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Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
Key Market Developments in 2011: Market Vista Briefing
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Key Market Developments in 2011: Market Vista Briefing

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How has the global services industry been impacted by the economic slowdown? Why has global services delivery increased in Central & Eastern Europe? And what about Africa? Our Market vista webinar …

How has the global services industry been impacted by the economic slowdown? Why has global services delivery increased in Central & Eastern Europe? And what about Africa? Our Market vista webinar reviews the state of the global services industry in 2011 and outlook for 2012.
This webinar will provide facts and insights on the decline in outsourcing transactions, reduction in operating margins across leading service providers, and captive adoption in emerging locations.

Published in: Business, Economy & Finance
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  • 1. Key Market Developments in 2011:Market Vista BriefingFebruary 16, 2012Live Tweeting #MarketVista
  • 2. Introductions Katrina Menzigian Vice President, Research katrina.menzigian@everestgrp.com Eric Simonson Managing Partner, Research eric.simonson@everestgrp.com H. Karthik Vice President, Research h.karthik@everestgrp.com Proprietary & Confidential. © 2012, Everest Global, Inc. 2
  • 3. Context settingFocus of this webinar Present key global services developments in 2011 and outlook for 2012 Provide perspectives on attractiveness of U.S. Tier-2/3 citiesSources for today’s webinar  Summary from a Location Optimization Market 175+ page report Vista + Service Provider  Fact-based research covering Intelligence global services Proprietary & Confidential. © 2012, Everest Global, Inc. 3
  • 4. Highlights of today’s webinar Audience pollOutsourcing and offshoring  Outlook and extent of declineactivity declined in the second  Segment performancehalf of 2011New location investments are  Geographic trendsincreasingly specialized  Tier-1 and Tier-2 city trendsU.S. Tier-2/3 cities can be  Factors influencing U.S.attractive, but have stark location strategyimplications on the operating  City/delivery optionsmodel Proprietary & Confidential. © 2012, Everest Global, Inc. 4
  • 5. Presentation topics Key market Special topic: developments Perspective on Wrap up and in Q4 2011 and U.S. Tier-2/3 Q&A yearly review cities Outsourcing transactions Captives Service providers Locations Proprietary & Confidential. © 2012, Everest Global, Inc. 5
  • 6. Poll Question: In comparison to 3 years ago, how matureare your organizations global sourcing efforts? Somewhat more mature 83% About the same 9% We may be slipping... 2% Mature? We are babes in the 7% woodsSource: Live polling conducted during the “Key Market Developments in 2011: Market Vista Briefing” webinar on February 16, 2012 Proprietary & Confidential. © 2012, Everest Global, Inc. 6
  • 7. Outsourcing transactions decreased in H2 2011while captive activity remained steadyIndex of outsourcing transactions Index of offshore captive healthNumber Number Captive set-ups and expansions Captive divestures 46 1,036 1,024 43 943 890 905 840 35 29 27 17 6 2 3 1 0 1 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2009 2009 2010 2010 2011 2011 2009 2009 2010 2010 2011 2011 Proprietary & Confidential. © 2012, Everest Global, Inc. 7
  • 8. Decrease in transactions in most sectors, excepthealthcareOutsourcing transactions by verticalNumber of transactions 1,024 905 Others1 226 201 MDR 156  Growth in healthcare driven by 144 Healthcare 100 changing regulatory environment E&U 52 113 Defense 35  Significant decrease in public sector 58 (government and defense)Government 187 25 transactions Technology 135 28 Telecom 48 23  Financial services largely steady 32 BFSI 192 174 H1 2011 H2 20111 Includes logistics and wholesale, services, travel and transport, media and entertainment, education, etc. Also, includes any transactions where buyer identity/industry was not disclosed Proprietary & Confidential. © 2012, Everest Global, Inc. 8
  • 9. Market Vista Index service providers facing increasingcompetition but continue to dominate large dealsDistribution of Market Vista Index service providers in transactionsNumber100% = 1,979 1,929Market Vista Index 22% 31%  Share of Market Vista Index service providers service providers decreased in transaction volume but increased in value Other service 78% 69% providers  Competition from specialist providers 2010 2011Market Vista Index service providers Proprietary & Confidential. © 2012, Everest Global, Inc. 9
  • 10. Acquisitions leveraged predominantly to build broaderservice portfolios and industry specific skillsYearly distribution of acquisitions by acquisition themes2009-2011; Number of acquisitions100% = 40 73 87 4% 1% Delivery 6%Industry consolidation 15% 10% footprint expansion 9% 8% Geography or client 20% expansion 15% 26%Industry-specific skills 13% 63% 58%Service portfolio gaps 52% 2009 2010 2011 Proprietary & Confidential. © 2012, Everest Global, Inc. 10
  • 11. Increasing focus on acquiring next generationcapabilities in service provider acquisitions EXAMPLES ACS-CredenceHealth: Cloud-  IBM-Q1 Labs: Analytics based applications for solutions in security/ healthcare BPO Business vulnerability domain platform analytics Accenture-CAS AG: CRM  Capgemini-Artesys: and mobility solutions Cloud Infrastructure services to Mobility focused on the retail industry computing augment cloud services in Europe 30% of M&A deals in 2011 carried some flavor of next generation services Proprietary & Confidential. © 2012, Everest Global, Inc. 11
  • 12. Europe and Africa gaining share in new set-ups;Tier-2 city set-ups now larger than Tier-1Offshore location activity across geographies Offshore location activity across Tier-1 andNumber of service delivery centers set up Tier-2 cities1 Number of service delivery centers set up 2009 2010 2011 93 84 86 76 78 72 70 67 60 32 32 27 24 22 21 12 8 6 Asia Europe Africa Latin America Tier-1 Tier-2 Proprietary & Confidential. © 2012, Everest Global, Inc. 12
  • 13. Overall captive activity increased in 2011 withsignificant growth in engineering services/R&DDistribution of new captive set-ups by functions supported1 Primarily engineering services/R&DNumber Primarily other functions 82 Multiple functions including 5 Engineering/R&D 50 41 42 2 4 15 23 24 27 15 2009 2010 2011 Majority of the engineering services/R&D captive activity in India, Rest of Asia, and CEE1 Indicates announcements related to actual captives set-ups only; captive expansions not included Proprietary & Confidential. © 2012, Everest Global, Inc. 13
  • 14. What we expect looking forward into 20121 Increased aggressiveness in winning away renewals from incumbents2 1-2 landmark captive divestitures – but not a trend Continued widening of gap between Tier 1 and Tier 2/3 service3 providers, making consolidation by acquisition more attractive4 Exchange rate concerns outweigh inflation concerns5 Continued increase in location activity in Central & Eastern Europe Proprietary & Confidential. © 2012, Everest Global, Inc. 14
  • 15. Presentation topics Key market Special topic: developments Perspective on Wrap up and in Q4 2011 and U.S. Tier-2/3 Q&A Yearly review cities  Factors influencing U.S. location strategy  City/delivery options Proprietary & Confidential. © 2012, Everest Global, Inc. 15
  • 16. Poll Question: What best describes your company’s futureplan for onshore delivery centers (e.g., in the US) relative tooffshore centers? Grow onshore delivery while 4% decreasing use of offshore delivery Grow offshore delivery while 0% decreasing use of onshore delivery Grow both onshore and offshore 96% delivery Decrease both onshore delivery and 0% offshore deliverySource: Live polling conducted during the “Key Market Developments in 2011: Market Vista Briefing” webinar on February 16, 2012 Proprietary & Confidential. © 2012, Everest Global, Inc. 16
  • 17. Key drivers of interest in U.S. Tier-2/3 citiesSavings relative to U.S. Cultural fit, time zone andTier-1 cities proximity to client IncreasingSensitivity towards interest in Skilled talent pooloffshoring U.S. Tier-2/3 cities Robust physicalGovernment incentives infrastructure Proprietary & Confidential. © 2012, Everest Global, Inc. 17
  • 18. Perspectives on commonly held opinions regardingU.S. Tier-2/3 citiesOpinions regarding U.S. Tier-2/3 cities Our perspectiveCosts are often comparable to Although U.S. Tier-2/3 cities offer savingsoffshore locations when relative to Tier-1 cities, operating costsconsidering total cost to manage significantly higher than offshore locationsPrimarily appropriate to deliver Some Tier-2/3 cities offer a quality pool ofcontact center and transactional technical talent for IT, although specificBPO work from these cities business domain knowledge may not existOperating models in Tier-1 cities Scale and associated operating complexitiescan be transposed onto Tier-2/3 quickly constrain the potential roles for thesecities cities Proprietary & Confidential. © 2012, Everest Global, Inc. 18
  • 19. Talent-cost profile for IT skills  Wide diversity of options  Niche options, non-  Experienced IT pool traditional business center 20-80% of Tier-1 Experienced IT pool Operating cost per FTE  5-20% of Tier-1 Tier-1 5-8% Savings Upper Tier-2 range 10-15% Lower Tier-2 15-20% Tier-3 20% 40% 60% 80% 100% Accessible annual graduate pool for IT Often single company towns (As a percentage of pool in Tier I cities) Costs can be similar to Tier-2 due to small labor market (1-10% of Tier-1) Proprietary & Confidential. © 2012, Everest Global, Inc. 19
  • 20. Models for small scale centers (50-250 FTEs) inTier-3 cities1 Isolated and/or  Support unique needs (regulatory, economic specialized center development, industry skills)  Commitment to developing distinctive talent position2 Complementary  Extra capacity to balance across centers capacity  Well-defined delivery platform to create delivery efficiency and predictability3 Satellite staff  Support a large center by providing targeted skills augmentation center  Requires clear operating and project management model Each requires a specific talent and operating model Proprietary & Confidential. © 2012, Everest Global, Inc. 20
  • 21. Presentation topics Key market Special topic: developments Perspective on Wrap up and in Q4 2011 and U.S. Tier-2/3 Q&A Yearly review cities  Submit any remaining questions! Proprietary & Confidential. © 2012, Everest Global, Inc. 21
  • 22. Key messages in today’s webinar  Decrease across most verticals,Outsourcing and offshoring except healthcareactivity declined in the  Captive set-ups increased,second half of 2011 divestitures remain lowNew location investments  Growth in CEE and Africaare increasingly specialized  Tier-2 city growthU.S. Tier-2/3 cities can beattractive, but have stark  Savings versus challenges inimplications on the scalability and breadth of skillsoperating model Proprietary & Confidential. © 2012, Everest Global, Inc. 22
  • 23. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on right side of your screen. This opens Q&A Be sure to keep the default set to “send to All Panelists” Type your question in the box at the bottom of the Q&A box and click the send button Attendees will receive an email with instructions for downloading today’s presentation For advice or research on Market Vista, please contact: – Eric Simonson, eric.simonson@everestgrp.com – Katrina Menzigian, katrina.menzigian@everestgrp.com – H. Karthik, h.karthik@everestgrp.comStay connectedWebsites Twitter Blogswww.everestgrp.com @EverestGroup www.sherpasinblueshirts.comresearch.everestgrp.com @Everest_Cloud www.gainingaltitudeinthecloud.com Proprietary & Confidential. © 2012, Everest Global, Inc. 23
  • 24. MV 2012 Offshore Locations Survey 2012 Offshore Locations Survey: Perceptions and Plans How do your offshore location plans compare with the industry? Participate in Everest Group’s 2012 Market Vista Offshore Locations Survey and share your perspectives. All participants receive a complimentary copy of survey findings. Take the survey: https://www.surveymonkey.com/s/lo2012-mvw Survey ends soon! Proprietary & Confidential. © 2012, Everest Global, Inc. 24
  • 25. Check out our blog for the latest perspectiveson global services Experts in the global services terrain www.sherpasinblueshirts.com Proprietary & Confidential. © 2012, Everest Global, Inc. 25
  • 26. Related Content Market Vista: Q4 2011 Market Vista: 2011 in Review Global Location Insights: December 2011 – Perspectives on Tier-2/3 Cities in the United States as Locations for IT Services Delivery Global Locations Compass – China Global Offshore Captive Landscape and Trends: Focus Geography – China Blog: What’s your Policy to Serve Policy Providers? Blog: Video: Outsourcing and Offshoring Trends in Pharmaceuticals Report – Key Findings Proprietary & Confidential. © 2012, Everest Global, Inc. 26
  • 27. Everest GroupLeading clients from insight to actionEverest Group locations Dallas (Headquarters): info@everestgrp.com +1-214-451-3000 New York: info@everestgrp.com +1-646-805-4000 Toronto: canada@everestgrp.com +1-416-865-2033 London: unitedkingdom@everestgrp.com +44-207-887-1483 Delhi: india@everestgrp.com +91-124-496-1000 www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com Proprietary & Confidential. © 2012, Everest Global, Inc. 27

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