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Webinar Deck: Market Vista: Global Services Developments in Q4 2012 and 2012 Year in Review
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Webinar Deck: Market Vista: Global Services Developments in Q4 2012 and 2012 Year in Review

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On February 6, Everest Group hosted a webinar that covered facts and insights on outsourcing transaction trends, financial performance of leading service providers, and Global In-house Center (GIC) …

On February 6, Everest Group hosted a webinar that covered facts and insights on outsourcing transaction trends, financial performance of leading service providers, and Global In-house Center (GIC) adoption across verticals and geographies.

How has the global services industry been impacted by the economic slowdown? Is the worst behind us or is there more to come? Why has global services delivery continue to increase in Asia despite inflationary pressures? And what about Latin America?

Don’t Miss the Special Guest Speaker… Peter Bendor-Samuel, Founder and Chief Executive Officer of Everest Group. An industry veteran, Peter will share his unique perspectives on the state of the global services industry in 2012 and outlook for 2013.

Published in: Business

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  • 1. Global Services Developments in Q4 2012and 2012 Year in Review: Market VistaBriefingFebruary 6, 2013Live Tweeting #MarketVista
  • 2. Introductions Peter Bendor-Samuel CEO and Founder peter.bendorsamuel@everestgrp.com Eric Simonson Managing Partner – Research eric.simonson@everestgrp.com H. Karthik Vice President h.karthik@everestgrp.com Proprietary & Confidential. © 2013, Everest Global, Inc. 2
  • 3. Context settingFocus of this webinar Present key global services developments in 2012 Describe outlook on global sourcing locations for 2013Sources for today’s webinar  Summary from a Location Optimization 200+ page report + IT and Business  Fact-based research covering Services research global services Proprietary & Confidential. © 2013, Everest Global, Inc. 3
  • 4. Terminology | Global In-house Center (GIC) replacing “captive”Context What has changed Historically, the term “captive” has  Everest Group has adopted “Global In-house referred to service delivery operations Center” or “GIC” as the preferred term to in lower cost geographies, which are replace “captive” owned and operated by the same company receiving the services (i.e.,  This will appear in all of our reports and not third-party outsourcing) content beginning in July 2012 Although the term has become widely used, it has a perceived negative tone and is not self-explanatory, causing confusion for those new to the global Growing industry-wide shift services space Both NASSCOM (India) and BPAP (Philippines) are championing the change in terminology Furthermore, many organizations, for which captive is intended to describe, do not use the term themselves Proprietary & Confidential. © 2013, Everest Global, Inc. 4
  • 5. Highlights of 2012  Outsourcing transactions Global services market maturing in  Service provider performance multiple ways  Location activity  GIC trends Increase in new location set-ups;  Top 3 locations across regions significant uptick in LATAM  Drivers of growth GIC set-ups steady; increasing  GIC set-up activity sophistication in leverage  Changing parent expectations Proprietary & Confidential. © 2013, Everest Global, Inc. 5
  • 6. Presentation topics Special topic | Key market Global sourcing developments in Wrap up and Q&A locations: outlook 2012 for 2013 Outsourcing transactions Service providers Locations GICs Proprietary & Confidential. © 2013, Everest Global, Inc. 6
  • 7. 7 What is your growth outlook for the global services market in 2013 compared to 2012? Significantly faster 13% Marginally faster 58% Similar 19% Marginally slower 11% Significantly slower 0%Source: Live polling conducted during the “Market Vista: Global Services Developments in Q4 2012 and 2012 Year in Review” webinar on Proprietary & Confidential. © 2013, Everest Global, Inc. 7 February 6, 2013
  • 8. Outsourcing transactions decreased in 2012 as compared toprevious years; Q4 showed a marginal uptickIndex of outsourcing transactions Index of outsourcing transactions2010-2012; Number Q1-Q4 2012; Number 441 411 401 1,978 1,929 380 1,633 2010 2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Proprietary & Confidential. © 2013, Everest Global, Inc. 8
  • 9. Broad-based decline in transactions across regions andverticals, except in continental EuropeOutsourcing deals announcedNumber of transactions 1,978 1,929 2012 performance compared to 2011 2 Public HealthRest of World 440 382 1,633 BFSI MDR sector care Others 317Rest of Europe 522 475 473 UK 283 373 302 1North America 733 699 541 2010 2011 20121 Excludes Mexico2 Includes Asia-Pacific, Latin America, and Africa Proprietary & Confidential. © 2013, Everest Global, Inc. 9
  • 10. Market Vista Index service providers yet to meaningfullypenetrate small- to mid-market segment Share of Market Vista Index providers1 ITO Percentage BPO 50% 43% 41% 40% 30% 21% 19% 20% 22% 20% 12% 10% 14% 5% 6% 0% <US$0.25 US$0.25- US$1.5-5 US$5-10 >US$10 billion 1.5 billion billion billion billion1 Share of deals involving Market Vista Index service providers as a share of all deals signed in a buyer revenue category Proprietary & Confidential. © 2013, Everest Global, Inc. 10
  • 11. Sluggish demand in 2012 impacted provider revenue growthRevenue growth rate (year-on-year basis) for Operating margin (quarterly) for Market VistaMarket Vista Index service providers Index service providersPercentage Percentage Offshore-centric service providers Offshore-centric service providers Traditional global service providers Traditional global service providers40% 30% 25% 23.3% 22.6% 22.9%30% 22.2% 20%20% 18.0% 15.0% 11.2% 15% 9.7%10% 13.2% 13.7% 10% 11.5% 7.3% 10.9% 5.1% 0% 5% 1.5% -3.3%-10% 0% Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Proprietary & Confidential. © 2013, Everest Global, Inc. 11
  • 12. Latin America witnessed significant uptick in activity; some“dark horses” emergedNumber of service delivery centers set up 2010 2011 2012 Significant surge in activity in country in 2012 93 90 84 37 32 32 27 29 22 Asia Pacific Latin America Europe  India  Costa Rica  PolandTop-3 locations by  China  Mexico  Romaniaactivity (2012)  Singapore  Colombia  IrelandShare of GICs in ~40% ~25% ~50%centers set up (2012)Prominent functional ES/R&D Bilingual voice and Mix of IT, BPO,spikes (2012) non-voice BPO and ES/R&D Proprietary & Confidential. © 2013, Everest Global, Inc. 12
  • 13. GIC set-up activity remained steady; there were a few keydivesturesIndex of offshore GIC health GIC set-ups and expansions2010-2012; Number GIC divestures 89  Sustained shift towards more complex work: ~60% of new GICs set up in 2012 supported ES/R&D 70 62  India continues to be nerve center for ES/R&D  LATAM dominated new GIC set-ups focused on BPO (close to 50% of BPO GIC set-ups in 2012 were in LATAM) 2 5  Some increase in number of divestitures, 1 reflective of sourcing model strategy 2010 2011 2012 maturation Proprietary & Confidential. © 2013, Everest Global, Inc. 13
  • 14. Stronger permission for GICs to deliver value, but not at theexpense of cost Expectations of value beyond cost savings Distribution of parent respondents; Percentage 100% = 52 53 Deliver additional value even 4% 8% if cost savings is reduced Deliver additional value while 50% 60% maintaining cost savings Focus only on cost savings 42% 36% 2007 2012Source: Everest Group GIC Value Diagnostic Survey 2012 Proprietary & Confidential. © 2013, Everest Global, Inc. 14
  • 15. What to expect in 2013 Moderate uptick in growth but nature of growth will be very different Continued shifts in service provider landscape become even more visible More granular vs. broad-based approaches to sourcing model decisions Global talent management an increasing priority Proprietary & Confidential. © 2013, Everest Global, Inc. 15
  • 16. When organizations move work to an onshore center, what is the main motivation? Improve quality by moving work back 51% onshore from offshore delivery Reduce cost by moving work out of 15% high cost locations to lower cost… Other (regulatory, tax, etc.) 32% Dont know 1%Source: Live polling conducted during the “Market Vista: Global Services Developments in Q4 2012 and 2012 Year in Review” webinar on Proprietary & Confidential. © 2013, Everest Global, Inc. 16 February 6, 2013
  • 17. Presentation topics Special topic | Key market Global sourcing developments in Wrap up and Q&A locations: outlook 2012 for 2013  “Newer” frontiers  Expanding scope of services  Onshore/offshore location activity Proprietary & Confidential. © 2013, Everest Global, Inc. 17
  • 18. Global sourcing locations: Outlook for 20131 Companies will continue to expand into “newer” geographies to tap into niche labor pools, manage costs of delivery, or diversify risks2 Scope of services delivered from established locations likely to selectively expand beyond “traditional” sweet spots3 Companies will continue to grow onshore, but not at the expense of offshore Proprietary & Confidential. © 2013, Everest Global, Inc. 18
  • 19. Companies will continue to push the envelope and explore“newer” frontiers 1 NOT EXHAUSTIVE Multilingual skills, low competition Baltic states Native English skills Turkey Emerging R&D South Korea destinations Taiwan The Caribbean Vietnam Large graduate pool, Colombia Spanish skills Low-cost alternative Peru for IT Attractive costs and South Africa Spanish skills Preferred location for UK voice; large domestic market Proprietary & Confidential. © 2013, Everest Global, Inc. 19
  • 20. Scope of services delivered from locations likely to expandbeyond “traditional” sweet spots 2Locations “Traditional” sweet spots “Hidden jewels”Philippines English-language voice BPO for Healthcare BPO the U.S.South Africa English-language contact center High-end finance skills for the UKCosta Rica Bilingual (English and Spanish) Engineering and design voice BPO for the U.S.Chile Bilingual (English and Spanish) KPO, analytics, financial BPO for the U.S. research Proprietary & Confidential. © 2013, Everest Global, Inc. 20
  • 21. Companies will continue to grow onshore, but not at theexpense of offshore 3New delivery centers of Market Vista Estimated capacity addition by Market VistaIndex service providers Index service providersNumber ‘000 FTEs 79 88 28-32 36-40Offshore 66% 78% Offshore 87% 92%Onshore 34% 22% Onshore 13% 8% 2011 2012 2011 2012 Even though large service providers are setting up delivery centers in onshore locations, this is not at the expense of offshore locations; share of onshore locations by number of set-ups is typically 20-30% On a capacity basis, the share of onshore locations is even smaller (10-15% annually) Proprietary & Confidential. © 2013, Everest Global, Inc. 21
  • 22. Presentation topics Special topic | Key market Global sourcing developments in Wrap up and Q&A locations: outlook 2012 for 2013  Submit any remaining questions! Proprietary & Confidential. © 2013, Everest Global, Inc. 22
  • 23. Highlights of the webinar  Growth is slower, but broad-based across sourcing models, providers Global services market maturing in  Stronger permission for GICs to multiple ways deliver value, but not at the expense of savings  Growth in both traditional locations Increase in new location set-ups; and some “dark horses” significant uptick in LATAM  BPO driving growth in Latin America  Onshore-offshore complementary, Global sourcing locations: outlook not competing for 2013  Continued push towards newer locations and models Proprietary & Confidential. © 2013, Everest Global, Inc. 23
  • 24. 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 – H. Karthik, h.karthik@everestgrp.comStay connectedWebsites Twitter Blogswww.everestgrp.com @EverestGroup www.sherpasinblueshirts.comresearch.everestgrp.com @Everest_Cloud www.gainingaltitudeinthecloud.com Proprietary & Confidential. © 2013, 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. © 2013, Everest Global, Inc. 25
  • 26. Related Content Market Vista: Q4 2012 Market Vista: 2012 in Review Market Vista Industry Trends and Buyer Geography Trends Global Location Compass – Brazil Global Location Insights: January 2013 – Healthcare BPO is a “Hidden Jewel” for The Philippines Global Services Industry Blog: Service Providers Versus GICs: the Age-old Debate Blog: Leverage Points in Global Services for India, China, and Philippines Blog: Why the Traditional Infrastructure Outsourcing Market Is about to Shrink Dramatically Proprietary & Confidential. © 2013, Everest Global, Inc. 26
  • 27. About Everest GroupEverest Group is an advisor to business leaders on the next generation of globalservices with a worldwide reputation for helping Global 1000 firms dramaticallyimprove their performance by optimizing their back- and middle-office businessservices. With a fact-based approach driving outcomes, Everest Group counselsorganizations with complex challenges related to the use and delivery of globalservices in their pursuits to balance short-term needs with long-term goals. Throughits practical consulting, original research, and industry resource services, EverestGroup helps clients maximize value from delivery strategies, talent and sourcingmodels, technologies, and management approaches. Established in 1991, EverestGroup serves users of global services, providers of services, country organizations,and private equity firms in six continents across all industry categories. For moreinformation, please visit www.everestgrp.com and research.everestgrp.com. Proprietary & Confidential. © 2013, Everest Global, Inc. 27
  • 28. 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 +44-207-129-1318 Delhi: india@everestgrp.com +91-124-496-1000 www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com Proprietary & Confidential. © 2013, Everest Global, Inc. 28