The global BAO market witnessed significant growth and development in 2011, partially due to internal requirements and market regulations such as the U.S. healthcare reform. In this webinar, Everest Group experts will discuss the current state of the market and emerging themes, challenges faced by both buyers and service providers, an overview of the service provider landscape, and possible differentiation themes for service providers.

1. Webinar: Benefits Administration
Outsourcing Market: Mature yet Dynamic
October 2011

2. Today’s Webinar is brought to you by Everest Group
Today’s Webinar
Benefits Administration Outsourcing Market: Mature yet Dynamic
Synopsis:
The global BAO market witnessed significant growth and development in 2011, partially due to internal requirements
and market regulations such as the U.S. healthcare reform. In this webinar, Everest Group experts will discuss:
 The current state of the market and emerging themes
 Challenges faced by both buyers and service providers
 An overview of the service provider landscape
 Possible differentiation themes for service providers
About Everest Group
Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation
for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office
business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with
complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs
with long-term goals. Through its practical consulting, original research and industry resource services, Everest
Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies and
management approaches. Established in 1991, Everest Group serves users of global services, providers of services,
country organizations and private equity firms, in six continents across all industry categories. For more information,
please visit www.everestgrp.com and research.everestgrp.com.
For more information, contact Mark Williamson at mark.williamson@everestgrp.com
Proprietary & Confidential. © 2011, Everest Global, Inc. 2

3. Introductions
Rajesh Ranjan
Research Director
Everest Group
rajesh.ranjan@everestgrp.com
Sayan Chatterjee
Senior Research Analyst
Everest Group
sayan.chatterjee@everestgrp.com
Proprietary & Confidential. © 2011, Everest Global, Inc. 3

4. Contents
 Background and context
 Market size and growth
 Buyer adoption and solution characteristics
 Service provider landscape
 Key takeaways
Proprietary & Confidential. © 2011, Everest Global, Inc. 4

5. Everest Group provides a comprehensive coverage
of the HRO market
Strategy
Judgment-intensive
Transaction-intensive
1 Multi-process HRO 2 Single-process HRO
(MPHRO) (SPHRO)
 Includes transactions  Includes transactions that
HR
that include a minimum involve stand-alone single
strategy
of three HR processes. process outsourcing
 Targets both the mid- Employee relations  Currently tracks following
market (between 3,000 Regulatory & compliance
markets
to 15,000 employees) Global mobility – Benefits Administration
as well as large market Performance management Outsourcing (BAO)
(>15, 000 employees) Learning – Recruitment Process
Recruitment & selection Outsourcing (RPO)
Compensation – Multi-country Payroll
Benefits Outsourcing (MCPO)
Payroll – Learning Services
Employee data management Outsourcing (LSO)
HR information systems and reporting
Employee contact center
This webinar presents results of Everest Group’s recently released 2011 Annual Report on the Benefits Administration
Outsourcing (BAO) market
Proprietary & Confidential. © 2011, Everest Global, Inc. 5

6. Everest Group’s BAO research is based on two key
sources of proprietary information
1
 Proprietary Everest Group’s database of 1,000+ BAO deals (updated annually)
 The database tracks the following elements of each BAO deal:
– Buyer details: Including industry, size, and signing region
– Deal details: Including TCV, ACV, term, start date, total participants managed, and primary pricing structure
– Scope: Including buyer’s geography and process coverage
– Technology ownership and maintenance
– Global sourcing
2
 Proprietary Everest Group’s database of operational capability of 10+ BAO service providers (updated annually)
 The database tracks the following capability elements for each service provider:
– Major BAO clients and recent wins
– Overall revenues, total, and BAO employees
– Recent BAO-related developments (investments and partnerships)
– BAO clients split by geography, industry, scope, and buyer size
– BAO delivery locations and level of offshoring
– BAO service suite
– Service level agreements
– Benefits-related technology capability
In addition to these databases:
 Everest Group conducts executive-level interviews with leading BAO service providers and buyers of BAO services
 Everest Group continuously monitors and tracks market developments
Confidentiality: Everest Group takes its confidentiality pledge very seriously. Any information we collect, that is contract specific, will be
presented back to the industry only in an aggregated fashion
Proprietary & Confidential. © 2011, Everest Global, Inc. 6

7. Everest Group defines BAO as transfer of ownership of
at least one core-benefits area on an ongoing basis
Core-benefits area Support services
Benefits services
Health & Welfare (H&W) benefits Defined benefits (DB) Defined contribution (DC) Other services
 Annual enrolment  Setup and record keeping  Enrolment  Workers compensation
 Data administration / record  Calculation – estimates and final  Plan administration  Disability and absence
keeping calculations for retirements,  Payroll deductions management
 Feeds to service providers (i.e. terminations, etc.  Record keeping  Hybrid pension plan
medical providers, and insurance  Eligibility determination and  Fund management administration
companies) tracking  Decision-support  Stock plan administration
 Billing and financial management  Funding and account  Financial education  Non-qualified plan administration
(account reconciliations) reconciliation  Plan communication and  Total rewards statements
 COBRA eligibility and billing (U.S.  Retiree payroll education  Consulting services and benefits
only)  Governmental reporting strategy
 Contribution processing  Plan communication and
 Life event processing education
 Plan communication and education  Plan audit assistance
 Decision-support tools
 Dependent verification and audits
Technology support
Contact center
Vendor management
For this study, we include BAO deals in which:
 At least one of the following core-benefits areas is included – H&W, DB, and DC
 Deal length is at least two years
 The buyer employee size is 3,000 or more
Proprietary & Confidential. © 2011, Everest Global, Inc. 7

8. There are three outsourcing models for benefits
administration
Scope of this study
Low Degree of outsourcing High
Technology Selective Comprehensive
outsourcing model outsourcing model outsourcing model
 Resembles an ASP/Software-  Outsourcing of both
Key  Benefits technology and one of
as-a-Service (SaaS) model as health and retirement
characteristics the core-benefits areas (health or
only benefits technology is benefits administration
retirement) is transferred to the
outsourced process and underlying
service provider
 Service provider is responsible technology to a service
 Buyer retains the ownership of
for hosting and maintaining provider
the other core-benefits areas
legally compliant benefits  Also referred as Total
 Service provider may provide
system Benefits Outsourcing
technology integration with non-
 Buyer retains complete (TBO)
outsourced benefits areas
ownership of the benefits
 Outsourcing of only retirement
process
benefits, but including both DB
 Also referred to as “co-source”
and DC, is also referred as Total
model
Retirement Outsourcing (TRO)
 Buyer wants to keep complete  In some specific benefits areas,  Buyer wants to transform
Consideration control over the benefits buyers need expertise and the benefits function
for adoption process but requires access to support on an ongoing basis  Buyer wants to expand
better technology  Buyer wants to dip a toe in the the value creation beyond
outsourcing model the “selective” model
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 8

9. Contents
 Background and context
 Market size and growth
 Buyer adoption and solution characteristics
 Service provider landscape
 Key takeaways
Proprietary & Confidential. © 2011, Everest Global, Inc. 9

10. BAO is one of the largest and most mature markets
among others in HRO
Third-party HRO market size Third-party BAO market penetration
US$ billion US$ billion
20-22
100% = 18-20
Other SPHRO
markets1
MPHRO
15-20%
15-20%
5.4
Payroll 35-40%
25-30%
(SPHRO2) BAO
(SPHRO2) 2011 BAO Third-party
market size addressable BAO
market potential
1 Includes Recruitment Process Outsourcing (RPO) and Learning Services Outsourcing (LSO)
2 Single-process HRO
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 10

11. The BAO market, growing at a steady rate, crossed
the US$5 billion mark in 2011
BAO market size over time
US$ billion
5.4
4.8
20101 2011 2
1 As of April 2010
2 As of June 2011
Sample size: 1,039 BAO deals signed during 2007-June 2011
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 11

12. Poll Question: How do you expect the demand for
BAO to change in the next one year?
73%
23%
0%
Increase Remain the same Decrease
Source: Live polling conducted during the Benefits Administration Outsourcing Market: Mature yet Dynamic webinar on October 11, 2011
Proprietary & Confidential. © 2011, Everest Global, Inc. 12

13. On a smaller base, the H&W market is growing at a
rate of almost four times that of the pension market
H&W market size over time Pension administration market size over time
US$ billion US$ billion
4.1
3.8
1.3
1.0
20101 2011 2 20101 2011 2
1 As of April 2010
2 As of June 2011
Sample size: 1,039 BAO deals signed during 2007-June 2011
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 13

14. While there are some common outsourcing drivers
across both the H&W and pensions markets…
Business drivers H&W Pension administration
Cost reduction  
Compliance  
Improving
employee
engagement
 
Proprietary & Confidential. © 2011, Everest Global, Inc. 14

15. ….some drivers are unique to specific benefits
areas
Business drivers H&W Pension administration
U.S. healthcare
reform 2010  
Reduced
absenteeism and
enhanced  
productivity
Strategic shift
from DB to DC
 
Proprietary & Confidential. © 2011, Everest Global, Inc. 15

16. Contents
 Background and context
 Market size and growth
 Buyer adoption and solution characteristics
 Service provider landscape
 Key takeaways
Proprietary & Confidential. © 2011, Everest Global, Inc. 16

17. North America pioneered the BAO market and
continues to be at the forefront. Europe is starting
to witness increased activity in recent years
Overall share of active BAO deals by signing region
Number of deals
100% = 722 317
Rest of World 2% 1%
5% 9%
Europe
North America 93% 90%
2007-09 2010-11
Sample size: 1,039 BAO deals signed during 2007-June 2011
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 17

18. Notwithstanding interest in multi-country BAO, it is
yet to turn into actual adoption
Overall share of active BAO deals by geographic scope
Number of deals
100% = 4,852 303
Multi-country 3% 1%
Single-country 97% 99%
Overall 2010-11
Sample size: 4,852 BAO deals signed as of June 2011. 303 BAO deals signed during 2010-June 2011
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 18

19. Poll Question: Are you considering a multi-country
BAO solution in the current or near term?
59%
41%
0%
Yes, at advanced stage Yes, but at preliminary No
of consideration stage
Source: Live polling conducted during the Benefits Administration Outsourcing Market: Mature yet Dynamic webinar on October 11, 2011
Proprietary & Confidential. © 2011, Everest Global, Inc. 19

20. Offshore leverage in BAO continues to increase
Inclusion of offshoring in BAO deals Percentage of FTEs at offshore locations
Number of deals Percentage
28%
100% = 788
22%
No offshoring
component
34%
66%
Offshoring
component
2010 2011
Sample size: 788 BAO deals signed as of June 2011
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 20

21. The dominance of India as an offshore location
represents a global sourcing concentration risk
Distribution of BAO FTEs by offshore location
Percentage
100% = 7435
FTEs in offshore locations
other than India1
9%
91%
India FTEs
1 Includes South East Asia and Central and South America
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 21

22. Contents
 Background and context
 Market size and growth
 Buyer adoption and solution characteristics
 Service provider landscape
 Key takeaways
Proprietary & Confidential. © 2011, Everest Global, Inc. 22

23. The BAO market comprises service providers from
a variety of backgrounds
HR consulting/technology Focused benefits outsourcing
BAO service provider landscape
HRO/BPO services Financial services
Proprietary & Confidential. © 2011, Everest Global, Inc. 23

24. The consolidation wave in recent times has significantly
impacted the service provider landscape
ILLUSTRATIVE
Key BAO service providers landscape developments
Pre-2010 2010-2011
 ACS acquires Mellon  Advent International acquires Xafinity
HR&IS  AON announces acquisition of J.P. Morgan
 ING acquires Citistreet Compensation and Benefit Strategies
LLC  ACS acquires ExcellerateHRO
 Watson Wyatt merges  Mercer acquires Innovative Process
with Towers Perrin to Administration (IPA)
form Towers Watson  ADP acquires Workscape
 Aon and Hewitt announce their merger to
become Aon Hewitt
 Towers Watson acquires Aliquant
 Wageworks acquires FBMC’s tax favored
and benefits continuation administrative
services division
 Capita announced acquisition of trade and
assets of the pensions administration and
software business of NorthgateArinso
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 24

25. Investments by service providers are making the
value proposition of BAO more compelling
Technology
advancements
Key areas of Enhanced solution
investments scope
Expanding delivery
model
Source: Everest Group (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc. 25

26. Contents
 Background and context
 Market size and growth
 Buyer adoption and solution characteristics
 Service provider landscape
 Key takeaways
Proprietary & Confidential. © 2011, Everest Global, Inc. 26

27. Key takeaways for buyers and service providers of
BAO
For buyers
 Second generation buyers should evaluate the various service providers in the market afresh, rather than
going in for auto renewal
 Select a service provider which brings domain knowledge to navigate the complexities arising out of reform
and legislative changes
 Need to look at the total cost of ownership when creating the business case
For service providers
 Creating differentiation to stay ahead of competitors is key
 Provide a more integrated benefits outsourcing solution
 Need to reduce global-sourcing-concentration risk
Proprietary & Confidential. © 2011, Everest Global, Inc. 27

28. Major forthcoming HRO research
Topic Goals of the research Planned release
Benefits Administration Provides a comprehensive analysis of the BAO service provider
Q4-2011
Outsourcing (BAO) – landscape along multiple dimensions and assesses service providers
Service provider to position them in the Everest PEAK matrix
landscape and capability
assessment
Benefits Administration The report provides accurate, comprehensive, fact-based snapshots
Q4-2011
Outsourcing (BAO) of 10+ leading BAO service providers. Each profile highlights service
service provider profile provider’s delivery capability, market strategy, key organizational
compendium developments, and delivery footprint
Making the Right Choice – This research aims to compare Total Cost of Ownership (TCO) of
How to Evaluate BPaaS Business Process as a Service (BPaaS) solutions with traditional
Q4-2011
Solutions? BPO using a comprehensive financial model and create a
comprehensive framework to evaluate BPaaS sourcing
RPO Annual report 2012 Provides a comprehensive coverage of the 2011-12 Recruitment Q4-2011
Process Outsourcing (RPO) market including market size and buyer
adoption, emerging solutions and best practices, changing transaction
characteristics and evolving service provider landscape
Proprietary & Confidential. © 2011, Everest Global, Inc. 28

29. Q&A
 Attendees will receive an email enabling them to download today’s webinar presentation as well as access
a recorded audio version
 For advice or research on Benefits Administration Outsourcing, please contact:
– Rajesh Ranjan, rajesh.ranjan@everestgrp.com
– Sayan Chatterjee, sayan.chatterjee@everestgrp.com
 For background information on Everest Group, please visit:
– www.everestgrp.com
– research.everestgrp.com
 Thank you for attending today
To ask a question during the Q&A session
 Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen.
This will open the Q&A Panel
 Be sure to keep the default set to “send to a Panelist”
 Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to
submit
Proprietary & Confidential. © 2011, Everest Global, Inc. 29

30. Related Content
Related Research
 Benefits Administration Outsourcing (BAO) Annual Report 2011: The BAO Market - Mature yet Dynamic
 Blog | New Fuel for the old Benefits Administration Outsourcing Engine
 HRO Annual Report 2011 - The Revival of Multi-process HRO Market
 Global Sourcing In BAO - Looking Beyond the Obvious
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