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GS100 Compendium 2011


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Global Services 100 is an annual study of Global Outsourcing Industry recognizing service provider leadership & excellence in service delivery on a global scale. …

Global Services 100 is an annual study of Global Outsourcing Industry recognizing service provider leadership & excellence in service delivery on a global scale.
The outcome of GS100 study is an integrated program with multiple delivery media platforms including a digital magazine, microsite, webinars, webcasts, PDF reports to name a few.

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  • 1. Solutions For Your Global IT Services NeedsWhen Quality Matters – CMMi L5When Scalability Matters – 4000 professionalsWhen Global Delivery Matters – LATAM, USA, EMEAWhen Distance and Time Zone Matter – Nearshore / Next DoorWhen Technology Matters – Java, .NET, IBM, SAP, BI, Web, MobileWhen Breadth of Services Matters – AD, SI, Testing, Staffing, BPOWhen Business Flexibiliy Matters – Strategic Partnerships, Captives, Joint Ventures Then... Teamwork Innovation HILDEBRANDO IS YOUR Security Quality IT SERVICE PROVIDER OF CHOICE Integrity Perseverance Commitment Hildebrando has been featured as: - 2011 Global Services 100 Provider - Top Global Mid-Tier ITO Vendor - Leading Mid-Tier ADM Vendor - Top Mid-tier Industry-Specific BPO VendorCorporate HQ - Outsourcing Leader - Latin AmericaReforma 295, Piso 10 - Latin America Delivery Leader USA HQColonia Cuauhtémoc 5847 San Felipe 17th floorC.P. 06500 México, DF. MEXICO USA BRAZIL SPAIN COLOMBIA PERU Houston,Texas, 77057+52 55 5242 0300 +1 713 568 5944
  • 2. Editor’s NotE When Good Service Providers are Bad Data Providers ED Nair, Editor The GS100 exercise gives me a chance to sample all category distinguish themselves with theirtypes of outsourcing service providers in the world utter ignorance about global marketing. Leadand relate my experience with each one of them. I generation through inside sales (teams of tel-can even club them into unique categories based on ecallers from India), onsite bizdev (BD) guystheir acumen, attitudes, and marketing savvy. sneaking into IT conferences in the US, a web- So, here are my informal GS100 categories: site, and a Nasscom membership forms the 1. The disinterested large global multination- core of their marketing activity. A few of these als: They choose to ignore the GS100 exercise guys participate in our survey by giving some because a) their marketing departments are information, others are happy ignoring it. so stodgy and vast that the survey deadline is 6. The US-based East European (incl. Russian), over by the time they decide, or b) they hide Latin American, and Chinese providers: These behind some corporate policy. guys participate with full fervor and sincerity. 2. The participative and proactive global mul- They explore various marketing options to tinationals: They are very co-operative and help them distinguish themselves from Indian interested. They offer interviews and vari- mid-tier vendors. These guys also undertake ous other opportunities to help us get a good the task of marketing their respective offshore insight into their companies. They make sure locations. Year over year, they increase their they get heard. marketing sophistication by adding newer ele- 3. The diligent global multinationals: The mar- ments. They are ‘hungry’ and have a ‘sense of keting intern diligently works for 2 months at urgency’. filling up the questionnaire and then they for- 7. The small, start-up, boutique companies: They get about it. They don’t reach out to get heard. begin with the right earnestness, but they end 4. The large 6-8 Indian outsourcing service pro- up joining category 5 or 6 when they scale up. viders: A few of them choose to behave like Surveys such as the GS100 have a purpose— to category 1 above. But the others, if they par- help buyers choose potential service providers. In ticipate, then they are like category 2 above. itself, GS100 is an exercise to recognize service They put meticulous effort in giving informa- provider excellence. Participating in such surveys tion. These companies really understand the with full information helps the entire outsourcing finer nuances of global marketing, media rela- ecosystem. tions, media strategy, influence marketing, etc. We are happy to present the 2011 Global Services Nothing is too small for them to be ignored. Compendium. 5. The vast group of mid-tier Indian outsourc- ing service providers: Most of them in this Happy Reading!
  • 3. COnTenTS 7 INDUSTRY ANALYSIS AND OUTLOOK 2010-Global Outsourcing Slows Down to Re-adjust 8 Outlook 2011- Rising from the Bottom, Steady Recovery Onward 11 13 SURVEY ANALYSIS The 2011 Global Services100: Defining Leadership in Global IT and Business 14 GS100 LISTS The GS100 Methodology 30 The GS100 Lists 33 The GS100 Category Lists 38 29Pradeep Gupta Sourabh Chandra Pushp AdVErtiSErS LiStChairman & Managing Director Media (India) Ltd. design Hildebrando 2E. Abraham Mathew Suresh KumarPresident Luxoft 9Ed Nair Forthcoming CompendiumsEditor, Destinations Compendium Talentica 15 Vox Artis - Voice of ExpertsSatish Gupta Germany Trade & Invest 17AVP, Global ServicesGary Bindra Cyber Media (India) Ltd. Great Idea CyberHouse, B- 35, Sector 32Virendra Kumar Gurgaon-122001, India Indecomm 37 Tel: +911 24 Chauhan Fax: +911 24 2380694 Sonata 41 IBA 47Smriti Sharma disclaimer: All rights reserved. No of this publication may be reproduced EPAM 53Smita Vasudevan by any means without prior permission from the publisher. HCL 67
  • 4. iTO AnAlysis And Trends SEGmENT ANALYSISADM Outsourcing: The Old Horse FacingWaves of Change 44OPD Goes Mainstream, Ties in closer toBusiness Value 51eSO: Growing Demand, UntappedPotential 58not Cloud Alone, There are other Tailwinds forInfrastructure Management 64Old World eRP Takes on a new Avatar 71 43 BPO AnAlysis And Trends Interaction Unfold new Opportunities for Contact Centres 76 FAO Market is on Roll 82 Analytics Outsourcing Gaining Ground 90 Industry Specific BPO will Continue to evolve 96 Procurement Outsourcing on the Rise, Flush with Deals 108 Small, Shorter Term Deals Setting new Trends in HRO 113 The Global Services 100 Compendium 2012 BE THERE WHERE IT MATTERS! Book your advertisement space now! Contact Niketa at
  • 5. destinations 2011compendiuma one stop resource on outsourcing destinationsDestinations compendium brings together themyriad dynamics of the outsourcing locations. Itcovers research report on top 100 outsourcingcities, countries-in-focus, regional dynamics, cityprofiles, experts opinion on location assessment. Dont miss this opportunity! Book your space now! Contact Niketa at
  • 7. 8 Industry Analysis 2010-Global Outsourcing Slows Down to Re-adjust Course T he effects of the recession were seen complete in 2010 with most indicators pointing south. But the fundamentals are strong for a steady recovery. In that sense, the year was a brief interlude. Ed Nair The full impact of the 2008 recession on the grew at modest rates, whichever source global services industry was only begin- you allude to. Global Services does not ning to get felt in 2009, but it actually size up the overall industry, but evidences played out in 2010 in terms of growth from GS100 data also suggest that the vol- rates, total contract values, new customers ume of outsourcing has grown. Therefore, gained, and type of contracts. These are the the good news is that the big picture is real measures of outsourcing activity and intact. (See Fig. 1) these measures tell a tough story in 2010. TPI tracks deal activity on a quarterly The silver lining on the dark clouds of basis. Global deals larger than $25M in 2010 is that despite the bad news, the size TCV get tracked as the global broader of the outsourcing industry did not shrink. market. Though not a perfect measure, it is The industry is not depressed. In fact, it still a great indicator of global deal activity Global Market Size Figure 1 Companies have spent more for outsourcing services year after year during the past decade Annualized revenues cont the revenues available to service providers in any Source: TPI given year. It combines the active awards from current and previous years. 2011 Global services 100 study
  • 8. YOUR STRATEGICTECHNOLOGYPARTNERBuilding solutions forFinance, Telecom, IT,Automotive and Energysectors 4500+ best in class engineers 18 offices in 11 countries Track record of building highly complex solutions Expertise in business and technology domains Focus on innovation and R&D Best-in-class processes CONTACT US: MICHAEL MINKEVICH ROMAN TRAKHTENBERG VP Technology Services Managing Director, Luxoft USA E-mail: E-mail: Tel: +7 (495) 967-8030 x4427 Tel: +1 (212) 964 9900x Mobile: +7 (495) 364-9137 Mobile: +1 (917) 930-205
  • 9. 10 2010-RevIew correlated with size. For full year 2010, now looking at part processes and having a the TCV was $79.4 B, which is 11 percent phased approach to implementing end-to- down from 2009. The figure of course does end business processes. Multi-sourcing is not include deals below $25M in TCV, another reason for BPO numbers to drop. which if take into consideration may indi- (see Figure 2) cate a net increase over 2009. In 2010, nearly three-fourths of the con- The split between contract restructuring tracts were multi-sourced, which in compari- and new scope reveals that the year was pre- son to 2000, suggests that true multi-sourcing dominated by restructuring, which showed has become the mainstream practice. a 39% increase over 2009. At the same time, In summary, 2010 was a difficult year new scope contracts showed a sharp decline brought about by the effects of recession of 25 percent. It means that in 2010, the focus and manifested as reduced TCV, increase of outsourcing was to extend existing rela- in restructurings, and reduced new scope. tionships, mostly on renegotiated rates and Add to this, a general decline in contract different terms. New scope is suggestive of sizes and a deepening of the trend of multi- fresh activity, which in itself, is an indication sourcing. These are the new behaviors that Figure 2 Categories 2010 FY 2010 FY (Based on TCV) TCV ($B) Growth Global Broader 79.4 -11% Market Restructuring 26.3 39% New Scope 53.1 -25% Americas 33 -3.2% EMEA 37.7 -14% APAC 8.7 -24% ITO 62.4 -3.7% BPO 17 -31% Source: TPI 4Q10 Index of growth and advancement of the envelope are likely to continue. In summary, none of of outsourcing. In other words, depressed this suggests that outsourcing is coming to new scope denotes sluggishness. a logical decline in activity. The economic BPO contracts in 2010 fell by 31 percent. In case for outsourcing is still strong, the stra- addition, most of the BPO activity was from tegic case for outsourcing is proven, and the Americas. One of the prominent reasons there’s a whole lot of scope for more out- for this is that BPO contracts are often small- sourcing in all areas. That’s the reason that er in value. The days of large multi-tower in 2011, we would see a steady recovery BPO deals are over. Instead, companies are and a more positive outlook. 2011 Global services 100 study
  • 10. Industry Analysis 11Outlook 2011- Risingfrom the Bottom, SteadyRecovery OnwardT he worst seems to be behind us and 2011 would see the beginning of slow and steady recovery.Ed NairThe overall outlook for 2011 is that of As of this time, there is insufficient prog-steady recovery. But the year began with nosis or data on 2Q2011. Vendors haveweak performance. It was expected that informally reported a positive outlook afterthere would be a lot of spillover from an exceedingly difficult previous quarter.4Q2010 (OND 2010), but it was not quite Indications are that volumes would rise,discernible. but there would be pricing 2011 Global services 100 study
  • 11. 12 2011-outlook impact of this on their business. Telecom, media, and manufacturing had a strong performance in the first quarter. More business segments are expected to follow the good performance. Organizations are seeking more value out of their service providers. Sourcing strategies are an important lever and organizations are re-looking at the mix of in-sourcing, shared services, and third- party outsourcing. There is an awful lot of new development work pending in technology. The specter of cloud com- puting and its impact on infrastructure, applications, and services; the increased need for analytics; and the consumeriza- Even in the first quarter, there were signs tion of IT are also the driving factors for of a reversal in course. Restructurings, more technology work. Similarly, busi- which were at an all-time high in 2010, ness processes optimized using BPO, can saw a remarkable dip earlier this year. have direct impact on costs and profit- Though this showed up as a headwind ability. This is true of both generic SG&A- for ITO TCV, the concurrent effect of related processes and industry-specific increase in new scope was a welcome processes. Even mid-size organizations sign. are looking to embrace new trends in IT There is a resurgence in BPO activity and BPO. These would translate into new this year with a 66% rise in TCV, with demand for IT services and BPO. activity levels near a 5-year high, again 1Q2011 was the lowest first quarter according to TPI. It shows that BPO had ever in the past 10 years and the global clearly bottomed out last quarter. TCV was down by 25%, according to Fears of a double-dip recession TPI. Global Services believes that this is have been doing the rounds recently. the last squeeze out of the tube for out- Economists are divided on their opinion. sourcing and it is the beginning of a slow Providers have not reported any material steady recovery. 2011 Global services 100 study
  • 12. Survey Analysis
  • 13. 14 2011 GS100 Survey Analysis The 2011 Global Services 100: Defining Leadership in Global IT and Business Process Outsourcing Ed Nair This is neither a study of 100 companies nor a survey aimed at choosing hundred best companies based on financial performance. Hundred best companies they are; chosen through a rigorous methodology (see Methodology section below) that evaluates each company across multiple dimensions, measured both quanti- tatively and qualitatively. From over 200 applications (companies that opt-in to participate), the study presents a complete view of the dynamics of the most sig- nificant segments that make up the IT and business process outsourcing industry. The following charts show the make-up of the 100 companies that form part of this year’s GS100 and what they do.Revenue Ranges (% No. of No. of Revenue Ranges (% companies) companies) Revenue Ranges (% no. of Total Outsourcing Revenue= $53B companies) BPO 35% 13 13 ITO Less than $100MLess than $100M ITO BPO 45 45 65% $100M to $1B $100M to $1B 42 More than $1B More than $1B 42 ITO Segments (by Revenue) 2011 Global services 100 study
  • 14. www.talentica.comBuilding Core Intellectual Property With Dedicated Off-shore Teams Offshore success is wholly dependent on teams at both shores working towards a common end. We build teams of ace developers who integrate closely with your team to understand the challenges of your business. At Talentica, we know this works! S P R E A D Y O U R W I N G S
  • 15. 16 2011 GS100 Survey Analysis Total ITO Revenue- $35B Total BPO Revenue- $18B 4% 0% 11% 1% 32% FAO 32% ADM 42% HRO EA PO IM KPO 11% ESO 42% 17% CC OPD 4% IS-BPO 4% Strategic ITO BPO Segments (by Revenue) The GS100 Methodology geographies represented, sectoral diver- Companies who opted to participate in sity, contract sizes, customer case stud- the survey were asked to share exhaustive ies, complexity of projects, marquee cli- information through an online survey done ents, important wins, etc.) during 03/11 and 04/11. The top 100 list • Global Delivery Maturity (global and the names in the categories are derived delivery footprint, type of work done, using a scientific research methodology expansions, headcounts, growth in based on over 200 data points and headcounts) several qualitative parameters. • Breadth of Services Portfolio The GS100 model for analysis (breadth of capabilities and is based on four primary pillars: service offerings across ITO • Management Excellence and BPO, domain expertise (includes across verti- revenue, cals, engage- growth, ment mod- profit- els, ven- ability, dor man- expansion, agement M&A, head- practices, new count, thought leader- capabilities and services ship, innovation capability, marketing launched, category leadership, ability to excellence, leadership quality, resource serve niche markets, etc.) profile, risk management measures, HR A weighted scoring scheme was used practices and policies, and several other to rate each of the above areas based on a performance indicators) scoring scheme designed by a panel from • Customer Maturity (paying customers, Global Services’ and NeoGroups practice new customers, verticals represented, experts. 2011 Global services 100 study
  • 16. Business Location GermanyEdyta Pawlowska – © Germany pays off Germany is the largest domestic BPO market in Europe – but also a developing country in terms of untapped potential. Available outsourcing volume is forecast at EUR 32 billion. And yet the market remains highly fragmented: the top 20 BPO providers occupy less than 30 percent of total market share. Now is the ideal time for you to take a closer look at and enter the German market – we are here to help you. Talk to us: Germany Trade & Invest provides confidential and free-of-charge information services. For more information, please contact Germany Trade & Invest Asha-Maria Sharma T. +91 (0)22 66652-180 Promoted by the Federal Ministry of Economics and Technology and the Federal Government Commissioner for the New Federal States in accordance with a German Parliament resolution.
  • 17. COUNTRY-IN-FOCUS Ensuring Global Visibility A special feature for countries to showcase their uniqueness There are numerous outsourcing destinations that exist as great alternatives to India and China. Inviting Countries to showcase capabilities that accentuate their uniqueness.Examples of Country-in-focus feature Egypt Philippines Jordan JORDAN For more information write to
  • 18. 2011 GS100 Survey Analysis 19The Growth Story Revenue growth was the most sought after performance indicator during 2010, but iteluded most of the companies due the depressed market environment. Nearly half the companies have growth In the 10 percent to 30 percent band, thererates of 10 percent or less, including about are many aggressive and leading India-a fifth of companies in the negative zone. focused companies and large regional ITSix out the 19 companies in the negative leaders. These are the companies that werezone are global $1B+ companies and most equipped to handle the market forces, wereof the rest are mid-tier companies. The able to get business either through theirspread includes few companies with IT scale or specialty, and were able to deliverand BPO capabilities, few niche IT lead- better than average results.ers, and many pure play BPO companies. Amongst companies that grew fastest,Single digit growth companies are an with growth rates in excess of 30 percent, oneassortment of many mid-tier IT and BPO would find many global mid-tier companiescompanies from India and a few small from India, China, Russia, E.Europe, andnon-Indian offshore players. Clearly, there Latin America. In some cases, growth haswas pressure on the top-line for mid-tier come in from acquisitions— a strategy thatcompanies. works well when primary demand is 2011 Global services 100 study
  • 19. 20 2011 GS100 Survey Analysis Fastest Growing Companies* Customer Leadership Aegis Limited Customer acquisition is one of the key Auriga Inc. factors for success in the services business. Chinasoft International Ltd. Customers represent lifetime value to the Ci&T Software business. The quality of customers deter- Ciklum mines the stability of the business model, the DBA Engenharia de Sistemas potential to innovate, and the overall learn- eClerx Services Ltd ing for the organization. EPAM Systems ExlService Holdings, Inc. (EXL Service) A global customer base signifies the abil- Globant ity to understand diverse global businesses HTC Global Services, Inc. and the ability to orchestrate delivery using iGATE Global Solutions Limited multiple offshore delivery locations. InterGlobe Technologies GS100 companies serve customers across KPIT Cummins Infosystems Ltd. the globe. The chart shows the global diver- Luxoft sity of GS100 customer base. US and W. Nagarro, Inc. Europe (with 96 and 87 companies respec- VanceInfo Technologies tively) obviously lead the group because *Growth rate of more than 30 percent they continue to be the demand centers No. of companies with corporate customers in the region 2011 Global services 100 study
  • 20. 21for services. Canada and Australia come next. Interestingly, other countries/ regions thatinclude India, Japan, South America, and E. Europe are rising in demand for global services. In terms of new customer acquisition in 2010, the GS100 companies got in nearly 6800new customers for IT services. Within that, the major areas are ADM and bundled ITservices (multi-tower IT services). Similarly in BPO, the areas were analytics and industry-specific BPO. ITO Customers Area Total Paying New Customers % New in Total Customers in 2010 Customer Base ADM 8542 2373 27.78 EA 3819 1008 26.39 ESO 1477 252 17.06 OPD 1749 625 35.73 IM 1999 314 15.71 Multi-IT 7376 2209 29.95 BPO Customers Area Total Paying New Customers % New in Total Customers in 2010 Customer Base FAO 5337 317 5.94 HRO 270 29 10.74 CC 2079 472 22.70 PO 153 13 8.50 KPO/ Analytics 4365 653 14.96 Industry-specific 2012 447 2011 Global services 100 study
  • 21. Software Paradise, 后Hangzhou Sourcing Demonstration City of Chinasourcing Hangzhou Hangzhou was defined as the “China Service Outsourcing Demonstration City” in February 2009. Hangzhou is also the one of eleven software industry base cities in mainland China. It has currently formed the several industries including telecommunication, software, integrated circuit, digital TV, animation games and E-commerce.The revenue of software business in Hangzhou was achieved at 47 billion RMB in 2009, the software export revenue reached at 460million USD. There were total 112 enterprises passed CMMCMI, ISO27001 certification. There were 20 IT software enterpriseshave list on public market, two companies ranked at Top 10 of self-brand software products, total 15 enterprises have list at the key software enterprises name list of the national strategic planning. In order to accelerate the development of outsourcing industry, Hangzhou Municipal Government set up the leading team to draw up the development plan, issue the supporting policy to make the rapid development of outsourcing industry in Hangzhou. The total delivered amount of offshore outsourcing business reached at 919mllion US Dollars, risen to 352% compared to the same period of last year (2008).Hangzhou government has put more focus on the financial service outsourcing that is considered as the medium and high end outsourcing industry, Hangzhou now is creating to become the financial delivery center. International Financial Outsourcing Center Promotion & Undertaker: Great-Idea International Outsourcing Consulting Center
  • 22. Hangzhou, China A City of Financial Delivery Center To Combine the Global Resources and Facilitate theIntegration & Upgrade of the Global Service Capability Please Attention October Trip in Hangzhou China Sourcing Summit & Delegation to China Sponsors: Ministry of Commerce of the People’s Republic of China Ministry of Industry and Information Technology of the People’s Republic of China Ministry of Education of the People’s Republic of China Host City : Hangzhou People’s Government Official Promotion: Hangzhou Municipal Foreign Trade & Economic Cooperation Bureau International Financial Outsourcing Center Contact: Tel-8610 85863613 Fax-8610 59081093
  • 23. 24 2011 GS100 Survey Analysis ITO Customers BPO Customers Contracts and Deals Contracts in terms of numbers and value (which includes duration) are very good indi- cators of the level of activity in the services market. Figures below denote the value of existing contracts, including new ones signed during the year. The relative level and scale of activity in the ITO and BPO areas can be easily understood from this. Large BPO contracts are almost absent, whereas in ITO, there are nearly 100 contracts that are $100M plus in TCV. 2011 Global services 100 study
  • 24. 25 Contract TCV Range ITO BPO Upto $5M 12041 4683 $5M to $19M 2280 433 $20M to $34M 2009 147 $35M to $50M 1194 69 $51 M to $99 M 128 18 $100M to $299 M 71 11 $300M to $499 M 14 0 $500M to $749 M 5 0 $750M to $ 1B 4 0 $ 1 B to $ 2 B 5 1 More than $ 2 B 4 2011 Global services 100 study
  • 25. 26 2011 GS100 Survey Analysis Global Spread With the spread of global delivery, the number of employees in various countries helps to understand the rise of new locations. Top 5 Locations Country No. of Full-time Personnel India 448010 United States 143059 Philippines 84121 China 45085 England/UK 30422 Next 5 Locations Country No. of Full-time Personnel Canada 29333 Brazil 12467 Germany 11361 Argentina 9923 Mexico 9593 2011 Global services 100 study
  • 26. 27 YoY Comparison • Drop in India numbers can be attributed Country 2009 2010 to the non-participation of TCS, which was part of the sample last year. India 514157 448010 • Rise in the US numbers does point Philippines 97740 84121 towards increased hiring of profession- United States 42808 143059 als in the US by offshore vendors in IT China 34672 45085 and contact centers. Canada 32690 29333 • Numbers in China does not signify an England/UK 23494 30422 overall rising trend; at best the numbers Brazil 10213 12467 should be construed to be stable and Germany 9269 11361 growing, but definitely not decreasing. Australia 8544 8247 • Increased deal activity in UK is the rea- son behind increase in the numbers. Mexico 8412 9593 • Numbers from Latin American coun- Argentina NA 9923 tries like Argentina, Chile, Colombia, and Mexico alongwith Brazil are on a• Numbers are not strictly comparable steady rise. This trend is undoubted, because they belong to different sam- though the numbers from the sample ples, but the samples are identical. are not significant enough. HuMAN ReSouRCeS employee 2011 Global services 100 study
  • 27. 28 2011 GS100 Survey Analysis Top 20 employers (in terms of total employees in 2010) Aditya Birla Minacs Worldwide Ltd. Aegis Limited Capgemini S. A. CGI Group, Inc. Convergys Corporation CSC Firstsource Solutions Ltd Genpact HCL Technologies Ltd. Hinduja Global Solutions Limited Infosys Technologies Limited Intelenet Global Services Pvt. Ltd NCO Financial Systems, Inc. Neusoft Corporation Sitel Stream Global Services Sutherland Global Services, Inc. Tech Mahindra Ltd. Unisys Corporation Wipro Technologies Top 10 employers (in terms of employees recruited) Aegis Limited Aditya Birla Minacs Worldwide Ltd. Capgemini S. A. Firstsource Solutions Ltd HCL Technologies Ltd. Infosys Technologies Limited Intelenet Global Services Pvt. Ltd Stream Global Services Sutherland Global Services, Inc. Wipro Technologies 2011 Global services 100 study
  • 28. GS100 LISTS
  • 29. The 2011 Global Services100Defining Leadership in Global ITand Business Process OutsourcingThis is neither a study of 100 companies nor a surveyaimed at choosing hundred best companies basedon financial performance. Hundred best companiesthey are; chosen through a rigorous methodology thatevaluates each company across multiple dimensions,measured both quantitatively and qualitatively. Thestudy presents a complete view of the dynamics ofthe most significant segments that make up the IT andbusiness process outsourcing industry.
  • 30. The GS100 MethodologyCompanies who opted to participate in the survey were asked to share exhaustiveinformation through an online survey done during 03/11 and 04/11. The top100 list and the names in the categories are derived using a scientific researchmethodology based on over 200 data points and several qualitative parameters.The GS100 model for analysis is based on four primary pillars:• Management Excellence (includes revenue, growth, profitability, expansion, M&A, headcount, thought leadership, innovation capability, marketing excellence, leadership quality, resource profile, risk management measures, HR practices and policies, and several other performance indicators)• Customer Maturity (paying customers, new customers, verticals represented, geographies represented, sectoral diversity, contract sizes, customer case studies, complexity of projects, marquee clients, important wins, etc.)• Global Delivery Maturity (global delivery footprint, type of work done, expansions, headcounts, growth in headcounts)• Breadth of Services Portfolio (breadth of capabilities and service offerings across ITO and BPO, domain expertise across verticals, engagement models, vendor management practices, new capabilities and services launched, category leadership, ability to serve niche markets, etc.)A weighted scoring scheme was used to rate each of the above areas based ona scoring scheme designed by a panel from Global Services’ and NeoGroupspractice experts.
  • 31. 2011 GS100 list 33 2011 GLOBAL SERVICES 100 COMPANIES Company Name of the CEO Headquarters 24/7 Customer Pvt. Ltd P V Kannan Campbell, (California) USA Aditya Birla Minacs Deepak J Patel Bangalore, India Toronto, Worldwide Ltd. Canada Aegis Ltd. Aparup Sengupta Mumbai, India Affinity Express Inc. Kenneth W. Swanson Elgin, USA Altisource Portfolio Solutions William B. Shepro Luxembourg City, Luxembourg S.A AppLabs Sashi Reddi Philadelphia, PA Artezio Pavel Adylin Moscow, Russia Auriga Inc. Andrei Pronin Moscow, Russian Federation Birlasoft Arup Gupta Noida, India Bleum, Inc. Eric Rongley Shanghai, China Capgemini S. A. Paul Hermelin Paris, France CGI Group, Inc. Michael E. Roach Montreal, Canada Chinasoft International Ltd. Yu Hong Henry Chen Hongkong (Beijing), China Ci&T Software Cesar Gon Campinas, Brazil Ciklum Torben Majgaard Kiev, Ukraine Collabera Inc Hiten Patel Morristown, (NJ) USA Convergys Corporation Jeff Fox Cincinnati, (OH) USA CSC Michael W. Laphen Falls Church, (VA) USA Cybage Software Private Ltd. Arun Nathani Pune, India DataArt Eugene Goland New York, USA Datamatics Global Services Rahul Kanodia Mumbai, India Ltd DATROSE William Rose Rochester, (NY) USA DBA Engenharia de Sistemas Patricia Andrea Freitas Rio de Janeiro, Brazil eClerx Services Ltd PD Mundhra and Anjan Mumbai, India 2011 Global services 100 study
  • 32. 34 2011 GS100 list Endava Ltd. John Cotterell London, United Kingdom EPAM Systems Arkadiy Dobkin Newtown, (PA) USA Exigen Services Alec Miloslavsky San-Francisco, (CA) USA ExlService Holdings, Inc. (EXL Rohit Kapoor New York, USA Service) Firstsource Solutions Ltd Matthew Vallance Mumbai, India Freeborders, Inc. Jean Cholka San Francisco, (CA) USA Genpact NV Tiger Tyagarajan NYC, USA and Gurgaon, India GlobalLogic, Inc. Peter CJ Harrison McLean, (VA) USA Globant Martin Migoya Buenos Aires, Argentina Grupo Prominente Gonzalo Rueda Cordoba, Argentina HCL Technologies Ltd. Vineet Nayar Noida, India *Headstrong Services, LLC Sandeep Sahai Reston, (VA) USA Hexacta Juan Navarro Buenos Aires, Argentina Hexaware Technologies Ltd. P.R.Chandrasekar Jamesburg, USA Hildebrando S.A. de C.V Diego Zavala Mexico City, Mexico Hinduja Global Solutions Ltd Partha Sarkar Bangalore, India HOV Services Ltd. Parvinder S Chadha Troy, MI and Chennai, India, USA and India HP Leo Apotheker Palo Alto, CA USA HTC Global Services, Inc. Madhava Reddy Troy, CA USA IBA Group Sergei Levteev Prague Czech, Republic iGATE Global Solutions Ltd Phaneesh Murthy Fremont, CA USA Indecomm Global services Naresh Ponnapa Bangalore, India Infosys Technologies Ltd. S. Gopalakrishnan Bangalore, India Innodata Isogen Jack Abuhoff Hackensack, (NJ) USA Insigma Technology Co., Ltd Lie Shi Hangzhou, China Intelenet Global Services Pvt. Susir Kumar Mumbai, India Ltd * Headstrong Services LLC has been acquired by Genpact 2011 Global services 100 study
  • 33. 2011 GS100 list 35 InterGlobe Technologies Vipul Doshi Gurgaon, India Intetics Co Boris Kontsevoi Wilmette, (IL) USA ITC Infotech B Sumant Bangalore, India Itransition Software Sergey Gvardeitsev Minsk, Belarus Development Company KPIT Cummins Infosystems Kishor Patil Pune, India Ltd. Lanit-Tercom, Inc Andrey N.Terekhov St.Petersburg, Russia Lionbridge Technologies, Inc. Rory Cowan Waltham, (MA) USA LogiGear Corporation Hung Quoc Nguyen San Mateo, CA USA LOHIKA Daniel Dargham San Bruno, USA Luxoft Dmitry Loschinin Moscow, Russia Marlabs, Inc. Siby Vadakekkara Piscataway, NJ USA MERA Dmitry Ponomarev Nizhny Novgorod, Russia Microland Ltd. Pradeep Kar Bangalore, Bangalore Mindteck (India) Ltd. Pankaj Agarwal Bangalore, India MindTree Ltd. Krishnakumar Bangalore, India Natarajan Nagarro, Inc. Vikas Sehgal San Jose, (CA) USA NCO Financial Systems, Inc. Ron Rittenmeyer Horsham, (PA) USA Neilsoft Ltd. Ketan Bakshi Pune, India NEORIS Claudio Muruzabal Miami, USA Ness Technologies Sachi Gerhlitz New Jersey, USA Neusoft Corporation Jiren Liu Shenyang, China Omnitech Solutions Atul Hemani Mumbai, India Outsource Partners Clarence T. Schmitz Los Angeles & New York (Dual International HQ), USA Pacific Global, Inc Shwetabh Kumar Noida, India Persistent Systems Ltd Dr. Anand Deshpande Pune, India Polaris Software Lab Ltd. Arun Jain Chennai, 2011 Global services 100 study
  • 34. 36 2011 GS100 list Quality Engineering and Ajit Prabhu Singapore, Singapore Software Technologies RCG Information Technology Robert Simplot Edison, (NJ) USA Reksoft Alexander Egorov St-Petersburg, Russia Scicom (MSC) Berhad Leo Ariyanayakam Kuala Lumpur, Malaysia Sitel David Garner Nashville, (TN) USA SoftServe, Inc. Taras Kytsmey Lviv, Ukraine Sonata Software Ltd. B Ramaswamy Bangalore, India SPi Global Maulik Parekh Metro Manila, Philippines Stream Global Services Kathryn Marinello Wellesley, USA Sutherland Global Serives, Dilip Vellodi New York, USA Inc. Symphony BPO Solutions Sdn Abdul Hamid Sheikh Petaling Jaya, Malaysia Bhd Mohamed Synapsis Soluciones y Leonardo Covalschi Santiago, Chile Servicios IT LTDA Syntel, Inc. Prashant Ranade Troy, (MI) USA Talentica Software (India) Pvt Nitin Shimpi Pune, India Ltd TEAM International Matt Moore Lake Mary, USA Tech Mahindra Ltd. Vineet Nayyar Pune, India TELUS International Jeffrey D. Puritt Vancouver, Canada Transactel Barbados Inc Guillermo Montano Guatemala, Guatemala Unisys Corporation J. Edward Coleman Blue Bell, (PA) USA VanceInfo Technologies Chris Chen Beijing, China Virtusa Corporation Kris Canekeratne Westborough, USA Wipro Technologies T K Kurien Bangalore, India WNS Global Services Keshav R Murugesh Mumbai, India Zensar Technologies Ganesh Natarajan Pune, India *The companies are in alphabetical order, not ranked. 2011 Global services 100 study
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  • 36. 38 2011 GS Category 100 list GLOBAL SERVICES 100 CATEGORY LIST- 2011 Top ADM Vendors GLOBAL SERVICES MAGAzINE CapGemini CGI Group, Inc. Past Issues CSC HCL Technologies Ltd. 2011 May Issue The Promise of IaaS New Opportunities HP in Global Sourcing: Infosys Technologies Ltd. IaaS and Analytics Syntel, Inc. Tech Mahindra Ltd. Unisys Corporation Click Here Wipro Technologies To Read Leading Mid-Tier ADM Vendors Collabera Inc Hildebrando HTC Global Services, Inc. 2011 April Issue The New Rules in iGATE Global Solutions Ltd. BPO Luxoft Learn about what will drive the BPO MindTree Ltd. sector in this special Neoris report. Polaris Top FAO Vendors Click Here CapGemini To Read ExlService Holdings, Inc. (EXL Service) Genpact HOV Services Ltd. Infosys Technologies Ltd. 2011 March Issue Contact Center Industry: Where Do Intelenet Global Services Pvt. Ltd You Go From Here? NCO Financial Systems, Inc. Contact Centers and Wipro Technologies the Challenge of Social Media WNS Global Services Zensar Technologies Top Global BPO Vendors Click Here Aegis Ltd. To Read Convergys Corporation Firstsource Solutions Ltd 2011 Global services 100 study
  • 37. 39 Genpact HCL Technologies Ltd. HP HP NCO Financial Systems, Inc. Infosys Technologies Ltd. Sitel Tech Mahindra Ltd. Stream Global Services Unisys Corporation Sutherland Global Serives, Inc. Wipro Technologies Wipro Technologies Emerging IM Vendors Top Global ITO Vendors Collabera Inc Capgemini S. A. Microland Ltd. CGI Group, Inc. MindTree Ltd. HCL Technologies Ltd. Sonata Software Ltd. HP Top Contact Center and Customer Management Vendor Infosys Technologies Ltd. 24/7 Customer Pvt. Ltd Syntel, Inc. Aditya Birla Minacs Worldwide Ltd. Tech Mahindra Ltd. Aegis Ltd. Unisys Corporation Convergys Corporation Wipro Technologies Firstsource Solutions Ltd Top Speciality Product Hinduja Global Solutions Ltd. Engineering Vendors Intelenet Global Services Pvt. Ltd Applabs NCO Financial Systems, Inc. Bleum Sitel Ciklum Stream Global Services Cybage Sutherland Global Serives, Inc. Exigen Services Tech Mahindra Ltd. Indecomm Global TELUS International Luxoft Top Product Engineering Vendors MERA EPAM Systems Nagarro GlobalLogic, Inc. SoftServe Globant Sonata Infosys Technologies Ltd. Tech Mahindra Ltd. Lionbridge Technologies, Inc. Virtusa Corporation MindTree Ltd. Top IM Vendors Ness Technologies CSC Persistent Systems Ltd CapGemini VanceInfo Technologies CGI Group, Inc. Wipro 2011 Global services 100 study
  • 38. 40 2011 GS Category 100 list Top Enterprise Applications Vendors 2011 February Issue Next & Best CapGemini Practices in Global Sourcing CGI Group, Inc. Thought-leading CSC Practitioners’ Viewpoint HCL Technologies Ltd. HP Client priorities are shifting and there Infosys Technologies Ltd. is no consistent NEORIS correlation of the benefits of Ness Technologies outsourcing to Wipro Technologies business impact. This is the Top Engineering Services Outsourcing opportunity for Vendors India to reinvent and CSC innovate once again. HCL Technologies Ltd. Click Here Infosys Technologies Ltd. To Read KPIT Cummins Infosystems Ltd. MindTree Ltd. Neilsoft Ltd. 2011 January Issue Utility Computing: Quality Engineering and Software The Reality Check Technologies As we look back Wipro Technologies to the decade Top HRO Vendors that went by, the outsourcing industry CGI or the global services industry had many CapGemini momentous shifts Convergys Corporation Genpact Click Here Hexaware Technologies Ltd. To Read Infosys Technologies Ltd. Symphony BPO Solutions Sdn Bhd Top Global Mid-Tier BPO Vendors 2010 Archives 24/7 Customer Pvt. Ltd Aditya Birla Minacs Worldwide Ltd. 2011 Global services 100 study
  • 39. How are organisations like yours globally adopting innovative technologies to drive their businesses?Talk to us.Aligning Technology Solutions with Business NeedsKnow more @
  • 40. 42 2011 GS Category 100 list Altisource Portfolio Solutions S.A Infosys Technologies Ltd. Capgemini S. A. Lionbridge Technologies, Inc. CGI Group, Inc. NCO Financial Systems, Inc. ExlService Holdings, Inc. (EXL Service) Syntel, Inc. HCL Technologies Ltd. Unisys Corporation Hinduja Global Solutions Ltd. WNS Global Services HOV Services Ltd. Top Mid-Tier Industry-Specific BPO Infosys Technologies Ltd. Datamatics Global Services Ltd Intelenet Global Services Pvt. Ltd HCL Technologies Ltd. Lionbridge Technologies, Inc. Hexaware Technologies Ltd. SPi Global Hildebrando S.A. de C.V TELUS International iGATE Global Solutions Ltd. WNS Global Services Insigma Technology Co., Ltd Top Global Mid-Tier ITO Vendors InterGlobe Technologies Collabera Inc Scicom (MSC) Berhad EPAM Systems SPi Global Top KPO Vendors Hexaware Technologies Ltd. Affinity Express Inc. Hildebrando S.A. de C.V eClerx Services Ltd iGATE Global Solutions Ltd. ExlService Holdings, Inc. (EXL Service) Luxoft Infosys Technologies Ltd. MindTree Ltd. Syntel, Inc. NEORIS Top Global Diversified Ness Technologies Outsourcing Vendors Neusoft Corporation Capgemini S. A. Polaris Software Lab Ltd. CGI Group, Inc. VanceInfo Technologies Convergys Corporation Zensar Technologies CSC Top Industry-Specific BPO Genpact Aditya Birla Minacs Worldwide Ltd. HCL Technologies Ltd. CGI Group, Inc. HP CSC Infosys Technologies Ltd. Genpact NCO Financial Systems, Inc. HP Unisys Corporation HTC Global Services, Inc. Wipro Technologies *The companies are in alphabetical order, not ranked. 2011 Global services 100 study
  • 41. Segment Analysis 43 ITO/BPO SeGmenT 2011 Global services 100 study
  • 42. 44 Ito ADM OutsOurcing ADM Outsourcing: The Old Horse Facing Waves of Change A pplications development services accelerate the delivery of high quality business applications with fewer defects, less rework and lower cost. While this remains, better economics of software delivery, a well-maintained application lifecycle and software delivery process, and a better and more business-aligned recognition of the real value are the new mandates for ADM. Sourabh Chandra Pushp The ADM segment is still the mainstay of entry of other mid-tier vendors like Neoris, the IT outsourcing market. Led by Auriga, and Softtek who have broken US-based majors such as IBM, Accenture, ground with non-India offshore delivery. H-P, Cognizant and others and India- However, India continues to be the lead- based offshore vendors like TCS, Infosys, ing offshore location. Wipro, and HCL, ADM activity still con- The ADM industry is going through a stitutes a large chunk of the overall IT significant transformation in their licens- outsourcing. Recent years have seen the ing, delivery and support models. 2011 Global services 100 study
  • 43. Segment Analysis 45 Have the reasons for outsourc- Study) predicts 95% of buyersing ADM changed? Many com- reporting positive outcomes.panies are outsourcing applica- It also reveals that in-housetion development or main- delivery of IT applica-tenance for reasons beyond tion, maintenance andcost, notably for improving processes are still domi-service and freeing up IT nant in 2010-2011. ADMstaff for more strategic work. outsourcing saw 38%Organizations are receiving four in-house activity togetherkey benefits from their third-party with 31% outsourced activity asrelationships: more time for their IT sourcing model for managing thestaff to focus on strategic work, lower IT business. Companies are placing acosts, and improvements in version con- renewed focus on aftermarket services,trol, life-cycle management, and in docu-as well as maintenance, repair and over-mentation of procedures and best prac- haul services as a source for new revenuetices. In other words, applications devel- streams. Servicing existing products isopment services accelerate the delivery of taking on a greater importance.high quality business applications with However, new scope application devel-fewer defects, less rework and lower cost. opment work is still under pressure. Says Despite a trend towards increased ADM Srini Koushik, Worldwide Executiveoutsourcing to lower-wage economies, Application Development, H-P Enterprisethe cost of developing and maintain- Services, “Though discretionary ADMing applications can still consume more spend (including consulting) appears tothan half of the total IT budget. Hence, have hit rock bottom, the muted probabil-the potential of Lean IT to increase pro-ity of a sharp rise exists. Most customersductivity makes ADM a primary target will like to fence-sit during 2011, fear-within the IT department. McKinsey & ing a double-dip recession. Hence, ADMCompany states that applying Lean IT revenues will predominantly derive fromprinciples can increase application devel- maintenance.”opment and maintenance productivity Application management wouldby as much as 40%, while improving the also continue. According to Sachdevquality and speed of execution. Ramakrishna, Director - Marketing, Steria India,” The application management mar-New scope still to recover ket is expected to grow from $51 billion in Research carried by Horses for Sources 2010 to approx $63 billion by 2014 at a rateResearch (State of Outsourcing 2011 of 5.7 %. By 2014, key geographies 2011 Global services 100 study
  • 44. 46 Ito UK, France and Germany will account for day-to-day application maintenance work approx 65 % of the W. Europe Market.” to third parties. In keeping with their low Companies are forced to focus on spend strategy, companies new emerging markets and new prod- are now focusing to tap uct portfolio. With output-based pricing into newer easier to govern, theres the case for a opportunities marked increase in outsourced applica- and tion development and maintenance in the newer mid-market. "In 2011, outsourcing budg- ets are expected to reach around $76 mil- customer requirements. ADM market has become one of the key elements of lion and companies will the global business, the size of the global increase their use-frequency." reported software product market is in the range Michael Friedenberg, IDG Enterprise. He of USD 300 – 320 billion. ADM spend of further added, "As demands of the organ- companies in software product vertical is ization shift from cost optimization to in the range of USD 45 – 48 billion. growth, ADM outsourcing now need to amend their solutions for deeper exper- Key Themes tise for the concerned business process The key themes that dominated the and customer engagement." market in 2010 were cloud, agile, securi- Research carried by Zinnov and E&Y, ty, analytics, improved delivery through indicates 80% of total software applica- better collaboration and insight and a tion spend goes towards activities to sup- greater focus on enriching the experi- port the products that are in maintenance ence and engagement of software users. mode. Not only IT organizations have Thus far, these themes have held sway as outsourced application development vendors and end-users alike look to take work, some are now handing over the advantage of new delivery models, the 2011 Global services 100 study
  • 45. 48 Ito explosion digital content, more pervasive Deals network connectivity and the continued ADM deals witnessed huge shift, in proliferation of smart handheld devices. terms of deal value and market adop- In 2010, all the leading players have ena- tion. Contract-signings that were delayed bled sections of their portfolios as cloud during the recession months are now in service offerings. full-swing, service vendors are reporting Web Services and service-oriented healthy results. After a slow start to 2010, architecture (SOA) have been obscured the number of deals announced in the by the attention lavished on cloud. ADM sector bounced back in Q2, with an Conceptually, SOA is still perceived to increase of 14 per cent on Q1, according to be important, it is just that organizations Ovum. MNCs together with government have been forced to look at the immedi- organizations signed higher value, scope ate implications of cloud. Whether SOA and duration deals compared to offshore will come back in the same form and suppliers. Large buyers preferred input name is still a question. The opening of based pricing with offshore suppliers and access to data and systems around the complex pricing with MNC suppliers. organization and the possibilities for new The biggest IT services deals have been application innovation will increase the dominated by US federal government pressure on design and end user expe- and defense agencies. US and UK togeth- rience and engagement. In that sense, er with federal government and defense SOA may return in another garb. More agencies were responsible for around interestingly the consumerization of IT 60-70% of the major deals in ADM. Ovum and the focus on "experience" design reveals that the second quarter of 2010 is likely to gain momentum outside the was the best for 12 months for the sector in usual incumbents of Microsoft, Adobe, terms of the number of deals announced. Google and Apple. Public sector demand remained steady, Agile practices and processes will be particularly in the US, which accounted strong themes and proof points for the for more than 90 per cent of the market’s rest of the year. Add to this a greater quarterly total contract value (TCV). This push on the economics of software deliv- was good news for vendors with a major ery from the likes of IBM and others, and focus on the US government sector, nota- there may start to be a better and more bly General Dynamics, Lockheed Martin business-aligned recognition of the real and SAIC. value and opportunities within a well Half of the top ten deals involved either maintained application lifecycle and soft- federal or state and local agencies, includ- ware delivery process. ing the mega-deals awarded by NASA and 2011 Global services 100 study
  • 46. Segment Analysis 49the Department of Homeland Security. OutlookScience Applications International ADM outsourcing is in a state of pro-Corporation (SAIC) has been the most found change, where businessessuccessful vendor operating in this ver- are forced to accomplish new lev-tical market throughout the year, and it els productivity and sources ofadded a deal with the GSA worth $208m revenue simply to its big win with NASA. SAIC Small and Mediumhas announced 15 contract enterprises (SMEs)wins in the first three are coming up as amonths of 2011, with huge market in thea combined value of emerg-$5.1bn. ing Some of geog-the biggestADM deals raphies andannounced were val- one of the keyued at over $1bn, and these growth drivers.mega-deals were awarded The ADM outlookto Lockheed Martin, Serco, will shift remarkably inVT Group and Amsec (a sub- coming years. With higher adapt-sidiary of Northrop Grumman) by ability of outcome-based mod-the Space and Naval Warfare Systems els, ADM outsourcing is notCommand (SPAWAR), US Navy. The alone about moving applicationenergy and utilities industry bagged few development out of the country – the coreimportant outsourcing deals, Oil and gas issues are about trust and demonstratinggiant Royal Dutch Shell chose Logica to real business value and its Commercial Fleet in Europeand Asia whereas, Logica, underwent Study reveals huge untapped potentialpartnership with FleetCor Technologies, for future ADM outsourcing right acrosswill provide the technology platform and both IT development and business func-underlying business processes to run tions. According to the survey, 58% ofShell’s fuel card portfolio. The Nuclear corporates already outsourcing and likelyRegulatory Commission underwent a to increase in coming couple of years.6-year, $252 million contract with Dell’s Around 10% of the companies will lookPerot Systems, to provide a full scope of to start outsourcing for the first time overIT application services. next 2011 Global services 100 study
  • 47. 50 Ito Beni Lopez, chief globalization offic- markets and using technology to enable er, Softtek, said “ Companies are focus- this shift. There is a growing demand for ing themselves and developing regional applications in mobile and cloud areas, strategy, but to make it succeed they need and rich multimedia delivery and stor- to address the specifics of whats driving age solutions. The users started consider- their corporate sourcing strategy.” ing moving from conventional business models to modern risk-reward approach- With the rise of mobile device usage, es, or to combining agile flexibility with companies are now more focused on fixed price safety,” says Andrei Pronin, software application development for General Manager-Auriga. devices such as the iPhone, Android and iPad. 2011 will experience mobile appli- In 2011, the market will see an increased cation development surpassing applica- push for more comprehensive global IT tion development on traditional IT plat- strategies. Flexibility that Agile software forms. With increasing demand for access development has provided to smaller to services and wireless internet con- enterprises will now be embraced by large nections on the move will push for the corporations to continually transform and development of new solutions to meet thrive in a dynamic environment. In com- this growing demand. ing year, companies will look for an out- source service provider with the capacity "Future growth for the industry is con- to take over the entire product or applica- tingent upon developing new business tion development process, and in some strategies and models to pursue new cases, manage the entire business function. The Global Services 100 Study One-Stop-Resource 2011 Global services 100 study
  • 48. Segment Analysis 51prODuct DevelOpMentOPD Goes Mainstream, TiesIn Closer to Business ValueN ew product development, product refresh cycles, new geographies, and the mid-market drives the pace of the OPD marketSruthi RamakrishnanSome effects of the 2008 recession are still on your value proposition, and be openlingering. With the playing field left more to looking at new engagement models.difficult for providers through an empty Market Sweet-spots With most big companies on a spend- ing lockdown and several small com- panies (worth less than $100 million) shrinking and even going under dur- ing the recession, OPDs (Outsourced Product Developers) are looking to the midsized market ($25-500 million range) for business. “The midsized market is extremely compelling to us because this is where some of the most excit- ing and current technology development (e.g., unified communications) is occur-deal pipeline, increased expectations, cli- ring. So we intend to continue takingents’ reluctance for fresh investments and advantage of opportunities with largertheir ‘no compromise on quality’ mantra, ISVs while expanding our footprint tothere is much the industry needs to do include the mid- market." Jim Walsh,before it can get back on its feet. Chief Technology Officer, GlobalLogic In such a scenario, the formula for had told Global Services (Tracking therecovery is old-fashioned- hold on tight OPD Recovery, Global Services Media,to your existing customers, over-deliver December 22, 2010) 2011 Global services 100 study
  • 49. 52 Ito Large ISVs (Independent Software lines so that they can be rapidly deployed Vendors) also present an opportu- and configured at a lower price point in nity. "Large ISVs still represent excel- the newer areas. Companies are looking at lent growth opportunities as they are revenue generation activities, revitalizing driving innovation across a number of their product lines and broadening their areas, such as Cloud enablement, SaaS markets by leveraging new technologies." (Software as a Service), Product Lifecycle The new pricing models (outcome Management, etc.” Walsh said. Software based pricing, revenue share pricing and companies moving to cloud computing risk reward pricing) offered by vendors and a higher pro- pensity to lever- age them as an antidote to the recession have added to the attractiveness of partnerships. Companies are now look- ing to leverage the risk-reward partnership model, where the vendors are willing to absorb and SaaS will have significantly larger a certain amount of business model risk, opportunities, Karthik Ananth, Director- across the lifecycle of products. Market Expansion, Zinnov Management Consulting had said (Tracking the New Geographies OPD Recovery, Global Services Media, Besides Asia, Europe is one of the December 22, 2010). geographies OPDs are looking to expand Besides, OPDs are looking to exploit in. In this context, IT Sourcing Europe, a the opportunities provided by companies UK-based nearshore IT outsourcing (ITO) wanting to refresh their product lines. research and consultancy company, has "Companies wanting to grow in newer surveyed the 157 Austrian companies markets want to revitalize their product in the frames of its Pan-European ITO 2011 Global services 100 study
  • 50. DELIVERING EXCELLENCEIN SOFTWARE ENGINEERINGEPAM Systems is one of the leading full-cycle software services companies in Central and Eastern Europe.We help businesses leverage IT innvoation through our unmatched technical expertise, well-honed toolsand processes, and deep domain knowledge. Experience: since 1993Services Industries Talents: 6,000+ Product Development ISVs and Technology Quality: CMMI Level 4, SAS Application Development Banking & Financial Services 70 Type II, ISO 9001:2000, Enterprise Application Platforms Business Information & Media ISO 27001:2005 Application Testing Travel and Hospitality Our Awards Application Maintenance & Support Retail & CPG ASM & Infrastructure Services Emerging Verticals Sample clients:
  • 51. 54 Ito Emerging Destinations research 2010 to explore the year’s key vendor’s site etc, 12 percent of compa- trends and challenges of Austrian soft- nies extend deadlines, 10 percent claim ware development outsourcing. to bring in outside assistance to improve According to the research findings, the their vendor relationships, 6 percent con- top three challenges of today’s software sider partnering with a different vendor development outsourcing in Austria are: able to offer engagement via an inno- poor client-vendor communication (16 vative and more transparent business percent of respondents), delayed project model and only 4 percent of the Austrian delivery and missed milestones (15 per- outsourcers terminate their ITO contracts cent of respondents) and cultural differ- and back-source software development ence (14 percent of participants). back to house. In order to respond to the current chal- The European IT Outsourcing lenges, most of the Austrian companies Intelligence Report 2010 by the Nearshore take the following actions: 31 percent IT Outsourcing Market Research & increase face-to-face communication with Consultancy found that while IT out- their vendor’s project management and sourcing was considered as the strategy project teams, 20 percent dedicate more most frequently adopted by large com- managerial resources to control the ven- panies in the pre-crisis times, today’s ITO dor, 17 percent revise and update ven- practices find more and more supporters dor management processes by opting among the mid-sized and small compa- to switch to a different software devel- nies, for whom cost efficiency is as impor- opment methodology, relocating own tant as an opportunity to have access project managers to work temporarily on to skills and services that can generally 2011 Global services 100 study
  • 52. Segment Analysis 55improve their online presence and busi- including higher total cost of ownership,ness performance. high set up cost and lower productivity The study also found that to select an are also leading them to work directlyoutsourcing destination, 23 percent of with third-party providers. "The futurethe Western European companies pay of product development will be work-attention to low costs of software devel- ing with a lot of partners to innovateopment and IT resources, another 23 per- and build cutting edge products verycent to available IT talent pool, 16 percent quickly," said Jacob Hsu, CEO, Symbio atto positive references from the fellow a webinar conducted by Global Servicescompanies/local business community, Media. (Globalization Opportunities inanother 16 percent to geographical and Software Development for Enterprisescultural proximity, 7 percent to strong and ISVs).research and development (R&D) legacy,6 percent to political and economic sta- Be Agile to Winbility, another 6 percent to Intellectual Gartner, in their study Predicts 2010:Property (IP) security and 3 percent to Agile and Cloud Impact Applicationproficient English language skills. Development Directions, say that as Currently, Dutch companies outsource organizations seek to improve productiv-mostly offshore, but there’s a strong ity and reduce application operating andtendency for moving outsourced opera- maintenance costs, there will continuetions closer to the home country. Most of to be an evolution of software devel-today’s non-outsourcers would consider opment tools, platforms and practices.outsourcing nearshore, if there will be To take advantage of this, organizationssuch a need in the future. must shift structures and practices while embracing new technologies.Outsourcing to Third-party Vendors The study says that by 2012 “agile With software product companies development methods will be utilizedtoday facing the twin challenges of free- in 80% of all software developmenting up resources to work on new products projects”. Although Scrum will continueand maintaining margins for legacy prod- gaining in popularity over the comingucts, low end R&D work like QA/testing years, organizations will not be success-related to mature products is being off- ful in their transition unless they moveshored, either to captive centers or third toward a team-focused culture. Very fewparty vendors. organizations use a pure-Scrum approach Challenges faced by companies, espe- and most rely on a hybrid approachcially small and medium sized ones, (waterfall and Agile) 2011 Global services 100 study
  • 53. 56 Ito “ Development organizations have been making a shift toward agile methods, but this is still slow to ” move beyond development. The report says that organizations Booming Testing Segment, Skill struggle to implement true collabora- Shortages Coming Up tion in the context of globally distributed The 2010 Ross Report found that a teams. A situation that has amplified in shortage of testers could lead to signifi- recent years with outsourcing and off- cant delays in the development of soft- shoring of software development projects. ware and systems. The report found that On the other hand, teams who have there will likely be an increase in demand successfully moved to Agile see pro- for an extra 1500 to 2000 software testers ductivity improvements especially in in the next two years. “the flexibility of the development team While earlier software testing had usu- to respond to shifting requirements”. ally been carried out by organizations “as This is especially true for web-based an afterthought in development — if it gets application developments where rapid carried out at all”, more businesses are see- responses to a changing environment are ing the value of testing earlier in the devel- critical. opment cycle, which is a positive both for us Development organizations have been and for developers, the report says. making a shift toward agile methods, but this is still slow to move beyond develop- The Global Services 100 Study ment, and often is a mixture of waterfall practices utilizing an agile or iterative One-Stop-Resource project cycle”. Organizations that do not make use of key agile practices and do not invest in training and supportive “The flipside to this testing boom, how- tools’ infrastructure will find that a shift ever, is that testers are set to become a to pseudoagile, while potentially deliver- more scarce human resource in Australia, ing a short-term productivity bump, will which I’m concerned may result in cor- end in long-term declines in quality and ners being cut,” says KJ Ross & Associates productivity. director, Dr Kelvin Ross. 2011 Global services 100 study
  • 54. 58 Ito engineering services Engineering Services Outsourcing: Growing Demand, Untapped Potential T echnology-led innovations, global expertise and broad vertical capa- bilities will be high priority areas in the clients demand list this year. Smita Vasudevan An increasing number of companies this year. The report ‘Globalization of worldwide are looking at Engineering Engineering Services’ by National Service Outsourcing (ESO) options to cope Association of Software and Services up with the changing market demands Companies (Nasscom) and Booz Allen comprising faster time-to-market for prod- Hamilton reflects that by 2020 the world- ucts, lower design engineering costs, high- wide outsourcing expenditure is expected er product quality. to reach $200B. The recovery in the ESO market has Service providers believe that the been rather slow post recession, though changes in the ESO market are fairly the last two quarters have seen the mar- visible and would be seen throughout ket gaining some momentum. And this the year. “Following the global financial is very likely to continue as product crisis, companies last year were investing engineering services are expected to be a in outsourcing services, yet were doing major growth driver for service providers so on a modest-level. Today, companies 2011 Global services 100 study
  • 55. Segment Analysis 59are operating with more confidence, ship to India. Today it has a design centerand as a result, the way in which they here. It’s the same with GM, Mercedes,seek outsourcing support has evolved as Volvo, GE, Bombardier, Boeing and manywell. Previously, outsourcing was used more. This is a great market to be in, andas affordable labor; however, today, the also to begin building a pipeline for cheapparadigm has shifted. More and more, engineering design. But it may be inter-we are talking to companies interested esting to note that it’s not just about thein longer, more strategic relationships.” transfer of wealth or knowledge. India issays Michael Minkevich, Vice President, also a recognized hot bed of innovation.Technology Services, Luxoft. Leaders like GE, GM, Honeywell, have already taken the initiative to push a con-Current Scenario siderable amount of their development to Companies worldwideare targeting new growthavenues and one way ofdoing this is expandingtheir offerings to inter-national locations. As aresult, clients are showingmore preference for engi-neering service providerswith a global footprint.The focus is especiallyhigh on emerging markets and in order to Indian shores, leveraging the talent poolcapitalize on the opportunity, service pro- and the cost advantages available.”viders are also developing strategies and According to a recent survey conductedproducts that are in line with the specific by ValueNotes Sourcing Practice, draft-customer needs of these locations. India ing & 3D modeling is considered to beis the most preferred destination for engi- the most popular area for outsourcing.neering services outsourcing, followed by Aerospace engineering is a big opportu-US and China. Other emerging destina- nity area as the outsourcing of machinetions include Taiwan, Ireland and Poland. parts is currently on a high. In an earlier Global Services article, There is also a change in the nature ofAlok Sinha, Sr V-P, Engineering Design deals that are being companies are gettingServices, Symphony Services wrote, into. Engineering companies are now tak-“There was a time when BMW would ing their outsourcing agreements 2011 Global services 100 study
  • 56. 60 Ito the traditional core areas. The nature of ESO requires years of knowledge and work currently undertaken by service skill-building to acquire scale. Growth providers calls for a substantial portion through acquisitions is therefore a faster of the actual design activity. This is more route to establishing market presence in on the back of buyers realizing the fact ESO. Symphony has acquired Proteans that to fully utilize the outsourcing value for its expertise in PLM and its client base and have a competitive edge they need to captive. The company was earlier focused think beyond just the cost saving factor. At on the software product development the same time, service providers are also market and has now forayed into PLM coming up with technology innovations for automotive and aerospace markets and building their expertise across differ- with the Proteans acquisition. Service ent areas that now enables them to offer a providers are acquiring MNC R&D cent- full package of engineering services. The ers in India to obtain exclusive access global engineering services partnership to product knowledge or professional between Tata Consultancy Services and services business. MindTree’s acquisi- Rolls-Royce is a recent example of this. tion of Kyocera Wireless India center As a part of the deal, TCS will be offering and Cognizant’s acquisition of Invensys various engineering services to the com- captive in Hyderabad are steps in this pany across the entire product life cycle. direction. Scope of eSO Services Product Design Plant Automation Services (Mechanical & Electronic) Engineering analysis and design Control System Integration Electronics and embedded software Production Optimization Knowledge based engineering Manufacturing Execution System PLM solutions Plant Design / Process Engineering Enterprise Asset Management Detailed design TPM solutions Construction and commissioning support Product implementation OEM solutions Source: Nasscom 2011 Global services 100 study
  • 57. Segment Analysis 61 Engineering Services An Outsourcing Evolution An increasingly competitive market for engineering services has made outsourcing indispensable to the industry, more so following the downturn. Runa Mookerjee , Analyst , ValueNotes Sourcing Practice Engineering services outsourcing is likely to skyrocket from $15B in 2010 to around $200b by 2020. In a recent ValueNotes survey1 we found that traditional design and manufacturing services make up the largest portion of outsourced engineering services. An increasingly competitive market for engineering services has made outsourcing indispensable to the industry, more so following the recent global economic downturn. An increase demand for engineering services is leading to a corresponding increase for outsourced services. Current spending on engineering services of $750B is expected to increase to $1.1T by 2020.Industry sources expect India to play a large part in the outsourced engineering services sector. Growth Drivers Include Changing demographics among western countries - as a ‘dominant engineering service employed’ baby boomer generation reaches retirement, the availability of skilled engineering workforce is on the decline in the west. Outsourcing helps clients concentrate on core services – the availability of special- ised talent that can deliver regular processes helps the firm to focus on its core com- petencies or development of newer technologies. During the 2008-2009 global financial recession, several engineering manufacturing companies had to cut back on their costs and downsize in terms of operations, proc- esses and employees. This benefited the outsourcing industry as more was out- sourced, and the trend is expected to continue through 2020. Certain regions which are also among the favoured outsourcing destinations are more popular for engineering service buyers. Besides, led by rapid industrial growth some of these Asian countries form the client base as well as provide outsourcing services. Going Beyond Traditional Outsourcing Our survey findings indicated that outsourced engineering services are popular in aerospace manufacturing, industrial and automotive domains. A decade ago, 2011 Global services 100 study
  • 58. 62 Ito nature of engineering work being outsourced involved lower end services like creating digital models and drawings and sending these back to the buyer who then incorpo- rated these in his designs. However, engineering work currently undertaken involves a substantial portion of the actual design activity. This has come as a result of buyers realising that to have a competitive edge, they need to realise the full value of out- sourcing rather than just cost savings. Subsequently, service providers have evolved into providers of specialised services with a better understanding of their customer product lines. They have also had to build new competencies, such as knowledge based engineering, life cycle management, technical publication - to adapt to changing customer needs that allow them to support complete product development. Some companies are successfully turning to technology to further their engineering services needs, effectively using Web 2.0 technologies to an outsourcing advantage. These companies take the help of means such as ‘open innovation’ and crowd sourc- ing - i.e. outsourcing of tasks which are traditionally performed by an employee or contractor to a large (undefined) group, community (a crowd), through an ‘open and usually interactive platform’. The tasks outsourced could be as simple as generating competitive or cost cutting ideas or as complex as the designing of an entire product range or a completely new product. In a multi polar global space the knowledge process outsourcing industry has grown beyond conventional outsourcing. Apart from using third party services for regular engineering services, increasingly, engi- neering service providers are turning to outsourced innovation to contribute to the ‘product design’ itself. Let us take a look at some examples that showcase just this – Toyota: Outsourced Innovation The Japanese auto maker’s ‘value innovation’ strategy involves its suppliers beyond cost cuts and lower prices for supplies – engaging them in the design process for its high selling Prius model. Toyota’s is a case where open innovation and crowd sourc- ing merge- adopting a best practice method that invites all the best minds (albeit at large!) to participate in its collective effort to cut back costs and come up with a better design for its product. Boeing: Testing the Model Boeing also made optimal use of open innovation technologies to stress test the hydraulics of the 787 Dreamliner, combining the inputs of companies in the US, UK, 2011 Global services 100 study
  • 59. Segment Analysis 63 Japan, China. Boeing allowed over a 1,00,000 entries in its World Design Team, an Internet based global forum encouraging participation and feedback from various stakeholder groups during final states of development. Their ideas and inputs were then collected through online surveys, in turn providing updates as the design of the plane’s exterior and interior evolved. This novel innovation method allowed Boeing to build a prototype using inputs from several thousand engineers and run tests as the design emerged. Though the use of open source technologies is a debatable issue, its use in generating ideas for products is more of a win-win situation for engineering firms. Even if the design comes out eventually flawed, the firm then has a prototype which is a test of ‘what can go wrong’. On broader level, it is clear that outsourcing engineering serv- ices is here to stay and go even further in the coming years. *This article is being republished; it was originally published online by Global Services on January 18, 2011. The Global Services 100 Study One-Stop-Resource 2011 Global services 100 study
  • 60. 64 Ito inFrAstructure MAnAgeMent services Not Cloud Alone, There Are Other Tailwinds for Infrastructure Management M arket momentum created by the rising profile of offshore suppliers, maturing global deliv- ery, productization of services and consulting offerings, and industry consolidation is rapidly shaping the growth for IMS. Sourabh Chandra Pushp The infrastructure management services market is holding strong. Even during the recession, the IMS market underwent a reinvention of sorts with the adoption of remote management and asset-light mod- els. Many new service providers laid out offerings in the IMS area leveraging heav- ily on the global delivery model. Combined with advances in virtualiza- Infrastructure management really took off tion, utility-based computing, standards- in the ‘offshore’ sense in the last three based infrastructure, data center trans- years. The infrastructure management formation, and cloud computing, the out- market is expected to touch $180 billion by look for IMS continues to be dynamic and 2013. This is accompanied by the forecast exciting. that global IT purchases will rise 7.1 per- cent in 2011 to $1.7 trillion and the growth Industry Drivers is likely to be sustained, according to new Leaders in IMS help buyers in trans- forecast data from Forrester Research. forming their IT from being a business 2011 Global services 100 study
  • 61. Segment Analysis 65support tool to one that deals, including new engagements signedadds business value. In by traditional infrastructure suppliers.terms of economics, IMS Many mid-market companies are con-helps to variabilize their sidering outsourcing IM using one of theIT costs. emerging models. Outsourcing to a third Main drivers for this party increases complexity andmarket include com- prompts the need for a strongerpanies´ focus in reduc- governance structure– whiching operational costs and infrastructure operations toimproving operational outsource; how to devel-systems, the increasing op SLR (Service Levelconfidence in medium/ Requirements); how tolong term outsourcing do the transition; after economy recovery A growing numberand cloud computing concept, of companies areincluding virtualization tech- looking at outsourcingnologies,” says Marcelo Kawanami, infrastructure based upon ITILFrost & Sullivan ICT Industry Manager. v3-Based Outsourcing Framework. The market for IT infrastructure man- ITIL v3 provide a set of best practices andagement services is evolving rapidly as recommendations that can be applied toenterprises are aiming at cutting down the outsourcing lifecycle.spends on buying and maintaining infra- The market in developed economiesstructure resources internally. This cou- is fairly matured while emerging econo-pled with the ease of global delivery mies are witnessing new business modelsoffered by infrastructure service provid- and new providers. According to Rolfers is resulting in a surge of demand for Jester , Analyst, Gartner , “In the devel-outsourcing. oped economies of Asia Pacific (APAC)— In the recent years, a major devel- Australia, New Zealand, Singapore andopment has been the convergence of Hong Kong—the market is relativelythe Remote Infrastructure Management mature, with modest but long-term, sus-Outsourcing (RIMO) and traditional tainable growth and a relatively smallInfrastructure Outsourcing (IO) models. group of providers currently dominat-The RIMO model is gaining a wider ing the market.” He adds, “Most multi-acceptance with buyers, resulting in a national providers are investing in thislarger number of high-value offshore growth region now, and even developinginfrastructure management outsourcing new service models, and 2011 Global services 100 study
  • 62. 66 Ito providers are entering the market, intro- (Kuala Lumpur), Singapore, Australia ducing disruptive emerging business (Melbourne, Sydney), Egypt (Cairo), models based on utility as-a-service or Germany (Hamburg), Brazil (Sao Paulo) cloud offerings.” and USA (Cleveland, Omaha, and Laguna Newer offshoring locations are com- Hills). ing up. The McKinsey Quarterly report states that unlike India, whose talent pool Major Deals for mainframes is limited (though grow- Most of the big deals witnessed in the ing rapidly), Brazil has strong capabili- infrastructure management space, over ties in this area, and a number of global the last few months, have come from vendors run mainframe centers of excel- diverse industry verticals. M&A activity lence there. Pan- European companies saw a renewal in 2010. Large deals con- that require French- or German-speaking tinue to skew the average deal size. Year support staff have their sourcing options 2010 has already seen bigger names like in Africa and Eastern Europe, which may Thomson Reuters, Singapore Exchange, have deeper pools of talent to meet these Merck Sharp and Dohme (MSD) out- specialized needs. sourcing their infrastructure installation Tech Mahindra has 21 global deliv- and management in multi-million dollar ery centers across nine countries cov- deals. ering all the continents. These include In some other major deals, HP signed India (Hyderabad, Pune, Bangalore, five-year Infrastructure outsourcing Mumbai, Chennai, Vishakhapatnam, services agreement valued in excess of Bhubaneswar, Noida, and Chandigarh), $400 million with BP. In its another China (Shanghai, Nanjing), Malaysia deal HP underwent agreement with SHI International for providing infrastructure services for its cloud center. In December 2010, HCL signed remote multi year end- to-end IT Infrastructure Management engagement with pharmaceutical compa- ny Purdue Pharma L.P., in the same month Wipro secured 5 year IT infrastructure services contract from with Electricity North West Limited. Capgemini UK plc, part of Capgemini Group signed five- year, multi-million pound outsourcing contract with Anglian Water, UK’s leading 2011 Global services 100 study
  • 63. 68 Ito providers of water suppliers view services. Wärtsilä and position it. Signed a three-year Innovation outsourcing services in new remote agreement with HP. management Tech Mahindra has tools and 175 active custom- technologies ers across Americas, has led to the Europe, Middle East emergence of & Africa and APAC the asset-light regions. The revenue distribution RIMO, in which both the compa- between the geographies is Americas (51 nies and outsourcing vendors enter percent), EMEA (26 percent and APAC into a short-term contract. Unlike (23 percent). The total resource distribu- the Asset-heavy model, Asset-light tion across the regions is Americas (10 model does not entail transfer of percent), EMEA (8 percent), and APAC asset ownership and IT personnel to the (82 percent). It has signed deals across vendor. The asset-light model is being different verticals; TechM being prima- used proactively by providers to reduce rily focused on Telecom service provid- cost and time frame of implementation. ers, most of the deals signed by TechM Due to the lower capital investment are in the Telecom vertical. Mahindra involved, it has created opportunities for Satyam has customers in the enterprise low-cost offshore providers to enter the space with BFSI, Energy, Automobile and RIMO market. Manufacturing being major contributors At times value added services like to revenue. financial leasing, vendor-managed inven- tory, etc. are also offered by service New Delivery Models providers. Infrastructure service offerings that are Manoj Nair, practice and solutions being offered today are mainly of four head, IMS, Tech Mahindra stated the types, based on the deal characteristics. different models employed by Tech These are: Infrastructure Outsourcing Mahindra: (IO), application hosting, Infrastructure The following explain some of the Managed Services (IMS) and RIMO. IMS more successful methods through which and RIMO trends are close in nature with Tech Mahindra has been able to show- the major difference today in the scope, case their leadership in the global deliv- extent of labor arbitrage and the way the ery model. 2011 Global services 100 study
  • 64. Segment Analysis 69 • The infrastructure managed services engagements are structured in such a way so as to maximize remote delivery of managed services. All managed services activities/proc- esses are classified into onsite and remote based on various factors. In order to maximize the cost benefit to our customers, the remote services are largely delivered from low cost offshore delivery centers. • For consulting, design and imple- mentation services, we offer a unique delivery methodology by leveraging offshore resources for executing spe- cific tasks such as assessment, analy- sis, reporting, design, POC, testing and other remotely executable tasks, thus optimizing the number of cus- tomer facing consultants required to market trends research suggests that it execute the engagement. will reach £463 billion by 2015 and will hit a 4.5 per cent growth rate by 2013.Future Directions Although 2011 growth is still not back An open technology and business envi- to pre-recessionary levels, the market willronment, enabled by cloud computing return to healthy growth of over 4.5 perand new outsourcing models, is creating cent in 2013.a radically new approach to the present Nair added, “Infrastructure manage-infrastructure market. Most of the glo- ment service providers will need to gearbal infrastructure services outsourcing up to monitor and manage Private, Publicproviders have a strong vision and strat- and Hybrid cloud platforms which willegy for cloud-based services for future become an integral part of enterprise archi-offerings. tecture and IT landscape. Cloud platforms According to the latest report by tech- demand a high level of automation innology analyst firm Ovum, the global provisioning and billing and monitoring.infrastructure market will grow 4.4 per With the help of best-of- breed tools in thiscent by 2015. Ovum’s Infrastructure platform, we would be able to 2011 Global services 100 study
  • 65. 70 Ito “ Cloud-based infrastructure services will continue ” to overshadow other services. manage private and public cloud based well as rampant acquisition at the level services by performing service monitoring of cloud suppliers like Terremark and and taking automated actions in response NaviSite. to incidents, threats, abnormal behavior Nair added “Businesses in general have or capacity thresholds.” inclination towards” Cloud-based infrastructure services • Data centre transformation will continue to overshadow other serv- • Data centre consolidation ices. It continues to be the most talked • Cloud computing solutions about service. Although most provid- • Green Data centre ers want to make the most of the cloud • DC Asset Monetization & re-badge fever only a few are offering real public resources cloud solutions with high flexibility of • Delivering offshore based remote changing baselines and pay-what-you- Data Centre operations management use pricing models. Some are offering to provide significant cost benefit infrastructure managed services includ- • Migrating customers to Asset Light ing public cloud solutions of third parties model thru DC Consolidation, like Amazon or Google. IT infrastructure Virtualization, Asset Monetization management and cloud solutions are con- and Cloud verging rapidly. Gartners Gartner esti- mates that over the course of the next five The Global Services 100 Study years, enterprises will be spending $112 B cumulatively on SaaS (Software as a One-Stop-Resource Service), PaaS (Platform as a Service) and IaaS. United States, Western Europe and Japan will be holding a major share of the In summary, several forces are slowly global cloud market. transforming the stable but growing mar- The winds of industry consolidation are ket for infrastructure services, including blowing again across different elements the rising profile of offshore suppliers, of the delivery supply chain with Atos maturing global delivery, productization Origin’s intention to purchase Siemens of service and consulting offerings, and (SIS), iGate’s acquisition of Patni, as industry consolidation. 2011 Global services 100 study
  • 66. Segment Analysis 71enterprise ApplicAtiOnsOld World ERP Takes on aNew AvatarU tility-based offering will be on rise as cloud andSaaS take roots in the ERPmarket. Vendor consolida-tion, industry specialization,and the introduction ofnewer technologies that im-prove business process flex-ibility will further changethe vendor landscape forimplementation services.Sourabh Chandra PushpEconomic woes had a major impact on of organizations will apply an "explore/how companies chose to implement appli- exploit" style to EA that delivers demon-cation solutions during the recession. strable business value. There are strongCompanies were forced to cut ERP imple- indications that 90% of organizationsmentation budgets and duration periods, will use anchor models as the prima-they nonetheless realized significantly ry means of communicating enterprisemore business benefits from their ERP change to business leaders in comingsoftware than they did in 2009. few years. Gartner predicts, by 2013, 5% of enter-prise applications (EA) programs will use EA Trendsleading indicators of business perform- The 2011 witnessed some interestingance to demonstrate EA value. Further trends that began last year and continueGartner opines, 22% of EA programs into this year. The accelerating adoptionwill be led from outside the IT organi- of SaaS and the increased focus on busi-zation by the end of 2014. While 20% ness case and benefits realization are bothof organizations will adopt alternative trends that aren’t too surprising in thisnames for the EA discipline, another 20% economic 2011 Global services 100 study
  • 67. 72 Ito While it is good that companies are not leading system integrators will automate spending as much on ERP implementa- the implementation of SAP in days to tions as they have in years past, the bad come. What is equally encouraging is that news is that many companies are cutting there is renewed interest of clients in SAP corners in their attempts to do more with investments and a decrease in the usage less. Even though implementation costs of hybrid environment. Clients are will- and durations decreased, more compa- ing to try SAPs HCM and supply chain nies beginning their projects with unreal- management tools, where traditionally istic expectations and are blowing away PeopleSoft were the favorites. their budgeted time and resources at an Gartner has released a forecast that pre- alarming rate. dicts a 16.2 percent increase in SaaS rev- Most companies (over the years) enue in the enterprise application market maximized the benefits of offshoring. from 2010. The SaaS revenue in the enter- However, today the client demands more. prise application software market in 2009 They wish to innovate and use automa- was $7.9 Billion and, according to the tion to not just do the work faster, but analyst firm, it is forecasted to increase to eliminate some of the steps in the SAP $9.2 Billion in 2010, a solid 15.7 percent implementation cycle. It is evident that increase from 2009, considering the kind 2011 Global services 100 study
  • 68. Segment Analysis 73of resistance SaaS has been seeing in the Gartner estimates that 75 percent of theenterprises due to concerns over security current SaaS delivery revenue could beand integration issues. considered as a cloud service, and that According to Gartner Research, the could exceed 90 percent by 2014 as theinitial concerns have considerably dimin- SaaS model matures and converges withished as SaaS model matured and saw cloud services models.widespread adoption and SaaS is heading Because SaaS and cloud are hot con-towards a large-scale enterprise adoption cepts in the market, many suppliers arein the coming years. rebranding their hosting or application There is an increasing involvement of management or application outsourcingexecutives in the purchasing decisions capabilities as SaaS or are claiming theirand an increased participation by IT in solutions are available ‘in the cloud.’the process with higher requirement for Much relabeling of more-traditionaldownstream integration. application outsourcing approaches is An increasing number of enterprises occurring.are using a variety of SaaS applicationsfrom multiple vendors that were pro- Mobile Enterprise Applicationscured and deployed without participation Analysts forecast that the Mobilefrom IT, creating management issues and Enterprise Application Market will reachchallenges. Social media andsocial software are becomingincreasingly integrated withSaaS solutions, as social plat-forms such as Facebook andTwitter are leveraging cus-tomer service, sales and mar-keting initiatives. Content,communications and col-laboration (CCC) continuesto lead the enterprise SaaSmarket with worldwide CCC revenue $11.5 billion in 2014. One of the key fac-on pace to reach $2.9 billion in 2010, fol- tors contributing to this market growthlowed by customer relationship manage- is the high adoption of smartphonesment (CRM) revenue of $2.6 billion. For across enterprises. The Mobile EnterpriseCCC technologies, SaaS use varies across Application Market has also been wit-the market segments. nessing high growth in 2011 Global services 100 study
  • 69. 74 Ito 2011 ERP Report- Key Findings ■ The average ERP implementation cost dropped from $6.2 million to $5.48 million. ■ The average project duration dropped from 18.4 months to 14.3 months. ■ The percentage of companies who realized between 51- and 100-percent of anticipated business benefits increased from 33-percent to 42-percent. ■ The percentage of companies who realized 50-percent or less of anticipated busi- ness benefits decreased from 67-percent to 48-percent. ■ The percentage of companies who realized 30-percent or less of anticipated busi- ness benefits decreased from 55-percent to 21-percent. ■ The percentage of companies reporting project overruns (61.1-percent) and budget overruns (74.1-percent) increased significantly from 2009 (35.5-percent and 51.4-percent, respectively). ■ In 2010, the percentage of companies who chose not to customize their solution at all (15-percent) was nearly half what it was in 2009 (28.3-percent). ■ The percentage of companies who developed a business case as part of their implementation process rose from 85-percent in 2009 to 97-percent in 2010. Source: Panorama Consulting Solutions mobile enterprise applications. However, Until some time back, most of the security issues with Mobile Enterprise mid sized organizations were living with Applications could be a challenge to the homegrown applications which are non- growth of this market. integrated and on disparate architectures Key vendors dominating this market resulting in redundant technology and space include Salesforce Inc., Research Innon- availability of critical information at Motion, Microsoft Corp, Sybase and IBM the right time. The key drivers of intro- Corp. ducing an ERP solution in a midsized company are introduction of industry Mid Size Market Adoption standard processes which are already The implementation of ERP systems embedded in the application, adopting has helped mid sized corporations, sig- integration across business functions nificantly improve their business metrics leading to transparency, access to real by process optimization, improving the time information etc. entire supply chain process and integra- The need for an ERP system can be tion across functionality. viewed with respect to the organization 2011 Global services 100 study
  • 70. Segment Analysis 75objectives, key drivers and finally the SAP is planning to launch SAP app storechoice of solution. The key considerations like Apple’s iTunes store. Nonetheless,evaluation and selection of an ERP are SAP’s Business ByDesign SaaS solutionscalability, vendor management and reli- is again getting a lot of visibility. SAPable service and support. Business ByDesign is a complete, fully ERP solutions are designed to grow integrated business management solutionwith the company. Unlike some stand- delivered on demand. SAP will also usealone applications, they do not succumb the Business ByDesign platform to buildto volume and change pressures, leaving its line-of-business, on-demand applica-you to start over from scratch. Managing tions for large companies, and use thea plethora of vendors for customer serv- App Store model to develop and sell add-ice is not easy. The ability to access ons for customers.affordable service and support is critical. That said, while SaaS ERP systems are stillIt is easier to support an integrated ERP years away from capturing a significant por-environment than a mixture of different tion of the ERP market among midsize to largeapplications. organizations, CIOs will continue to look at other cloud computing options. Hosted ERPOutlook solutions and outsourced IT infrastructures The ERP market recovered fairly well will likely be on the minds of many 2010 from the midrecession activity In addition, although larger companies maylevels of 2009; the market will continue not yet be in a position to adopt enterprise-to grow in 2011, but will gradually shift wide SaaS models, they will continue tofrom a licensed to a subscription modelover the next five years. Vendor consoli- The Global Services 100 Studydation, industry specialization, and theintroduction of newer technologies that One-Stop-Resourceimprove business process flexibility will change the vendor landscape. License revenue will start to fall by 2015 evaluate targeted SaaS solutions, such asand maintenance revenue will be on the Document Management Systems (DMS),rise. Utility-based offering will be on rise Human Resource Systems (HRM/HCM),as cloud and SaaS will be major players Product Lifecycle Management (PLM),in ERP implementation. Subscription rev- and Customer Relationship Managementenue will pick up as SaaS ERP revenue. (CRM) 2011 Global services 100 study
  • 71. 76 BPo cOntAct center : Web-Based Customer Interactions Unfold New Opportunities for Contact Centers A fter going through a relatively sluggish phase in 2009 and 2010, the customer care outsourcing industry is getting back on track. Smita Vasudevan The Changing Market Scenario The reviving market and “ The whole customer will mushroom.” Enterprises are realizing the fact that their customers are burgeoning customer interacting in more than one expectations are resulting experience now way and are hence looking in some transformational matters and the for service providers that changes in the area of con- are able to offer services on tact center outsourcing. complexity of multiple channels. Sitel also Channels of communica- the customer holds a similar opinion and tion are growing, custom- expects web engagement to ers are interacting more experience be a major trend in than ever and technology ecosystem will 2011.“Established rules of innovations by service pro- communicating with cus- ” viders are on the rise. mushroom. tomers have already Nancy Pryor, Senior Vice changed, largely driven by President, Customer Management, a shift in demographics and how custom- Convergys says, “The whole customer ers are using digital technologies. Emails experience now matters and the complex- and voice calls are being replaced by ity of the customer experience ecosystem Facebook, Twitter and other 2011 Global services 100 study
  • 72. Segment Analysis 77online communities. Customers are takingmatters into their hands, and participatingin social media forums, blogs, and com-munities to find the answers theyneed. Here is the reality all com-panies must face, social mediainteractions are going to happenwith or without you” says AmitShankardass, Chief CorporateStrategist, Global Operations, Sitel. Enterprises that are able to makecustomer interactions simple, serve cus-tomers on multiple channels, implementbetter technology and bring flexibilityin their offerings will definitely have an Latin America will remain an impor-edge over others. It is increasingly impor- tant destination for contact center out-tant for companies to be able to offer cus- sourcing. "Overall, increasing pressure ontomized packages according to specific profit margins and the global economiccustomer requirements. T. Scott Gross climate have boosted the demand forstates in a white paper sponsored by customer care cost savings, giving a legSitel, My way, Right Away, Why Pay?, up to the contact center outsourcing serv-“You really cannot serve great customer ices market in Colombia and Peru," saysservice from a script. It is a one-of-a-kind Juan Gonzalez, Industry Manager, Frost &product. Gen Y does not like to be treated Sullivan. "Their ability to provide a fullyas a number and want their purchases to integrated suite of end-to-end servicesbe just as customized.” has further reinforced their status as out- sourcing hubs in Latin America” he adds.Growth Across Geographies and On the other side of the world, AsiaVerticals Pacific region continues to be a favored The economic slowdown has made cost location. It has witnessed a significantefficiency an even bigger concern for growth in outsourcing in 2010, with an 8.5companies. This is driving outsourcing per cent growth in agent seats. Accordingcontracts to lower cost regions. India, to Krishna Baidya, Industry Manager,Malaysia, Mexico, Colombia, China and ICT, Frost & Sullivan “Agent seats arePhilippines continue to be major hubs for expected to grow at 9.5 per cent CAGRcontact centers across the world. through the period till 2017.” 2011 Global services 100 study
  • 73. 78 BPo Adoption levels for contact center out- maintain their competitive advantage. sourcing are picking up across variousAnimesh jain, Chief Delivery Officer, verticals too. Apart from the traditional India, 24/7 Customer, says, “The only areas like financial, travel and telecom- way to do this is through building cus- munication sectors, there is now strong tomer engagement models and customer demand from other areas like healthcare, loyalty.” Engaging customers once they insurance and transportation. Across the are on the web either through self service APAC region, retail, hospitality, utilities, or assistance service is very essential for entertainment and manufacturing are customer retention. This type of a dig- booming with outsourcing opportunities. ital transformation is expected to the big- Sitel believes that the U.S. market will gest trend this year and companies that see a major part of its demand coming are able to foresee and prepare for this from financial services, travel, retail, and change are most likely to gain. As web media and communication sectors. interactions are gaining preference, web retention and web conversions are going Digital Transformation is the Way to to be two big opportunity areas. When Go customers go online intending to buy The market is seeing transformation something, service providers can increase everywhere-in terms of technology, modes of communication, customer preferences and so on. Traditionally, cus- tomer care was considered equal to a call center, while this is not the case any more. Today, there is a huge dif- ference in the way cus- tomers are interacting and their interactions are not just limited to phone calls. They have access to infor- mation and are much more aware about what servic- es are available. In such a scenario, how can compa- nies retain customers and 2011 Global services 100 study
  • 74. Segment Analysis 79the chances of converting it into a sale by Preparing themselves for technologyoffering some live support. changes will be essential for companies Sitel foresees humanization of tech- across different sectors. “Customers arenology to be an important change and increasingly looking to interact usingis already moving in this direction. This new channels. As social networks con-involves a delicate balance of automation tinue to expand, the quantity of new toolstechnology and the customer experience. and solutions available is overwhelm-The idea behind the change is to discover ing. Publishers must look at ways toways to reduce expenses through tech- enhance their services through texting,nology without sacrificing the human social media, cell phone applications,touch. and whatever emerges next or risk los- ing their subscribers” says Jeff Gossman,How Are Service Providers Making a Senior Director of Technology Solutions,Difference? Convergys, in its recent press release, Enterprises are eying at using social about the strategies required in publish-media platforms as an effective and rela- ing companies.tively low-cost medium for understand- How are service providers preparing foring customer behavior and preferences. the big change ? Web-based customer serv-Data analytics is another area that is ices seem to be becoming a common focusincreasingly gaining more prominence. area for most players. 24/7 Customer isAccording to a Frost & Sullivan report offering online predictive customer experi-Redefining Contact Center Analytics, ence solution that is a combination of three2011, there is an increase in the portion things-software platform solutions, web-of companies that are actively using ana- based analytics and contact center serv-lytics in their contact centers. ices. The company identifies web-based “Sitel is help- “We offer “Offering er s l to /7te m n ing to drive self- us 24 online pre- multilingualSi w service and agent- dictive customer contact center serv- C assisted interactions experience solution across company web- ices via onshore, near- sites, social networking that is a combination shore and offshore sites (such as Twitter and of three things-software Facebook) and mobile delivery models is our platform solutions, web- applications (for the iPad based analytics and con- core strategy.” or iPhone).” tact center services.” 2011 Global services 100 study
  • 75. 80 BPo interactions as a major trend this year and models, leveraging IT and PO synergies finds its strategies to be a step taken in this from best-in-class technology and proc- direction. esses bundled together. Soon in the part- According to Shankardass “Sitel is help- nership they are likely to offer business ing to drive self-service and agent-assist- analytics and insights and offer proac- ed interactions across company websites, tive service leading to revenue genera- social networking sites (such as Twitter tion. Outcome based pricing instead of and Facebook) and mobile applications headcount is then likely to be a common (for the iPad or iPhone).” aspect of such partnership.” WNS finds offering multilingual con- Presenting a similar opinion, Pryor says, tact center services via onshore, nearshore “The biggest change Convergys sees is and offshore delivery models to be its core that more companies are driving towards strategy. It also looks at building in-depthsome form of outcome-based business capabilities in end-to-end customer lifecy- model and a related pricing arrangement. cle support, by leveraging existing experi- Service providers are looking to scale ence within diverse client base. up in terms of their service capabilities Taking a broader look across geogra- and geographical reach. As buyers look phies, the high growth markets like India, for providers with a global footprint, China and Philippines are focusing more establishing a global delivery program is on workforce optimization and self serv- going to be a key area for providers. And ice applications. While mature markets this trend is going to drive the merger like Australia and Singapore are see- and acquisition decisions significantly. ing huge investments into analytics and Talking about the recent merger and social media integration. acquisition deals in contact center indus- try, Baidya commented “As customers Outcome-Based Pricing & demand more services from a single ven- Technology-Based Acquisitions dor at multiple geographies with multi- Models are mostly going to be outcome language capability, such consolidations based. This implies that service provid- are likely to be common.” As complexi- ers will earn in line with what they are ties grow and level of sophistication goes able to sell on behalf of their customers. up, service providers will also be aiming According to Baidya,“Service providers more at technology acquisitions. are trying to transform their relation- ship and position themselves as strate- What Lies Ahead? gic partners. Strategic partners are likely Experts are of the opinion that these to deliver in truly flexible pay-per-use transformations can have a double-sided 2011 Global services 100 study
  • 76. Segment Analysis 81impact on the market-challenges plus believe that this is not going to curtailopportunities. For instance, companies growth opportunities as calls will bethat service customers over the web replaced by other methods of interaction.through methods other than voice, can With growing preference for self service,overcome limitations relating to dialect service providers will, in fact, have theor language. Hence difference in the opportunity to offer more services withgeographical locations or languages will the same number of agents. Opportunitiesnot be a hurdle. But to grab a share are thus huge and challenges are big, butof the outsourcing pie, providers need being proactive is going to make all theto establish their presence on multiple difference. Commenting on the futurechannels and be able to interact in ways prospects, Pryor says, “Convergys sees athat are preferred by customers. Multiple healthy BPO customer care market grow-channel capabilities and expertise in spe- ing at five to six per cent over the nextcific verticals is going to be important three to five years”.in luring customers when products and The market is seeing a lot of activ-services are otherwise similar to a large ity in terms of fresh deals and demandextent. “Social media will be central to is coming from various verticals andcompanies strategies towards customer geographies. Companies are moving “ Sitel identifies web-based interactions as the biggest trend in 2011 and finds its strategies to be a ” step in this direction.engagement and what companies can to double digit growth numbers andoffer in this direction is going to be very complexities are also growing. Expertsimportant” says Jain. The mid market isanother big opportunity area and service The Global Services 100 Studyproviders are already coming up withspecialized offerings to attract this mar- One-Stop-Resourceket segment. But is the declining call volumes incontact centers going to affect growth believe that on the whole, 2011 is goingin the long run? As a trend call volumes to be an exciting year full of challengeshave been declining, but service providers and 2011 Global services 100 study
  • 77. 82 BPo FinAnce & AccOunting FAO Market Is On A Roll T he traditional FAO market is rapidly maturing in many ways even as new demand geographies are emerging. Smriti Sharma The FAO market continues to be vibrant new engagements reached $5 B. The FAO and dynamic. According to reports, the market reached $3.5 B in ACV in 2010, United States accounted for over half of representing about $28.5B in total FAO total FAO spending in 2010 while Asia- spending. Pacific witnessed the fastest growth. Large As per HfS research, the average con- buyers accounted for 55 percent of con- tract size for an F&A BPO engagement tracts signed in 2010. Mid-market compa- has declined from $30M in TCV in 2004 to nies that have revenues of $1-5B annually, less than $20M in 2010. This size decrease revived adoption of FAO last year. is caused by increased competitive- According to Everest Group, the FAO ness, falling price-points and increased market is expected to grow 15-20 percent number of engagements being signed and top $4B in annual contract value in 2011. with organizations in the $750M to $3B According to the same report, in 2010, revenue category. ACV grew almost 15 percent in compari- More than half the market engagements son to about 10 percent growth during are with Accenture, IBM and Genpact, the 2009, and total contract values (TCV) of report says. 2011 Global services 100 study
  • 78. Segment Analysis 83 Approximately 48 percent of 2010s Multi-billion dollar offshore-centric pro-engagements involve gainshare incen- viders Infosys, TCS and Wipro, and BPOtive. This space is witnessing a grow- pure-play specialists EXL Service anding demand for more transactional and WNS, are also very active in the marketoutcome-based pricing models. for large engagements. ACS has merged with Xerox, they have commercializedThe FAO Leaders their end to end Source to Pay capabilities. Accenture and IBM dominate the ACS has also formulized three key alli-global F&A BPO market. Accenture, ances in the Source-to-Pay area. TheseIBM, Genpact, Capgemini, Infosys BPO alliances bring additional technologyand HP have been recognized as the enablement and capabilities with certainmajor players by advisories. In Everest spend categories. They continue to investGroup’s Performance/Experience/Ability/Knowledge (PEAK)matrix, leading serv-ice providers namedwere Accenture, IBM,Genpact, Capgemini,Infosys BPO and HP. Recent years, havewitnessed these playersbag multiple engage-ments in the $50M+range and thus theyare able to dominatethis space. Interestingly, market leader in F&A enabling technologies that willAccenture and IBM adhere to different help drive benefits beyond labor arbi-approaches as per HfS Research on FAO: trages ACS is aggressively integratingAccenture has consolidated its command- new Xerox technologies into their FAOing presence with large-scale enterprise solutions.customers, but IBM has determinedly Tony Chambliss, global offering lead forgone after the mid-market to take a com- F&A BPO services at Accenture articulat-manding position in that sector. ed, “The ability to undertake analytics on Capgemini and Genpact are the major transactions, understand the insights andcontenders for large scale engagements. then identify opportunities to improve 2011 Global services 100 study
  • 79. 84 BPo add value is what our clients expect from Intelenets high value capabilities and BPO. For F&A BPO clients we process customer base, together with its econ- their invoices, collate the spend, map that omies of scale, means we can access back to their strategic sourcing agreements new markets and strengthen our existing and identify rogue spending outside that propositions.” agreement – that is money sifting through Second tier vendors are eying the mid- their hands. We’re focused on finding it market and are distinguishing themselves and giving it back to help drive savings. by creating differentiated offerings. Their We’re also seeing more emphasis on deep focus areas will be innovative value prop- industry expertise. More and more, clients ositions such as industry-specific solu- are looking for providers that have a deep tions, end-to-end processes solutions, understanding of the industry environment specialized process offerings etc, strategic in which they operate.” alliances between pure-play FAO serv- FAO space will further consolidate ice providers and technology providers as providers draft acquisition strategies to offer platform/SaaS-based offerings to increase their presence. EXL Service and increasing presence and foray into recently announced the acquisition of emerging destinations such as Africa, OPI Global, a pure play FAO vendor. Latin America. Genpacts strategy for addressing the Steria, one of Europe’s providers of market in 2011 is not different from their outsourced Finance and Accounting 2010 plan. That is, client acquisitions will (F&A), embraced a number of landmark continue to be very aggressive in terms of contracts. Steria manages and controls both new logos as well as expanding their over approximately $80.56B payments footprints with their existing logos. Recently, Serco signed an agreement to acquire Intelenet, an India-based BPO provider. Highlighting on how this acqui- sition will benefit Serco, Chris Hyman, chief executive of Serco, commented, “The acquisition of Intelenet supports our ambitions. The international BPO market is growing quickly as companies seek out new ways to improve their service and reduce costs. 2011 Global services 100 study
  • 80. Segment Analysis 85per year, $20B collectionsand over 3.5M payrolltransactions. Sachdev Ramakrishna,director marketing, SteriaIndia said, “We under-stand that regulations,systems and processesare not static. Our financespecialists actively lookat the future of financeand leading best prac-tice. We design and runexcellent finance opera- F&PM areas. He opined, “Access totions and platforms that ensure a reliable, better information to communicate tocontrolled and flexible service that can their line of business owners seemdeliver change. This enables our public to be driving more value add forand private sector clients to dramatically the F&A organizations and makingimprove control, cost and service.” the opportunities to grow analytics and improvements in the bottom lineThe Models for companies. Value propositions are In recent years, phased approach of centered around improvements to cashscope migration has replaced the big- performance.”bang approach. Buyers are increasingly There are several models of imple-focusing on cost and value proposition in menting centralized finance operations.terms of optimizing process. To maximize Saurabh Gupta, vice president Everestvalue creation from FAO contracts, buy- Group, stated:ers are starting to follow end-to-end proc- • Building captive finance shared serv-ess-driven approach to FAO as opposed ice operationsto a traditional functional and piecemeal • Build-Operate-Transfer (BOT) modelapproach. – Buyer engages a third-party serv- Chambliss spoke about how many ice provider to build dedicated F&Acompanies are moving from just a operations offshore. Service provid-transactional basis of BPO toward out- er then operates the F&A opera-sourcing higher value added func- tions for buyer in steady state. Oncetions in their decision making and steady state operations and 2011 Global services 100 study
  • 81. 86 BPo scale are achieved, service provider Technology Matters transfers operations to the buyer Strategic technology investment ena- organization that can then run it as a bles both process optimization and long- captive term value in FAO outsourcing arrange- • Third-party outsourcing – Buyer out- ments. The role of technology has evolved sources part of F&A operations com- from the basic “tie-and-run” model to an pletely to a third-party service pro- “augmentation” model. In 2010, technol- vider, the classical FAO engagement ogy augmentation emerged as the new model. “normal” – nearly 50 percent of the new Organizations often leverage hybrid contracts included add-on tools such as or mixed approach leveraging more than workflows, interfaces, document man- one model described above. agement, business process management, WNS has adopted several models of business intelligence and user portals/ implementations such as- lift and shift, dashboards. shift and fix, and a combination of fix Ramakrishna added, “Historically, “ The ability to undertake analytics on transactions, understand the insights and then identify opportunities to ” improve and add value is what our clients expect. whilst lifting and shifting. Tasneem F&A outsourcing has not been a technol- Lakdawalla, business unit leader, Finance ogy intensive service. The focus has been and Accounting shared, “WNS delivers more on adhering to processes, backed a full range of FAO processes to sup- by a strong manual work component. port all functions in the CFO’s office. We This is starting to change and for the first perform over 650 processes ranging from time, a growing number of F&A suppli- simple transactions to complex analyti- ers are offering standardized IT platforms cal processes including industry-specific with their F&A services. While there are processes such as royalty and passen- challenges to overcome regarding data ger revenue accounting. Specifically, we security, ERP architecture & integration, deliver end-to-end services across the full these options will continue to evolve, par- spectrum of finance and accounting func- ticularly in the near term for mid-market tions, including procure-to-pay, order-to- buyers who typically are more inclined to cash and record-to-report.” buy in standard solutions.” 2011 Global services 100 study
  • 82. Segment Analysis 87 Although cloud is investments in their ERP platforms. Themaking its presence ERP application is the core source systemfelt across vari- for F&A processes. Thus adopting a SaaSous industry ERP application for this type of company isverticals, this very difficult. Therefore I think adop-industry still tion of cloud computing asso-needs to mature ciated with the corebefore its processes can be delivered ERP will remainin cloud- enabled models. The reason low forbeing, buyers have already injected huge this type ofinvestments in this space such as ERPand they expect to achieve major processand cost-efficiency gains through them. buyer.So, they are reluctant to let go of these However, theinvestments. industry has In addition to the obvious security focused on BPaaSconcerns of placing financial data in a (Business Process as acloud, the other concern is cloud-based Service) more discrete-FAO solutions need transaction-based ly on a functional basispricing as opposed to FTE-based pricing (e.g., Procure to Pay, Order to Cash) andin traditional FAO. However, transaction- or on an industry vertical basis (e.g., claimsbased pricing is not yet a well established processing)."pricing model in FAO Lightfoot added, "In this case, provid- Having said the above, still there is no ers offer technology enablement and BPOescaping the cloud. They could either con- services bundled and the work environ-sider approaching a third-party in a cloud ment for the clients as well as the pricing isF&A BPO model or move completely into either subscription based, or usage based.entirely cloud-enabled platforms. Adopting a SaaS ERP solution or a BPaaS Kevin Lightfoot, vice president,external model with the underlaying ERP andcommunications,ACS articulates, "The functional tools along is more likely withmajority (over 70 percent) of the FAO con- the mid-market where CFO’s are moretracts signed with the major FAO provid- willing to balance ERP requirements for aers are with Global 2000 companies (com- tradeoff in ownership and costs. ACS canpany revenue in excess of $2B). Thus most offer F&A BPaaS services on a cloud basedof these companies have complex ERP SAP platform. Currently our focus for thisrequirements and have made significant service is the European mid-market." 2011 Global services 100 study
  • 83. 88 BPo Gupta stated technology strategies that & logistics. Industries that have adopted are being deployed across all FAO: FAO in recent years include healthcare, • Tie-and-run: Limited role of technol- media, real estate, and hospitality. ogy where service provider plugs In 2010, nearly 95 percent of FAO con- into the buyer’s existing systems to tracts had an offshore component with deliver pure-play BPO services maximum offshore growth occurring • Technology augmentation: Service in Indian tier-2 locations, Central and provider implements tools that serve South America as well as Southeast Asia. as “add-ons” around the periphery of Several new locations entered the FAO the existing buyer systems to address delivery location map including South specific gaps Africa and Morocco. • Core F&A technology replacement/ Providers are looking for a stronger implementation: IT infrastructure presence in destinations – China, Central and/or core F&A application imple- Europe and Latin America- where they mentation bundled with FAO serv- can serve regional clients with multilin- ices. Technology ownership resides gual staff and higher-touch processes. with buyer More than 55 percent of FAO contracts • Platform-based FAO: Pre-integrated offshore F&A services to India. Of more applications and pre-built process- than 20 leading FAO service providers es, owned by service provider, with tracked by Everest, 18 have delivery pres- pricing built into the FAO contract ence in India with close to 80 delivery In 2010, technology augmentation centers when taken together. In recent emerged as the most prevalent model. years, India has also emerged as a buyer While most FAO buyers prefer a technol- geography for FAO. ogy augmentation approach, there exist situations where buyers are amenable to Outlook platform-based FAO as well. However, Demand in the emerging markets- such instances are few given the hurdles whether it is India or Asia Pacific or Latin described in the answer to the question America- for FAO services is expected to on cloud computing adoption. increase this year. Shantanu Ghosh, senior vice presi- Clients and Delivery Locations dent and global head of practices, solu- The largest client-base in this sector is tions and transitions, Genpact opined, based in the US. In 2010, the top three “The reason being a lot of multina- verticals adopting FAO were manufactur- tionals - which are US and continental ing & retail, financial services, and travel Europe based- have done their first 2011 Global services 100 study
  • 84. Segment Analysis 89wave of FAO, where they obviously FAO has now moved on to closing report-focused on high impact geographies ing, financial planning, tax support US or UK or continental Europe FAO is on its second generation of whatare now focusing on their second or can be done. FAO has moved beyond justthird wave outsourcing through the Accounts Payable, Accounts Receivablenew market. These economies are cre- and General Ledger.ating companies that are growing from An end-to-end process-driven approachsmall to medium to big and they are to FAO is also emerging as opposed toexpanding outside their home terri- a traditional functional and piecemealtories. They are also looking not only approach.from the prospects of labor arbitrage Gupta added, “Competitive intensitybut also from the prospect of creating among FAO service providers is at angrowth platforms along with delivering all time high and the need to achieveprocess excellence through use of proc- differentiation is paramount. This isess management expertise.” visible in terms of expanding delivery FAO will continue to increase in the network to newer locations, launch-developed markets, which is the source ing process maturity models, investingdestination for demand. Demand will in technology solutions, building newcontinue to come from late adopters. process offerings etc. The market hasGhosh shared, “These are the people recently seen some consolidation as wellwho have not jumped on the FAO (iGATE acquiring Patni and EXL acquir-bandwagon earlier, but now have seen ing OPI)”.the model get proven and have got In terms of contract scope, the trendenough confidence that this works and towards end-to-end solutions will con-they are therefore now coming in the tinue to gain momentum as opposed to amarket. Many of them are large but that traditional piecemeal solution.also includes the medium business seg-ments that are now beginning to show The Global Services 100 Studyinterest in now getting into the FAOmarket.” One-Stop-Resource For people who have experienced their wave of FAO, they can be clearlyseen going up the value chain. Lots of There is an increasing trend of “verti-the business with existing customers that calization” in FAO, moving away fromwas in the initial pieces of transactional the traditional assumption that FAO is aand little beyond transactional like ledger horizontal 2011 Global services 100 study
  • 85. 90 BPo AnAlytics Analytics Outsourcing: Gaining Ground T he offshore analytics space has evolved from being dominated by cap- tives of large companies to embracing large vendors offering end-to- end specialized analytics solutions to specific verticals. Smriti Sharma A recent study of Chief Information dashboards. Another 63 percent are using Officers (CIOs) by IBM reveals that the top MDM (master data management). Master strategic technology investment over the data refers to information entities, such next five years at outperforming midsize as specific product or supplier names organizations is business analytics. that are supposed to be consistent across The study reflects that within the a number of systems and applications broader category of analytics, 64 percent within a company. of midmarket CIOs said they are using The heightened need for business ana- data warehousing platforms and visual lytics has begun to drive the demand for 2011 Global services 100 study
  • 86. Segment Analysis 91 Data security con- cerns make certain companies hesitant about analytics out- sourcing. Vendors are targeting such buy- ers by offering onsite delivery teams – at client premises, client country- so data is not required to reach offshore. Analytics serviceoutsourced analytic services, which hith- providers includes: BPOs, KPOs, BPO/erto has been driven by the need to off- KPO arm or department of large IT-BPOshore knowledge-based processes to take Company, specialist market researchadvantage of labor arbitrage and avail- (MR) firms, and other boutique Researchability of specialist professional skills in and Analytics (R&A) firms.countries like India. We see that the area The approach adopted by large IT com-called Knowledge Process Outsourcing panies, BPOs and KPOs differs signifi-(KPO) is slowly giving way to Analytics cantly. WNS and Cognizant are expand-Outsourcing (AO). ing by employing the acquisition route. Over the last decade, the offshore ana- Others such as Wipro have built in-houselytics space has evolved from being dom- capabilities. For KPOs, analytics was aninated by captives of large companies to obvious lucrative step up to expand theirembracing large vendors offering end- specialized analytics solutions tospecific verticals. Service providers such Client Profileas PharmaARC and Fractal Analytics are US, UK and to some degree, the restsome of the early entrants and they have of Europe are major markets served byestablished themselves as end-to-end analytics service provider. Since theseanalytics consulting companies. mature markets embrace experience in Last five years have witnessed a signifi- offshoring business processes they arecant increase in the percentage of service now moving up the value chain and areproviders offering analytics services from willing to outsource knowledge serv-offshore 2011 Global services 100 study
  • 87. 92 BPo ices. Some providers are also focusing on with 200+M subscribers as well as green- Australia and Japan. field operators and mid-sized companies. Fortune 500 companies are the big- Their customers include Bharti, T-Mobile, league clients for this knowledge service. Telefonica, Alcatel Lucent, YTL, IDEA Carnation Auto and GE Money are some amongst others. of Genpacts clients. Pankaj Kulshreshtha, senior vice president, Genpacts analyt- Top Delivery Locations ics and research department articulated, India, China and Eastern Europe are the “Genpact has a large concentration in most prominent destinations on the ana- America and a large portion of their cur- lytics outsourcing map. Others include rent revenue comes from this region. It nearshore countries to the US such as has footprints in Europe, China, India Mexico and Costa Rica, and offshore and Australia. In the coming years, it is destinations such as Singapore and Sri expecting to grow significantly in Europe Lanka. and Asia-Pacific Region.” Eastern Europe and nearshore destina- Most of WNS clients are based in tions to the US have time zone advan- the United States and European Union tages. For buyers whose service require- region. It is also expanding its client base ments call for real-time and frequent cli- in the Asia-Pacific region. Most of their ent interactions, these destinations fit the clients are spread across several industry bill perfectly. verticals, including financial services and Corine Van Erkom Schurink, ana- insurance, retail, CPG, healthcare, profes- lytics team lead at Prescient Business sional services, travel and leisure. Technologies (PBT), a South African Some of Accentures clients are BP service provider said, “Unfortunately, and Verizon. Capgeminis clients include advanced analytics has not had the impact Mazda and Baycorp. Connectiva serves it should in the local market due to vari- service providers in telecom, media and ous reasons, the most pertinent being that entertainment. Their customers include it is not understood and therefore not some of the worlds largest providers implemented correctly.” “ India, China and Eastern Europe are the most prominent destinations on the analytics outsourcing map. Others include nearshore countries to the ” US such as Mexico and Costa Rica. 2011 Global services 100 study
  • 88. Segment Analysis 93 Continued Van Erkom Schurink, “With Arun Kharbanda, business unit head,this in mind, it is important for business- Research & Analytics, WNS Globales to get the process of advanced analyt- Services stated why analytics is used byics right for the technology to effectively their clients, “To enable our clients in theirbenefit the business. Too often local busi- Top line growth by using analytics to cre-nesses and CIOs have been let down by ate a One view of the Customer, improv-this concept due to the fact that they do ing customer life time value through betternot fully understand what it is and how acquisition, retention strategies, increas-it should be implemented. This needs to ing share of customer wallet throughchange and PBT is becoming a strong active cross-sell and up-sell plans, drivingadvocate in this regard.” better sales force effectiveness, framing PBT suggested that getting this right product-market strategies with accurateinvolves a top-to-bottom approach: or targeted research on competition, mar- * Advanced analytics should not be kets, and consumers, improving market-looked at as an IT function solely, but rath- ing return on investment.”er should be driven by the business as a He added, “To enable cost reduction/whole, to allow for the correct platforms to optimization of price, inventory andbe developed, based on the identified busi- shipment to reduce demand-supply mis-ness model and what the business needs to matches, Improving sourcing to reduceachieve from having access to such data. cost of procurement, quantifying prob- * The business should have a solid BI ability of adverse outcomes to reduceprocess in place whereby the data ware- risk, improving compliance adherencehouse is fully up and running, and offers and provide strategies to minimize risk;a central representation of data that can be Improving predictability of and minimizeunderstood on all levels of the business. variations in planning.” The HfS report on analytics outsourc-Demand Drivers ing highlighted the following drivers: With ever growing competition and Leveraging IT and BPO offshoring expe-globalization, analytics has become criti- rience and ecosystem Companies withcal for all businesses to support tactical existing outsourcing relationships are look-and strategic decision making. Today, ing to leverage their IT-BPO offshoringcompanies can choose from a host of plat- experience to source analytics solutions,forms and services based tools that can preferably from the same service deployed to make intelligent use of In most cases, the third-party service pro-information enabling business decisions viders developed analytics solutions in athat impact both top line and bottom line. bid to move up the value 2011 Global services 100 study
  • 89. 94 BPo Availability of cross-functional, multi- Reduced time to market With increas- skilled talent As the scale and scope ing competition and the urgency to obtain of analytics expanded to accommodate first mover advantages, it has become several core functions, the delivery of imperative for firms globally to access tal- analytics called for maintaining high- ent to provide pertinent data supported ly specialized manpower across more by thorough analysis at a faster and more diverse domain areas. This manpower efficient pace. Offshore delivery centers often remained under-utilized. Given are attractive as they come with faster their high cost, companies increasingly time to market and provide accompany- started looking at third-party service ing support services on a 24x7 basis. providers to help. Increasing demand for analytics also led to the emergence Outlook of pure play analytics service providers. The next 10 years of the analytics land- These providers have teams with deep scape will be drastically different from the domain knowledge, technology and sta- last one. “With structural shifts in demo- tistical expertise. graphics that will reflect more prominent- Cost arbitrage for low-end analytics. ly in the international trade and econom- According to HfS Research, for a typical ics, where outsourcing will no longer be analytics project, talent costs constitute a choice. The KPO industry in India has approximately 60% to 70% of the total gone through a “concept selling” phase in costs. With other costs (infrastructure, the last few years for a majority of clients etc.) significantly lower than in onshore who have so far utilized BPO services. locations, cost arbitrage can range up to At the same time, some clients have been 50% for offshore locations. able to create a competitive advantage 2011 Global services 100 study
  • 90. Segment Analysis 95for themselves throughestablishing AnalyticsCenters of Excellence pro- “ Next will come a time when they will own data and provide consulting/ analytics based on thegrams that have resulted owned data as well asin improved decision companies in customer data.”making across multiple India will start Viral Thakker, execu-business groups, mar- tive director, perform-kets and geographies,” services where ance and technologyopined Kharbanda. they will own services KPMG pointed Industry verticals such out some of the emerg-as shipping and logistics, data and provide ing/growth areas inmanufacturing and sup- consulting/ analytics:ply chain were initially • Customer analyticsnot very active in this analytics based for the energy and utili-space and now they offer on the owned ties sectorgood opportunities. From • Fraud analytics in data as well asan offering standpoint, retail banking customer data. ”web and web related • Cyber-analytics toservices are very much in detect cyber crime anddemand from the market, terrorismas are packaged solutions that combine • Learning analytics to assess academicconsulting services with delivery. performance Ramachandran K, executive director Other trends that could emerge are:& head healthcare, Activecubes stated, • Cloud-based BI tools could see“Analytics Outsourcing started with proliferationfinancial and marketing functions. Someof the first companies to take advantage The Global Services 100 Studyof this were the MNC’s when they setup captives in India. Initially the heavy One-Stop-Resourcelifting in terms of data analysis was outsourced. Then came the higherend statistical modeling. Nowadays, • ‘Big data analytics’— Big dta refers tohigh end business consulting (based the tools, processes and procedureson the data) is also being outsourced. allowing an organization to create,Next will come a time when compa- manipulate, and manage very largenies in India will start services where data sets and storage 2011 Global services 100 study
  • 91. 96 BPo inDustry-speciFic Industry-specific BPO Will Continue to Evolve B PO driven by industry-specific knowledge helps achieve measurable business outcomes Sruthi Ramakrishnan Canada, Mexico are queuing up to grab a share of the approxi- mately $2.5 trillion US healthcare pie. Experts say that opportunities will be widespread in those industry domains where BPO and IT serv- ices can be bundled together under a sin- gle vendors provision. This will help to gener- Vertical-specific BPO services present a ate more efficient business outcomes and larger and more diverse market opportu- to secure future IT work with existing nity as compared to horizontal BPO serv- clients. So the providers who can bring ices. The US Healthcare Reform bill has in industry domain expertise are set to been the biggest newsmaker in this regard, emerge as significant players in the com- with many already terming it the “biggest ing year. bonanza yet” for the industry. Service pro- A trend that is indicative of this growth viders with expertise in the healthcare potential is that newer vendor entrants area, both from industry leaders like India, are entering the BPO industry through Philippines and nearshore locations like the industry-specific (vertical) process 2011 Global services 100 study
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  • 93. 98 BPo domains. Most of the strong IT services manufacturing, media, etc. - are under- vendors have also been developing BPO going fundamental changes, right from niches in specific verticals where they their infrastructure to business model to have developed some strong process acu- customer expectations. In such a situa- men and client credibility. tion, outsourcing processes is no longer According to a survey by Horses for seen as abhorrent or unusual. Sources, one-in-ten financial services Another reason is the success of exist- firms, and one-in-five from life sciences,ing domain-specific BPO engagements. are looking to move into some form of Over half of all the financial services and domain-specific BPO this year for the life sciences firms recently surveyed by first time. These are typically areas where Horses for Sources are looking to expand there is some immediate labor arbitrage existing BPO engagements this year, opportunity, like trade settlement trans- and very few intend to pull work back actions and mortgage processing in finan- onshore. However, this doesnt neces- cial services, and data storage and man- sarily entail massive increased spending agement processes in life sciences. overnight, but more a gradual incremen- tal increase in engagement scope. Evolution Suppliers also find the marketplace At the outset, process outsourcing had increasingly crowded, and industry-cen- been primarily a cost-control strategy tric capabilities enable competitive differ- driven mainly by labor arbitrage. Cost- entiation. Moreover, the move to greater control is still relevant. But in today’s domain-specificity is intrinsically tied to environment, especially keeping the slow the business utility model of the future, economic recovery in view, organizations where there are signs of the con- are searching for value--for ways to do vergence of SaaS, Cloud and BPO/ things better, faster, and cheap- ITO models within an engage- er--and for the ability to truly ment structure. The need for cli- transform their businesses. To do ents and vendors to define, develop that, they need BPO that is based on and implement holistic end-to-end industry-specific knowledge and process solutions is slowly coming that is driven to achieve measur- to the forefront. able business outcomes. All these reasons have led On the buyer side, sev- an increasing number eral industries- financial of industry verticals to services, life sciences, explore new and radi- healthcare, retail, cal means to improve 2011 Global services 100 study
  • 94. Segment Analysis 99productivity, source new revenue oppor- of medical procedures and codes, andtunities and drive-out cost. Other benefits variations between states which makesought from providers include enhanced this market more challenging.customer service, greater competitive But with 32 million Americans slatedagility, and measurable long-term busi- to join the ranks of the newly-insured,ness value, to name a few. many providers will soon be seeking assistance in the processing of not just theIndustry-specific Processes new enrollees, but their existing clients as Healthcare outsourcing– The well. Insurance providers who were pre-Healthcare Reform bill has the out- viously hesitant about outsourcing serv-sourcing industry abuzz with anticipa- ices will also now be forced to rethink,tion. Many BPO firms, including several especially as competition will be tougherIndian ones, recently increased or are in than ever in their industry. Of coursethe process of increasing their onshore with that, competition to gain profit frompresence in the US or seeking possible healthcare services will be tougher in themergers and acquisitions with other com- outsourcing industry as well.panies so as to broaden their expertise Financial sector outsourcing- Theand so gain more business from the financial services sector has sel-on-the-brink-of-booming healthcare dom faced a tougher set ofindustry there. business, market, and regula- But capturing the US healthcare tory challenges. Many firmsmarket is easier said than done. So far face threats from ongo-only few IT and BPO firms have made ing consolidations, morea headway into the US healthcare pro- mature non-traditionalvider and payer market despite the huge competitors, and pro-potential for automation and outsourced liferating complianceservices in areas such demands. To meetas revenue cycle these challenges,management and BPO is increasinglyclaims processing. Industry players and being seen as a logical and proven tool forexperts cite issues like lesser willingness banks, card issuers, mortgage, insuranceto outsource as compared to the financial and other financial services firms. Banksservices players, regulatory and privacy and other organizations are using BPO toconcerns related to patient records, com- manage risk, to reduce costs, and to com-pliance to specific Acts such as HIPAA ply with increasingly rigorous regulatory(Health Insurance Portability), knowledge 2011 Global services 100 study
  • 95. 100 BPo Mortgage Process Outsourcing- The and expand the scope of potentially out- major challenge which service providers sourced business processes. face while offering mortgage services is Life sciences outsourcing- The indus- the integration of services like loan origi- try-wide drive for pharmaceutical and nation, vendor management, post-closing biotechnology companies to lower costs, processing services, third party services access specialized services and increase until underwriting, modification services, flexibility through outsourcing work to technology services etc. Contract Service Providers (CSPs) was TCS (Tata Consultancy Services) highlighted by BioCrossroads’ latest shared with Global Services (New report on Industry Developments in U.S. Demands in Mortgage Processing BPO, Biopharmaceutical Contract Services. The September 28, 2009) that as mortgage new report acknowledges that while 2009 rates dropped to under 5% early last was slow for many CSPs, the underlying year, re-finance activity increased creat- reasons for pharmaceutical and biotech- ing a spike in demand for origination nology companies to outsource selected and loan closing related services. This activities will continue for the foreseeable demand cooled as rates edged up. For future. CSPs should continue to grow default related services including MODs as the pharmaceutical industry moves and real estate owned (REO) there were towards a more flexible business model. early demand spikes as servicers began Biomarker services and the need for larg- to deal with the mortgage crisis. An er clinical trials will provide opportuni- uncertain regulatory environment and ties for additional growth in future years. political pressures for moratoria on Besides, with the consolidation of the foreclosures late in 2008 contributed to pharmaceutical industry and the con- a slowing in default outsourcing. As tinued trend of strategic partnerships moratoria expire and MOD programs between CSPs and their clients, many become better defined, service provid- companies in the sector will be drawn to ers are facing a need to rapidly add find new revenue sources. scale. Cycle time has shortened dra- Besides India and Japan, China matically. For service providers this is emerging as a potential industry translates into a need for excellence in leader in this vertical. According to a manpower management, recruiting, and 2008 report ‘The Changing Dynamics training. An additional critical element of Pharma Outsourcing in Asia: Are is deep domain expertise – the ability to You Readjusting Your Sights?’ by work with the client to optimize proc- PriceWaterhouseCoopers, big pharma- esses, find ways to automate more fully ceutical companies rated China as the 2011 Global services 100 study
  • 96. Segment Analysis 101best location for outsourcing in Asia. The electronic book sales amounted to $167country’s large population represents million according to the Internationalenormous market potential for Western Digital Publishing Forum (IDPF). Thefirms whose domestic profits are com- e-book segment is growing and has wit-ing to a standstill. Pharma companies are nessed serious attempts by publishers toalso drawn by China’s low production make it a strong revenue source.costs. The Wall Street Journal estimates Outsourcing is being looked upon,that the total cost of a scientist in China is besides to tackle cost pressures, to deal$30,000, compared to $250,000 in the U.S. with the challenges of adapting to newWorldwide pharmaceutical firms looking technology, lack of in-house capabilityto expand sales into emerging markets and addressing new geographies.are contributing resources to China. According to a 2010 ValueNotes survey Supply Management Outsourcing- of publishing service buyers, India wasThe market surpassed a billion dollars followed by the US in popular publish-in expenditure for the first time last year, ing outsourcing destinations, while thewith a 30% hike in expenditure on new Philippines was the second most pre-multi-scope BPO contracts, as reported by ferred offshore destination after India.the AMR Research Supplier Management ValueNotes estimates the Indian publish-BPO services report of 2009. The main ing outsourcing industry to grow to a $1.2reason for this uptake is the increased billion annual market by 2012 from $660availability of low-cost offshore services million in 2008. This growth is expectedfor procure-to-pay and strategic sourcing to come from the rise in the number ofsupport, with 72 percent of services being publishing firms that will outsource theirdelivered from India for largely North work.American and European organizations. Indian players are shifting focus fromBut experts say that this market will not the matured academic segment to thesustain its growth trajectory unless cus- more lucrative segments in the publish-tomers think beyond short-term labor ing market- educational, magazines, cor-arbitrage, and service providers intro- porate, B2B, trade and e-books will beduce significant process and technology attractive segments over the next three-enhancements to the early adopters to four years, and Indian service providershelp them optimize their delivery. can extend their current capabilities to Publishing outsourcing- The pressures service these upcoming opportunities.that publishers faced in the wake of eco- The industry still suffers from a seri-nomic recession stimulated the e-book ous piracy problem, caused largely bymarket. In the US alone, trade wholesale the high price of books, especially 2011 Global services 100 study
  • 97. 102 BPo books published under license, where Other Verticals currency exchange rates push up the pric- Industry specific variations of hori- es. Besides, diversifying into new areas zontals continue to remain unaddressed of business and providing value-addition though a few areas such as Revenue within current offerings are areas where Accounting (Travel) or Revenue outsourcing is yet to be viewed as a com- Assurance (Telecom) are drawing inter- plete solution, the ValueNotes survey est. Travel (airlines) is a sector where revealed. industry specific services such as Pricing/ Media outsourcing- The global media Fare filing or Yield Management or Load and entertainment industry revenue is Management have seen demand though likely to increase by leaps and bounds "revenue accounting" has been leading in due to the proliferation of content in mul- the sector. tiple formats across media platforms. The Insurance is a sector which has been media process outsourcing opportunity is waiting for a good platform solution for a huge since most of the existing contents few years now. worldwide are in the analogue form and Firms looking at supply chain func- need to be digitized for new platforms. tions, such as management of environ- As advertising declines, the pace of mental compliance, distribution manage- onshore and offshore outsourcing in the ment, sourcing etc. are also choosing to media industry appears to be picking up. outsource them. The Everest Group reported an increase Other emerging verticals include tech- in media-related outsourcing deals in the nology, telecom and transportation. last year. Mergers among media compa- nies are driving some of those deals, but Opportunities and Risks most of the push to outsourcing is due to The 2009 Everest report ‘Industry- pressures in the ad market. Publishers see Centric BPO Solutions- Opportunity to labor arbitrage and offshoring as one of Attain Distinctive Market Positioning’ the easiest things they can do to cut costs. says that while “verticalization” of serv- Many companies today understand the ices implies numerous opportunities for importance of maintaining a good profile value creation, there are also potential on the internet. Hence, they seek social risks, and suppliers need to identify and media services like SMO (SM optimiza- adopt mitigation strategies for these risks. tion) for their websites from third party Among opportunities, the report men- vendors to boost their online business tions that while the overall BPO market is marketing while they focus full time on highly competitive, the market by indus- their core business development. try is concentrated. Also, the industry 2011 Global services 100 study
  • 98. Segment Analysis 103specificity of services sets the stage forthe introduction of higher-value pric-ing models. On the other hand, strategicinvestments for capability building invertical services will carry larger risks. Experts also warn that while industry-specificity will clearly be a major driverin outsourcing, the financial pressures onvendors to maintain their profit marginsmay override its development. The capa-bility to deliver genuine domain-specif-ic process acumen to clients is quicklybecoming a major differentiator in themarket. However, investing in the talentto truly scale these capabilities is expen-sive, and the margins arent as appealingas those currently being displayed by and attitude on the vendors’ side to investseveral vendors delivering the easy, oper- in the depth of talent they need, andational work. As a result, sector-specific less concern about short-term profits andskill shortages (specialized skill catego- demands.ries for vertical-specific processes suchas actuaries for Insurance BPO) are likely The Global Services 100 Studyto emerge, according to the Nasscom-Everest India BPO Study (2008). One-Stop-Resource While some vendors are clearly content a thin veneer of vertical capability,others are picking verticals where they Many of the GS100 companies offerfeel they can gain an edge over the com- industry-specific BPO solutions. The tablepetition. But its a gradual development, below gives examples of work done by theseand experts say that it will take patience companies across various industry 2011 Global services 100 study
  • 99. 104 BPo TABLE INDUSTRY-SPECIFIC BPO Oil & Gas End-to-end accounting services for O&G exploration and production companies, including work pay, division order management, and O&G specific AR/AP/GL accounting. Oil & Gas Trust: End-to-end Oil and Gas Trust accounting services for banks and large trusts. There are service providers that offer end-to-end BPO serv- ices for the entire range of trust accounting, division orders, and land management. Healthcare Financial Consulting, Evaluation and development of provider reimbursement sys- tems. Inpatient, outpatient, professional and allied health services, CMS compliance, Medicare Advantage risk adjustment data and HCC audits, Fraud Consulting, CAS 5.0 fraud, waste and abuse technology solutions for medical and pharmacy claims, Clinical audits (professional and institutional) Compliance with State anti-fraud regulations. Pharmacy Consulting and Software, Medicare Part D compliance, Pharmacy claims analysis, Retail & PBM reviews, Medicare Part D compliance. Healthcare Insurance: Policy management lifecycle, Claims Administration, Collections, Disease & Case Management, Referrals & Authorizations Management, Provider Credentialing, Provider Contracts Management, Member & Provider Contact center services, Fraud Analytics, Actuarial Support, Clinical Content Analysis, Patient base analytics. Pharmaceutical Clinical Data Management, Pharmacovigilance, Statistical Analysis and Reporting. Claims adjudication, patient demographics entry, medical coding, charge entry, refunds, credits, payment posting, denial management, provider matching, claim re-pricing, case management, disease management, workers compensation, claims processing. Managing entire revenue cycle including: consulting, scheduling, pre-registra- tion, registration, eligibility, transcription, coding, billing, self pay & insurance follow-up, e-payments, collections, legal services, and vendor management tools. Clinical data management, drug safety support, records management, medical writing, sales and brand analytics. Insurance: policy issuance, endorsements, renewals, cancellations & reinstate- ments, agency management, payment processing, claims reserve allocation, claims re-pricing, analytics/fraud detection, retirement plan setup & administration. Document Management In-bound Mail Management (includes scanning and indexing), Print and Mail Services Conversion, Postal Tracking, Explanations of Benefits, Householding. Retail & CPG Master Data Management, Trade promotions Management, Store solutions, Supply chain solutions, Reporting & analytics. Retail Offerings include Merchandizing, Store keeping, Supply Chain, MDM Services, Advertising/Promotions, Collaterals, Direct Marketing, Catalogue Management, eCom/Web, Social Media. 2011 Global services 100 study
  • 100. Segment Analysis 105Energy, Utilities & ServicesMaster Data Management, Flex-staffing, Supplier Performance Management &Analytics, Engineering Documentation, Advanced Metering Infrastructure Support,data validation, new product/ feature support and Meter Data Analytics. UtilityServices- Utility Services has developed and implemented creative and innovativesolutions to increase cash flow, reduce recovery costs, free capacity, and increasecustomer retention. Early stage outbound credit calls , Inbound call center sup-port , Back office support, Early stage third-party collections, Regular collections,Portfolio purchasing, Attorney network collections, Outbound customer servicecalls (power outages, new service notification calls). Merchandizing, Store keep-ing, Supply Chain, MDM Services, Advertising/Promotions, Collaterals, DirectMarketing, Catalogue Management, eCom/Web, Social Media.GovernmentService providers in this area offer performance-based Contract Administration,Complete contract administration for all performance-based standards, fromstart-up to daily operations for some or all tasks required under HUD ACC.Acknowledged Owner/Agent Satisfaction, collaborative HUD relationship, Timelyresolution of tenant inquiries. Consulting services are offered to complement theBPO government offering: Performance Based Contract Administration - Fulltraining program with certification, technical assistance to meet ACC require-ments, development and implementation of performance and production reporting.Provide on-site assessments, specialized training, tracking and forecasting toolsto help public housing authorities. Custom Training Seminars, Training Materialsand Operations Manuals. Government Services collections programs, experiencein delivering results by partnering with government clients to provide customizedservices to meet unique needs.Content ServicesDigitization, Scanning, Indexing & Abstracting, Data Entry, Data Conversion,Claims Processing, Mail Management. Manufacturing: Account planning and partner support, Lead and Quote gen-eration, Material Planning & Sourcing, Master Data Management (Material, partcatalog and customer), Forward and Reverse Supply Chain & Logistics Support, After-sales service and support, Website content Management. Dealer, Retail,Franchise and Channel Support Mystery Shopping Services, Pre-owned Vehicles(for automotive) and pre-approved owners loyalty programs, Warranty manage-ment (dealers, end users), Leasing & financing transaction program, TechnicalAssistance (dealers, end users), Repurchase Lemon Law (end-to-end management),Back office / Support documentation, Promotional Marketing (dealers, chan-nels), Service Marketing (automotive), Loyalty Marketing, Marketing EnablementServices, Service Contract 2011 Global services 100 study
  • 101. 106 BPo Software localization and Language Services The bulk of the language services consist of ongoing business process transactions in which web sites, backend database information, documentation, marketing materials, multimedia, training and eLearning content is maintained in hundreds of languages and locales. These outsourced processes serve number of specific indus- tries including Automotive, Consumer, Educational, Financial, Governmental, Healthcare, Life Sciences, Manufacturing, Technology, and Telco / Mobile. Communication Services Fulfillment - Order Management, Order fall-out management, Exception manage- ment, Provision, Modify & Cease orders, Service upgrades, Sales Support - Bid Management, Sales Reporting, Pricing, Voice of Customer analytics , Churn analyt- ics. * Assurance - Technical help desk, Incident Management, Fault Diagnostics/ Validation/ Repair, Engineer Appointments, routing assistance, Cable protection Management * Billing - Customer query Management/ Billing Dispute Resolution, Billing & Commissions, Credit Referrals, Fraud Settlements, Roaming Settlement, Interconnect Billing, Revenue Assurance, Network access cost Management, Circuit inventory Management. Media & Entertainment Digitization, Digital restoration, Digital Asset Management (Transcoding, Encoding, Metadata), Rights Management, Newspaper Advertising & Circulation Accounting, Advertising Operations (Creative), Web Search Marketing, Shared Service Platform for newspapers, Web monetization Platform, Online campaign implementation and optimization, Content Creation services (Creative Design, Content re-writing, review, moderation), Content aggregation /syndication services, DTP (Enhancing presentations, web publishing). Customer and revenue acquisition, Revenue assur- ance, protection, and churn mitigation services, and billing care and support serv- ices, Contract review services, Technical triage and diagnostics, Product testing and development services, Filed & retail service management, Channel and ISP manage- ment services, Hardware, Software, and order management services Insurance Claims Administration: The Claims Administration process outsourcing encom- passes transactions like First Notice Of Loss, Loss Adjustment, Reserving Appraisal, Statutory and Bureau Reporting, Claims Payment, Salvage and Subrogation Reporting and Management Reporting. Policy Owner Services: This includes the outsourcing of processes related to policy owners like policy enquiry, policy change, policy renewal , billing, cancellation and reinstatement. New Business: This includes outsourcing services in quotation, application, underwriting, require- ments, underwriting, policy issue and policy printing processes. Analytics: Analytics includes outsourcing of processes like Underwriting, Portfolio Analytics, Reporting, Acquisition Analytics, Customer Profiling and Fraud Analytics. 2011 Global services 100 study
  • 102. Segment Analysis 107Capital MarketsTrade processing, reconciliation factory model, NAV calculation, post-trade compli-ance monitoring, fund data acquisition.Customer Relations ManagementCRM divisions support a diverse menu of inbound and outbound programs, andhave the capabilities to interact with customers over the telephone, through e-mailand text messaging, or through Web chat. Flexible contact center solutions. Someof the CRM services are listed below. Customer Acquisition, Customer Retention,Customer Winback, Up-selling and Cross-selling, Customer care Technical support,IVR Solutions, Text Messaging Services, Email Management, Web Chat, AnalyticServices, Multi-lingual Services, Social Networking. Service provider delivers end-to-end solutions that support an integrated, mul-tichannel communications service for the clients Customer Interaction Service.Every contact with the customer is focused on building the customer brand andfurther developing the customer relationship. The service includes the identificationand implementation of service improvement opportunities on an ongoing basis.During service initiation, customer interaction processes are customized specifi-cally to client needs, then formed into a structured process that provides seamless,predictable service. Representatives are trained to address the varied needs of geo-graphically disparate communities.TravelContact Centre Services and Transaction Processing. Contact center servicesare Customer Service, Reservations, Telesales, Email and Web based Helpdesk,Support, Queue Management, Fares Desk, Mishandled Baggage Desk , FrequentFlier / Loyalty Program Management. Transaction Processing / Back-office services: Queue Management, Teletype Reject Processing, Dupes Processing, Fares Filing,Flight Rebooking , Satellite Ticketing, File Finishing, Tables Maintenance, DebitMemo Research, ARC Reconciliation.Location ServicesService provider offers diverse outsourcing services to Digital map providers andother companies delivered from different offshore centers. Some of the specific GIS-functions include geo-coding, image geo-rectification, creation and maintenance ofgeospatial database, map digitization, parcel mapping, satellite imagery interpreta-tion and other sophisticated 2011 Global services 100 study
  • 103. 108 BPo prOcureMent OutsOurcing Procurement Outsourcing: On the Rise, Flush with Deals P rocurement outsourcing is proving its value as a strategic piece of ser- vices. The procurement function would entail more complex categories of products and is focused on creating long term, sustainable relationships with global suppliers. Sourabh Chandra Pushp Procurement spends have a direct impact Market & Engagements on profit and at times like these, anything PO has made big advances across the that moves the lever on profits is good board in the last few years. PO enjoyed strategy. The merits of procurement out- a good year in 2010 - with the value of sourcing (PO) as the means to unlock contracts hitting $1.3 billion. PO market value from the procurement function is experienced a record year for new con- being tested as never before. PO is making tract signings and extensions. 2010 saw the most of its newly gained importance in actual contract value (ACV) grow 13 per- the corporate board room. In 2011, the cent to reach US$1.3 billion. Cumulative shift towards transforming procurement total contract value (TCV) for existing from a mere functional role to a more stra- and new engagements reached US$9 bil- tegic one is expected to continue. lion, an increase of 15 percent from 2009. 2011 Global services 100 study
  • 104. Segment Analysis 109 "Procurement has started to acquire the transactional services to ensure compli-perception that procurement is rapidly ance and sustainability” said Saurabhbecoming a power player, well able to Gupta, vice president, Everest Research.augment the fortunes of business just as Traditionally, the UK and USA havefinance, manufacturing, sales and market- been at the lead of the PO market, fol-ing are seen to do," says global consultant lowed by the likes of European power-Accenture. The market has adapted to houses France and Germany. Accordingclient objectives by providing a wide to Everest research, the PO market starvariety of outsourcing solutions by spend performers were Accenture, IBM and ICGcategory, process, or geography. Commerce, which together accounted for “ Now the next wave of innovation — cloud computing— is redefining the concept of outsourcing by offering “as-a-service” capabilities ranging from ” infrastructure to platform to applications. The number of small-sized contracts nearly 75 percent of the overall marketincreased; nearly 70 percent of contracts by ACV and 50 percent of new contractssigned last year have a TCV less than signed in 2010. These service providersUS$15 million. While manufacturing com- demonstrated the strongest movementpanies led adoption, the consumer pack- forward across the following two dimen-aged goods and retail sectors together sions: market success in 2010 based onaccounted for 35 percent of market share ACV growth, number of contract sign-in terms of TCV. The United States led ings and value of contract signings lastPO adoption, accounting for 45 percent year. Other prominent players in POof contracts signed, followed by Europe market were Global eProcure, Xchanging,with 43 percent. CapGemini, Corbus and Genpact. “Following the economic recession, we “Buying patterns are changing,” sayssaw market recovery begin in 2010 as Stan Lepeak, Global Research Team-evidenced by a large number of new KPMG. Now the next wave of innova-and renewed contracts and a significant tion — cloud computing— is redefiningrebound in mid-market adoption, We the concept of outsourcing by offeringcontinue to see an increase in sourc- “as-a-service” capabilities ranging froming-focused contracts expanding into infrastructure to platform to 2011 Global services 100 study
  • 105. 110 BPo Most companies have dabbled with cen- its business across UK, France, Germany, tralized and decentralized procurement and Spain. over the last decade and are now settling Thames Water and Efficio Deal was into a hybrid structure determined by the hailed as a landmark deal, witnessing the profile of category. Companies now focus start of a new paradigm for PO. Thames on managing spend at the level that maxi- Water’s £2.5bn PO deal with Efficio isn’t mizes efficiency and effectiveness. just significant for its size – it’s also nota- Capgemini and ICG Commerce both ble for the boldness with which the com- led the way for PO deals with bagging pany has embraced the concept. three deals each, Capgemini sourced multi-year agreement with Kraft Foods Top Drivers to provide procurement services for With the increased focus on cost and its North American operations. Under compliance, the procurement function its second deal Capgemini will man- has been elevated to a strategic compo- age Novozymes procurement serv- nent of value creation and a rich source ices including Procure-to-Pay (P2P) of competitive advantage. Not surpris- on demand services and applications. Capgemini bagged its third deal with Hilti Corporation in a five-year contract. Capgemini will provide strategic sourc- ing and spend management for a wide range of corporate services. ICG Commerce bagged three deals with Brinker International, a multi-year agreement with DICE to provide sourc- ing management services and agreement with Elizabeth Arden to provide strategic sourcing and category management. ingly whatever the strategic impera- Xchanging bagged three-year agree- tives, cost is still king and hence cost ment with SELEX Galileo to manage an reduction is still the over-riding prior- annual spend of £17 million on behalf ity for organizations. The reduction of of SELEX Galileo’s UK business. In its working capital was seen as the major second deal Xchanging underwent five- requirement for procurement at the cur- year agreement with CHEP to manage rent time. Apart from the above men- £75 million of spend and integrate and tioned drivers for PO, managing insta- standardize procurement processes for bility in commodity prices and ensuring 2011 Global services 100 study
  • 106. Segment Analysis 111supply chain stability are also worthmentioning. IT service providers are leading theway when it comes to the supplier space.Majority are currently outsourcing theirprocurement to IT service providers,which once again illustrates how reliantorganizations are on outside expertisein the technology marketplace. Of thosecompanies already engaged in some POactivity, eProcurement systems manage-ment turned out to be the most commonlyoutsourced procurement function. Whenit comes to selecting an outsourcing part-ner, proven capability ranked highest in competitive RFIs across various vendorsterms of importance and spend category in order to identify the best suited vendorexpertise was the second-most important for the organization. Procurement depart-criterion that companies pay attention to ment’s strategic importance is rising with-as they evaluate suppliers. in an organization and this is because a typical organization spends between 40%Realizing the Strategic Importance to 50% of its revenue on procured goods Procurement’s strategic importance and services. This means any reductionwithin an organization continues to rise in that 40% to 50% of spend is a directand along with the higher profile comes impact on companies bottom-line.greatly elevated performance expectations. Bob Booth, Head, Capgemini Procurement is involved in critical Procurement Services says, "Procurementdecisions that pertain to a greater por- is a continuous change-managementtion of third-party spend, and as a result activity and unless you understand yourthere is an innovation agenda that goes stakeholders motivations and their likelywell beyond cost and working capital. objections, you will struggle to convinceOrganizations typically employ a com- them to support the change you desirepetitive RFI process to identify service and to build a consensus for change."providers who meet their criteria to pro- As technology continues to shrink thevider PO services. Once in a PO relation- world, PO market will gain more trac-ship service providers typically undertake tion. Unlike other BPO areas the valuestrategic sourcing initiatives by launching proposition for PO is not based on 2011 Global services 100 study
  • 107. 112 BPo arbitrage. In fact, in many cases the high- to 2010 for PO. PO market is set to grow er skilled service provider resources may at 15-20% YoY to reach a market size be more expensive than the existing pro- of US$1.5 billion for multi-process PO, curement team within the organization. representing managed spend of around US$190 billion. Beyond just new con- What Future Holds ? tracts, over US$3 billion worth of existing In terms of the number of service pro- contracts are coming up for renewal in the viders in the market as well as the number next three years. The SMB segment will of procurement subject matter experts at see higher adoption levels, influenced by each provider, capacity in the market has new platform-based offerings. expanded, with continued new entrants With eProcurement on the rise, not only and increased competition. did e-procurement solutions seem to offer a new way of improving purchasing proc- esses through the automation of requisi- tions and purchase orders for both goods and services. E-procurement provides real-time business intelligence to the ven- dor as to the status of a customers needs. The greatest advantage of e-procurement is ‘reducing invoice processing delays and errors’. PO is becoming especially attrac- tive to mid-market companies, who have found it challenging to invest in develop- ment of indirect sourcing talent as well as eSourcing and eProcurement tools. The focus will move to considering global For 2011, it is estimated that the end- suppliers for more complex categories and of-term activity will be significant as 45 percent of PO contracts, valued at nearly The Global Services 100 Study US$3 billion, are up for renewal within the next three years. PO will see higher adop- One-Stop-Resource tion and impact influenced by new plat- form-based offerings that include cloud services as a delivery model. Research creating long term, sustainable relation- firms such as Gartner and Everest, predict ships with them. PO is at an inflection point that 2011 will be a stronger year compared and will be a prominent strategy in 2011. 2011 Global services 100 study
  • 108. Segment Analysis 113huMAn resOurce Small, Shorter Term Deals Setting New Trends in HROH HRO providers are not seeing too many opportunities for multi process deals, but there lies a clear opportunity in transforming small,short-term deals into longer strategic outsourcing relationships.Smita VasudevanAs the economy is reviving, the HRO mar- as pressures to cut costs are mounting.ket is regaining its lost momentum. The Sectors like financial services, pharmaceu-number of deals has gone up over the last tical and manufacturing are some areasfew quarters and adoption rates are that are currently high on HRO adoption.improving. According to Krishna Baidya, Everest Groups Human ResourcesIndustry Manager, Frost & Sullivan, “The Outsourcing Annual Report 2011 pointsHRO market has received a great boost as out few noticeable trends for this year.increased number of multi-process out- Demand for global expertise by buyers,sourcing deals, involving HR services such integrated HR services, technology inno-payroll, recruitment, training and devel- vations and preference for single serviceopment etc have started pouring in.” contracts will be major factors driving A major chunk of the demand is com- the HRO market in 2011. Increased buyering from public sectors across regions, preference for offshore service 2011 Global services 100 study
  • 109. 114 BPo as a low cost HRO partner will most likely have and deliver consistent experience,” be an important trend to look forward this says Baidya. year. GIAs Human Resource Outsourcing: Payroll has traditionally been the most A Global Strategic Business Report (2011)’ outsourced function in HRO, considering expects United States and Europe to con- its complexity and specialized knowledge tinue dominating the global HRO market. required in the domain. Typically, enter- prises are initially starting with outsourc- Going Strong ing transaction intensive functions like “In 2010, the Multi Process HRO payroll and over time, they move to other (MPHRO) market grew by six per cent to areas like learning and recruitment. The reach an ACV of $ 3.07 B. More than 40 opportunity service providers have here new deals were signed during this time is to transform short term agreements into and there were also significant number of long-term strategic relationships by offer- extensions to the existing ones,” says Rajesh ing competitive services combined with Ranjan, Research Director, Everest Group. innovative technologies that suit specific This coupled with reduction in the number enterprise needs. of contract terminations indicate improved buyer satisfaction. As enterprises are RPO is Hot becoming more careful in their outsourc- Recruitment Process Outsourcing (RPO) ing strategies and are reevaluating partner- is relatively new as compared to most other ships, there are some notable changes in areas in HRO, but it has matured fast. The the types of HRO contracts being signed. segment is growing, though certain areas The visible trend is that the size of con- are still not developed fully. In terms of tracts is reducing and the contract period is global RPO, there hasn’t been much of going down. Enterprises are also including development as there are not many service lesser number of processes in the MPHRO providers capable of delivering a compre- deals. The idea behind this is to start slow- hensive global offering. This apparently is ly and later move to bigger deals if the deal the reason why buyers have been depend- appears to be paying off. “Such change in ing on multiple service providers for their customers mentality is keeping vendors global RPO needs. Employment branding on their toes in the increasingly competi- is an RPO area that is increasingly gaining tive market. Through such outsourcing, focus. Enterprises are looking for service buyers are seeking to scale up quickly or providers for their employment market- gain access to contingent workforce with ing and communication initiatives as they the required skills, gain cost advantage at find it cost effective to outsource these various geographical presences they may rather than doing it in house. Technology 2011 Global services 100 study
  • 110. Segment Analysis 115 Service provider strategies are also changing in line with the changing demands of the industry. Many providers are try- ing to strengthen their offshore pres- ence and add sin- gle process offer- ings to their line of services. Growth is most likely to be achieved by way of inorganic routesfor recruitment processes are evolving and like mergers and acquisitions. The recententerprises are looking for providers who spate of M&A deals amongst HRO serviceare able to offer sophisticated technol- providers clearly highlights this. Northgateogy solutions. These technologies include Arinso is of the opinion that need formobile platforms, and employment mar- higher employee engagement, continuingketing and recruitment CRMs. Integrated globalization, openness to process stand-technology offerings is most likely to be ardization, automation of transactions, andone of the major service provider innova- focus on core strategy as the most impor-tions to be witnessed in 2011. In terms of tant elements of a successful HRO strategy.the geographical demand, North Americaaccounts for more than 50 per cent of the Emerging Modelsglobal RPO deals. Typically, the pricing models are based on headcount utilization by enterprises.Service Provider Strategies This is usually the same for both single- The Everest Report had classified process and multi-process HRO. But asADP, Aon Hewitt, Northgate Arinso cloud-based and SaaS offerings are becom-(Convergys), IBM and Accenture as the ing more popular, utility based pricingleaders, while Genpact, Xchanging and models are likely to be seen more. Mid-Neeyamo are categorized as the emerging market enterprises will be more open toplayers. such kind of a model as it offers 2011 Global services 100 study
  • 111. 116 BPo access to technology applications with- Drivers out having to pay a high initial cost for “Cost reduction remains a top driver of deployment. MPHRO. Other important drivers include managing compliance risk, greater align- The Power of the Mid Market The mid market segment is expanding the growth opportunities for global HRO service providers. Today a large chunk of the business is coming from these enterprises and providers are developing specialized strategies to tap this explod- ing potential. A research paper by Katrina Menzigian, VP, Research Relations, Everest Institute How Mid-market HRO is Emerging as a True Growth Platform, ment between HR and business strate- 2011 states that the mid-market com- gy and access to better technology,” says panies have increased their adoption of Ranjan. Enterprises are depending a lot integrated MPHRO and this segment is on service providers in areas other than becoming the growth platform for many cost saving and are looking for partner- of the leading HRO service providers. Of ships that bring a little extra in the form of all the MPHRO deals signed in 2010, 61 innovation and guidance. Experts believe per cent came from the mid market. Cost that providers have a big opportunity here. saving objectives, access to advanced HR They may not be seeing too many opportu- technology and improvements in over- nities for multi process deals but there lies all business efficiency are the major fac- a clear opportunity in transforming small, tors driving these companies towards short-term deals into longer strategic out- outsourcing. Commenting on their mid-market strate- The Global Services 100 Study gies, Ann Vezina, executive vice president and group president of HR Services, ACS, One-Stop-Resource says, “Services need to be scalable for any size employer with the ability to grow as mid-market organizations grow and their sourcing relationships. Enterprises are tar- needs expand. We are prepared to meet geting improvements in different areas, their needs in all service lines and grow and providers that are able to offer this will with them as the economy recovers.” have a visible advantage in the end. 2011 Global services 100 study