Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Emerging Locations in the FAO Delivery Landscape – The New Frontiers

42,401 views

Published on

While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from Everest Group’s latest study around emerging locations in the FAO delivery location landscape.

Published in: Business
  • Be the first to comment

  • Be the first to like this

Emerging Locations in the FAO Delivery Landscape – The New Frontiers

  1. 1. Today’s Webinar is brought to you by Everest GroupToday’s WebinarEmerging Locations in the FAO Delivery Landscape – The New FrontiersSynopsis: While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from EverestGroup’s latest study around emerging locations in the FAO delivery location landscapeAbout Everest GroupEverest Group is an advisor to business leaders on the next generation of global services with a worldwidereputation for helping Global 1000 firms dramatically improve their p p p g y p performance by optimizing their back- and y p gmiddle-office business services. With a fact-based approach driving outcomes, Everest Group counselsorganizations with complex challenges related to the use and delivery of global services in their pursuits tobalance short-term needs with long-term goals. Through its practical consulting, original research andindustry resource services, Everest Group helps clients maximize value from delivery strategies, talent andsourcing models technologies and management approaches. Established in 1991, Everest Group serves models, approaches 1991users of global services, providers of services, country organizations and private equity firms, in sixcontinents across all industry categories. For more information, please visit www.everestgrp.com andresearch.everestgrp.com.For more information, contact Mark Williamson at mark.williamson@everestgrp.com Proprietary & Confidential. © 2011, Everest Global, Inc. 1
  2. 2. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to All Panelists” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit Proprietary & Confidential. © 2011, Everest Global, Inc. 2
  3. 3. Emerging Locations in the FAO DeliveryLandscape – The New FrontiersWebinarSeptember 2011
  4. 4. Introductions Saurabh Gupta Vice President Everest Group saurabh.gupta@everestgrp.com Kuldeep Lulla Senior Research Analyst Everest Group kuldeep.lulla@everestgrp.com k ld l ll @ t Proprietary & Confidential. © 2011, Everest Global, Inc. 4
  5. 5. In today’s session, we will cover three key aspects of theexpanding FAO delivery-location landscape  Global sourcing in FAO contracts  Offshorability of F&A processes  Direct-cost Direct cost benefits from offshoring  Labor arbitrage across source and destination geographies Value proposition of global sourcing in FAO New locations that emerged  The expansion of FAO 1 on the FAO delivery-location delivery footprint beyond landscape in 2009-2010 India Spotlight on five emerging  Key factors driving the FAO locations 3 2 delivery location expansionNote: For more details refer to our recently published report titled ‘The New Frontiers: Emerging Locations in the FAO Landscape’ available at http://research.everestgrp.com/Product/11564 Proprietary & Confidential. © 2011, Everest Global, Inc. 5
  6. 6. Contents Value proposition of global sourcing in FAO Expanding FAO delivery footprint New FAO delivery locations Q&A Proprietary & Confidential. © 2011, Everest Global, Inc. 6
  7. 7. The multi-process FAO market witnessed strongperformance in 2010 Cumulative activity to date xx% Annual growth Activity in current year Higher number of new FAO contract signings in 2010 Continued momentum in FAO contract extensions in 2010 compared to 2009 Number of contracts Number of contracts 18% 66% 15% 580 236 493 87 69% 63 94 142 58 493 430 142 84 2009 2010 2009 2010 ~15% growth in active ACV was witnessed in 2010 20%+ growth in overall TCV in 2010 compared to ~10% growth in 2009. The current FAO TCV in US$ billion market size is US$3.6 billion 21% Active ACV in US$ billion 13% 28.7 15% 23.7 4.9 3.6 36 2.7 10% 21.0 23.8 3.1 Dec-09 Dec-10 2009 2010Sample size: 580 multi-process FAO contracts signed as of 2010 Source: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 7
  8. 8. Poll Question: How would you describe the currentand near future state of the FAO market?Source: Live polling conducted during the Emerging Locations in the FAO Delivery Landscape webinar on September 27, 2011 Proprietary & Confidential. © 2011, Everest Global, Inc. 8
  9. 9. More than 90 percent of the FAO contracts leverage globalsourcing todayPortion of FAO contracts with offshore component Average FTEs at offshore locationsNumber of original contracts Percentage100% = 396 56 Contractscompletely onshore Contracts withoffshore/nearshore componentSample size: 452 multi-process FAO contracts signed as of 2010 Source: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 9
  10. 10. Given that FAO is a mature market today, most F&Aprocesses have a high degree of offshorabilityOffshorability of F&A processesPercentage Transaction-intensive processes p Judgment-intensive processes  Accounts payable  Accounts receivable  Offshorability is defined as the  General p percentage of in-house scope that g p accounting  Payroll can be delivered from an offshore  Fixed assets  Tax location  Budgeting/  While transaction-intensive have a  Management forecasting high degree of offshorability, reporting and p g  Treasury and judgment-intensive processes are analysis risk i k not offshored as much due to the management complex nature of activities  Internal audit  Offshorability of individual F&A  Capital processes can also vary significantly 70-90 budgeting depending on the buyer context and specific requirements 50-70 20-40 High Medium LowSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 10
  11. 11. Offshoring can provide significant savings on the direct costof the entire F&A functionImpact on direct cost of F&A function due to offshoring ILLUSTRATIVEIndexed to a total direct cost of 100 for onsite operations Most-likely scenario 100  Buyers of F&A services can achieve significant 30-40% savings from offshore delivery due to labor arbitrage savings 70-80% and productivity improvements savings – Labor arbitrage: Labor arbitrage can range from 60-70 30 to 80 percent, depending on the delivery location mix (onshore versus nearshore versus offshore) – Potential productivity improvements: Ongoing initiatives such as process improvements, improvements automation, and standardization etc. can contribute 20-30 20 to 30 percent to the cost savings  Percentage of services offshored is also impacts savings. In addition, situation-specific factors such as set up set-up costs, governance costs, and contract term determine the actual savings achieved from offshoring 100% onsite 55-60% onsite + 100% offshore2 40-45% offshore2 Note: The savings projections are for a steady-state offshore operation; the scenario is expected to be different in the first one to two years of the engagementSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 11
  12. 12. Contents Value proposition of global sourcing in FAO Expanding FAO delivery footprint New FAO delivery locations Q&A Proprietary & Confidential. © 2011, Everest Global, Inc. 12
  13. 13. India continues to be the location of choice for offshoring F&Aservices Inclusion of delivery locations in FAO contracts Number of delivery Number of service Percentage centers1 providers1 India Offshore + nearshore Central and Eastern Europe Central/ South America Southeast Asia China Onshore North America Western Europe India is the preferred location for offshoring F&A services. Nearly 55 percent of the FAO offshored F&A services from India 1 Based on the operational details of 20+ FAO service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, Cognizant HP EXL Service, Genpact, HCL IBM iGate Infosys BPO, Intelenet, Steria, Sutherland Global Services, TCS, VWA Service Genpact HCL, IBM, iGate, BPO Intelenet Steria Services TCS VWA, Wipro, and WNSSample size: 580 multi-process FAO contracts signed as of 2010 Source: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 13
  14. 14. However, the FAO delivery-location landscape now has a trulyglobal footprintOffshore and nearshore F&A delivery locations Central and Eastern Europe Lodz L d Wroclaw Warsaw Dabrowa Katowice Lublin Prague Krakow Brno Bratislava Budapest Cluj Varna Timisoara Sofia Chengdu Tianjin Bucharest China and Dalian Casablanca Tulsa Southeast Asia Juarez Cairo Chandigarh Delhi NCR Okinawa Rabat Jaipur J i Abu Dhabi India Guangzhou Shanghai Monterrey Dubai Nasik Pune Hangzhou Guadalajara Montego Bay Mumbai Kolkata Hyderabad Manila Guatemala Costa Rica Bangalore Philippines Chennai San Jose Bangkok Kochi Kuala Lumpur Cebu Colombo Cyberjaya Quito Singapore Central and South America Hortolandia Santiago Belo Sao Paulo Horizonte Johannesburg Curitiba Gaspar Montevideo Buenos Aires Note: Based on information of 20+ service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, EXLService, Genpact, HCL, IBM, iGate, Infosys, Intelenet, OPI, RMS, Steria, Sutherland Global Services, TCS, Wipro, and WNSSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 14
  15. 15. Poll Question: Do you leverage locations outside ofIndia for F&A offshoring/service delivery?Source: Live polling conducted during the Emerging Locations in the FAO Delivery Landscape webinar on September 27, 2011 Proprietary & Confidential. © 2011, Everest Global, Inc. 15
  16. 16. In 2009-2010, expansion of delivery footprint was a majorinvestment theme among the service providersNumber of FAO delivery Number of delivery centers by regioncenters over time Number of centersNumber of centers 2008 2010 India China Southeast Central & Central & North Western Asia South Eastern America Europe America EuropeA number of service providers including Genpact, Infosys, TCS, WNS, and Wipro etc. opened new delivery centers inabove geographies during 2009-2010 Note: Based on the operational details of 20+ leading FAO service providersSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 16
  17. 17. There are four key drivers behind the FAO delivery-locationexpansion 1 Tapping into new source geographies 4 2 Resource constraints Creating a blended as established Drivers for FAO onshore-nearshore- locations near delivery-location delivery location offshore model to saturation expansion offer true global delivery 3 Avoiding location concentration riskSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 17
  18. 18. Contents Value proposition of global sourcing in FAO Expanding FAO delivery footprint New FAO delivery locations Q&A Proprietary & Confidential. © 2011, Everest Global, Inc. 18
  19. 19. Over 15 new locations emerged on the FAO delivery-locationlandscape in 2009-2010Offshore/nearshore F&A delivery locations Dabrowa Timisoara Varna Chengdu Sofia Tianjin Casablanca Rabat Ca o Cairo Jaipur Chandigarh g Okinawa Abu Dhabi Dubai Guatemala Bangkok Cebu Kuala Lumpur Quito Cyberjaya Belo Horizonte Johannesburg Curitiba Gaspar Montevideo Note: Based on information of 20+ service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, EXLService, Genpact, HCL, IBM, iGate, Infosys, Intelenet, OPI, RMS, Steria, Sutherland Global Services, TCS, Wipro, and WNSSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 19
  20. 20. The study focuses on five from such locations  Jaipur is fast emerging as the next generation BPO destination in India Jaipur – Low-cost labor, proximity to National Capital Region (NCR) region, unexploited real estate market, and availability of good analytical skills make Jaipur a viable alternative – Key F&A processes delivered from Jaipur include accounts payable, accounts receivable, general y p p p y , ,g accounting, and other transactional processes  Montevideo is a late entrant to the outsourcing map, but has attracted the attention of foreign investors due to a stable economic and political environment coupled with availability of an educated and low-cost workforce – Its strategic geographic location has also become a significant factor for selecting it as a regional center of p business operations Montevideo – Key F&A processes delivered include accounts payable, accounts receivable, management reporting, and tax & audit  Johannesburg, the smallest but wealthiest province of Africa already has a well established domestic outsourcing market – It is now increasingly becoming attractive as a Tier-II destination for global offshore outsourcing. This is attributed to the increased awareness of potential cost savingsJohannesburg – Key F&A processes delivered include accounting, and late stage collections  Guatemala City is an emerging location for bilingual English-Spanish talent as the wages are higher and labor supplies constrained in neighboring locations – A stable economy, strategic location and excellent telecom infrastructure lend this city the potential to become th b t nearshore l b the best h location f A ti for American clients i li tGuatemala City – Key F&A processes delivered include accounts payable, accounts receivable, and management reporting Rabat  Rabat has three natural advantages that make it a highly competitive delivery location for serving Western Europe – Low cost and multilingual workforce – M d Modern and lib li d t l d liberalized telecom sector t – Geographical and cultural proximity to Europe – Key F&A processes delivered include accounts payable, accounts receivable, and tax & auditSource: Everest Group (2011) Proprietary & Confidential. © 2011, Everest Global, Inc. 20
  21. 21. The research includes an in-depth profile of each locationbased on a variety of parametersRisk assessmentEvaluation of each location on parameters suchas geopolitical stability, macro-economic g p y,environment, legal and regulatory framework,safety and security, infrastructure support, andlabor sustainability etc.Service provider presenceKey third-party providers and captives present ateach locationF&A functional capabilityKey F&A processes delivered from each locationValue propositionUnique advantages of each location in terms of q goperating costs, availability of talent pool,geographic advantage, & infrastructure supportGeography covered and languagecompetenciesPrimary buyer geographies served from eachlocation and language capability Proprietary & Confidential. © 2011, Everest Global, Inc. 21
  22. 22. Key takeaways More than 90 percent of the FAO contracts leverage global sourcing today Given that FAO is a mature market, most F&A processes have a high degree of offshorability especially market offshorability, transaction-intensive processes. In contrast, judgment-intensive F&A processes are not offshored as much due to the complex nature of activities involved Offshoring can provide significant savings on the direct cost of the entire F&A function, primarily due to labor arbitrage and productivity improvements achieved by service providers India emerged as the global hub for FAO delivery, accounting for nearly 70 percent of the service providers’ offshore/nearshore FAO headcount. However, the FAO delivery-location landscape is now a truly global footprint In 2009 2010, expansion of the delivery footprint was a major investment theme footprint. 2009-2010 among service providers There are four key drivers behind the FAO delivery location expansion: – Tapping into new source geographies – C ti a t l global d li Creating truly l b l delivery network t k – Avoiding location concentration risk – Resource constraints as established locations near saturation Over 15 new locations emerged on the FAO delivery-location landscape in 2009-2010 g y p Proprietary & Confidential. © 2011, Everest Global, Inc. 22
  23. 23. 2011 FAO research plan (page 1 of 2) Published To-be publishedTopic Goals of the research Planned releaseFAO annual report 2011 – Overview of the overall FAO market in 2010 with size & growth of market, March -2011FAO is Back! contract characteristics, value proposition, service provider rating and market outlook for 2011Meter-to-cash BPO As part of its industry-specific BPO research initiatives, Everest Group May-2011market for Utilities – conducted a study focused around Meter-to-Cash (M2C) BPO opportunitymarket webinar assessment and solution trends. This webinar was aimed at helping market stakeholders understand M2C BPO demand potential, drivers to outsource, service provider landscape and go-to-market characteristicsFAO service provider In this research study, we analyze the fast-changing global FAO service May-2011landscape provider landscape and its impact on the FAO market. We focus on service provider position and market shares, delivery capability assessment, and modes of differentiationIndia-to-India Domestic While India has traditionally been a prominent delivery location for BPO May-2011BPO market services, it is starting to emerge as a notable source geography as well. In this study, we focus on the General & Administrative Outsourcing (GAO) segments (FAO, PO, d (FAO PO and HRO) of the domestic BPO market and analyze market growth, f th d ti k t d l k t th key drivers to outsource, buyer adoption trends, service provider landscape, and future outlook Proprietary & Confidential. © 2011, Everest Global, Inc. 23
  24. 24. 2011 FAO research plan (page 2 of 2) Published To-be publishedTopic Goals of the research Planned releaseFAO service provider Profile 20+ established FAO service providers across various dimensions Jun-2011profile compendium including overall revenues, FTEs strength, key delivery locations, FAO service suite, market positioning, overall FAO delivery capability assessment, and Everest Research perspective on service providerTop 5 emerging locations Beyond the established locations that feature in most leading FAO service Sep-2011in FAO providers’ global delivery network, newer locations are making their presence felt on the FAO delivery map. This study evaluates top five from such locations and highlights the market state thereinProcess maturity models In a bid to continue growing in a competitive market, service providers are Q4-2011in FAO – Can it be a looking for ways to generate business impact beyond just labour arbitrage.differentiators for Service Few FAO service providers have developed models to optimize theProviders? outsourced processes and shift them towards best-in-class performance benchmarks. This white paper investigates such models and their potential to create differentiation in FAO marketIndustry-specific FAO While FAO is largely considered a horizontal BPO offering, in recent years, Q4-2011solutions service providers have increasingly shifted their focus on specific industries, both in terms of service offerings and sales strategy, to drive greater penetration. This report i t ti Thi t investigates some such i t ti t h instances visible i th FAO i ibl in the market Proprietary & Confidential. © 2011, Everest Global, Inc. 24
  25. 25. Contents Value proposition of global sourcing in FAO Expanding FAO delivery footprint New FAO delivery locations Q&A Proprietary & Confidential. © 2011, Everest Global, Inc. 25
  26. 26. Q&A Attendees will receive an email enabling them to download today’s webinar presentation as well as access a recorded audio version For advice or research on F&A services, please contact: – Saurabh Gupta, saurabh.gupta@everestgrp.com – Kuldeep Lulla, kuldeep.lulla@everestgrp.com For background information on Everest Group, please visit: – www.everestgrp.com – research.everestgrp.com Thank you for attending todayTo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen screen. This will open the Q&A Panel Be sure to keep the default set to “send to All Panelists” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit Proprietary & Confidential. © 2011, Everest Global, Inc. 26
  27. 27. Related Content Research Reports The New Frontiers: Emerging Locations in the FAO Landscape FAO Annual Report 2011 – FAO is Back!! Global FAO Service Provider Landscape – Competitive Intensity Driving Innovation Value Creation through FAO – Perspectives of Mature Buyers Upcoming Webinars SAP & Everest Group: Architecting for Success E tG A hit ti f S  Wednesday, October 5, 9:00 a.m. CDT  Register Benefits Administration Outsourcing Market: Mature yet Dynamic g y y  Tuesday, October 11, 9:00 a.m. CDT  Register The Nielsen Company, TCS & Everest Group: Future-Proofing Your Organization via FP&A  Thursday October 13 9:00 a m CDT Thursday, 13, a.m.  Register Proprietary & Confidential. © 2011, Everest Global, Inc. 27
  28. 28. Everest Group leads clients from insight to actionContact us for more information about our consulting, research, and industry resources. Dallas (Corporate Headquarters) Canada info@everestgrp.com canada@everestgrp.com +1-214-451-3000 +1-416-865-2033 +1-214-451-3110 New York India/Middle East info@everestgrp.com info@everestgrp com india@everestgrp.com india@everestgrp com +1-646-805-4000 +91-124-496-1000 +91-124-496-1100 United Kingdom Netherlands & Continental Europe unitedkingdom@everestgrp.com benelux@everestgrp.com +44-870-770-0270 +31-20-301-2138 www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com Proprietary & Confidential. © 2011, Everest Global, Inc. 28

×