IT Application Outsourcing in Banking: Market trends, evolving service provider landscape, and future outlook
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IT Application Outsourcing in Banking: Market trends, evolving service provider landscape, and future outlook

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Everest Group will highlight the findings of its reports on the banking AO market covering the following aspects: ...

Everest Group will highlight the findings of its reports on the banking AO market covering the following aspects:

Key Market Trends: Analyze the current trends for large, multi-year application outsourcing relationships for the global banking sector

Evolving Service Provider Landscape, and Results of Everest Group’s banking AO PEAK 2011: Highlight the capabilities of over 20 leading AO service providers specific to the global banking sector. These providers have been mapped on the Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to a provider’s capability and market success.

Key Implications and Future Outlook: Highlight themes that are likely to influence the service provider landscape for large banking AO relationships in the future, and discuss implications for banking buyers and service providers

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IT Application Outsourcing in Banking: Market trends, evolving service provider landscape, and future outlook IT Application Outsourcing in Banking: Market trends, evolving service provider landscape, and future outlook Presentation Transcript

  • Today’s Webinar is brought to you by Everest Group Today’s Webinar IT Application Outsourcing in Banking: Market trends, evolving service provider landscape, and future outlook Synopsis: Everest Group will highlight the findings of its reports on the banking AO market covering the following aspects:  Key Market Trends: Analyze the current trends for large, multi-year application outsourcing relationships for the global banking sector  Evolving Service Provider Landscape, and Results of Everest Group’s banking AO PEAK 2011: Highlight the capabilities of over 20 leading AO service providers specific to the global banking sector. These providers have been mapped on the Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to a provider’s capability and market success.  Key Implications and Future Outlook: Highlight themes that are likely to influence the service provider landscape for large banking AO relationships in the future, and discuss implications for banking buyers and service providers About Everest Group Everest Group is an advisor to business leaders on next generation 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 www.everestresearchinstitute.com. For more information, contact Mark Williamson at mark.williamson@everestgrp.com 1 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Q&ATo 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 2 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • IT Application Outsourcing (AO) inBanking: PEAK into the EvolvingService Provider LandscapeWebinarJune 29, 2011
  • Introductions Amneet Singh Vice President Everest Group amneet.singh@everestgrp.com Jimit Arora Research Director Everest Group jimit.arora@everestgrp.com Rajat Juneja Senior Research Analyst Everest Group rajat.juneja@everestgrp.com 4 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Agenda Background and context IT AO in Banking – Emerging market trends Banking AO service provider landscape – Everest Group’s PEAK results Key implications and future outlook Q&A 5 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • This Webinar presents results of Everest Group’srecently released reports on the banking ApplicationsOutsourcing (AO) market BFSI NOT EXHAUSTIVE Focus of webinarBanking Capital markets Insurance Retail financial services (B2C1)  Investment banking  Life and pensions  Retail banking  Asset management  Property and casualty  Lending  Custody  Cards  Fund administration Commercial banking (B2B2) Services industryIT Infrastructure IT Applications Business ProcessOutsourcing (IO) Outsourcing (AO) Outsourcing (BPO) Consulting Traditional IO  Application development  BFSI-specific BPO  IT strategy/operations Remote Infrastructure  Applications maintenance  HRO consulting Management (RIM)  Independent testing  FAO  Business consulting Infrastructure Management  Package implementation  PO  Infrastructure consulting Services (IMS)  ERP services  Contact center  Infrastructure roll-outs Cloud  Business intelligence /  Knowledge services Data warehousingEverest Group’s research analyzes IT applications outsourcing market in the Banking sub-vertical with a focus on large(TCV >US$25 million), annuity-based, multi-year (>3 years) relationships; and capabilities of service providers in winningand executing such transactions1 Business-to-consumer relationships2 Business-to-business relationships 6 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • These reports are a part of Everest Group’s series ofnine reports focused on applications outsourcing inBFSI in 2011Market Trends and Future Outlook in IT Applications Outsourcing Services  Each report provides an overview of the application outsourcing Banking market for the specific banking / capital markets / insurance sub- vertical Capital markets  The report analyzes key trends in market size and growth, demand drivers, adoption and scope trends, emerging themes, key areas of investment, and implications for key stakeholders InsuranceService Provider Landscape: IT Application Outsourcing Services Each report provides: Banking  Mapping of service providers on Everest Group’s capability matrix i.e., Performance | Experience | Ability | Knowledge (PEAK) Matrix for the specific sub-vertical Capital markets  Assessment of service providers based on delivery capability and market success in establishing large AO contracts with financial institutions InsuranceService Providers’ Profiles Compendium: IT Application Outsourcing services Capability profiles of service providers capturing their AO services Banking experience in specific sub-verticals. Each service provider profile includes:  Service provider overview: Details of AO services capabilities, key Capital markets investments, proprietary solutions, technological expertise  Functional/LoB focus  Transactions overview for application services offerings  Delivery footprint Insurance 7 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest Group’s BFSI research is based on two keysources of proprietary information1  Proprietary Everest Group database of ~345 large, multi-year Service providers covered in the analysis AO contracts within BFSI (updated annually)  The database tracks the following elements of each large AO relationship:  Buyer details including industry, size, and signing region  Contract details including TCV, ACV, term, start date, service provider FTEs, and pricing structure  Activity broken down separately for banking, capital markets, and insurance, and by Lines of Business (e.g., retail banking, credit cards, loans and mortgages)  Scope includes coverage of buyer geography as well as functional activities  Global sourcing, including delivery locations and level of offshoring2  Proprietary Everest Group database of operational capability of 20+ BFSI AO service providers (updated annually)  The database tracks the following capability elements for each service provider:  Key leaders  Major BFSI AO clients and recent wins  Overall revenues, total employees, and BFSI employees  Recent BFSI-related developments  BFSI AO delivery locations  BFSI AO service suite  Domain capabilities, proprietary solutions, and intellectual property investments Note: We continuously monitor market developments and track additional service providers beyond those included in the analysisConfidentiality: The Everest Research Institute takes our confidentiality pledge very seriously. Any information we collect, that is contract specific, will be presented back to the industry only in an aggregated fashion 8 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest Group has collated information on large-sizedBFSI AO transactions and has used this robust data-setto analyze various aspects of the BFSI AO marketResearch scope  Industry: Banking (retail banking, wholesale banking, credit cards, loans and mortgages); excludes capital markets and insurance  Services: Large (TCV >US$25 million), multi-year (>3 years), annuity-based applications outsourcing  Geography: Global  Sourcing model: Third-party AO transactions; excludes shared services or captive  Service providers: 22 leading banking AO service providers Everest Group’s Transaction Intelligence Database ~350 active large-sized BFSI AO transactions1  ~18,000 transactions listed Focus of  Over 95% transactions post- Banking (170+ large-sized transactions) this 2000 webinar  ~4,300 BFSI transactions Insurance Everest Group’s RFIs to BFSI AO service providers  Participation by over 20 leading service providers Capital Markets 1 Transactions with TCV >US$25 million, which are active as of Dec 2010Source: Everest Research Institute (2011) 9 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Agenda Background and context IT AO in Banking – Emerging market trends Banking AO service provider landscape – Everest Group’s PEAK results Key implications and future outlook Q&A 10 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • The global ITO market returned to growth in 2010;BFSI sector is a leading ITO adopterGlobal IT outsourcing market growth Global IT outsourcing market split by buyer industry(indexed) 2010; US$ billionBase year (2008) indexed to 100 100% = 450-500 100 96 99 BFSI Others 18% 16% Transport 3% Healthcare 3% Utilities and 4% 16% Manufacturing construction Services 7% 8% 13% 12% Telecom and Retail 2008 2009 2010 media Government With a market size of US$72-80 billion, BFSI is the leading industry in ITO adoption The BFSI vertical was instrumental in the revival of the ITO industry post the economic downturn Pent-up demand, post-merger integration, channel integration, and regulatory/compliance drove market activitySource: Everest Research Institute (2011) 11 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Applications Outsourcing is included in scope in over60% of all BFSI ITO transactionsScope distribution of BFSI ITO transactions1 Distribution of active BFSI AO contracts by size12008-2010; Number of transactions Percentage of all transactions100% = 189 230 202 Scope not 2% known 4% Non-AO3 39% 33% 31% Small transactions 9% 41% 15% (TCV <US$25Bundled AO2 11% Large million) 59% transactions (TCV >US$25 million) Pure AO 50% 50% 56% 2008 2009 2010 The proportion of pure AO contracts among the BFSI ITO transactions increased each year from 2008 to 2010 Large transactions (TCV >US$25 million) form a significant portion (over 50% in number, and even higher in terms of TCV) of BFSI AO transactions 1 Based on number of publicly announced transactions tracked through Everest Group’s Transaction Intelligence Database 2 Bundling of AO with IO and/or BPO 3 Pure IO, and IO bundled with BPOSource: Everest Research Institute (2011) 12 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • In line with the broader ITO trend, large banking AOtransactions have revived after the slowdown phase ofH2 2009-H1 2010 Slowdown phaseNumber of large, active banking AO contracts1Number of transactions 100% = 164 16 11 9 9 6 6 Contracts Contracts signed 65% 35%signed before during 2008-2010 2008 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010Total TCV of large, active banking AO contracts1US$ billion 100% = 27.3 1.97 1.75 1.19 0.95 0.84 TCV signed TCV signed during 74% 26% 0.3 before 2008 2008-2010 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 The revival of large-sized banking AO transactions in 2010 is more evident in terms of the value of contracts The healthy transaction activity in H1 2009 despite the onset of recession is attributed to the typical lead time in signing outsourcing contracts 1 New transactions with TCV >US$25 million, which started in the given period and which are active as of Dec 2010 Note: TCV excludes volume expansion for accounts that were signed prior to 2008Source: Everest Research Institute (2011) 13 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Custom application development, enhancements andmaintenance is at the core of most large AOrelationshipsSub-functions in large banking AO transactions1Frequency of inclusion2  Most large-sized banking AO ADM 97% transactions are structured around application development and ongoing enhancements and maintenance Testing 83%  Application testing is also a key outsourced AO sub-function, which is most commonly bundled in ADM Package 54% contracts. Stand-alone, independentimplementation testing services are also witnessing increased market traction ERP services 34%  Project-based, core banking implementations are relatively less common, given the contract scale cut- Others 57% offs imposed on the sample-set (i.e., TCV >US$25 million)Includes other AO sub-functions such as systemsintegration, and application related consulting 1 Transactions with TCV >US$25 million and which are active as of Dec 2010 2 Percentage of large banking AO transactions (with known scope details) in which the given sub-function is in scopeSource: Everest Research Institute (2011) 14 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Proportion of large banking AO contracts with offshoredelivery has increased steadily since H1 2009Percentage of large banking AO transactions Percentage of FTEs present in offshorewith offshore delivery1 locations for banking AO transactions with2008-2010 offshore delivery component1 2008-2010 83% 82% 72% 73% 70% 72% 67% 67% 69% 69% 56% 50%H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010The decline in offshoring during 2008-09 was primarily due to regulatory restrictions and the political sentiment ofgovernments against moving work outside their countries 1 Transactions with TCV >US$25 million and which are active as of Dec 2010Source: Everest Research Institute (2011) 15 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • While India continues to be the nerve-center forbanking AO delivery, service providers are buildingother locations for specific markets and skillsAO services capabilities placement in key offshore locations NOT EXHAUSTIVE Maturity1 level: High Medium Low Russia Poland Czech Republic Hungary Ukraine Romania China Israel India Mexico Vietnam Philippines Brazil Mauritius Chile Argentina 1 ‘Maturity’ defined based on ~20 leading service providers’ aggregate delivery workforce present in the countries for AO workSource: Everest Research Institute (2011) 16 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Agenda Background and context IT AO in Banking – Emerging market trends Banking AO service provider landscape – Everest Group’s PEAK results Key implications and future outlook Q&A 17 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • From a landscape of 50+ service providers, EverestGroup assessed 22 service providers for theircapabilities in Banking applications outsourcingService provider outreach (partial list) Service providers assessed 1 1 1 1 Criteria for inclusion in the assessment:  Success in large banking AO relationships, i.e.,  >US$25 million TCV  >3 years relationship duration  Active on Dec Assessment based on: 31, 2010  RFIs submitted by service providers1  Everest Group  Everest Group Transactions Intelligence experience and database RFI response  Service provider disclosures and interviews  Everest Group’s interaction with banking buyers 1 Assessment for Accenture, Capgemini, HPES, and IBM GS is based on Everest Group’s proprietary Transaction Intelligence (TI) database, service provider disclosures, and Everest Group’s interactions with banking buyersSource: Everest Research Institute (2011) 18 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • The current service provider landscape for banking AOservices has four major provider categoriesGlobal majors Offshore majors Regional players Tier-2 Indian providers Banking AO operations scale across four service provider categoriesAverage banking AO revenues  On an average, global and offshore majors derive2010; US$ million upwards of half a billion dollars in banking AO revenues ~660 ~650  Despite the difference in total revenues, offshore majors’ banking AO revenues are comparable to that of global majors ~150  While regional players have a smaller employee ~90 base in comparison to Tier-2 companies, they realize significantly higher revenues given their larger base of onshore employees Global Offshore Regional Tier-2 Indian majors majors players providers 1 Contracts that have a TCV of more than US$25 million and are active as of Dec 2010Source: Everest Research Institute (2011) 19 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • These service providers have been assessed on multipledimensions pertaining to their capability and market successto determine their positioning on the banking AO PEAK Matrix Everest Group PEAK Matrix Number of contracts Leaders Contract values Market success (TCV, ACV) Major Contenders Success with large- sized buyers New clients acquired Revenue growth Emerging Players Delivery capability Domain Delivery Scale Scope investments footprint Revenues Lines of Business Proprietary Delivery countries served solutions FTEs AO sub-functions Certifications Offshore leverage Number of Geographies M&A and alliances delivery centers served Number of clients Contract size range Length of contracts 20 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest Group PEAK Matrix for the large banking AOrelationships Leader Major Contender Emerging Player Leaders areEverest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix for large characterized bybanking AO relationships their breadth of Major Contenders have been successful in capability in banking establishing their stronghold in select regional 75th percentile AO services, pockets, functional areas, or sub-verticals established set of High through targeted investments in specialized Leaders proprietary TCS solutions or micro vertical focused solution IBM GS products/platforms, Infosys 75th percentile accelerators, and product partnerships highly scaled Accenture operations, as well Wipro Cognizant as their ability to win HPES and execute large(Transaction activity) Major Contenders annuity contracts Market success with major banking Capgemini buyers CSC CGI Polaris HCL Atos Origin 25th percentile MindTree Syntel Dell Services L&T Infotech Emerging Players that bank on select privileged Luxoft relationships in the banking AO space, and are seeking to Softtek aggressively grow their operations through investments in Ness ITC Infotech Hexaware dedicated CoEs, and expertise in custom application development, and analytics/testing services Emerging Players Low Low 25th percentile Delivery capability High (Scale, scope, domain investments, delivery footprint) 1 PEAK specific to large (>US$25 million TCV) multi-year (>3 years) applications outsourcing relationships specific to the banking sector (i.e., retail banking, credit cards, mortgage & loans, and commercial banking segments). EXCLUDES capital markets and insuranceSource: Everest Research Institute (2011) 21 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Leaders account for 70% of active ACV of largebanking AO contracts Market share of providers in large banking AO contracts1 Active ACV and TCV in US$ billion, Number of contracts 100% = 5.5 22.8 175+ Emerging Players 2% 3% 9% Major Contenders 28% 34% 32% Leaders 70% 63% 59% Active ACV TCV Number of contractsThe banking AO market represented by the 22 service providers assessed by Everest Group scaled upto over US$5 billion in revenues and ~100,000 FTEs spread across ~20 delivery countries 1 Contracts for a representative set of 22 providers; contract TCV >US$25 million and status active as of Dec 2010Source: Everest Research Institute (2011) 22 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest Group’s banking AO service provider landscapereport analyzes specific attributes of each providercategory / PEAK clusterScope of AO functions covered in large banking contracts Scope distribution of large banking AO contracts High Medium LowService provider capability assessment dashboard Banking AO scale by provider segment Service Domain Delivery Banking AO revenues Banking AO FTEs provider Scale Scope investments footprint US$ million Number of FTEs Service provider category 1 xxx xxx Provider 1 Provider 2 xxx xxx xxx xxx Provider 3 Provider 4 xxx xxx xxx xxx xx xx Service provider category 2 xx xx xx Provider 1 xx xx xx Provider 2 Provider 3 Leaders Major Emerging Leaders Major Emerging Provider 4 Contenders Players Contenders PlayersSource: Everest Research Institute (2011) 23 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • The report also provides specific details on eachservice provider’s distinctive characteristics, andcapabilities, in the banking AO services space Provider 7 Provider 8 Actionable Provider 4 insights on Provider 9 banking AO scale, Provider 5 breadth of Provider 10 offerings, Provider 1 domain investments Provider 6 and market success for Provider 2 each service provider on the PEAK Provider 3 24 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Agenda Background and context IT AO in Banking – Emerging market trends Banking AO service provider landscape – Everest Group’s PEAK results Key implications and future outlook Q&A 25 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Four primary priorities of banks are driving growth inlarge-scale applications outsourcing Restoring growth  As the banking sector emerges from recession, return of discretionary spend and increased business volumes are expected to drive outsourcing activity  Entry into new markets (e.g., MEA, APAC) and customer base expansion are creating significant technology demands of banks Adapting to changing customer preferences Improving profitability  Banks are investing in customer Factors driving Given pressures brought on by the experience management and evolving banking AO financial crisis, banks are focusing towards a ‘bank of the future’ by demand disproportionate attention towards blending technology (mobility, social removing redundancies in operations to: media) into banking to attract and  Improve business efficiency retain a new “generation” of clients  Achieve cost savings especially in the middle-and back-office activities Managing complexity  Extensive regulatory demands & increasing compliance complexity  Need to create “single view of customer” to mitigate risk and to sell better  Application rationalization and consolidation, cloud adoption to reduce IT complexity  Emergence of large, integrated, banking enterprises focusing on better governanceSources: Buyer and service provider interviews; Everest Research Institute (2011) 26 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Implications for banking buyersEstablish a robust IT foundation to navigate the intensifying businesscomplexities such as restoring growth, expanding operations, and improvingprofitability Total assets Pre-tax profits Assets of largest 1,000 banks Pre-tax profits of largest 1,000 banks US$ trillion US$ billion 120 800 90 600 60 400 30 200 0 0 2005-06 2006-07 2007-08 2008-09 2009-10The banking industry has traditionally been one of the most mature adopters of technology. However, it isfacing pressure with regards to its IT systems and processes as it emerges from recession: Banks’ profits dipped drastically during the slowdown phase of 2008-2009, driving them to focus on reducing their cost of operations. This can be achieved through:  Carefully evaluating various outsourcing and offshoring options to minimize costs and maximize value derived from providers  Designing a well integrated, efficient application framework to ensure optimal utilization of IT resources Banks also need to augment their IT systems to support their entry into new markets and to reach out to a wider customer base. Business expansion across geographies creates the challenge of integration of acquired assets and customers. It is therefore critical for banking buyers to create a global delivery footprint that helps meet their growth objectives, and also reduces location concentration risksSources: The Banker; Everest Research Institute (2011) 27 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Implications for banking buyersDesign an optimized portfolio of service providers to simplify sourcingenvironment and achieve cost savingsLandscape of applications outsourcing service provider portfolio GLOBAL FINANCIAL MAJOR EXAMPLE Retail banking Commercial banking Credit cards Enterprise-wide Service provider 1 Service provider 1 Service provider 3 Service provider 2 office Front Service provider 1 Service provider 1 Service provider 3office Service provider 2 Service provider 1 Service provider 1 Service provider 6back Mid- Service provider 2 Service provider 3 Service provider 4 Service provider 1  Service provider 1 has a large position Service provider 1  Service provider 3 is used by multiple businesses, but split across front and F&A mid-back office Service provider 1  Service provider 4 is also used by multiple businesses, but split across mid- Service provider 1 back office and HR HR  This variety in use reflects relationship preferences, not differing capabilities Service provider 4Most banks currently use a complex portfolio of service providers for their applications portfolio. Global expansion, andlarge-scale M&A have introduced further complexity to the portfolios. Rationalizing the portfolio helps in Creating a less complex sourcing environment Enabling strategic partnerships with service providers Deriving meaningful financial benefit: Utilizing fewer service providers can yield as much as 22-28% financial savings on an annualized basisBuyers therefore need to re-evaluate their service provider relationships to create an optimized service delivery portfoliothat balances trade-offs between concentration risks, redundancy levels, and competitive tension (may be optimallyenabled through a “champion challenger“ model)Source: Everest Research Institute (2011) 28 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Implications for banking buyersManage stringent compliance requirements being outlined by regulators in thepost-recessionary scenario; and adapt to changing customer preferencesthrough investments in technology that enhances customer experienceManaging increased  Banks are increasingly required to manage huge volumes of data originating fromregulatory/compliance several fronts to better comply with a stricter regulatory environment and managedemands risks  Examples of regulatory changes impacting the banking sector include:  Basel III which will be phased in from 2013 to 2019 globally, making it critical for banks to upgrade their IT backbone during 2011-12  Stricter regulatory requirements which are surfacing across different regions. For example: — The 2010 Dodd-Frank Act in the U.S. represents a significant change in the U.S. financial regulatory environment and is expected to affect almost every aspect of the country’s financial services industry — The recent call for reverse stress-testing by the Committee of European Banking Supervisors to toughen the scenarios used in examining banks’ financial stabilityInvest in customer-centric  In a post recessionary environment banks need to invest in staying connected withinitiatives their clientele, and enhancing customer experience. This would require greater investments in areas such as social media, multi-channel integration, enterprise- wide data management, and CRM & marketing toolsSource: Everest Research Institute (2011) 29 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Implications for service providersBuild deep vertical domain expertise to differentiate and effectively combatthe “Matthew Effect”Build micro-vertical  In the crowded banking AO provider landscape, buyers are placing disproportionateexpertise to emphasis on domain expertise as a key selection criteria for service providers. Buyersachieve/sustain are looking for technology that can reduce time-to-market for their products, anddifferentiation developing customer- focused solutions, and innovative products.  To deliver these benefits, providers need to invest in domain capabilities (build IP/solution accelerators) and develop expertise in individual LoBs within banking (e.g., mortgage, credit cared specialization). This micro-vertical approach to differentiation will be key to the future success of service providersMajor Contenders and  As buyer-driven portfolio consolidation drives M&A among service providers, theEmerging Players to landscape is exhibiting signs of the “Matthew effect” (rich get richer and poor getprepare for “The Matthew poorer) or in this case the “big get bigger”. This phenomenon could further widen theeffect” gap between the Leaders, Major Contenders and Emerging Players. As these relatively “smaller” service providers seek to achieve growth and remain competitive in this environment, M&A and alliances will play a significant role to achieve quantum jumps in capability and performance:  Major Contenders looking to more effectively compete with the Leaders need to expand their coverage and scope of offerings, enhance domain expertise, increase onshore presence, broaden global delivery footprint, strengthen sales and marketing capabilities to win new business, and build robust account management practices that can help drive growth in existing accounts  Emerging Players need to identify market niches to go after. As these providers rely on a select set of clients it remains critical for them to demonstrate superior value consistently to protect these accounts from any portfolio consolidation initiatives Source: Everest Research Institute (2011) 30 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Implications for service providersPrepare for a new competitive landscape as buyer-driven portfolioconsolidation accelerates M&A activityM&A transactions in 2010 that enhance BFSI capabilitiesNumber  Post-recession, M&A activity in the 10 outsourcing and offshoring industry gathered momentum  M&A activity in the Major Contenders category is significantly higher than that for the Leaders or Emerging Players 3  These M&A events are likely to alter 1 the landscape in coming years and create a new set of Leaders and Major Leaders Major Emerging Contenders Contenders PlayersSource: Everest Research Institute (2011) 31 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Agenda Background and context IT AO in Banking – Emerging market trends Banking AO service provider landscape – Everest Group’s PEAK results Key implications and future outlook Q&A 32 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Q&A Attendees will receive an email enabling them to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Mark Williamson, mark.williamson@everestgrp.com For advice or research on the BFSI outsourcing and offshoring market, please contact:  Amneet Singh, amneet.singh@everestgrp.com  Jimit Arora, jimit.arora@everestgrp.com  Rajat Juneja, rajat.juneja@everestgrp.com For background information on Everest Group, please visit:  www.everestgrp.com  www.everstresearchinstitute.com Thank you for attending todayTo 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 33 Proprietary & Confidential. © 2011, Everest Global, Inc.
  • Everest Group leads clients from insight to actionContact us for more information about our consulting, research, and industry resources.Dallas (Corporate Headquarters) Indiainfo@everestgrp.com india@everestgrp.cominfo@everestresearchinstitute.com +91-124-496-1000+1-214-451-3000 +91-124-496-1100+1-214-451-3110 AustralasiaNew York australia@everestgrp.cominfo@everestgrp.com +61-3-9509-3933+1-646-805-4000Canada UK Netherlands & Continentalcanada@everestgrp.com unitedkingdom@everestgrp.com Europe+1-416-865-2033 +44-870-770-0270 benelux@everestgrp.com +31-20-301-2138 www.everestgrp.com | www.everestresearchinstitute.com 34 Proprietary & Confidential. © 2011, Everest Global, Inc.