services 17 of the 22 industries included in this Magic Quadrant. Of these, the main markets for SAP application management services are consumer goods, life sciences and retail.

Strengths

• Capgemini demonstrates a strong vision and good execution capabilities through certified industry-specific end-to-end solutions, including licensing (OnePath solutions). Built mostly on its own IP and certified by SAP, the solution stack is transparent in terms of hosting (from on-premises to software as a service [SaaS]), the extent of services (up to business process outsourcing [BPO]), and pricing (up to utility pricing for all services, including licenses). Capgemini has received stronger recognition than other included vendors (through SAP's Pinnacle Awards) for its solutions and services for 2012, especially in the areas of cloud, BPO and mobility.
• Capgemini has been able to consolidate its position in Europe (where cost drives strong competition), while clearly demonstrating growth in NAM and LATAM (where the inclusion of CPM Braxis as a strong regional SAP service provider clearly improves Capgemini's capabilities). Capgemini addresses its growth markets with distinct approaches (like an overall IT outsourcing and technology focus on ERP and a sector-specific analytics focus for NAM).
• Capgemini's clients appreciate its delivery capabilities, technical expertise, work ethic and timeliness. They also appreciate the quality of references and peer connect options that Capgemini provides, which underline its status as an engaged provider. This is further supported by clients repeatedly stating that Capgemini invests in increasing value for them during the contract period. Although this does not automatically result in Capgemini implementing improvement suggestions, clients clearly appreciate the behavior itself.

Cautions

• Capgemini's OnePath vision and execution have matured over the past few years and have begun to bear fruit in 2012, but it has yet to fully integrate its approach across its entire installed base. While clients recognize that Capgemini invests in increasing value, they also score Capgemini relative low compared to the competition for optimizing services, particularly as compared to the expectations created at the beginning of the engagement or in the disconnect from consulting and implementation to delivery.
• While expanding its global capabilities, Capgemini still has much ground to cover in LATAM where the CPM Braxis capabilities are mainly located in and focused on Brazil. However, in regard to all other included vendors, it has virtually no revenue streams for APJ, nor has it strategically demonstrated any intention to expand this region as a separate SAP application management market.
• Although receiving clear recognition for its mobility solutions, Capgemini only realizes a very small portion of its SAP services revenue from mobility-based engagements, especially in comparison with the other Leaders in this Magic Quadrant. Capgemini also has the most deals in the $3 million to $6 million bracket for total contract value for application management services, though it has the least number of deals in the $10 million and above bracket, indicating a possible challenge in competing for and winning large SAP application management deals.
• Overall, Capgemini's referenced clients indicate Capgemini needs to improve its industry expertise and resourcing continuity. When implementing improvements, it requires additional management overhead from the client, and internally should better align service delivery capabilities with technology capabilities.

Ciber

Ciber has approximately 1,500 FTEs providing SAP application services worldwide, of which around 550 are involved in providing SAP application management services (with around 73% of its resources in EMEA and 27% in APJ). Ciber generates approximately 57% of its SAP application services revenue from application implementation services, and 43% from SAP application management services. Ciber services six of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are high tech, healthcare, and energy and utilities.

Strengths

• Ciber demonstrates a clear vision for the fundamental SAP applications maintenance business. It is a relatively small player, but is using its relative size as a strength, allowing it to focus on multinational midmarket clients with its All-in-One solutions for SAP application services. It is focusing on existing clients as well as clients in the growth markets of retail and professional services. Solutions are either based on Ciber IP (like Rapid Retail) or built on Rapid Deployment Solutions (RDS — for the utility industry or Hana). For the energy market, Ciber has created a rapid deployment solution itself in strategic partnership with existing energy clients, which allows for shorter sales and implementation cycles.
• Ciber has also maximized delivery flexibility for its SAP application management services. Ciber is able to support its U.S. SAP application management clients partially through its U.S. SAP application implementation staff, but mostly through remote delivery teams from India and China. This is supported by its reference clients, who appreciate Ciber's work ethic and the character of its staff, and indicate that they receive value for money.
• Ciber's reference clients rate Ciber high for its technically skilled resources, good overall project management and the ability to work very effectively with existing teams and SAP resources. This applies specifically for smaller deals and midmarket customers.

Cautions

• The downside of Ciber's relatively small size is the scale of the investments and industries it can cover. As mentioned above, Ciber only supports six industries for SAP application management services. It also has among the lowest amount of industry and process assets, and while taking a very focused and effective solution creation and innovation approach, it is limited in the global rollout capabilities of solutions in terms of support.
• Ciber still generates a relatively high percentage of revenue through efficiency focused application management engagements, with a strong focus on technology metrics. It also relies relatively heavily on staff augmentation. This is reflected in the client references, which indicate that Ciber is less effective in functional and process knowledge, and in engaging senior leadership in areas of process improvement and change management.
• Most engagements are relatively small compared to other vendors, which reflects Ciber's focus, but also reflects a concern regarding its limited capabilities to support large complex application management deals.

Cognizant

Gartner estimates that Cognizant has approximately 5,500 FTEs providing SAP application services worldwide, of which around 2,500 are involved in providing SAP application management services (with around 22% of its resources in NAM, 3% in LATAM, 6% in EMEA and 69% in APJ). Cognizant generates approximately 52% of its SAP application services revenue from application implementation services and 48% from SAP application management services. Cognizant services 17 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are oil and gas, life sciences, consumer packaged goods, retail, and professional services.

Strengths

• Although currently without any revenue or a clear strategy for LATAM, of the included vendors, Cognizant has demonstrated the highest relative growth in the SAP application services space, with 37% overall growth from 2010 to 2011. Even though this is only a snapshot in time, Cognizant is able to provide client references across the board from very large deals ($20 million plus) to very small deals (below $100,000), indicating its capability to support small to very large clients.
• Cognizant's growth is supported by its flexibility in multiple SAP application management pricing structures (capacity-based, ticket-based, application-based and user-based pricing options), where it allows clients to have one or multiple pricing strategies embedded in a single deal. Cognizant further actively promotes risk-reward-based engagements, licenses its tools, and "productizes" its industry and process IP to further provide flexibility in offerings to its clients.
• Cognizant's reference clients indicate strong satisfaction with Cognizant team members across multiple dimensions: technical expertise, strong work ethic, responsiveness, motivated with the ability to foster positive working relationships. They are also pleased with the quality, processes and timeliness of Cognizant's delivery, as well as the cost competitive approach for the high level of support received.

Cautions

• To support its growth, Cognizant leverages a partnership model more than its competitors — partially due to difficulties in attracting experienced SAP skills, visa challenges in Europe and a limited number of delivery centers. This potentially explains client concerns around the relative high levels of attrition that Cognizant demonstrates on their accounts.
• Regionally, Cognizant does not have a clear strategy for LATAM, and is also limited in its strategy for APJ. While its growth currently allows for an opportunistic strategy, in the long term a clear road map will need to demonstrate sustainable growth or, at a minimum, retained competitive parity.
• With 65% of Cognizant's SAP application management revenue coming from NA, clients looking for a strong global player in this space, with a strong global delivery footprint, may find Cognizant not yet large enough to fulfill their delivery requirements. Equally, Cognizant's strong focus on its key industries leads to a more opportunistic approach from a technology perspective in industries other than its core ones.
• Cognizant has among the fewest industry and process assets, which might explain reference client comments stating that Cognizant should be more proactive in bringing innovation and new ideas to its client deals. In this respect it should be noted that while Cognizant has made mobility one of its key investment areas and is receiving good client interest, it currently generates little SAP-related revenue in this area.

CSC

CSC has approximately 6,800 FTEs providing SAP application services worldwide, of which around 3,700 are involved in providing SAP application management services (with around 11% of its resources in NAM, 3% in LATAM, 32% in EMEA and 54% in APJ). Gartner estimates that CSC generates approximately 47% of its SAP application services revenue from application implementation services, and 53% from SAP application management services. CSC services 19 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are oil and gas, chemicals, aerospace and defense, and public.

Strengths

• CSC takes an integrated approach across consulting, implementation and management. Dependent on client maturity and capabilities, CSC deploys an evolutionary service, delivery and pricing approach. Client-based road maps are created for technology, services and pricing to match client demands at distinct moments in time. This model is globally aligned.
• CSC also invests in Hana (among others, for CRM and insurance), cloud transformation services (among others, for finance) and mobility solutions (among others, for geographic information systems). Its major investment focuses on SAP application management as a service, based on RunSAP and ITIL v3.
• In this Magic Quadrant, CSC demonstrates the most balanced coverage of the included SAP applications (SCM, ERP and CRM) and areas (BI and mobile). This is supported by the extensive list of references provided and the general feedback of these referenced clients that CSC demonstrates "wide SAP capabilities."
• CSC's clients appreciate both the consulting capabilities of CSC and its engineering background, which have led to strong technical skilled resources, delivered at a good price. Overall, CSC demonstrates a clear focus on the client relationship.

Cautions

• CSC's core focus is to build horizontal solutions integrated with industry IP. In this process, CSC is developing select industry offerings, which effectively results in the lowest number of industry solution assets of all included vendors. This is supported by referenced CSC clients who indicate the need for CSC to invest in and retain business knowledge and capabilities.
• CSC is not seen as innovative with regard to optimizing the SAP portfolio. Clients indicate that its technical skills are not seen as being supported by functional, industry or process consulting capabilities.
• While CSC's approach to SAP is clear and focused, as a company in general, CSC is in the midst of a turnaround. With a new operating model being announced in early September, organizations considering CSC must perform due diligence regarding its continued capabilities to deliver SAP application management services.

Deloitte

Deloitte has approximately 9,700 FTEs providing SAP application services worldwide, of which around 1,500 are involved in providing SAP application management services (with around 53% of its resources in NAM, 7% in LATAM, 27% in EMEA and 13% in APJ). Deloitte generates approximately 90% of its SAP application services revenue from application implementation services and 10% from SAP application management services. Deloitte services 15 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are aerospace and defense, consumer packaged goods, healthcare, energy and utilities, and the public sector.

Strengths

• Although Deloitte has strong regionally based and oriented services, for key areas like SAP services it ensures a global commitment and invests in technology, staffing, processes and services to that end. This translates into strong executive commitment to client delivery, where Deloitte specifically focuses on Fortune 1000 companies and existing clients for SAP application management services. For example, on the technology side Deloitte acquired Oco and Übermind in order to expand its analytics and mobility capabilities, resulting in 161 analytics solutions and a separate Deloitte Digital brand to address mobility in the widest sense. For cloud and on-demand services, Deloitte uses third parties to augment its own capabilities, but limits its focus to mature clients and core processes.
• Deloitte has a brand to protect in the field of talent management and prides itself on being able to attract and retain SAP skills on a global basis, supported by a low attrition rate of its Indian SAP capabilities of 14%. This is supported by Deloitte's client references who were pleased with Deloitte's depth of resources (which exhibit strong SAP knowledge) and vertical industry understanding (which offers clients the ability to solve problems and resolve issues expediently). Deloitte has also exhibited strong business process consulting skills.
• Deloitte received high customer satisfaction ratings for relationship management — it has a strong ability to work with client staff and a very positive work ethic; it responds to and resolves issues in an efficient and effective manner; and it displays an overall good competency for service delivery, as contractually promised and at a competitive price. Its clients are likely to rehire and recommend Deloitte.

Cautions

• Although Deloitte provided a decent split of references across the regions and clients appreciate its global delivery capabilities, its SAP application management services revenue is largely driven by NA, which accounts for 60% of its total. Also, the majority of the references represent SAP application management deals with a value below $1 million per year and the lowest average contract duration, potentially indicating a weaker competitive position for large and long-term SAP application management services deals.
• Even with an overall low attrition rate in India, some of Deloitte's reference clients expressed concern with Deloitte's employee retention, as they feel it is losing employees with significant technical depth and business skills. This is also a concern as Deloitte demonstrated a relatively limited amount of industry and process assets.
• Overall, Deloitte client references indicate the need for improved communication structures, both internally within Deloitte (in terms of knowledge transfer between the business and technology teams) as well as with clients (focusing on improved reporting and better communication with business users).

Fujitsu

Fujitsu has approximately 2,500 FTEs providing SAP application services worldwide, of which around 1,050 are involved in providing SAP application management services (with around 33% of its resources in NAM, 24% in EMEA and 43% in APJ). Fujitsu generates approximately 34% of its SAP application services revenue from application implementation services, 28% from SAP application management services and 38% from other SAP-related services. Fujitsu services 18 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are oil and gas, chemicals, discrete manufacturing, consumer goods, and the public sector.

Strengths

• Fujitsu continues to focus on application services in general, and SAP in particular, through standardized methodologies and industrialized technologies that integrate both third party and Fujitsu technologies under the Global Enterprise Management Services (GEMS) framework. For SAP, GEMS is expanded with Hana and mobility transformation solutions, including Fujitsu hardware and appliances.
• Fujitsu demonstrates a realistic vision with regard to increasing its SAP application services market share. It focuses on solutions for defined industries per geography (for example, healthcare for the U.K., manufacturing for Europe, real estate for Asia and logistics for NAM) in combination with its own technology IP to address the generic growth areas of Hana, mobility and cloud.
• More than most other included vendors, Fujitsu's reference clients selected Fujitsu for its technical expertise and cost of service, without expecting thought leadership, strong partnerships or dependence on references. This perpetuates a clear perception of Fujitsu as providing technical, reliable and flexible resources with a culture of, and commitment to, service excellence.

Cautions

• Fujitsu's group size and global coverage has led to wide industry coverage, yet the actual size of Fujitsu's SAP application management capabilities is relatively small in comparison to most vendors and also in relation to its overall size. This has resulted in a spread of more opportunistic deals rather than focused solution services. This is also represented in the relatively low amount of industry- and process-based assets that Fujitsu can deploy, as well as the relatively high dependency on SAP ERP-related business.
• Fujitsu is clearly improving with regard to its capabilities, especially on the technology side, yet it does not have the capabilities required to meet the needs of larger vendors in the Americas and, in general, is challenged when confronted with business-outcome-based engagements. This is also supported by Fujitsu's overall SAP deal size as well as concerns among client references regarding industry expertise.
• While viewed as a credible provider, Fujitsu's reference clients consider it to face challenges with regards innovation and delivery as contracted, which mostly relates to a perceived disconnect between sales and delivery. Although this could be the result of its continued investment in solutions at the front end, Fujitsu should improve its internal alignment.

HCL Axon

HCL Axon has approximately 6,100 FTEs providing SAP application services worldwide, of which around 2,200 are involved in providing SAP application management services (with around 17% of its resources in NAM, 5% in LATAM, 18% in EMEA and 61% in APJ). HCL Axon generates approximately 52% of its SAP application services revenue from application implementation services and 48% from SAP application management services. HCL Axon services 14 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are high tech, life sciences, and energy and utilities.

Strengths

• HCL Axon continues to expand on Axon's strong SAP heritage and has been able to increase the SAP application management revenue streams in NAM and APJ. In addition, HCL Axon has among the most balanced spread of revenue streams across the SAP product portfolio and a good spread of revenues across industries. This is realized through global aligned frameworks (MaSCoT for managed services, ASSeT for transitions and Prizm for portfolio optimization). This is combined with HCL's Unified Service Portal with a front-end dashboard and a back-end, industry-specific process repository to identify client-specific process improvements, as well as the Business Aligned IT (BAIT) framework, so as to continuously align infrastructure and applications to deliver desired business outcomes. Client references note that HCL continues to strive to succeed and often goes above and beyond the SLAs to realize business value.
• HCL Axon has improved its competitive position through the bundling of infrastructure, application and business process services (for example its Pre-Paid for Utilities [industry] solution), as well as maximizing factory-based development support and co-investments with clients to implement new technologies. HCL Axon offers flexibility with regard to contracts and pricing. It balances risk appropriately between the client and itself, which reference clients view as positive, as they do not often see this with other suppliers in outsourcing contracts.
• HCL Axon's reference clients also cite satisfaction with its employees who have a strong work ethic, work well with client staff and go the extra mile to resolve issues.

Cautions

• HCL Axon is investing in industry solutions and bundling of services. However, its industry solutions are mainly technology related.
• Although its clients indicate HCL delivers beyond expectation, at the same time they score HCL Axon relative low on innovation. This is partially due to the focus on technology-oriented solutions instead of business solutions. This is reflected by clients that indicate the need for more on-site leadership to drive the relationship forward.
• While clients generally appreciated HCL Axon employees, the consensus was that they would be even stronger if they were able to demonstrate more business knowledge next to technology expertise when dealing with business users.
• HCL Axon's transition methodology is executed successfully in general for small as well as large transitions, and is built on aggressive timelines to reduce the cost of such transitions. The approach integrates on- and off-site delivery in a seamless model. In some cases this hasn't been so successful, with clients indicating that HCL needs to improve internal communication and knowledge transfer between on- and off-shore delivery.

HP

HP has approximately 8,700 FTEs providing SAP application services worldwide, of which Gartner estimates around 4,800 are involved in providing SAP application management services (with around 33% of its resources in NAM, 2% in LATAM, 38% in EMEA and 27% in APJ). Gartner estimates that HP generates approximately 55% of its SAP application services revenue from application implementation services, and 45% from SAP application management services. HP services 12 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are automotive, discrete manufacturing, high tech, consumer goods and transportation.

Strengths

• HP has end-to-end service capabilities and a road map for commoditizing IP-based services. It has positioned its capabilities around its core technology strengths and focuses on mobility, (predictive) analytics and cloud. HP has been awarded global recognition from SAP both for Hana and RunSAP implementations. This is supported by HP reference clients that appreciate its technical expertise.
• HP demonstrates clear SAP application management revenue streams in LATAM and APJ, next to its stronger presence in NAM and EMEA. It supports this through a very low dependency on staff augmentation and a good balance between technical and business-metrics-based engagements.
• HP's account and project teams demonstrate effective contract and relationship management, highlighting its focus on expanding existing large accounts. HP's relative strength lies in the potential client base it can reach through its hardware and software businesses, besides existing services clients. In this approach, HP's reference clients appreciate the delivery teams that link effectively with client teams and an ethic focused on solving problems.
• HP is one of the few providers with in-depth experience in the core technologies underlying its offerings. Internally, it has aligned its hardware, software and services pillars in order to go-to-market with an integrated solution under the Industrialized Delivery System (IDS) banner.

Cautions

• HP's SAP application management focus and road map are heavily infrastructure and technology driven. While this is in line with HP's full services vision, it is light on industry-specific solutions. This is supported by HP reference clients, which perceive a lack of industry and consulting capabilities.
• While HP's clients recognize they receive services at a competitive unit cost, they also indicate that HP demonstrates resource quality inconsistencies. For some this resulted in delivery inefficiencies that negatively impacted the overall cost of HP's services and thereby diluted the benefits of the competitive unit cost.
• HP is currently facing major reorganizations, including executive changes. However, HP's head count reduction has not been focused on the SAP business. It is planning to grow SAP head count and capabilities faster than the market average for the next three years. Organizations considering HP must perform due diligence regarding its actual performance against this strategy.

IBM

IBM has approximately 26,500 FTEs providing SAP application services worldwide, of which Gartner estimates around 12,000 are involved in providing SAP application management services (with around 36% of its resources in NAM, 6% in LATAM, 26% in EMEA and 32% in APJ). Gartner estimates that IBM generates approximately 65% of its SAP application services revenue from application implementation services, and 35% from SAP application management services. Gartner estimates that IBM services all 22 of the industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are consumer products, life sciences, and energy and utilities.

Strengths

• IBM supports the entire SAP application services life cycle. Its strategy focuses on business transformation and combines many industry and technology assets for implementation and management services. IBM drives reusability and standardization through its Smarter ADM approach, building on its Catapult service management framework and on its optional Evergreen offering to include ongoing upgrades.
• IBM's combined strengths in business and technical consulting are helping it move from offering a basic break/fix service to transforming how clients use and maximize business benefits from its SAP applications. Examples include redefining business-to-business and business-to-consumer processes with mobile, cloud/SaaS and business process as a service, innovation-based productivity, and Smarter ADM.
• IBM's contracting practices can be very flexible during the deal negotiation and structuring stage. They tend to be based on value analysis, in order to optimize the contracting model for the client. IBM is able to support this with a competitive rate structure, especially when leveraging offshore resources. IBM indicates that its Business Value Assessment approach allows for deal structure and delivery model adjustments based on client maturity.
• IBM typically operates larger and more complex SAP environments and contracts than a number of its competitors, leveraging its experience in managing complex projects across many geographies.

Cautions

• Despite a standardized and global delivery model, some clients indicated that IBM demonstrates inconsistent execution across geographies. This relates to IBM's worldwide delivery model, which integrates IBM's location-based, nearshore and offshore resources to support any client anywhere. Some clients indicate staffing challenges regarding visas in combination with attrition for the acquired services.
• The focus on end-to-end solutions is implemented more from a technology stack perspective than from a business perspective, and is generally aimed at new clients rather than existing ones. This is reflected in clients comments that indicate IBM needs to enhance delivery in terms of staffing mix consistency (across projects) and speed of emerging technology (for example, solutions developed for infrastructure as a service and cloud) to further drive down costs and maximize client benefits.
• IBM is evolving its model toward value creation through life cycle services capabilities and delivery models that aim to create business value and innovation. However, the majority of IBM's referenced clients have an efficiency focused contract, indicating a potential challenge for IBM as it aligns sales with delivery.

Infosys

Infosys has approximately 9,250 FTEs providing SAP application services worldwide, of which Gartner estimates around 4,000 are involved in providing SAP application management services (with around 45% of its resources in NAM, 3% in LATAM, 45% in EMEA and 8% in APJ). Infosys generates approximately 62% of its SAP application services revenue from application implementation services, and 38% from SAP application management services. Infosys services 17 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are oil and gas, automotive, consumer goods, life sciences, and mining and construction.

Strengths

• Infosys has strong service delivery capabilities, which enable it to deliver against both foundational break/fix and support requirements, as well as other optimization requirements. Infosys has structured its delivery capabilities primarily into industry focused teams, supported by technology centers of excellence (more so than its Indian-heritage peers). As such, business demands lead solution and service development and delivery, for which Infosys has created distinct business process and knowledge management IP.
• Overall, Infosys demonstrates solid industry (Impact), implementation (i-SIF) and operations (Mantra) frameworks that it deploys for its SAP application services and brings to its clients. Around SAP application management Infosys invested in solutions to shift support toward more self help, portal solutions, knowledge extraction and analysis to improve delivery and client processes, as well as toward eliminating root-causes in a structured way to reduce the influx of issues). The overall capabilities are supported by client references — Infosys received the highest satisfaction scores across the included vendors.
• Infosys clients indicate that they receive value for money against attractive unit and total costs. Even though its coverage is limited in LATAM and APJ, the benefits apply on a global level — referenced clients scored Infosys exceptionally high for its geographical capabilities, with attention to overall delivery in combination with the quality of staff especially lauded resources.

Cautions

• Infosys should better communicate its overall vision for the future of SAP application management to its existing customers. Its clients recognize they receive good quality at a competitive price, but they indicate some challenges around vision, thought leadership and functional and business process capabilities. This is partially due to concerns that some clients have relating to resource turnover and subsequent issues around timely knowledge transition.
• In order to increase its competitive position in LATAM and APJ, Infosys needs to make strategic investments in capabilities in these regions. While Infosys scores high for its geographical delivery capabilities, its reference APJ clients indicate quality differences in delivery compared to the EMEA and U.S. clients. Infosys should potentially reconsider its global strategic directions to ensure a sustainable delivery model worldwide.
• While proactive in dealing with project issues, day-to-day operations and management oversight, Infosys needs to improve on bringing forward optimized solutions in existing accounts. Clients recognize that they receive value for money, but the current focus is more on an efficiency-focused delivery to decrease cost.
• Infosys is very rigorous in deploying its processes and frameworks from a commercial perspective, but it needs to ensure the continuation of those capabilities during delivery. As a consequence, some issues of service delivery and fit are worked out over time, requiring a period of transition that could be lengthy at times.

NTT Data

Note: NTT Data has been active in acquiring IT services companies and majority stakes in IT services companies over the past decade, and this activity continues today. Acquired companies Value Team, Keane, Intelligroup, Cirquent and Qunie have been consolidated into NTT Data, but were run and managed as stand-alone organizations up to 2012. In U.S., Intelligroup and Keane are among the companies that go to market under the NTT Data brand, and have done so since February 2012. Further, NTT Data has acquired a majority stake in itelligence, Extend Technologies and Business Formula. itelligence will continue to operate globally under its own brand. The SAP capabilities of all these companies have been consolidated for the purposes of this Magic Quadrant. As such, NTT Data's positioning will reflect both the combined strength of aligned and shared capabilities, as well as the inherent weaknesses of companies acting as independent providers themselves. In this report the combined entities are referred to as "NTT Data." Not included is Dimension Data, which was acquired by NTT, but is still a separate brand and a sister company to NTT Data.

NTT Data has approximately 5,500 FTEs providing SAP application services worldwide, of which around 1,500 are involved in providing SAP application management services (with around 17% of its resources in NAM, 17% in EMEA and 67% in APJ). NTT Data generates approximately 57% of its SAP application services revenue from application implementation services, 27% from SAP application management services and 16% from other SAP-related services. NTT Data services 21 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are automotive, discrete manufacturing, consumer goods, wholesale and professional services.

Strengths

• The strength of NTT's many acquisitions lies in the SAP technology and services capabilities that are core to companies like itelligence, Intelligroup, Cirquent and Keane. These acquisitions have filled out SAP application management and application hosting capabilities. The combined capabilities also include varied investment and solution capabilities in the areas of cloud, mobile and Hana as well as creating access to a variety of industry solutions.
• While not implemented across all geographies, the consolidation of capabilities follows a distinct path for branded service areas like SAP, whereby, across the regions and companies, a SAP Global One team leads the process to integrate methodologies, solutions, technology and delivery. The strength lies in the consistent approach to providing services to existing and new clients in order to benefit from consolidation for SAP under the SAP iTran (for implementations and transitions) and OME (operate, maintain, evolve) methodologies. It also allows NTT Data to support local, regional and global organizations.
• NTT Data clients indicate that it provides skilled technical resources that have the right mindset for delivery and that offer a good fit with the clients' internal organization. The fit is realized by combining NTT Data's shared services model (flexible staffing) and its COEs, which are measured through efficiency, effectiveness, risk and cost mitigation from a client perspective.

Cautions

• More than any other included vendor, NTT Data depends on SAP ERP-related services. While covering the complete SAP product portfolio and recognizing NTT Data for its ERP coverage, this also indicates that, relative to the other providers, NTT Data may find it difficult to compete for deals in the SCM and CRM areas, and especially in the BI area where it is clearly behind its peers. Overall, NTT Data has among the lowest amount of industry and process assets, which further impacts it competitive position.
• While NTT Data indicates that it supports clients ranging from the small to the very large, the provided references represent the lowest average deal size and average deal length among all included vendors.
• The back-end integration and consolidation of technologies and delivery entities across the acquired companies is a complex process. Until full consolidation occurs, separate company delivery structures will remain. This means that while the capabilities are there, the availability and ramp up of resources (people as well as technology) should not be expected immediately. This is also supported by the fact that reference clients referred to the acquired companies instead of NTT Data.
• NTT Data generates more revenue through application implementation than application management services. However, client references seem to indicate that there is a disconnect, as NTT Data scores lowest overall for assisting with change management within its engagements and in the application of its own methodologies. It also scores low for innovation and being proactive, which is supported by statements that clients expect NTT Data to bring in more SAP technology developments.

TCS

TCS has approximately 8,500 FTEs providing SAP application services worldwide, of which around 3,750 are involved in providing SAP application management services (with around 45% of its resources in NAM, 1% in LATAM, 35% in EMEA and 19% in APJ). TCS generates approximately 54% of its SAP application services revenue from application implementation services and 46% from SAP application management services. TCS services 19 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are discrete manufacturing, energy and utilities, and professional services.

Strengths

• TCS continues to expand its industry solution approach across platforms, clearly making industry demand its primary focus. From a services perspective, this leads to a transparent solution stack independent from the technology chosen. Consistency in the approach is realized through rotation of staff between industry-based delivery units and technology-based COEs, which are jointly responsible for delivery success. These joint centers support the application management delivery, which is managed by the global competency center (GCC) approach, aiming to maximize the improvement of operations. This is supported by the highest reference client scores of the included vendors for service delivery quality and thought leadership.
• TCS continues to invest in IP to support the improvement process — it has among the highest amount of industry and process assets of the involved vendors. Most of this IP is aimed at minimizing application management overhead: analyzing the level of customization tools, data migration simplification, knowledge transfer and extraction, business process repositories, and industry-specific IP. TCS's focus for this approach is to expand the wallet share of existing clients (97% of its SAP-related services revenue is realized through existing clients), rather than to go out and aggressively acquire new clients.
• TCS achieved the highest satisfaction scores across all surveyed areas. It demonstrates a strong service delivery performance supported by qualified technical, process and functional resources. Its clients especially mention the company's work ethic, in combination with the value for money they receive, and would happily expand services with TCS.

Cautions

• TCS has not yet achieved scale in its SAP offerings. It generates more than 50% of its SAP application management revenue in five industry areas (discrete manufacturing, energy and utilities, professional services, retail, and consumer packaged goods), which is disproportionate from the 14 other industry areas it supports. Clients outside these industries requiring a provider with in-depth industry capabilities need to perform proper due diligence in order to determine long-term suitability of TCS for their SAP application management services.
• While TCS demonstrates a strong application implementation capability, some of its clients indicate the need to improve the internal hand over to application management and the continuation of improvements over the contract life cycle. Although TCS only has a low attrition rate of, on average, 13%, clients indicate a clear lag between the agreed improvements and the actual execution of the improvements.
• Although it has staff in all regions, TCS clients indicate that there's an issue with regards the right staff being available locally to implement improvements. This signifies that the business and technology capabilities of the COEs and industry units are not fully embedded in the local delivery capabilities of the GCC. Furthermore, although TCS clearly aims to move its clients to business-level metrics, it currently has among the lowest revenue streams based on business metrics across the included vendors and among the highest streams based on staff augmentation.

Wipro

Gartner estimates that Wipro has approximately 8,750 FTEs providing SAP application services worldwide, of which around 3,300 are involved in providing SAP application management services (with around 39% of its resources in NAM, 3% in LATAM, 36% in EMEA and 21% in APJ). Wipro generates approximately 60% of its SAP application services revenue from application implementation services and 40% from SAP application management services. Wipro services 17 of the 22 industries covered in this Magic Quadrant. Of these, the main markets for SAP application management services are discrete manufacturing, consumer packaged goods, and energy and utilities.

Strengths

• Wipro has established a multiyear road map of services. It is based on transformational impact of technologies and market developments, and its capabilities to match the required capabilities locally, regionally and globally. While this is in itself logical, Wipro deploys the road map in close cooperation with long-term and strategic clients to maximize applicability. Wipro supports the process by extensive investments in its own infrastructure assets in its main regions (the U.S. and Europe) to enable and improve utility, cloud and hosting capabilities as well as BPO, and to gain access to potential new clients. Wipro's main SAP growth engine is the APAC region (38% from 2010 to 2011), and especially Australia.
• Wipro continues to expand the number of services and clients it supports through its Flex Delivery model, supported by its development factories and COEs. Its strength lies in the inclusion of more business and transformational capabilities beyond operational support, as well as having sufficient local staff to balance client demand with operational efficiency gains through global delivery. This is also supported by the referenced client data indicating among the highest average contract value with good global and industry spread.
• Reference clients clearly appreciate the cost competitiveness of Wipro in combination with its global delivery capabilities while meeting services at agreed levels. In regard to service delivery, Wipro's clients score its employees high on work ethic.

Cautions

• Wipro's growth strategy is sound for the U.S., continental Europe and the mature markets in APJ, but it lacks clarity on the positioning for LATAM and the emerging markets in APJ. This lack of clarity for LATAM is similar to most other included vendors.
• Although Wipro is increasing its transformational and business capabilities, these are still being built up within the Flex Delivery model. Wipro's referenced clients note that Wipro delivery staff, while dedicated, in general are reactive and have limited business knowledge. Clients would like to see Wipro improve its guidance for and support of its delivery staff, and demonstrate more proactive behavior in increasing the value add of its services.
• While already generating a large number of application implementation engagements through an outcome-based strategy, Wipro's aim for more business-level deals on the application management side has not yet paid off — this is because it has among the lowest percentage of business-metrics-based revenue. Its provided references indicate a disconnect between implementation and management deals, which suggests that clients select Wipro because of either implementation or maintenance considerations, but see limited benefits in moving implementation forward into maintenance.
• Wipro has a decent amount of industry and process assets it can deploy, yet its clients indicate that Wipro needs to ensure that common processes and methodologies are followed across their staff, especially by new team members. In relation to the perceived separation between application integration and application management, and the concerns around business knowledge, this means that assets are deployed more on a case-by-case basis than actually being embedded in the core delivery structure.

Vendors Added or Dropped

We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor appearing in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. This may be a reflection of a change in the market and, therefore, changed evaluation criteria, or a change of focus by a vendor.

Added

Not applicable, as this is a new Magic Quadrant.

Dropped

Not applicable, as this is a new Magic Quadrant.

Quantitative Criteria

• A minimum of $150 million in external revenue (estimated for fiscal year 2011) per application suite in Oracle and SAP application management services worldwide.
• Demonstrated SAP application management services revenue derived from clients in NAM, LATAM, EMEA and/or APAC. This revenue must, at the very least, be generated by and allocated to clients in three of the four regions, with at least five separate clients per region. Such clients can be global clients with subsidiaries, or local or regional clients.
• A minimum amount of allocated revenue per region, where providers need to be able to demonstrate at least three of the four regional revenue numbers below. Independent of the minimum worldwide revenue, providers must confirm that they have at least the following percentages of their global revenue in the respective regions:
  • NAM = 20%
  • EMEA = 20%
  • APJ = 10%
  • LATAM = 5%
• A minimum of 10 reference submissions, with at least two references provided per region.

Qualitative Criteria

• Overall market interest in and visibility of the provider, determined by serious consideration for selection from enterprise clients.
• Gartner analysts' interactions with enterprise buyers, which reveal interest in specific SAP application management service providers.
• Vendors are analyzed according to their breadth of capability and technical/package expertise, in combination with deep domain and process knowledge for the application management of SAP applications as defined above.

Specifically excluded are services for SAP infrastructure support or hosting.

Explicitly excluded are services related to SaaS, BPO, or independent service provider offered maintenance or software support.

Evaluation Criteria

Ability to Execute

Gartner analysts evaluate vendors on the quality and efficacy of the processes, systems, methods or procedures that enable vendor performance to be competitive, efficient and effective, and to positively impact revenue, retention and reputation. Ultimately, vendors are judged on their ability in capitalizing on their vision.

• Product/Service: Core services offered by the provider that compete in/serve the SAP applications life cycle services market. This includes current service offerings, as defined in the Market Definition section, and expressed by growth, capacity, market penetration, skills availability, breadth and depth of offering.

• Subcategories include:
  • A vendor's effective use of partnerships and alliances.
  • A vendor's end-to-end capabilities.
  • A vendor's comprehensive set of industry offerings.
  • A vendor's capabilities to deliver against business-outcome-based objectives and metrics.

• Overall Viability: (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue to invest in the service, continue offering the service and advancing the state of the art within the organization's portfolio of services.
• Sales Execution/Pricing: The vendor's capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.
• Market Responsiveness and Track Record: Ability to respond and adapt to changing competitive forces as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the provider's history of responsiveness, and the ability to quickly address changing requirements.
• Customer Experience: This criterion considers the provider's:
  • Specific client feedback on the their experience working with SAP applications life cycle services vendors
  • Demonstrated ability to deliver on key metrics that drive the overall "client experience"
• Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.

• Subcategories include:
  • Organizational and business model.
  • Applied use of methodologies, industry standards and control frameworks.
  • Global delivery model capabilities.

Source: Gartner (October 2012)

Completeness of Vision

Gartner analysts evaluate vendors on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs, and competitive forces. Ultimately, vendors are rated on their understanding of how market forces can be exploited to create opportunities for themselves and their clients.

• Market Understanding: Ability of the vendor to understand buyers' needs and translate these needs into products and services. Vendors that show the highest degree of vision listen to and understand buyers' wants and needs, and can shape or enhance those wants and needs with their added vision.

• Subcategories include:
  • A vendor's knowledge and articulation of key market direction and trends.
  • The analysis of the vendor's executive leadership (including thought leadership, continuity and operational capabilities).

• Marketing Strategy: A clear SAP services marketing strategy with a differentiated set of messages consistently communicated throughout the internal vendor organization and externalized through appropriate channels emphasizing differentiated positioning statements.
• Sales Strategy: The strategy for selling SAP application services that uses the appropriate network of direct and indirect sales, partner networking and alliance relationships that extend market reach to both prospects and the customer base.
• Offering (Product) Strategy: A vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology, and feature set as they map to current and future requirements.

• Subcategories include:
  • A vendor's strategies for partnerships and alliances
  • A vision for creating new and/or additional Oracle and/or SAP services business
  • A vendor's focus on end-to-end capabilities

• Business Model: The soundness and logic of the vendor's underlying business proposition.
• Vertical/Industry Strategy: The vendor's strategy to direct resources, skills, and offerings to meet the specific needs of individual market segments, including verticals.

• Subcategories include:
  • A vendor's strategies for partnerships and alliances
  • A vendor's comprehensive set of industry offerings

• Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.
• Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries, as appropriate for that geography and market.

Source: Gartner (October 2012)

Quadrant Descriptions

Leaders

Leaders are performing well today, and are gaining traction and mind share in the market. They have a clear vision of market direction and are actively building competencies to sustain their leadership position in the market. The Leaders in this Magic Quadrant are Accenture, Capgemini, CSC and IBM.

Challengers

Challengers execute well today for the portfolio of work selected, but they have a less-defined view of market direction. Consequently, these service providers may be the "up and comers" of the future, or they may not be aggressive and proactive enough in preparing for the future. The Challengers in this Magic Quadrant are Atos, HCL Axon, HP, Infosys and TCS.

Visionaries

Visionaries articulate important market trends and direction. However, they may not be in a position to fully deliver and consistently execute. They may need to improve their optimization of service delivery. The Visionaries in this Magic Quadrant are Ciber, Deloitte and Wipro.

Niche Players

Niche Players focus on a particular segment of the market such as vertical industry, client size, functional area (for example, human capital management, order management and others) or project complexity. Their ability to execute is limited to those focus areas and, therefore, is assessed accordingly. Their ability to innovate may be affected by this narrow focus. The Niche Players in this Magic Quadrant are Cognizant, Fujitsu and NTT Data.

This Magic Quadrant addresses the worldwide SAP application management services capabilities of vendors that meet our criteria for inclusion.

Gartner estimates that end-user spending on application outsourcing worldwide will be worth $40 billion in 2012 (see "Forecast: IT Services, 2010-2016, 3Q12 Update"). This forecast indicates growth of 0.25% for 2012, with further growth of 3.6% expected for 2013. On the other hand, Gartner's "IT Key Metrics Data 2012: Key Outsourcing Measures: Outsourcing Profiles: Multiyear" indicates that the outsourcing of application support declined from 41% in 2010 to 38% in 2011, and that only application development has seen growth, from 41% to 42% during the same period. It should be noted that in this Magic Quadrant, application development can be included in application management when development activities are embedded in multiyear engagements and are always followed by maintenance of the developed deliverables.

In practice, 2012 hasn't been much different from 2011 in terms of market drivers. Market developments reveal a continued cost focus. Contracts for SAP application management services are, on average, 4.3 years long for the included vendors (across the 160 reference clients) with an average yearly contract value of $1.4 million and average total contract value of $6.4 million. Drivers for end-user organizations to consider outsourcing SAP application management services include legacy modernization through to consolidation, rationalization and optimization of a business applications landscape. Providers commonly tend to address this through "transformational services," as buyers commonly tend to use the SAP migration as a means to refresh internal processes and prepare for business changes. However, in many cases buyers prefer, as much as possible, a "vanilla" implementation whereby they can redefine processes to minimize customizations.

In addition, buyers of SAP Applications life cycle services continue to expect, and demand, business-outcome-based services. This is clearly expanding along with the investments of SAP itself, as well as providers in industry solutions and capabilities, as they build around the next hype of cloud, analytics and mobile. All included vendors list their investments and capabilities and all indicate their partnership with SAP in these areas. Buyers can hardly get around the technology and the potential benefits it might offer. Nonetheless, while it is recognized that buyers often ask for industry capabilities and the ability to meet business-outcome-based objectives, the majority still focus on operational efficiency metrics. However, in comparison with "Magic Quadrant for SAP Application Service Providers, Europe," worldwide there is clearly more interest in business metrics.

The core product at the epicenter of this Magic Quadrant analysis, namely SAP, is continuing its prioritized focus on the above mentioned areas of cloud (with on-demand offerings), mobile (through its Sybase acquisition, SAP is better able to create real mobile offerings) and analytics (through its investment in Hana, to handle big data through in-memory processing in near real time). In addition, SAP has been able to extend its offerings to the midmarket through its RDS, which tends to be adopted more by its midsize partners but less so by the large vendors who often have their own implementation offerings.

The following conclusions are derived from information provided regarding the included providers:

• All are engaged in development initiatives with SAP, either for new products, services and/or markets. Some are even involved at SAP's own development centers.
• All have multiple (global) partnerships with SAP and have won multiple awards over the past few years for services, capabilities, projects, specific client engagements or achievements. With all the new technologies, the number of awards that can be won is rapidly expanding, which is decreasing the actual importance of individual awards as the coverage area is declining.
• The total generated revenue for SAP application services worldwide is almost $22 billion, of which $8 billion is generated through SAP application management services. On average, 37% of the total SAP application services revenue is generated in NAM, 4% in LATAM, 45% in EMEA and 15% in APJ. For SAP application management, the split is 40%, 4%, 41% and 15%, respectively.
• SAP services are still predominantly delivered to large enterprises, representing 86% of all revenue streams.
• As can be expected, the biggest revenue stream for SAP application services across the included service providers is SAP ERP, accounting for 51% of the average share of all SAP application platforms revenue (see the Evaluation Criteria Definitions section for what is included). On average, SCM represents 13%, CRM 10%, BI 17%, mobile 4% and other 5%.
• In terms of industries, the overall top five industries (out of the 22 included) are consumer goods, utilities and energy, oil and gas/chemicals/process industry, public, and life sciences. The "bottom" five industries are insurance, wholesale, financial services, education and not-for-profit. It should be noted that SAP Applications services are delivered in many industries (which we have grouped into 22 industries) and that the individual spread per provider indicates a focus on limited industries for vertical solutions and a more opportunistic approach for horizontal offerings. The main industries per provider are mentioned in the individual profiles.
• The references given by the providers gave us good insight in their worldwide capabilities. The clients indicated that they primarily pick providers based on service delivery capabilities in the first place, followed by technical expertise and then total cost of services. The least important selection criteria were partnership with software partners (like SAP), product independence and influence of the sales team on the delivery team. However, the least important criteria also received low scores once providers had been selected. This indicates both a disconnect in the provider organization between sales and delivery, as well as a disconnect in the client organization between the buying team and the actual service management team.
• On average, the providers in this Magic Quadrant scored better for being proactive than they did in the European Magic Quadrant, but innovation remains a challenge. Similar to the European Magic Quadrant, part of this challenge lies in the fact that during the selection process, the client does not rate innovation so highly, but then when it comes to execution they do and are surprised the provider does not demonstrate innovative behavior. However, overall there is a clear issue that is a direct consequence of provider behavior: they sell a story to which they do not deliver.

Needless to say, the 15 providers included in this Magic Quadrant are a small fraction of the service providers who provide SAP application management services. We selected these 15 based on them meeting our inclusion criteria. As a result, many potentially capable providers are not included in this study. For example, providers that specialize in delivery of application management primarily to the midmarket and/or to a single geographic region and/or focus on hosting and utility services. These vendors were not included in the study either because they did not meet the minimum revenue criteria or could not meet the minimum revenue distributions by geographic region.