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Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report
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Trends in Outsourcing & Offshoring in the Financial Services Industry 2008-2012: Elix-IRR Annual Report

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Financial Services companies continue to face headwinds in the global marketplace. Whilst outsourcing activity has not returned to the levels it enjoyed pre-Credit Crunch we are starting to see signs …

Financial Services companies continue to face headwinds in the global marketplace. Whilst outsourcing activity has not returned to the levels it enjoyed pre-Credit Crunch we are starting to see signs of strengthening demand across North America, EMEA and Asia-Pacific. The third edition of Elix-IRR’s report on Trends in Outsourcing and Offshoring in the Financial Services Industry examines developments in the market since 2011 and the key deal activity which has taken place. We once again assess the health of outsourcing in Financial Services by geography and by domain as well as applying particular scrutiny to the ever-increasing pressure of global regulation and the role of service management in ensuring that outsourcing contributes to the achievement of strategic goals. And because of our longstanding commitment to Africa we return to the continent with fresh insights to the health of the market there, particularly supplier activity in the region.

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  • 1. 12012 © Elix-IRR Partners LLP
  • 2. INDEX Chapter Page 1. INTRODUCTION 4 • Highlights of the 2012 Report 5 2. EXECUTIVE SUMMARY 7-10 3. WHY • Outsourcing Drivers are Changing 12 • Regulatory Environments 13 • Global Strengthening of Regulatory Regimes 14 • Regulation Breadth under RRP – Opportunities for the Industry 15 • Focal Points for RRP 16 4. WHAT • Global Trends in Outsourcing & Offshoring 18 • Global Outsourcing Activity in FS 2008-11 19 • Regional Trends in Deal Activity 21 • FS Back Office Outsourcing Candidates 23 • BPO Trends in the Outsourcing Market 25-31 • ITO Trends in the Outsourcing Market 34-37 • KPO Trends in the Outsourcing Market 39-42 5. HOW • FS Sourcing Strategies 44 • Achieving Strategic Goals 45 • Service Management Frameworks 46-52 • Market Analysis: Lessons Learned 53 6. WHERE • Global Trends 55 • Focus on Africa 56-59 • Near shore out sourcing 60-61 7. WHO • Top 15 Global FS Deals by Value 63 • Regional Analysis of Global Top 10 FS Deals 58-68 • Top 10 FS Outsourcing Deals in North America 66-68 • Top 10 FS Outsourcing Deals in EMEA 70-73 • Top 10 FS Outsourcing Deals in Asia Pacific 75-77 • Regional Summary of Key Trends 78 8. ELIX-IRR’S FINANCIAL SERVICES TRANSFORMATION CAPABILITIES IN SUPPORTING OUR CLIENTS 79 9. CONTACT US 80 10. Annex A 81 2 2012 © Elix-IRR Partners LLP
  • 3. 1. Introduction 3 2012 © Elix-IRR Partners LLP
  • 4. 1. IntroductionThis is the third year Elix-IRR has produced Trends in Outsourcing & Offshoring in theFinancial Services Industry. This study is widely read by senior executives in financialinstitutions and the service providers and consultancies within the sector.The insights have been broadly recognised as valuable contributions to the considerationsof Financial Services (FS) institutions furthering their regional and global sourcing strategiesin the wake of the global financial crisis.As with previous years this research will provide an overview of the trends in outsourcingand offshoring by major financial institutions in the last 4 years, focussing in detail onperformance in 2011 and making predictions as to the conclusion of 2012. We will cover: • The pre-eminence of regulatory focus in shaping the Why overall FS landscape continuing in 2012 • Functions and trends seen in the outsourcing deals What in 2011 outsourced/offshored • Sourcing best practice as outsourcing arrangements How mature • The popular and emerging locations for delivery of Where outsourcing activity • A summary of major outsourcing transactions by Who key FS players and service providersThe study also provides supporting data for the current outsourcing landscape for the FSindustry. A glossary of terms has been provided in Annex A for reference. 4 2012 © Elix-IRR Partners LLP
  • 5. Highlights of the 2012 Report The following are key sections and insights to this 2012 report, bringing new perspectives and industry insights from Elix-IRR.New Regulation  This section describes how the regulatory environment surrounding the FS industry in 2012 ischanges the way FS increasingly coming to shape relationships with service providersinstitutions work with  We analyse in detail Recovery and Resolution Plans, as a culmination of many of the regulatoryService Providers objectives of the past year, and where opportunity might arise for the industryAnnual Review of  We take our annual look at market activity from 2011, both new deals and renewals, and assessDeal Activity the latest trends from BPO, ITO, KPO and geographical perspectives  Understanding some of the key levers to executing a best practice sourcing strategy is keyThe role of Service  We assess how effective management of service providers lies at the heart of a successfulManagement outsourcing relationshipGlobal Trends in the  We cast our eye across the globe to find out where major industry activity has occurredMarket - MajorActivity Locations  Following on from our last report, our experts update the situation in Africa, an emerging location for outsourcing activity  This section presents the top ten FS outsourcing deals for each of these regions: North America,Top 10 Global FS EMEA and Asia PacificOutsourcing Deals byRegion  Information on deal ranking, company name, service provider, total contract value, outsourcing domain and key descriptions of activities 5 2012 © Elix-IRR Partners LLP
  • 6. 2. Executive Summary:FS Outsourcing Trends from 2011 and 2012 So Far 6 2012 © Elix-IRR Partners LLP
  • 7. Executive Summary1. Reasons for Outsourcing and OffshoringRegulatory and market challenges ensure continued focus on cost models The global economy continues to show signs of recovery and  Ever-increasing capital requirements on banks from global most global banks have shown improved profitability up to Q3 regulatory change are driving changes in business models 2012 causing a greater focus on cost efficiency Global regulators continue to impose tightening regulations in  Enhancing systems and platforms will help deliver full regulatory order to affect behavioural change through policy and legislative compliance but changes to support models will be needed to means help deliver substantial cost reductionsTactical sourcing strategies evolve to meet the strategic change challenges Tactical sourcing strategies have achieved cost reductions and  Companies continue to look towards suppliers to help productivity gains in the last 2-3 years commercialise their assets, but the development of internal commercial skills in the sourcing function is becoming more Increasing desire in 2012 to move to transformational outsourcing prevalent to realise enterprise-wide productivity gains, global synergies and increased margins  Internal sourcing departments are becoming better equipped to view the business and find economies of scale to optimise vendor relationships as a wholeA growing need to look across the change portfolio Systems integrators will increasingly find opportunities to support  By taking a strategic view of the entire change portfolio in 2012, technical change across global technology platforms companies are starting to achieve greater synergies and will be able to inter-lock the strategic change agenda with the service Suppliers and vendors have continued to develop benefits from management framework for a sustainable Total Cost of process and technology innovation to improve the ‘speed to Ownership market’ of new products and services because innovation comes at a cost 7 2012 © Elix-IRR Partners LLP
  • 8. Executive Summary2. Trends in Functions Outsourced / OffshoredFinancial Services outsourcing returns to growth overall FS Outsourcing market trends are showing signs of continued  In 2012 we have seen a rise in BPO and ITO deals, with some recovery also landing in 2013, as well as a number of renewals pending In 2011 companies were prudent and looked to ‘traditional’ cost  As macro-economic instability continues however with further reduction opportunities in the outsourcing market. In 2012 this is state-aid investments made to boost growth, many large banks continuing with a rise in ITO and BPO deals have initiated the design activity for innovative large scale outsourcing or further transformation of their existing support New entrants to outsourcing were ‘mid-tier’ banking and models insurance institutions3. Operating Models for Outsourcing and OffshoringOperating models are maturing and companies new to outsourcing have a shorter learning curve Legacy outsourcing approaches are now being challenged to  The front line business areas are increasingly engaging internal leverage global synergies and economies of scale without falling sourcing resources in the forward planning for change to ‘achieve foul of cross border restrictions and cross border data restrictions more with less’ FS companies are building upon their existing, internal sourcing  Tightening margins are generating increased demand for skills by increasing commercial skills, negotiation techniques and transformational solutions with a rapid pay back challenging suppliers to be more innovative  This puts renewed pressure on suppliers to deliver current solutions quicker than they would have previously 8 2012 © Elix-IRR Partners LLP
  • 9. Executive Summary4. Popular and Emerging Destinations for DeliveryTraditional offshore locations of choice are under pressure  India remains the dominant location, particularly for ITO services  Increasingly the middle office processing requirements however in the last two years salaries have risen circa 10-15% and KPO are being considered for outsourcing to (in $ terms), despite the slow economic recovery achieve further savings on labour arbitrage for perceived specialist skills although near shore solutions are seen as  Increasing pressures to near-shore in USA and EMEA brings preferential opportunities for markets in Asia, South America, Africa and Eastern Europe. Drivers for these opportunities include  Africa emerging as a BPO location generating significant timezone benefits, higher quality and greater customer market interest satisfaction  Providers are coming away from traditional markets faced with political pressure in advanced economies to ‘bring jobs home’5. Major Outsourcing Deals and Key Service ProvidersService provider acquisitions in 2012 Leading service providers continue to achieve increases in  We begin to see early acquisitions in the African region, with revenue, operating margin and headcount through acquisitions in contact centres, customer care and business continuity niche, analytical software, specialist processing services and services targeted cloud–based technologies 9 2012 © Elix-IRR Partners LLP
  • 10. Executive Summary5. Major Outsourcing Deals and Key Service Providers (cont)Indian providers invest in emerging markets Large Indian players are adding to their capabilities in both ‒ Governmental incentives onshore and nearshore locations and growing their presence  When factored in these incentives have the potential to reduce outside India. Benefits include: costs to a comparable level with India ‒ High-quality, medium-cost back office and call centre capabilities  A recent example of an Indian provider investing in emerging markets includes WNS’ recent acquisition of South African ‒ Availability of skills to service offshore clients is high BPO provider Fusion Outsourcing Services ‒ Industry knowledge and experienceIBM displaced in 2011 for largest new deal won (despite renewing the largest deal with BNP Paribas) Looking back on 2011, IBM lost its prime position in terms of  However IBM extended a significant joint venture deal with BNP high-value contracts in North America and Asia Pacific Paribas for data centre outsourcing ‒ In North America, T-System Services were awarded a  Near-shoring strategies by companies have had an impact upon US$1.7bn ITO contract by Capital One global service providers who offer ‘best shoring’ on the basis of ‒ In Asia Pacific, the outsourcing downturn was evident with the leveraging sales based on cost reduction through labour largest outsourcing deal at US$307m, awarded by HDFC arbitrage Bank to Reliance ‒ In EMEA, IBM retained the top new deal with US$1.3bn with la Caixa and a total regional value of $1.5bn Sources: Elix-IRR analysis, IAOP, BPeSA, IDC, press releases 10 2012 © Elix-IRR Partners LLP
  • 11. 3. Why:Why the Regulatory Environment is continuing to drive the shape ofFinancial Services Outsourcing in 2012 11 2012 © Elix-IRR Partners LLP
  • 12. Outsourcing drivers are changing, becoming more variedand global in their reachIn our last report we focussed on outsourcing deals with innovation triggers resulting in product & process outputs.In this report we note that the drivers for outsourcing continue to be affected by market headwinds and having tocomply with increasingly stringent regulation. As a consequence banks are looking for innovative sourcingsolutions that change the support cost paradigm while enabling focus on regulatory compliance.We will be assessing regulatory drivers and how they provide new opportunities for the outsourcing industry.COMMENTARY Our report will be focussing on the regulatory environment and its effect on the outsourcing market We see increasing scrutiny from regulators contributing to decreasing RoE requiring banks to emphasise cost cutting In turn this leads to a reduction in investment appetite, even for the regulatory and compliance solutions The cyclical nature of these prevailing conditions is amplified as they constrict and tighten on banking operations further. The over-riding risk therefore is loss of competitive advantage and market share 12 2012 © Elix-IRR Partners LLP
  • 13. A greater variety of factors are now driving theregulatory environments surrounding Financial Services  Regulating to ensure financial institutions can support themselves in times of stress and not depend on public money Political  Damaged reputations caused by on-going and highly publicised Three conclusions for the FS incidents Outsourcing Industry present themselves:  Increased capital requirements levied by regulators  Direct/indirect cost-cutting in response to bottom line pressure 1. Coupled with downward Economic  Lack of investment appetite driven by regional market instability pressure on margins, and the cost of capital pressures regulatory pressures are driving reviews of operating  Regulators prioritising protection of socio-economic stability costs, headcount and  Head count reduction necessitates fewer people doing more business rationalisation and Social  Key personnel have more personal regulatory responsibility transformation and less time available to focus on strategic direction 2. The investment budget for  Reduction in investment programmes, priority given to change and innovation will be regulatory compliance focused on regulatory,Technological  Complex highly integrated infrastructure leads to high indirect compliance, cross-border data costs of change programmes protection initiatives and cost reduction  Regulatory pressure globally  Emphasis on risk mitigation (financial and reputational) 3. Focussing on core banking Legal  Volcker Rule, FATCA, Dodd Frank, Basel II & III, RRP competencies will provide an  Client Money Segregation, Transaction Reporting, KYC opportunity to evolve new and existing shared services and outsourcing arrangements;  Head count reduction and off-shoring driving financial institutions toEnvironmental  Focus on building footprint in faster growing markets ‘do more with less’  Ongoing buy side out-sourcing of processes and services Given global regulatory  Regulators supporting customer freedom to switch between pressure these opportunities banks are universal… Customer  Sustained loyalty less assured as customers are better informed to buy financial products and services 13 2012 © Elix-IRR Partners LLP
  • 14. Greater variety of regulatory drivers are matched by aglobal strengthening of regulatory regimes EU Regulation COMMENTARY • EMIR – aims to increase stability within OTC derivative  Globally, regulators have markets • PRIPs – aims to achieve consistent and effective standards introduced greater levels of for investor protection stringency to banking US Regulation • MiFID – aims to enhance investor protection, improve cross- border market access and promote competition in the financial operations in order to• Dodd Frank• Volcker Rule markets across the EU safeguard consumers and• • AIFMD – to impact how AIFMs distribute funds and operate Financial Stability Oversight Council business public funds• Securitization Reform• Derivatives Regulation – increased  In addition, a perfect storm is transparency The concept of being created by natural• Consumer Protection Reform regional regulation Basel III• Credit Rating Agency Reform Aims to strengthen regulation, supervision, downward pressure on margins is almost a moot• Capital Requirements point for global risk management and transparency by as the result of lower growth• Living Wills regulatory standards on: players with • Capital adequacy occurring at the same time entities & clients spread across the • Stress testing  The challenge for Financial world • Liquidity Stability Services firms becomes how to increase shareholder value Bank LeviesFirst proposed by IMF in 2010 Recovery & Resolution Plans (RRPs) whilst satisfying regulators• UK Banks will be required to produce RRPs to give regulators a  This presents significant• France crisis management plan setting out necessary steps and• Germany powers to ensure bank failures are managed in a way to avoid opportunities for the• Austria financial instability and to minimise public costs outsourcing industry as banks• South Korea • Regulated under the Dodd-Frank in the US• Proposed – Netherlands ~2013 • June 2012 - European Commission adopted a legislative look to how they can rationalise• Possible EU Financial Transaction Tax proposal for bank recovery and resolution and consolidate their activitiesTHE SOURCING OPPORTUNITY Smart players in the outsourcing industry will increasingly be seen tying outsourcing offerings to compliance requirements and bottom line growth Robust sourcing strategies and outsourcing firms’ capabilities offer a breadth of support that will be well placed to support Financial Services clients meet their regulatory and financial challenges The following section will focus on the rise of Recovery and Resolution Plans (RRPs). Perhaps one of the most relevant developments in regulation for service providers in the last 12 months. RRPs are also one of the most wholesale from a compliance point of view, bringing together many of the components of other regulatory initiatives (e.g. capital adequacy, robust liquidity positions, balance sheet stability) with the practical measures to achieve either Recovery or Resolution. RRPs provide a stern challenge from the point of view of both compliance and ongoing execution of business strategy 14 2012 © Elix-IRR Partners LLP
  • 15. The breadth of regulation under Recovery andResolution Plans creates opportunity for the IndustryGlobal regulators are moving to safeguard the wider global economy from the fallout of another financial crisis inthe future. Analysis of the rise of RRPs reveals that alternative sourcing models can play a major role.  Globally financial authorities are taking a legislative, policy driven approach to transforming regulatory regimes to ensure that banks “Too Big to Fail” can do so in an orderly manner thereby minimising risk to consumers, the CONTEXT taxpayers and deposit holders  This is being compounded by a general shift in emphasis from Bail “Out” to Bail “In” where large banks faced with potential failure are being urged by Central Banks and regulators to recapitalise using private capital, not public money. This results in significant restructuring of balance sheets and risk management portfolios  RRPs are being mandated in order to recover a bank from severe threats to its survival (Recovery) or wind the bank up in an orderly manner protecting consumers and the public purse (Resolution)  Systemically Important Financial Institutions (SIFIs) are the banks which will invite most scrutiny, particularly SIFIs with global reach (G-SIFIs), due to the disproportionate consequences of disorderly failure from a the FOCUS political, economic or socio-economic perspective  The complexity of achieving compliance is magnified when set against a backdrop of existing and unprecedented regulatory change driven by major legislative or policy events such as Dodd-Frank, Basel III, the Vickers Report (UK) and tightening margins  All areas of banks will require both strategic and detailed analysis to understand which entities do what business, how they are funded and how they might be allowed to fail the COMPLEXITY  IS & IT strategies will form a core component to winding entities up as infrastructure, applications and users will need to be segregated  Significant consideration will also need to be given to how can staff be safeguarded against the failure of a particular entity so that they can continue to support surviving business  Changes to Operating Models, the need to segregate entities and the risk sharing potential of executing the right sourcing strategies can lie at the heart of future compliance efforts the CONCLUSION  Systems integrators and major outsourcing firms have both the industry expertise and the technical insight to play a major role in the diagnostics, planning and execution of RRP strategies 15 2012 © Elix-IRR Partners LLP
  • 16. The focal points for RRPs are opportunity areas wheresourcing and outsourcing specialists can play a roleElix-IRR’s work with major global banking institutions reveals recurring themes which come under scrutiny indeveloping RRPs. Our analysis asserts that a number of these hold opportunities for the major outsourcing players. RRP FOCUS AREAS KEY SOURCING CONCLUSIONS Group Risk Assessment Future commercial models will need to provide evidence of compliance to regulators, compounded by ongoing scrutiny on cross-border data protection. However we envisage suppliers being able toAnalysing the bank by entity to define the leverage this as an opportunity to innovate.most critical parts and any retail impact Liquidity Recovery The importance of liquidity utilisation and it’s many drivers and usages is an area where banks are struggling to provide the necessary data. Innovative vendors will be able to create utility solutionsEnsuring a robust liquidity position exists in to this emerging issue.times of stress Capital Recovery Banks will be keen to remove assets from their balance sheets in order to aid their capital ratiosEnsuring capital adequacy during times of leading to broader opportunities for vendors to take over human capital & IT assets.stressSupport & Business Contingency Robust sourcing strategies can help alleviate the pressure on CIOs to understand how to configure their future IT landscape. In light of 20+ years of technology and group integration efforts carefulAbility to be able to segregate IT effectively consideration will need to be given to how technology assets can be unwound in the event ofin failure without harming BAU elsewhere failure of a specific entity or group of entities. GovernanceEstablishing management structures to The complexity of corporate structures and organisational design drives a level of complexityoperate during times of severe stress which will be very challenging to unwind. Outsourcing players already engaged in BPO / HRO for multiple parties should position themselves as solution providers able to support the wind-down of entities whilst safeguarding staff from the failure of any particular entity and continuing to support People & Organisation the remaining business.Reviewing entity employmentarrangements and safeguarding the future 16 2012 © Elix-IRR Partners LLP
  • 17. 4. What: Global and Regional TrendsSourcing Market Analysis (BPO, ITO and KPO) 17 2012 © Elix-IRR Partners LLP
  • 18. Global Trends in the Overall Outsourcing & OffshoringMarket Overall growth of the outsourcing industry is picking up despite global economic pressures. Growth in Outsourcing Market, 2008-2011  The outsourcing market grew by a nominal 8% fromUS$bn CAGR +8% 2010 to 2011, an indication that the industry has picked up pace after a fall in size from 2008 to 2009500 +4% 422  EMEA and Americas still account for the majority of 378 389400 371 the outsourcing market – though the Americas’ market share is decreasing with a 5% growth rate from 2010300 to 2011 compared to 12% in EMEA and 8% in Asia Pacific. This reflects larger transaction values and the200 trend towards expansion of contracts at renewal100  Financial Services is the largest vertical for outsourcing services accounting for some 20% by value 0 2008 2009 2010 2011  The US is the largest outsourcing consumer by country and this will be the case for the foreseeable future 2011: Outsourcing Market breakdown by • Cost is still the main driver for outsourcing; however,US$bn type, region and vertical there are an increasing number of other factors that500 play a role in the outsourcing decision process, e.g. 422 422 422 achieving speed, agility, flexibility and innovation as400 Asia Pacific FS well as access to technical and/or industry specific BPO 78 (19%) 83 (20%) 153 (36%) expertise and skills300 Americas • We believe outsourcing advisory firms increasingly 201 (48%) influence the decision-making of buyers of outsourcing200 ITO Non-FS 339 (80%) services 258 (61%)100 EMEA • ITO and BPO outsourcing activity continue to generate 143 (34%) KPO the largest proportion of revenue in the outsourcing 0 11 (3%) market 2011 2011 2011 Source: Evalueserve, 2011, IDC, 2012 & Elix-IRR analysis, 2012 18 2012 © Elix-IRR Partners LLP Note: Vertical-specific BPO not included
  • 19. Global ITO and BPO Outsourcing Deal Activity in FS BPO deals continue to show growth while ITO deals are declining from a high in 2010. Market activity in 2011, as in 2010, was driven by renewals and extensions and not by new outsourcing deals. New Deals: TCV of Global ITO vs. BPO ITO New Deals: Avg Contract Value of Global ITO vs. ITO BPO BPO BPO BPO CAGR 20 19.1 19.1 17.9 -10% 16.5 ITO CAGR 15 +8% 9.4 ACV ($m)TCV ($ Bn) 14.3 13.3 150 10 12.7 107.0 114.7 90.9 92.6 100 74.3 66.8 5 39.5 44.3 8.5 50 3.8 4.7 5.7 0 0 2008 2009 2010 2011 2008 2009 2010 2011  In addition to the increase in Total Contract Value of BPO deals and decrease of  While the Total Contract Value of deals remained the same between 2010 & TCV of ITO deals, we see a similar trend in the average contract value between 2011, we have seen an increase in the proportion made up of BPO deals 2010 - 2011  ITO activity fell for the first time in 2011 when, despite growth in North America  Where nervous markets saw BPO average contract values decrease 40% from and EMEA, the value of ITO deals in Asia Pacific fell by over 70% 2008 to 2010, we see a trend towards recovery with BPO average contract values  BPO continues to trend towards previous 2008 highs, buoyed mainly by robust up almost 50% in the last year growth in North America, particularly in the insurance sector  North America is the only region to have recorded a fall in average ITO contract value, having a marked effect on the global average ITO new deals BPO new deals Global ITO Deals New vs. Renewed Global BPO Deals New vs. Renewed ITO renewed deals BPO renewed deals 100 100% of TCV % of TCV 34% 44 % 29% 66 % 68 % 51 % 59 % 71 % 50 50 66% 56 % 71% 34 % 32 % 49 % 41 % 29 % 0 0 2008 2009 2010 2011 2008 2009 2010 2011  The trend towards a greater proportion of value coming from renewed deals  The strong trend towards increased renewed deal proportions has continued, with continues, with roughly two thirds of ITO TCV in 2011 being renewals a full 71% of BPO TCV coming from renewed deals in 2011  This is likely indicative of a maturing of the marketplace, with most companies  The North American BPO market was biased towards new deals from 2008-2010, already having some level of outsourcing in place before a sizable shift in 2011 to 80% of value being derived from renewals  The majority of contracts in the Asia Pacific region are new, possibly indicative  A similar shift occurred in EMEA in 2010 and was sustained in 2011, possibly of the emergent market for outsourcing there indicative of market maturity 19 Source: IDC 2012 © Elix-IRR Partners LLP Note: The data above excludes South America
  • 20. What:Regional Trends 20 2012 © Elix-IRR Partners LLP
  • 21. Regional Trends in New Deal & Renewal Activity 2008-11The North American outsourcing market has shown a strong return to growth between 2010-11 as it recovers to 2008levels. However, growth in EMEA has slowed down substantially, whilst no mega-deals over $500m have taken place inAsia Pacific. Of the $19.1bn of new deals in 2011 $6.1bn were in North America, $12.2bn in EMEA and only $0.8n in Asia-Pacific Asia Pacific North America -74% TCV CAGR TCV CAGR Total Contract Value ($ Bn) +56% Total Contract Value ($ Bn) +4% -12% 10 106 150 35 35 3 40 No. of Deals No. of Deals 91 85 26 25 30 100 2 5 62 $ 8.8 $ 3.0 20 50 $ 2.5 $ 6.1 1 $ 4.4 $ 3.9 10 $ 0.7 $ 0.8 0 0 0 0 2008 2009 2010 2011 2008 2009 2010 2011 EMEA  Whilst outsourcing activity has still not  Whilst over the period there has still been 0% returned to 2008 levels, the Total Contract TCV CAGR growth in Asia Pacific, we have seen a Total Contract Value ($ Bn) Value (TCV) increased by over 50% +14% very substantial decline of almost three between 2010-11 143 quarters of TCV over the past year 15 150  This positive trend is visible in both ITO 112  The most substantial fall was in BPO and BPO activity, with BPO showing very 88 89 activity, losing over 98% of total contract No. of Deals 10 100 substantial increases value due to new contracts halving $ 12.2 $ 12.2 compared to 2010 5 $ 8.4 $ 9.5 50 0 0 Colour Key: 2008 2009 2010 2011 Growth in Outsourcing is highest (hot)  The previously strong upward trend has flattened in Outsourcing activity is high and still growing (warm) the past year, with a slight fall in Total Contract Value Outsourcing activity is decreasing (cooling)  EMEA deals accounted for ~ 64% of all global deals in 2011  There has been an increase in the number of deals, but a concurrent fall in their average value 21 2012 © Elix-IRR Partners LLP Source: IDC BuyerPulse Contracts Database, August 2012
  • 22. What:Sourcing opportunity for FS Sourcing Type Analysis (BPO, ITO and KPO) 22 2012 © Elix-IRR Partners LLP
  • 23. FS Back Office outsourcing candidatesIn Elix-IRR’s experience, processes that are repeatable, high-volume and administrative in nature are potentialcandidates for efficiency gains arising from outsourcing. In the following section we analyse the overall outsourcingmarket in 2011 and then focus on the application of the following three sourcing types: BPO, ITO and KPO OPERATIONS Investment Banking Wealth Management Retail Banking SUPPORT FUNCTIONS HR Finance Procurement FM & Real Estate CONTROL RESEARCH AND ANALYTICS Research & Governance and Assurance Legal & Compliance Analytics IT Management Application Infrastructure Helpdesk Key 23 BPO ITO KPO 2012 © Elix-IRR Partners LLP
  • 24. What:BPO Analysis 24 2012 © Elix-IRR Partners LLP
  • 25. BPO Trends in the FS Outsourcing MarketFinancial Services has been a critical driver in the growth on BPO volumes and values in the past. Elix-IRR believe thereis still significant value to be obtained by extending the scope of BPO to a broader set of functions across the backoffice. Below we describe a selection of major processes which are typically retained, possible outsourcing candidates orprocesses that are often outsourced OPERATIONS* Investment Banking Wealth Management Retail Banking • Business Development • Account • Sales Generation • Operations • On boarding AML/KYC • Confirmations Services • Strategy Control Management • Settlements • Business • Cash and Liquidity • Customer • Origination /account • Data opening Management • Customer Queries Development Management billing • Investor Custody • Account servicing • Clearing and • Reconciliations • Service • Payments Services • Cash and Liquidity Settlements Management Processing • Statements • Collateral Management Management • Payments Processing • Card Manufacture SUPPORT FUNCTIONS* HR Finance Procurement FM & Real Estate • HR Strategy • Budgeting Process • Category • Leasing • Buildings • Business Partners • Regulatory Reports Management • Network and Space Maintenance • Collateral • Tax Filing Management • Cleaning • Spend • Reception Management Units • Treasury Management • Recruitment • Payments • Landlord Services • Procure to Pay • Case Management • Accounts Payable • Communications • Reporting • Account Receivable • Transport Services Key: *Selected processes are intended to be indicative of the business areas under discussion. We do not purport to be representing the totality of capabilities undertaken in the course of daily banking = Typically retained business = Possible candidate for Shared Service/Outsourcing 25 = Suitable for Shared Service/Outsourcing 2012 © Elix-IRR Partners LLP
  • 26. Overall BPO Trends in the Outsourcing Market Banking and Financial Institutions along with central and federal government clients, were critical in driving the demand in the BPO market. Total BPO Spend Globally  BPO outsourcing has seen a moderate 3% growth over the past few years, though this has picked up in 2011 CAGR +8%  There has been a noticeable increase in the number of +3% BPO deals over the last 12 months in both North 160 153 America and EMEATotal Value of Outsourcing Spend ($ Billions) 140 142 140 138  Asia Pacific experienced a downturn in 2011 as the global recession impacted the region 120  South Africa have introduced incentive schemes for job creation and India service providers are increasingly 100 interested in the region for alternate delivery models  BPO demand in Financial Services is driven by demand 80 for credit card processing, insurance services, investment bank processing and payment processing 60  Buyers are increasingly looking at bundled ITO/BPO options, which reflects increasingly integrated sourcing 40 strategies 20  BPO vendors focus on strengthening operational excellence capabilities, platform BPO assets, and business analytical services as levers for the expansion 0 of existing deals, new deals and renewals 2008 2009 2010 2011  Latin America will continue to increase in attractiveness Note: Vertical BPO figures are not available within total global BPO spend figures. as a near-shore destination for the US However, the following pages show the break out of vertical BPO versus other outsourcing domains for new deals. With the rise and increasing importance of vertical BPO deals in FS over the past decade, we estimate that, for the FS market, vertical BPO is at least as large as traditional BPO domains 26 Source: Evalueserve, 2011, IDC, 2012 & Elix-IRR analysis, 2012 2012 © Elix-IRR Partners LLP
  • 27. FS BPO Activity by Outsourcing DomainThere has been a substantial rise in the value of Vertical BPO activity in North America. The same domain has shownsubstantial falls in value in EMEA and Asia Pacific, respectively – it is, however, still the dominant BPO activity in allregions. Key: HR = Human Resources F&A = Finance & Accounting BPO Sub-Domain Outsourcing Activity – based on 2011 TCV ($m) Vertical BPO = BPO specific to FS Industry North America EMEA Asia Pacific Total: $3.3bn Total: $2.5bn Total: $4m  There has been a substantial ($2.2bn) rise in the value of Vertical BPO activity in North America, and consequently, its share of all BPO contract value has risen from 36% in 2010 to 82.8% in 2011. There were significant extensions to existing, large scale deals for periods of 5 – 7 years, indicating a deepening of established relationships  Customer care contracts increased from a low base to $297m in EMEA, with a small number of deals in North America and none in Asia Pacific. Globally, this has more than accounted for the fall in this domain in North America, showing an increase of 2% of global BPO activity  HR Outsourcing fell by almost $400m in North America, having accounted for 46% of deals in 2010 to only 7.1% in 2011. This reflects that the early advantages of HR outsourcing have been achieved and our experience is that new entrants to outsourcing will come to the market with a multi-sourcing transformational strategy rather than labour arbitrage  F&A Outsourcing fell in Asia Pacific from 56% of all BPO deals in 2010. The trend for all support functions is to create organisation- wide synergies with sourcing strategies 27Source: IDC, 2012, Elix-IRR analysis, 2012 2012 © Elix-IRR Partners LLP
  • 28. Regional Analysis of FS Industry BPO Activity Overall activity in FS-specific BPO (banking and insurance operations processes*) has dipped below 2008 levels with the majority of new deals being in EMEA. North America $ CAGR -16% Total Contract Value 55 54  While the number of deals happening each year has been No. of Deals 6,000 55 60 41 relatively constant over the period, the TCV has varied ($m) 4,000 40 substantially 5,539 2,000 3,282 20  There has been a substantial increase between 2010-11, although 1,180 1,423 TCV is still at around 20% below 2008 levels 0 0 2008 2009 2010 2011 EMEA $ CAGR No. of Deals -4%  The TCV of BPO has seen relatively little change over 2008-2011, Total Contract Value 3,000 60 with a slight overall decline 40 42 2,000 31 30 40  It will be interesting to see whether 2012 and 2013 analysis will ($m) 2,803 2,963 1,000 2,453 2,460 20 show whether patterns of growth followed by decline persist 0 0 2008 2009 2010 2011 Asia Pacific $ CAGR -67%  BPO activity has stalled in Asia Pacific, with TCV falling by 98% Total Contract Value No. of Deals 400.0 13 15 from its high of 2010 11 300.0 7 10  Only three BPO deals occurred in the region in the last 12 months ($m) 200.0 359 compared to 13 BPO deals in 2010, highlighting the effect of the 3 5 100.0 157 economic crisis which has now hit the region (particularly Australia 109 0.0 4 0 and Japan) 2008 2009 2010 2011*NOTE: Banking and Insurance operations processes include but are not limited to– trade processing, loan administration, billing services, payments services, 28document and data management, account processing and reconciliation etc. 2012 © Elix-IRR Partners LLP Source: IDC BuyerPulse Contracts Database, August 2012
  • 29. FS BPO Average Contract Analysis by Region Average Contract Value for BPO deals is far lower than ITO – particularly for renewals. The upturn in KEY Asia Pacific in 2010 has come to a halt – there were only three new deals in 2011. New Deals Renewals North America Average Contract Value 200 190 159 150  BPO activity showed a substantial decline 2008-2009, which was sustained into ($ million) +20% 2010 100 83 -72% 50  Renewed contracts rose by 20% from 2008 to 2011, although new BPO contracts 31 26 28 23 17 have fallen further still and are now at 72% below 2008 level 0 2008 2009 2010 2011 EMEA Average Contract Value 200 174  New deal figures in 2011 have still not returned to their 2008 highs, but have 150 +132% picked up in the last year ($ million) 117 102 94 100 76 -65%  Data on renewals shows more fluctuation than that of new contracts, but despite a 50 50 26 35 fall from the spike of 2010, Average Contract Values remain well up over the period. This is a reflection of the number of contracts expanded on renewal. 0 2008 2009 2010 2011 Asia Pacific Average Contract Value 60 50 40 34 • After a promising 2010, figures for both new and renewed contracts in 2011 have ($ million) 30 crashed. In total there were three new deals in 2011, with an average value of just 19 +37% 20 17 12 13 17 over $1m, and no renewed contracts. 10 -100% 1 0 0 2008 2009 2010 2011 29Source: IDC Research, 2012, Elix-IRR analysis. 2012 © Elix-IRR Partners LLP
  • 30. Examples of BPO Outsourcing Activity Wing Lung Bank outsources ING sign new deal with BACS payment debit HCL Technologies set operation management to Cognizant to provide an and credit processing up back-end processes Accenture (deposits, loans, insurance and finance services are for loans, financial payments and customer business process centre of outsourced by LBG products and customer servicing) excellence to Parseq (2011- service at Citi (July 2014) 2012) MidSouth Bank outsources payroll and Zurich used Procurian and Genpact to ISS manages and delivers facilities management services HR services to Inova Payroll restructure and manage procurement to Barclays operations in the UK, Europe, the Americas, infrastructure Asia Pacific and the Middle East (July 2012) 30 2012 © Elix-IRR Partners LLP
  • 31. Future Trends in BPO in Financial Services BPO - Generic• There will be a major focus on customer data sovereignty and the rapidly changing legislation on physical location of data and its use. This has the potential to impact some BPO deals until specific countries / regulatory bodies clarify their stance• Service Management professionalisation – organisations will realise the value of a skilled, retained organisation to lead on the refinement of supplier relationships and the longer term outsourcing benefits• Emerging geographies in Asia Pacific, Africa and Latin America will contribute further in the next 12 months BPO - FS Specific• Ongoing regulatory pressures and reducing margins have resulted in wholesale banks looking for opportunities across their environment• Banks are looking beyond labour arbitrage and seeking broad ranging productivity gains to: • inter-lock the business strategy with sourcing approaches • Obtain significant, step change savings over time Snapshot: Trends in BPO Payments Processing • An increasing move to outsource payments processing in the• Outsourcing will be more focused at achieving productivity gains sector (and financial savings) across the enterprise • Considerations must be made in regards to data protection and regulatory issues, as well as customer’s perceptions of• KYC and Single Customer View strategies will develop further off-shore data access and require elements of business process re-engineering prior to • Larger U.S. banks often have their own payment ‘factories’ • Further outsourcing and offshoring is being considered by outsourcing banks and credit card operators to reduce cost and improve margins• Increasingly a move to outsource payments processing in the • New banks and innovative mobile payments operators have sector more flexibility and have the potential to establish lower cost payments operations by optimising locations world-wide 31 2012 © Elix-IRR Partners LLP
  • 32. What:ITO Analysis 32 2012 © Elix-IRR Partners LLP
  • 33. ITO Outsourcing: In Summary As with BPO, Financial Institutions combined with central and federal government clients drove the demand in the ITO market in 2011. IT* Management Application Infrastructure Helpdesk • Service Management • Change • Business • Development • Data Centre • Tier 1 call centre • Strategy & Management Requirements • Testing • Network Management • Incident Architecture • Solutions • Maintenance • VOIP Management • Disaster Recovery *Selected processes are intended to be indicative of the business areas under discussion. We do not purport to be representing the totality of capabilities undertaken in the course of daily banking business Key: Total Information = Typically retained Technology Outsourcing CAGR +8% = Possible candidate for Shared Service/Outsourcing Spend Globally = Suitable for Shared Service/Outsourcing +4% 258Total Value of Outsourcing Spend ($ Billions) 260  There has been moderate growth in the total ITO spend 238 over the 2008-2010 period, with growth picking up 240 232 226 substantially to 8% in 2011 220 200  The key market drivers for ITO are cloud computing and Remote Infrastructure Management Outsourcing (RIMO) 180 as well as consumerisation of data storage and social 160 media solutions 140  Industry-specific offerings will continue to increase, and 120 vendors must improve their knowledge of their clients business and industry 100 80  Competition is fierce and margin pressures grow higher, even as the market begins to improve 60  Striking the right balance between offshore, near-shore 40 and onshore offerings will be key to vendor success 20  ITO customers are still “testing” to find the right balance 0 between captive centres and outsourcing 2008 2009 2010 2011 33 2012 © Elix-IRR Partners LLP
  • 34. FS ITO Outsourcing Domain Activity Infrastructure services continue to dominate ITO activity in all regions followed by Applications Maintenance in North America and Network & Desktop Outsourcing in EMEA and Asia Pacific. KEY: ISO = Infrastructure Services Outsourcing HAM = Hosted Application Maintenance ITO Sub-Domain Outsourcing Activity – based on 2011 TCV ($m) AM = Applications Maintenance NDOS = Network & Desktop Outsourcing HIS = Hosted Infrastructure Services North America EMEA Asia Pacific Total: $2.8bn Total: $9.7bn Total: $755m  Infrastructure services, as in previous years, continue to be by far the most common form of IT outsourcing. ISO now accounts for over 80% of all ITO market activity, having risen by $550m in North America and $1200m in EMEA since 2010  In North America ISO dominates with 92.6% of market activity share  In EMEA and Asia Pacific, whilst still dominant, NDOS and AM activity also represent non-trivial proportions of activity  Other Sub-Domains do not contribute significantly  Market uncertainty and the pressure to improve bottom line returns from infrastructure estates is likely to be fuelling the dominance of ISO. From a rationalisation perspective focussing on hardware procurement is an attractive option for quick savings, fuelling outsourcing activitySource: IDC, 2012, Elix-IRR analysis, 2012 34 2012 © Elix-IRR Partners LLP
  • 35. FS ITO Average Contract Analysis by RegionAverage Contract Value in ITO has grown both in North America and in EMEA driven in the KEYmain by renewals. New Deals Renewed Deals North America 350 312  While the value of new North American deals has decreased overall since 2008, itAverage Contract Value 300 remains above 2009 levels 250 ($ million) 200 179 +229%  There is a tendency in North America for Total Contract Values to be largely 150 biased towards new deals one year, followed by a sizable shift to renewals the 95 100 76 77 next. This oscillatory nature is also visible in these Average Contract Values, 33 40 45 50 where the higher amplitude in renewed values is driven by a market shift towards 0 fewer, much larger deals. 2008 2009 2010 2011 EMEA 400 377 Average Contract Value +36%  After falling in 2009, the value of renewed deals has grown substantially in the 300 278 past two years ($ million) 200 152 132  Conversely, after seeing a spike in 2009, new EMEA contracts have fallen an 100 72 84 75 average of 45% YoY throughout the 2009-2011 period. However, the number of 40 deals is growing YoY. 0 2008 2009 2010 2011 Asia Pacific 300Average Contract Value 253 • Having shown substantial growth prospects from 2008 to 2010, the size of the ITO 250 market in Asia Pacific has plummeted 200 ($ million) 150 -86% • Renewed contract value fell by 86% in the year to 2011, and new deals by 56% 118 94 100 78 • The smaller quantity of deals in Asia Pacific means that a single very large deal can 50 29 35 34 34 drastically change the Average Contract Value. For example: in 2010, there was a 0 $1.08bn renewal deal, without which the ACV would have been <$67m. 2008 2009 2010 2011 35Source: IDC, 2012, Elix-IRR analysis, 2012 2012 © Elix-IRR Partners LLP
  • 36. Examples of ITO OutsourcingFinancial Services has been a critical driver in the growth on ITO transactions in the past. Elix-IRR believe there is stillsignificant value to be obtained by extending the scope of ITO to a broader set of functions across the back office,particularly driven by the increasing need for Banks to reduce IT related operating expenses. BT is helping CLSA to flex its communication and Nordea outsources development Ratnakar Bank outsources IT Deutsche Bank IT service desk, IT requirements by implementing an innovative, and maintenance of existing and Infrastructure to Netmagic service operations and ITIL global utility based pricing model for BTs new applications in the areas of Solutions (10/2012) services have been managed by risk management, treasury, human networked IT services and the deployment of BT Tata Consulting Services since resources and procurement Unified Trading for trading September 2011 management to Accenture communications (6/2012) Key: = Typically retained = Possible candidate for Shared Service/Outsourcing 36 = Suitable for Shared Service/Outsourcing 2012 © Elix-IRR Partners LLP
  • 37. Future Trends in ITO ITO Outsourcing will continue to be driven by large buyers negotiating global deals, but there may be more innovation in sourcing strategies to allow commodity purchases from more than one enterprise- wide supplier (internal marketplace). This will encourage supplier competitiveness and ensure best value for money Cloud computing will become increasingly mainstream with the initial security concerns allayed. There will also be a greater potential to deliver customer-centric solutions such as the Single Customer View Mature outsourcing organisations will seek to link business demand and ‘horizon plans’ to ITO to ensure rapid ‘go to market’ delivery through robust Service Management Spend Reviews due to lower margins and higher investment in regulatory change initiatives. Buyers will challenge the suppliers to ‘do more with less’ Customer participation will increase because business customers will continue to want to work more closely with ITO suppliers to understand how to make best use of virtual offices, collaboration software and achieve more without business process re-engineering Near-shoring will be more prevalent in response to government and economic pressures, especially in the USA 37 2012 © Elix-IRR Partners LLP
  • 38. What:KPO Analysis 38 2012 © Elix-IRR Partners LLP
  • 39. KPO Outsourcing Knowledge process outsourcing is being used to transform elements of the operating models for complex, judgement driven and fee-earning activities within Financial Institutions RESEARCH AND ANALYTICS Research & Legal & Compliance Analytics • Market Abuse • Quantitative Analytics • PA Trading • Qualitative Analytics • Conflicts Control • KYC • Industry Reports • Legal Drafting • Market Intelligence • Anti Money Laundering • Virtual Data Rooms • Transcription and Document Management • Legal Research The growing maturity of KPO service providers is allowing firms to use KPO as an enabler of new operating models across a range of functions whilst addressing potential challenges of talent retention in their home location Key: = Typically retained = Possible candidate for Shared Service/Outsourcing 39 = Suitable for Shared Service/Outsourcing 2012 © Elix-IRR Partners LLP
  • 40. KPO Trends in the Outsourcing Market KPO usage continues to grow at a significant rate of just under 20% annually albeit from a low base as Financial Service firms seek to deploy KPO solutions to knowledge intensive work processes. Total KPO Spend Globally  The growth in Knowledge Process Outsourcing (KPO) +24% continues into 2011, with a trend growth of 24% from 2010-2011  Total KPO spend in 2011 was almost 70% higher than in CAGR 2008 11.0Total Value of Outsourcing Spend ($ Billions)* 11 +19%  Competition is intensifying as KPO niche players are 10 increasingly challenged by major BPO providers 8.9 extending their services through acquisition 9  KPO is being used to transform the operating models for 8 7.2 complex, judgement driven and fee-earning activities of 7 6.5 a range of firms within Financial Services 6  The fastest growth in KPO is seen in: 5  Banking and financial research services  Quantitative analysis 4  Business information 3  An upcoming KPO area includes data analytics and 2 content monitoring and creation for social media 1 activities. In the last 12 months, an increasing number of BPO service providers such as Capgemini have now 0 launched their social media management service, while 2008 2009 2010 2011 others such as Genpact have acquired a social media Source: Evalueserve, 2011 analytics firms 40 *Evalueserve revised published data for 2008-2010 2012 © Elix-IRR Partners LLP
  • 41. Examples of KPO OutsourcingKPO is beginning to reach beyond simple analytics with firms starting to outsource higher value Knowledge-basedactivity. Increasing margins is a driver but so is overall growth in M&A activity in the industry during 2011, which we seecontinuing in 2012*. RESEARCH AND ANALYTICS Research & Legal & Compliance Analytics • Market Abuse • Quantitative Analytics • PA Trading • Qualitative Analytics • Conflicts Control • KYC • Industry Reports • Legal Drafting • Market Intelligence • Anti Money Laundering • Virtual Data Rooms • Transcription and Document Management • Legal Research Some large investment banks are increasing their use of external Many of the leading investment banks, private equity firms and hedge counsel for initial drafting of contracts both for service provider fund businesses now source equity research on a range of corporates contracts and for client transactions. This practice enables firms to within different industry sectors from providers based largely in India. reduce the number of permanently employed lawyers. This has included: Large banks are also starting to move legal functions to near shore  Quantitative modelling and valuation of companies based on quarterly locations as a way of reducing the cost of providing legal services to and annual filings the wider organisation  Detailed risk analytics to support business strategy formulation and decision making Key: = Typically retained* Financial services M&A to drive growth in 2012, = Possible candidate for Shared Service/Outsourcing 41 = Suitable for Shared Service/Outsourcingwww.investmenteurope.net, 15 Nov 2011 2012 © Elix-IRR Partners LLP
  • 42. Future Trends in KPO in Financial Services  Continuing consolidation in the KPO space as niche providers are subsumed within larger, better funded companies  Broadening of capabilities by KPO firms as they seek to off-set income loss within the core client base of investment banks  Blurring of the boundaries between BPO and KPO service providers as BPO looks to develop more complex, higher margin services to complete with traditional KPO providers  Focus on ensuring KPO providers are able to meet the increasingly stringent standards imposed by regulators on all banks when using third parties to deliver services  KPO increasingly used to supplement existing capacity and capability, rather than to migrate the activity in its entirety to a third party provider as with BPO and ITO 42 2012 © Elix-IRR Partners LLP
  • 43. 5. How:Sourcing Maturity &Service Management 43 2012 © Elix-IRR Partners LLP
  • 44. FS Sourcing StrategiesLooking across the spectrum of Financial Services reveals different banks demonstrate different operating models forthe delivery of their support functions  Our last report highlighted different models of outsourcing and offshoring across the spectrum of service providers depending on the maturity of the services and their internal capabilities  Increasingly the models are maturing to meet the changing needs of business to rapidly go to market with new products and service  Customer-centric strategies are now aligning with sourcing models to ensure business are more competitive and to support gains in market share Clients are increasingly discussing how the advantages of industrialisation will help with increasing regulatory constraints and compressed margins Both ITO and BPO are increasing in the Transformational Outsourcing and Commercialisation stages of the maturity model. To support “speed to market” companies are turning to multi-sourcing and an enterprise-wide Business Services Strategy but caution is essential in managing these arrangements as they require: - Capability/functions and strong relationships with the Sourcing function - Consistent alignment with business drivers and the sourcing portfolio - Increased commercial competencies than were required for core service management - Empowering sourcing teams to optimise execution and attune commercial agreements to the best competitive advantage 44 2012 © Elix-IRR Partners LLP
  • 45. Improving the Chances of Achieving Strategic GoalsOnly a third of organisations achieve 80% of their goals for their sourcing strategies. This provides centralisedservice management functions an opportunity to drive out further efficiencies Senior Executive’s rate sourcing success Why goals are not fully met • Inadequate management capability to oversee large, potentially • Satisfaction is not complex multi-sourcing arrangements solely attributed to cost reductions • Lack of integration between the business strategy and tendency to select service providers on price • Service quality and relationship • Transition activities over-run and affect the service delivered or 48% management are key impact on achieving the strategic goals. 43% of projects fail to aspects deliver on time and 33% exceed the budget 24% 28% • The success ratio of • Performance monitoring along with supply and demand projects continues to management does not track or address the most appropriate Somewhat Successful Outstanding successful success fall short of strategic key performance metrics for the organisation goals • Transparency and control of sourcing decisions are not prioritisedSources: Gartner 2012, Elix-IRR analysis Increase the likelihood of achieving strategic goals • Ensure the stages of the sourcing strategy (vision, operating model, delivery options, selection, negotiation, transition, transformation) aligns to the strategic goals • Refresh the sourcing strategy to ensure the business strategy remains aligned and improve the competitive position • A number of sourcing scenarios may be required to obtain the best service value Through developing a robust Service Management Framework it is possible to significantly improve the success rate of achieving a particular sourcing strategy 45 2012 © Elix-IRR Partners LLP
  • 46. The Importance of Service Management For companies to move beyond achieving pure cost efficiencies from their sourcing operating models, it is essential they establish a robust service management framework to manage client/supplier relationships and the delivery of quality service Historic reason to outsource More strategic focus on value creation Sourcing 3.0 Industry Sourcing 2.5 Utilities / Joint Ventures Sourcing 2.0Value Commercialisation Sourcing 1.5 Sourcing Service Maturity Step Integration Change Service Sourcing 1.0 Management Cost Sourcing Maturity Tactical Strategic  The trend towards service management frameworks and skill professionalisation is at the heart of business forecasting for new products, services and market strategies. This allows companies to negotiate better sourcing deals, prepare strategic suppliers in advance for rapid ‘go to market’ delivery and also to achieve enterprise-wide economies by leveraging the supply chain across the back office 46 2012 © Elix-IRR Partners LLP
  • 47. Evolving framework for Service ManagementThe growing recognition of the value of Service Management in assisting organisations to achieve their objectives isreflected in the range of activities which Service Management is required to touch Management Framework – this is ‘the best of the best’ from what Elix-IRR sees in the market xxx • Overall interface between the support functions and the rest of the organisation including ‘Clients’ in the Corporate Centre and Business Divisions and Suppliers outside of FS Institutions. It describes definitions, components and capabilities of the overall Framework 5 End-to-end Service Management • Focal point of end-to-end service provision to Clients • Agrees Service Levels with Clients and Run the Bank Service Delivery • Manages “demand & supply” relationship between Clients • Brokers the “demand” from clients (demand) and Service Delivery (supply) • Uses relevant Management Information to review and refine services 1 Service Planning 5. End-to-end Service Management 4 Management and Support • Control and compliance • Strategic planning & direction 4. Management and • Produces and maintains management 1. Service Planning • Enterprise & Solution architecture reporting including KPI / SLA • Principles & Mission statement Support performance reports 2. Service • SLA structure & principles • Risk Management 3. Service Delivery Development • Owns governance structure, org • Operations Control design, roles & responsibilities • Conducts satisfaction surveys • Owns ‘Service Catalogue’ • Governs requests for new services 6. Supplier Relationship Management 2 Service Development 6 Supplier Relationship Management 3 Service Delivery • Strategy translation and integration • Owns contractual relationships • Manages service delivery on the • Approval processes of new business • Engages suppliers when new services are needed ground opportunities • Manages suppliers in a consistent manner • Gateways and ‘hand-over’ • Communication processes to Business As Usual • Controls “supply” part of “demand & supply” equation teamFS Institutions incorporated intothis assessment include: 47 2012 © Elix-IRR Partners LLP
  • 48. Benefits of a Service Management FrameworkSuccessful organisations have 6 key Building Blocks of the Service Management Framework, where the existence ofall 6 increases the chance of achieving the sourcing vision, goals and strategy. Building Blocks Description Benefits1  A Service Management layer is created, within  Strategic relationship with Clients which Service Managers act as a single point of empower Service Managers contact for their client  Greater responsibility and accountability  Their main responsibilities include: facilitates linking rewards to performance ‒ Establish Strategic partnership with their  Motivated Service Managers continually Service Manager: Client(s) seek ways to improve service Single Point of Contact ‒ Ensure high levels of service and assist in  Enhanced motivation for Service Managers offering tailored solutions further reinforces the Service Management ‒ Challenge Client demands and requirements mindset ‒ Review performance metrics to ensure  Faster decision making process agreed service standards are met ‒ Address issues of Client dissatisfaction2  Contractual mechanics are the contractual  Ability to monitor compliance to SLAs tools/ documents which enable the organisation and measure performance to formalise agreed Service standard levels and  Faster identification and resolution of to allow for a robust performance measurement areas not meeting agreed service reporting process levels  Examples of contractual mechanics include:  Embedded culture of regular service ‒ Master Service Agreement (MSA) – a high levels and contract review to ensure level agreement between Client and service relevancy provider  Consistency of service delivery can Contractual Mechanics ‒ Service Schedule – sub-agreements within assist the business to focus on an MSA containing more specific service attaining its objectives requirements ‒ Service Level Agreements (SLAs) – detailed service measures, e.g. time, quality, customer satisfaction, cost, volume, etc ‒ Service Catalogue – Master document which records a comprehensive list of all services being offered to the Client 48 2012 © Elix-IRR Partners LLP
  • 49. Benefits of a Service Management Framework (cont.) Building Blocks Description Benefits3  A distinct Central Service Management Office (CSMO) function, inclusive of a Service Management Office Lead, is responsible for the  Central coordination and alignment of overall governance of the Service Management the Service Management Framework Framework within an organisation.  Ensures consistency in approach  Responsibilities of the Central SMO include:  Greater efficiency by leveraging ‒ Supporting service management forums economies of scale ‒ Oversight on alignment of the Service Management Framework Central Service ‒ Providing guidance and direction Management Office ‒ Provide depository for maintaining overarching contractual mechanics documentation  Responsibilities of the Central SMO Lead include: ‒ Delivering the rollout of the service management Framework ‒ Providing guidance and direction to Service Managers4  A well-defined Governance structure is required  Open clear communication leading to a with clear reporting lines more proactive relationship  Centrally coordinated regular service forums  Regular forum highlights issues and risks Governance encourage open discussion of service and cost in a timely fashion metrics as well as strategic implications  Visibility on potential conflict and issues for escalation and prioritisation 49 2012 © Elix-IRR Partners LLP
  • 50. Benefits of a Service Management Framework (cont.) Building Blocks Description Benefits5  Regular and robust performance reporting  Consistency in reporting methodology processes across the organisation  Service metrics are reported and highlighted in  Instil mindset and routine of regularly dashboards to management measuring and monitoring service levels Performance Reporting  A Central dashboard will roll up the RAG status and key performance metrics from each area to Exco or other senior management tiers as appropriate6  A centrally-run integrated reporting &  Real time and up-to-date comprehensive performance software tool can help to monitor management information and track service performance  Ease of use and drill down functionality  Fully automated dashboard provides greater  Facilitates comparison of service level Central Software Tools visibility and consolidation of service reporting RAG status between locations or  Document vault acts as central depository house business areas and provides document management system  Automatic alert and email notification when service level agreements are not met This Service Management assessment included the following FS institutions: 50 2012 © Elix-IRR Partners LLP
  • 51. Embedding the change – Typical Challenges Typical challenges exist when embedding the Framework, which need to be resolved for maximum impact. Challenge Response (from Elix-IRR survey) • Engage the business areas in the design phase and collaborate on the Run the Bank model • Regular communication to senior stakeholders is necessary for on-going sponsorship Obtaining Buy-in • Engagement and involvement in governance to support prioritisation discussions • Communicate financial and non-financial business benefits and customer-centric benefits • Payment milestones are an effective way to communicate the need to deliver on transition; Service Transition business dependencies and enablers associated with transition are important context • Key staged, measures of success are essential rather than a final date of transition • Retain middle or senior executive oversight of the project to assist the strategic project focusRetained Organisation • Avoid the temptation to make the retained structure a clerical function to oversee contractual & Governance performance. Increasingly complex contractual arrangements will require senior management involvement in order to intervene prior to performance failure. • Agree transparency on key measures and metrics to ensure the relationship is successful. Buying scalability, agility and supporting rapid Go To Market launches needs to be continually Metrics, Measures tested and proven and enshrined as contractual obligations in the form of performance & Reporting standards documented as service level agreements and key performance indicators • Sharing ‘horizon plans’ for change with third parties helps them prepare for change • Ensuring that informal and formal routes are known and agreed for non-performance including remedies such as step-in rights and service credits Non-performance • Clerical/administrative support functions need to be empowered by the business areas or the business areas support remediation • Create a rolling 12-month forward look of business and customer change to assist in planning and understanding business and technology embargoes and critical business events (AGMs, Capacity etc) • Ensuring the skills and capabilities are available to support an agile and responsible service • Third parties focus on Transformation and Innovation to enhance the commercial Transformation attractiveness of their engagement. Ensure that appropriate attention is given to the core services when periods of Transformation and Innovation are in place with specific metrics. & Innovation • Provide a contractual framework for sharing any benefits which arise from these activities 51 2012 © Elix-IRR Partners LLP
  • 52. Service Management Framework – Real Examples Elix-IRR see many banks beginning to create a co-ordinated and centralised service management framework. Bank Approach Rationale Implications Global Expense Management function manages demand and supply relationship Vendor management is still largely devolved into the relevant by providing a cost reduction focussed interface between business and functions leading to regional and business unit fragmentation and 1 procurement incl. a cost analytics capability. Some functions have effectively not well co-ordinated except for a small set of major global suppliers centralised service management, e.g. Infrastructure who receive particular focus (e.g. IBM, SAP) Have pushed to centralise as much of the management framework as possible and Economies of scale through reducing the cost involved in the 2 consolidate operations between different banking divisions although centralisation management framework. Risks the loss of compliance in regional has not been able to align service and supplier management sufficiently departments as the framework is withdrawn from these areas. Centralised the overall management of spend and supplier performance by Greater consistency in the management of vendors and improved category to improve negotiation with suppliers and improve the value of purchasing leverage based on better management information. 3 management information on spend. Domestic Retail Country X and Corporate Investment Banking are still like different banks with inconsistent consolidation plans. A centrally controlled management framework to ensure shared but common Centralising support services should maximise economies of scale 4 strategy and initiatives across the whole group, combined with an ability to align and reduces costs but risks failures in customer service as strategy with service and vendor management more easily. specialised regional service capabilities are lost. Close alignment between Group Shared Services function (Service and Supplier Implementation of a Group wide Service Management Framework Management) and centralised strategic functions address unclear interfaces without a consistent Vendor Management Framework risks shortfall 5 between business and support functions across the Group, but consistent on Service delivery objectives promised to Business. framework not yet in place. Moving away from a ‘find/ get/ keep’ arrangement for sourcing to a unified strategic With the old set up there were separate owners for strategic 6 sourcing and procurement function and a stronger management framework for sourcing, procurement and management so communication of engaging and managing suppliers under a single executive sourcing strategy between the departments was difficult Centralised management of supplier performance by category. Standardised Consolidated view of supplier performance and consistent approach approach to supplier selection, negotiation and management. Close collaboration to service management via robust framework. Business areas retain 7 with the business areas for supply and demand trends. Professionalised and final decision on supplier and budgets, potentially compromising defined the competencies and skills by role Group level economies of scale. Centralised the management of supplier selection, negotiation and performance Able to achieve economies of scale inter-company via the across the Group. Actively seeks to consolidate existing supplier arrangements by extension, consolidation or management of new contracts. This 8 analysis of Group spend by category. Dedicated business relationship managers realises significant savings for the Group as part of wider assigned for service management reporting and supply and demand forecasting. transformation objectives. Strategic unit oversees the direction, Group-wide architectural decisions on Alignment of the strategic and operational functions would aid sourcing strategies and engagement with business areas for supply and demand business planning and oversight of supplier management metrics to 9 insight. Separate function executes the servicing supplier management framework objectives and obtain a comprehensive view of risk on delivery of and governance on performance metrics. services to the business.FS Institutions incorporated intothis assessment include: 52 2012 © Elix-IRR Partners LLP
  • 53. Market Analysis: Lessons Learned• Many banks are undertaking a similar journey towards building a powerful and effective Service Management Framework that can leverage best practice across their legal entities as they look to reduce their cost base and to improve quality of service• Many banks use a similar approach to create a common Framework across functions, but with various degrees of success in fully implementing these models• Potential reasons for such difficulties are due to components of the Service Management Framework not being appropriately addressed or unclear interfaces between the layers• Organisations commonly face the challenge of balancing strategies of industrialisation and rationalisation across their organisations with the requirement for focussed product and/ or Client specialisation• A strong Service Management Framework is key if a bank is to effectively deliver its sourcing strategy and operating model 53 2012 © Elix-IRR Partners LLP
  • 54. 6. Where:Global Trends from 2011, Africa Update & the Growth in Near Shore during 2012 54 2012 © Elix-IRR Partners LLP
  • 55. Global Trends• North America had fewer mega-deals coming to the market in 2011, yet there was expansion of existing outsourcing deals• EMEA continued to grow in BPO and ITO and the BNP Paribas joint venture with IBM matured further to cover data centres• IBM lost prime position in North America and Asia Pacific regions although their niche market acquisition strategy continued• Deutsche Bank and Barclays have focused on Manila for offshoring their Accounting hubs• As the cost base rises for Indian service providers, they are looking to South Africa for comparable alternatives. The South Africa government have deployed incentive schemes to make the destination a viable alternative. Gartner is predicting that South Africa will generate some 40,000 outsourcing related roles by 2014 Established centres Emerging centres Eastern Europe & Ireland: Contact centres, procurement and F&A for Europe and Middle Eastern markets China: Egypt and Morocco: Application development Regional unrest and maintenance, dataNorth America: highlighted in location India: processing for globalSignificant selections Delivery models businessesnumber of mega- diversify to includedeal renewals, nearshore capabilitiesextensions andexpansions Philippines: Manila has come a significant Accounting hub for banks South America (Brazil & Chile): Application development and South Africa, Mauritius and Ghana: maintenance for North America Further developments in BPO domains and acquisition of niche vendors by global service providers There is increasing political pressure to ensure sourcing strategies consider near-shoring to bolster local economies and address unemployment statistics, especially in the UK and USA 55 2012 © Elix-IRR Partners LLP
  • 56. Africa UpdateSouth African corporates are acutely aware of the benefits available as the region continues to emerge as a keysourcing destination for both local and global vendors. Acquisition of South African processing and nichetechnology providers have increased in the last year and provide vendors with an ideal gateway to develop into therest of Africa. Commercial Banks Skills At least two of the region’s ‘big 4’ The government offers a wide range banks are actively reviewing their of incentive schemes to encourage sourcing strategies the growth of new enterprises and New banking businesses and the creation of sustainable franchises are opening across the employment continent with proven, rapid start- ABSA and other global companies up models have been investing in skills in the region Vendors Incentives Significant acquisitions by global The South African Department of vendors are expanding their niche Trade & Industry have created an services in BPO and KPO incentive programme for any offerings company bringing sustainable Vendors such as AirTel utilise employment to the region, making global relationships with IBM and cost of operations for vendors Tech Mahindra to build capability comparable with Indian destinations in new destinations such as South Africa South Africa 56 2012 © Elix-IRR Partners LLP
  • 57. Africa is a growing centre for outsourcingIn Northern and Sub-Saharan Africa the market continues to grow. Accompanied by supportive government policy-making we see the macro-economic environment continuing to be favourable to growth in outsourcing activity. Context Opportunity Next steps• Africa is and will remain one of the • Northern Africa has already seen • Investments from MNC’s as well world’s fastest-growing regions many outsourcing successes with as continued demand for local Morocco, Tunisia and Algeria and regional service delivery• According to The Economist, six of serving French-language support from them will be very important the world’s ten fastest-growing requirements to any country which wants to economies from 2000-2010 were succeed as an outsourcing in sub-Saharan Africa • Ghana, Kenya and Mauritius are destination emerging as attractive locations• Over the next 20 years, Standard for regional delivery – indeed • Government support is essential Chartered forecasts that Africa’s Accenture has a well-established to enable Africa to succeed as economy will grow at an average call centre and IT delivery centre an outsourcing location. The annual rate of 7%, which is slightly business in Mauritius due to Ghanaian and Kenyan faster than China’s expected attractive tax and labour legislation governments are promoting the growth rate outsourcing industry through tax • Governments and the private breaks and infrastructure• Countries in Africa are positioning sector have made important development themselves on the global progress in improving broadband outsourcing map and are connectivity and reducing prices. • Governments must become increasingly becoming competitive The fibre optic SEACOM subsea users of outsourcing services, destinations for both BPO and ITO cable went live in 2009, and since increasing credibility and creating services then we have seen a dramatic demand essential for continued reduction in connectivity costs growth in the industry• Several multinationals have been investing in Africa to service the • Technology parks have been • On-going investments by global local and regional markets as well developed (and are planned) to outsourcers in the region to as leveraging it as a global promote the growth of the develop the infrastructure, delivery hub Outsourcing industry in Africa connectivity and skills base 57 2012 © Elix-IRR Partners LLP
  • 58. Examples of Acquisitions and Investment in Africa  Global vendors continue with the acquisition strategies of niche companies to extend their specialist services.  Indian vendors such as Wipro have implemented an Africa Strategy to diversify their delivery models, extend their capabilities and take advantage of government incentive schemes to manage their cost base Acquisition Acquisition Acquisition Tech Mahindra completed their  WNS announced the acquisition of  HCL Axon announced a strategic acquisition of Satyam Computer Fusion Outsourcing Services in June partnership with UCS Group and a take Services Limited in March 2012 2012 over of the UCS Group’s Enterprise Solutions SAP practiceServices Services BPO, ITO, service desks, software  Customer care, contact centre BPO Services centres and products services and business continuity  UCS’ SAP practice offers Tier 1 retail and wholesale SAP project implementationsRationale Rationale The merger resulted in the creation of  Based on Fusion’s existing book of Rationale a new offshore services provider for business, the acquisition is expected  This partnership will allow UCS Group to Tech Mahindra with approximately to contribute incremental revenue of grow its annuity services business US$2.4bn in revenues, a 75,000+ $9 million - $10 million for WNS in internationally besides expanding HCL strong work force and 350+ active fiscal 2013. WNS expects the Axon’s market presence in South Africa clients (including Fortune Global 500 transaction to be neutral to adjusted  The acquisition will also boost HCL companies), across 54 countries earnings per share in fiscal 2013, and AXONs existing enterprise-software The move allows a diversification in accretive in fiscal 2014 capabilities and deepen the companys the delivery model for Tech Mahindra market presence, especially in the retail sector, in South Africa 58Source: Press releases 2012 © Elix-IRR Partners LLP
  • 59. Examples of Acquisitions and Investment in Africa IBM have been particularly active in the African acquisition market. Acquisition Services  IBM announced the signing of 5  Created new facilities, offices, training, strategic agreements in the Kenyan staffing and recruitment, sales and Financial Services sector in December marketing capabilities 2011 Rationale Services  IBM continues to expand its  IBM will provide technology services operations across Africa as part of an to five Kenyan banks to support their increased presence in key growth rapid growth and to help them launch markets new services such as mobile and  Recent opening of offices in Mauritius, internet banking Tanzania, Senegal and Angola  Established business hubs in South Rationale Africa, Kenya, Nigeria and Egypt  According to IBM, Africas financial  IBMs increased presence is part of a services sector is currently worth over broad program of investment the $100 billion and will continue to grow company is making across Africa at double digit percentages through  IBM is now present in more than 20 2020, outpacing Africas gross African countries domestic product growth 59Source: Press releases 2012 © Elix-IRR Partners LLP
  • 60. Growing Importance of Near ShoreThe rise of Near Shore is set against a policy background in the major economies which is looking to redress perceivedemployment imbalances and ‘bring jobs home’. The global regulatory environment also requires data protection acrossborders which is more easily achieved closer to home. Context Drivers for near shore Examples• On-going economic pressures • Legislation and incentives to • Citibank has developed near mean offshoring and outsourcing locate jobs onshore shore operations and IT centres remain key levers for most major in Florida for its US business and corporates in trying to reduce their • Cultural alignment and language in Northern Ireland for its cost base skills European/UK business• Local political pressure intensifying • Time zone and proximity to clients • Deutsche Bank has built against sending jobs offshore customer service operations for • Increasing levels of data protection its Capital Markets clients in• Many of the typical offshore making it more onerous to be able Birmingham in the UK and destinations continuing to to move data to different legal Jacksonville, Florida in the experience double-digit rates of jurisdictions United States inflation • Improved levels of staff and • UK retail banks are developing• Banks have embraced near knowledge retention near shore customer contact shoring sourcing strategies as an centres alternative to traditional off shore • Wage inflation, high attrition and destinations such as India productivity differentials 60 2012 © Elix-IRR Partners LLP
  • 61. Key Factors to Consider When Selecting an Offshore or Nearshore Location Key Factors Examples • The US have devised punitive measures to dissuadePolitical Factors Anti-Outsourcing Rhetoric companies from offshoring. The ‘Call Center Worker and • Political rhetoric and tone in US/Western Europe is increasingly levelled Consumer Protection Act’, if passed, will make against firms looking to outsource/offshore operations companies who offshore call centres ineligible for any Legislation indirect federal loans or loan guarantees for five years. • Rhetoric is beginning to be matched in some locations by legislative action to The legislation would also require overseas call centre penalise firms that move jobs offshore employees to reveal their location to U.S. consumers and give them the right to be transferred to a call-centre in the US. Labour Costs • Wage inflation remains low in Western Europe and America at around 2-3% • Recent studies show that office space prices have compared to 11-13% in India reduced considerably in regional UK cities such asEconomic Factors Real Estate Costs Birmingham, Manchester, Newcastle, Belfast and Cardiff. Currently, the average serviced office rents • Rapidly increasing in tier 1 offshore locations. Recession and property bust in (per person) is at £125 per person per month in US and Europe means tier 2 locations onshore are increasingly attractive. Birmingham and £82 in Manchester, down from 2011 Productivity Loss highs of £159 and £96 per person per month (around • Our experience with our clients shows that offshoring operations can cost a 20 per cent) respectively. company between 20% to 60% in the first 1-3 years depending on the quality of • Such trends are also true for US cities like resources at the offshore location Jacksonville, Raleigh, Detroit and Atlanta where office Hidden Costs space is both plentiful and cheap compared to Tier 1 • Transition costs such as training, recruiting and on-going management costs cities in low cost emerging markets can contribute to around 10-15% of the cost of an outsourcing deal Language Skills/Cultural Factors • When Citibank relocated some IT development and • While this is less of a challenge for English language skills, Western support from London to Belfast in Northern Ireland, theySocial Factors European countries have found language skills scarcer and often of lower found at critical moments in projects or during severe quality incidents it was very simple for management from London Staff Retention to go on-site and be more hands-on during those periods • Failure to retain staff can be very expensive. The BPO attrition rate is 55% in • Deutsche Bank benefitted from relocating its capital India and 30% in China, compared to 20% in the UK. This can cost between markets client services operations from London to 25-40% of the average annual salary of the lost resource Birmingham – with ability to retain several key Location & Time Zone management staff which significantly reduced the risk of • Working in a common time zone can yield significant value for businesses knowledge loss and reduced time to transfer 61 2012 © Elix-IRR Partners LLP
  • 62. 7. Who:Major Outsourcing Deals 62 2012 © Elix-IRR Partners LLP
  • 63. Top 15 Global FS Deals by value in 2011There have been major shifts in deal activity from 2010:• Significant number of renewals and mega-deal extensions in North America• Evidence the economic downturn impacted Asia Pacific region after strong outsourcing trends of 2010 #10 #11 Colour Key: Bank of National Bank Montreal #6 #15 of Canada Areas of High Outsourcing Deal $397m $342m Scottish Widows RBS Activity (both ITO and BPO) $310m $665m #5  BNP Paribas and IBM extended their joint CIBC $850m venture for $4.07bn #7  Of the top global 15 deals, 1 was from Africa PIMCO by Old Mutual for a $315m ITO contract to T- $600m #9 Allianz Systems #12 $489m  In the top 15 deals, EMEA featured two BPOING U.S. (USFS) deals (RBS and Scottish Widows) and 4 ITO $330m #1 BNP Paribas deals $4.07bn #14 The Hartford #3 $310m #2 La Caixa Capital One $1.36Bn $1.7Bn #8 #4 Deutsche Bank Blue Cross & Blue $502m Shield of Rhode Island $1.2Bn #9 #13 Blue Shield of Old Mutual California South Africa $400m $316m In North America, with the exception of Capital One and  Large mega outsourcing deals in Asia Pacific, specifically ING, the trend continued for most deals to be undertaken by in Australia, were not prevalent in the last 12 months, Canadian banks and mid-tier US banks compared to the year before that, signalling the effect of The PIMCO deal (#7) with State Street represents one of the the economic downturn finally reaching the region. None of largest investment management operations outsourcing the Top 15 deals we made in this region in 2011 deals in the industry 63 2012 © Elix-IRR Partners LLP Source: IDC, Press Releases
  • 64. Regional Analysis of Global Top Ten FS Deals in 2011 North America continues to demonstrate its importance in driving global outsourcing deal values . Value of Top Ten Deals by Region 7 North America • This year, the Top 3 EMEA deals only make up 66% of Total Value of Top 10 Deals total value of Top 3 North American deals, in 6.4 comparison to last year when they were more than Total Value of Top 3 Deals double the value of the Top 3 North American deals. 6 The value for Top 10 EMEA deals has reduced significantly by 46% from $8.5 billion in 2011 to $4.6 EMEA billion. Total Deal Value ($ billion) 5 4.6 • The value of the Top 10 North American deals has grown by 33% from $4.8 billion in 2011 to $6.4 billion 4 3.8 • In North America, 3 of the Top 10 deals were by the Blue Cross Blue Shield Association, a federation made up of health insurance organisations 3 2.5 • In North America, 3 of the Top 10 deals were carried out by Canadian banks 2 Asia Pacific • TSYS was awarded the largest deal in North America 1.3 at $1.7 billion by Capital One, and the second largest deal in EMEA by RBS 1 0.8 • There are no deals this year over $500 million in value in Asia Pacific as result of the lack of mega deals $0 taking place in Australia. This trend continues from the previous year.Source: IDCAug 2011 – July 2012 Geographic Region 64 2012 © Elix-IRR Partners LLP
  • 65. 7. Who:Regional Analysis for 2011 65 2012 © Elix-IRR Partners LLP
  • 66. Top Ten FS Outsourcing Deals in North America Total ServiceRank Company Contract Domain Description Provider Value • The company originally signed a 5-year contract with Capital One in 2005, with processing beginning in 2006 and 2007 after its then 49 million card portfolio was #1 $1.7Bn BPO • converted to the TSYS system TSYS will now continue to process Capital Ones consumer and small business credit cards in North America until Sept. 30, 2017  Under the terms of the agreement, Catamaran (formerly SXC Health Solutions Corp.) will provide a full suite of PBM services, including claims adjudication, pharmacy #2 $1.2Bn BPO  network management, clinical programs and mail SXCs services will begin January 1, 2013, and will support approximately 450,000 BCBSRI members with an annual drug spend of approximately US$400 million per year  Information regarding the scope of the extended contract is very limited - under CIBC’s previous contract with them, HP supported the banks enterprise infrastructure, including Internet banking, branch tellers, point-of-sale, wire payments, fraud detection systems and CIBCs #3 $850m ITO  automated banking machines – this is believed to continue HP was also responsible for data center and network infrastructure management, host (mainframe and HP Non- Stop systems) and midrange transaction processing, application services, operating systems, storage and desktop messaging 66Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 67. Top Ten FS Outsourcing Deals in North America Total Service Rank Company Contract Domain Description Provider Value  State Street Corporation will provide an array of investment manager operations outsourcing services for $1.3 trillion in assets  This represents a renewal of one of the first and largest investment manager operations outsourcing relationships of its #4 $600m BPO kind in the industry  Over the last decade, State Street has provided services including custody, accounting, valuation services, trade processing, collateral management, pricing, derivatives processing and IT development  HP and BSC have a relationship spanning more than 43 years  HP will continue to provide technology infrastructure & #5 $400m ITO applications, applications development & management services and connect existing centres of excellence with software professionals across Blue Shield projects  Aon Hewitt will continue to provide a comprehensive suite of HR and benefits administration services including payroll, workforce administration, health and welfare administration, recruitment services, and compensation administration among #6 $397m BPO  many others As part of the new agreement, Aon Hewitt will add a variety of new services as well, further expanding the solution suite for the Bank of Montreal  Aon Hewitt will implement its newest technology and solutions  For 11 years, CGI has provided the National Bank of Canada with application development and support services #7 $342m ITO  National Bank will continue to benefit from the expertise of CGI and its professionals in maintaining and developing its banking information systems 67Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 68. Top Ten FS Outsourcing Deals in North America Total ServiceRank Company Contract Domain Description Provider Value  Under the terms of the new agreement, Cognizant will hire more than 1,000 ING U.S. employees in Minot, North Dakota and Des Moines, Iowa to create a world-class, U.S.-based centre of excellence for insurance and finance business #8 $330m BPO  process services ING have said that leveraging Cognizants expertise will help them to operate more efficiently, while delivering the high levels of support their customers and distribution partners have come to expect  Accenture will provide The Hartford with management and technology consulting as well as finance and accounting (F&A) business process outsourcing (BPO) services. According to the agreements, Accenture will help The Hartford to:  Simplify and standardise processes and tools across the finance department; #9 $310m BPO  Identify appropriate investments in technologies to increase speed to market;  Improve process consistency and reduce cost;  Streamline the finance organisation to empower leaders and remove redundant oversight;  Increase the speed of decision-making  The agreement includes ownership, management and support of a variety of technology systems and functions, including mainframes, servers, desktop PCs, telephone systems, networks and technology security#10 $250m ITO  This agreement is expected to provide BCBSNC with business flexibility and significant operational cost savings, as well as offer professional development opportunities for BCBSNC employees in affected business areas 68Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 69. 7. Who:EMEA Analysis for 2011 69 2012 © Elix-IRR Partners LLP
  • 70. Top Ten FS Outsourcing Deals in EMEA Total ServiceRank Company Contract Domain Description Provider Value  IBM extended is Joint Venture with BNP Paribas at the end of 2011  BNP Paribas S.A. provides a range of banking and financial services worldwide and is headquartered in Paris  The BNP Paribas Partners for Innovation (BP2I) joint #1 $4.07bn ITO venture agreement was established in 2003. It was further extended in 2004 with data processing operations.  BNP Paribas exercises significant influence over BP21, which is owned on a 50/50 basis with IBM  BP21 is staffed essentially with BNP Paribas employees and its offices and data centres are owned by the Group.  Spanish savings bank la Caixa and IBM established a 10- year strategic services relationship  As part of the agreement, IBM will help “Serveis Informatics la Caixa” manage the infrastructure technology budget of la Caixa of more than € 2 billion over 10 years  The IBM-provided scope is about 50% of this budget (€1Bn #2 $1.36bn ITO over 10 years) the remainder is directed to additional service providers  The new strategic alliance is expected to save la Caixa €400m over the term of the agreement  IBM has been the privileged technology partner of la Caixa for 50 years 70Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 71. Top Ten FS Outsourcing Deals in EMEA Total ServiceRank Company Contract Domain Description Provider Value  TSYS has been awarded a long-term payment extension by RBS Group, the estimated value of which is £420m over 13 years  TS2, TSYS’ outsourced payments processing solution, has been used by RBS since 2001 #3 $665m BPO  This extension means TSYS will continue to provide payment processing and related services for RBS UK and Irish consumer credit and commercial businesses for 12.5 years and its US consumer credit and commercial businesses for 13 years  TCS (Tata Consultancy Services) will deliver a global application service desk, ITIL (IT Infrastructure Library) services, besides other software solutions, to the bank at locations across 7 countries - the United States, United Kingdom, Germany, Hungary, Philippines, Singapore and India #4 $502m ITO  TCS will partner with Deutsche Bank to transform to an ITIL-aligned model, aimed at significantly improving service delivery through this framework of best practices  The team will leverage the concept of LEAN to eliminate non-value added activities and provide cost efficiencies to the bank 71Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 72. Top Ten FS Outsourcing Deals in EMEA Total ServiceRank Company Contract Domain Description Provider Value  Old Mutual and T-Systems in South Africa have agreed an IT infrastructure management deal valued at R2.58 billion extending the existing relationship between the two partners to 2019  Referred to as Equinox, the deal puts a strong focus on innovation. It will help set up processes to reduce Old #5 $316m ITO Mutual’s operating costs over the 7-year period and provide the organisation with a platform for innovation that supports its Long-Term Savings (LTS) strategy  The partnership will accelerate Old Mutual’s ability to deliver on its commitment to improving customer service, and increasing IT operational efficiency  State Street will serve as the preferred single provider of middle office, custody, fund accounting, depositary, securities lending and investment administration services for Scottish Widows and SWIP  The consolidated portfolios include investment accounting #6 $310m BPO for more than £200 billion of assets and the services currently supported by other providers will migrate to State Street during the next 18 months. The deal will help Lloyds Banking Group positively address the many changes taking place in the industry, such as Solvency II  HCL Technologies has been awarded a large outsourcing contract by Union Bank of Switzerland (UBS). IDC estimates the deal to be US$275 million over 5 years  HCL Technologies will deploy about 1,000 professionals to #7 $275m ITO handle this project who will be located across the globe including India. The company is setting up an offshore delivery center (ODC) in Bangalore for UBS, operational 72 from April 1, 2012 2012 © Elix-IRR Partners LLPSource: IDC, Press Releases
  • 73. Top Ten FS Outsourcing Deals in EMEA Total ServiceRank Company Contract Domain Description Provider Value  HCL Technologies Ltd will provide Applications Support transformation services to Deutsche Bank AG Markets arm  The service factory delivery model implemented by HCL is expected to significantly enhance productivity, driven by transparent Service Level Agreements (SLAs) and performance metrics, and comes as Deutsche Bank endeavours to move away #8 $250m ITO from a traditional applications support model to a set of unique process driven services governed by global standards like Information Technology Infrastructure Library (ITIL) and LEAN  The transformational program, which will result in significant vendor consolidation, involves the management of key banking applications that are the backbone to Deutsche Banks critical businesses.  Serco Group Plc has been awarded a 10-year contract by Aegon N.V to provide customer contact and services. The deal is worth £150 million over 10 years  The agreement is expected to see Serco deliver a wide range of life #9 $240m BPO and pensions services for AEGON. These include managing all aspects of the customer journey from initial underwriting through to claims management for the AEGON Individual Protection (AIP) suite, which comprises a full portfolio of life assurance, critical illness, disability and income protection products  IBM will assume responsibility for the development and support of Ukrsotsbanks information systems and applications, as well as the management of the banks IT infrastructure  By tapping into IBMs vast cumulative knowledge, Ukrsotsbank#10 $200m ITO plans to improve customer service, increase performance efficiency and lower operational risk across its country-wide network of nearly 400 branches, as well as help the bank achieve 73 significant operational savings 2012 © Elix-IRR Partners LLPSource: IDC, Press Releases
  • 74. 7. Who:Asia Pacific Analysis for 2011 74 2012 © Elix-IRR Partners LLP
  • 75. Top Ten FS Outsourcing Deals in Asia Pacific Total ServiceRank Company Contract Domain Description Provider Value  Reliance Communications has been awarded a 15 year outsourcing contract by HDFC Bank for building and managing a data centre  The project is the largest-ever outsourced in this sector #1 $308m ITO  Reliance will be establishing the facility in different stages. During the first phase of the data centre, it will get ready in one year and the entire project is scheduled to be completed in two years time  Currently, CSC provides Australian insurance firm AMP with fully outsourced managed infrastructure services for mainframe, network, desktop, service desk, cloud email service and information/system security #2 $236m ITO  CSC’s services will enable AMP to maximise efficiencies from the integration of all infrastructure services across the new AMP/AXA entity. CSC will continue to deliver advanced and consistent services across all AMP business units, and work has already begun on the technology integration  WNS is to provide end-to-end insurance outsourcing. The deal is worth A$220 million over a period of 5 to 7 years  Suncorp will set up a A$300-400 million onshore facility in Australia #3 $223m BPO in addition to offshoring 2,000 jobs to India through the end-to-end insurance outsourcing with WNS and F&A outsourcing with Genpact.  ANZ will consolidate 40 outsourcing deals and transfer 360 staff to Capgemini under a new managed services agreement for IT testing and environment management  ANZ needed Capgemini to “support change for approximately 800 #4 $120m ITO applications and more than 280 projects at a pace that we cannot achieve alone”  As part of ANZ’s 2017 technology roadmap, they have said that they need to continue to access increasingly scarce IT skills 75Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 76. Top Ten FS Outsourcing Deals in Asia Pacific Total ServiceRank Company Contract Domain Description Provider Value  Under the new agreement, which expands on an agreement first signed in 2000, IBM will deploy new technologies to improve customer service and sustainability, and upgrade existing systems  IBM will provide a range of advanced technologies which, #5 $84m ITO together with the existing environment, will create additional synergies, flexibility and choice for users  The deal provides the upgrade path for Westpacs workplace environment, ensuring the latest technology is deployed and there is a migration path to the latest operating systems  The other part of the previously listed Suncorp BPO outsourcing deal this year offers an $81m contract for Genpact to outsource #6 $81m BPO  finance and accounting services to India TPI served as adviser during the bidding process. Accenture, ExlService, and Infosys Ltd. also bid on the deals  The banks aim is to ensure it understands more about the reason a customer is calling and then be able to have the call answered by the most suitably skilled customer service representatives  Gen-i (Telecom Corporation of New Zealand) said that the high #7 $80m ITO volume customer service solutions require IT systems that are both exceptionally reliable and able to cope with surges in demand. The platform handles over 100 million calls per annum, with high levels of self service, and it intelligently routes calls to over 1,500 agent representatives 76Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 77. Top Ten FS Outsourcing Deals in Asia Pacific Total ServiceRank Company Contract Domain Description Provider Value  BT is helping CLSA to flex its communication and IT requirements by implementing an innovative, global utility based pricing model for BTs networked IT services and the deployment of BT Unified Trading for trading communications #8 $74m ITO  The project includes a strong professional services component aimed at managed security & firewall services, application optimisation, device management and a 24/7 maintenance and support team  Dah Sing Bank has appointed Atos Information Technology HK Limited as its new data centre services provider  It won this deal over a major global competitor, thought to be IBM #9 $28m ITO  Dah Sing Bank said that this new service partnership will enhance its ability to provide quality services to its customers, beginning close to the end of 2012  IBM Global Services has been awarded a contract by Manappuram General Finance & Leasing Limited to transform its IT systems in support of its growth plan  They will build and manage the entire IT infrastructure for#10 $27m ITO Manappuram Finance and deliver application transformation benefits through implementation of leading business solutions in Finance, Human Resource Management, Business Intelligence Collaboration tools and Document Management 77Source: IDC, Press Releases 2012 © Elix-IRR Partners LLP
  • 78. Regional Summary of Key Trends in the GlobalOutsourcing Market Key Trends:North America • BPO deals continue to dominate (6 out of top 10 deals ) • 7 out of 10 deals on or nearshore Analysis: • Capital One accounted for the most significant deal of the Year renewing their contract with T-SYS for $1.7bn to see TSYS continue to supply their North American credit cards until 2017. • The Canadian banking sector has shown strong demand for HP (ITO), AON-Hewitt (BPO) and CGI (ITO) from CIBC, Bank of Montreal and National Bank of Canada respectively • A final observation was the strength of demand from healthcare providers mobilising in light of new legislation in the US Key Trends: EMEA • ITO showing strongest demand (7 out of top 10 deals) • Likewise banking, where 9 of the 10 deal were for banks. Just one insurance provider was represented (Aegon) Analysis: • IBM were the big winner. The top two deals went the way of IBM with combined TCV of $5.43bn • IBM also appeared two further times in the top ten as large systems integrators performed well (IBM, TATA, HCL) • Serco’s appearance on the list is notable as the predominantly public sector focused UK group continue to expand into the private sector following their acquisition of the Listening Company, the London based customer services outsourcer. Key Trends: Asia - Pacific • ITO showing strongest demand (8 out of top 10 deals) • Australia bringing through demand, despite a reduction in so-called ‘mega-deals’ Analysis: • Systems Integrators continuing to perform strongly (IBM, CSC, Capgemini, BT, ATOS) • The fact that the large systems firms are performing well reflects a tendency to continue to prefer suppliers based in the developed world • Marking a departure from our previous report we have not observed as much A-PAC to A-PAC activity. 78 2012 © Elix-IRR Partners LLP
  • 79. Elix-IRR’s financial services transformation capabilities in supporting our clientsElix-IRR have transformation capability in all areas of financial services support functions. Our experienced staff alsounderstand the decision making processes and methodologies which sit underneath these functions. We enableoperational excellence and creation of innovative new revenue streams. COMMENTARY  Elix-IRR have found that each support function has a unique set of challenges which renewed sourcing arrangements need to address.  Elix-IRR are experts in the following key areas of sourcing considerations : target operating models, effective organisational design, access to sourcing expertise , quality assessments of best locations, accurate vendor selection and shared services design.  For more information on how we might be able to support your business meet the challenges of the future please contact us 79 2012 © Elix-IRR Partners LLP
  • 80. Contact UsFor further information on the research, please contact any of the following people at Elix-IRR:• Stephen Newton • Barry Lewis Managing Partner Partner Tel: +44 (0) 207 220 5420 Tel: +44 (0) 207 220 5448 M: +44 (0) 7885 886 290 M: +44 (0) 7500 121 355 Email: stephen.newton@elix-irr.com Email: barry.lewis@elix-irr.com• Graham Busby • Anthony Potter Partner Principal Tel: +44 (0) 207 220 5421 Tel: +44 (0) 207 220 5424 M: +44 (0) 7968 228 372 M: +44 (0) 7748 300 931 Email: graham.busby@elix-irr.com Email: anthony.potter@elix-irr.comElix-IRR is a Strategic Sourcing Advisory firm that specialises in consulting on all forms of outsourcing, shared services andoperating models. Elix-IRR delivers on large change programmes, focusing on creating demonstrable value to the business.With deep experience in the buy-side, sell-side, legal and advisory aspects of sourcing initiatives we provide high-impactservices to FTSE 100/ Fortune 500 and middle-market clients across the complex strategic sourcing landscape and guide ourclients in making the right supplier choices. Elix-IRR’s priority is practical delivery, bridging the gap between the theoreticalstrategy houses and the transactional focus of traditional sourcing companies. 80 2012 © Elix-IRR Partners LLP
  • 81. Annex AGlossary of key abbreviations: ACV Average Contract Value ITO IT Outsourcing AIFM Alternative Investment Fund Managers KPO Knowledge Process Outsourcing AIFMD Alternative Investment Fund Managers Directive KYC Know Your Customer AML Anti-Money Laundering MIFID Markets In Financial Institutes Directive BAU Business As Usual MNC Multi-National Corporations BPO Business Process Outsourcing ODC Offshore Delivery Centres CAGR Compound Annual Growth Rate OTC Over The Counter CIO Chief Information Officer PRIP Pattern Recognition and Image Processing EMEA Europe, the Middle East & Africa Q# e.g. Quarter 1, Quarter 2, etc. EMIR European Market Infrastructure Regulation RIMO Remote Infrastructure Management Outsourcing FAO Finance & Accounting Outsourcing RoE Return on Equity FATCA Foreign Account Tax Compliance Act RRP Recovery and Resolution Plan FS Financial Services SIFIs Systematically Important Financial Institutions G-SIFIs Global Systematically Important Financial Institutions SMF Service Management Framework HRO Human Resources Outsourcing TCO Total Cost of Ownership IMF Investment Fund Manager TCV Total Contract Value IS Information Systems YoY Year on Year IT Information TechnologyElix-IRR is a Strategic Sourcing Advisory firm that specialises in consulting on all forms of outsourcing, shared services andoperating models. Elix-IRR delivers on large change programmes, focusing on creating demonstrable value to the business.With deep experience in the buy-side, sell-side, legal and advisory aspects of sourcing initiatives we provide high-impactservices to FTSE 100/ Fortune 500 and middle-market clients across the complex strategic sourcing landscape and guide ourclients in making the right supplier choices. Elix-IRR’s priority is practical delivery, bridging the gap between the theoreticalstrategy houses and the transactional focus of traditional sourcing companies. 81 2012 © Elix-IRR Partners LLP

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