2013 Predictions: State of theGlobal Services MarketJanuary 23, 2013Live Tweeting #Predictions2013
Areas of coverage   Introductions and “2012: Year-in-Review”   IT Services   Business Process Outsourcing (BPO)   Glob...
Introductions                                            Katrina Menzigian (moderator)                                    ...
Everest Group: 2013 research offeringsSubscription information             Market Vista   If you want to learn whether   ...
2012: Year-in-Review                                                                    Same as prediction             Sim...
Areas of coverage   Introductions and “2012: Year-in-Review”   IT Services   Business Process Outsourcing (BPO)   Glob...
IT Services | Key 2013 Predictions“SMAC” (especially MAC) will fuel IT services growth“Enterprise IT” vs. “Business IT”: E...
Cloud adoption will accelerate as buyers continueto realize value from these delivery modelsTrend in cloud related global ...
SaaS modules have been adopted most widely; IaaSadoption is expected to grow fastest in 2013Enterprise Cloud adoption tren...
M&A in 2013 will extend beyond conventionaladjacencies as service providers respond to an evolvingdemand environmentAn evo...
Areas of coverage   Introductions and “2012: Year-in-Review”   IT Services   Business Process Outsourcing (BPO)   Glob...
BPO | Key 2013 PredictionsThe BPO world will be increasingly verticalThe adoption of SMAC in BPO will increase but will tr...
Traditional delivery geography will increasingly becomedemand geography; profitable service delivery will be the keyFAO de...
A balanced model that harnesses the power of ANDwill be more successfulSourcing                 Internal shared services  ...
To what extent do you expect organizations to invest hard cash in capturing global services values beyond savings in 2013?...
Areas of coverage   Introductions and “2012: Year-in-Review”   IT Services   Business Process Outsourcing (BPO)   Glob...
Global Sourcing | Key 2013 PredictionsNew buyer segments will drive global sourcingIncreased focus on complementing onshor...
While a few “wildcards” will emerge, India andPhilippines will continue to reign                                          ...
Tier-2 locations to become “must-have” from “goodto have”Proportion of Tier-2/3 cities in new delivery center set-ups     ...
Delivering value beyond cost savings will become astrong imperative and mandate for GICsWhat should GICs deliver over the ...
Areas of coverage   Introductions and “2012: Year-in-Review”   IT Services   Business Process Outsourcing (BPO)   Glob...
Pricing | 2013 Predictions IT pricing is expected to be stable Adoption of fixed-price models will strengthen in IT deals ...
Prices of ITO services are expected to remain stable ordecline marginally at offshore as well as onshorelocationsTrend in ...
BPO pricing is expected to increase at offshore aswell as onshore locationsTrend in blended FTE price at offshore (India) ...
ITO and BPO deals would be characterized by theadoption of more sophisticated pricing modelsFixed price adoption trends in...
Areas of coverage   Introductions and “2012: Year-in-Review”   IT Services   Business Process Outsourcing (BPO)   Glob...
Macro-Themes for 2013: Summary                                                               Buyer satisfaction validatin...
Q&ATo ask a question during the Q&A session   Click the question mark (Q&A) button located on right side of your screen. ...
Check out our blog for the latest perspectiveson global services                                                        Ex...
Related content   Market Vista: Q3 2012   Webinar Deck: Global In-house Centers vs. Service Providers: Who is Winning? ...
About Everest GroupEverest Group is an advisor to business leaders on the next generation of globalservices with a worldwi...
Everest GroupLeading clients from insight to actionEverest Group locations                                                ...
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State of the Global Services Market: 2013 Predictions

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What does the new year hold for the global services market? In what ways will industry-specific expertise drive service provider differentiation? How will Global In-house Centers (GICs) evolve and what value will organizations expect? What’s in store for cloud and how will the interplay between cloud and traditional IT Services progress?

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State of the Global Services Market: 2013 Predictions

  1. 1. 2013 Predictions: State of theGlobal Services MarketJanuary 23, 2013Live Tweeting #Predictions2013
  2. 2. Areas of coverage Introductions and “2012: Year-in-Review” IT Services Business Process Outsourcing (BPO) Global Sourcing Pricing Summary and Q&A Proprietary & Confidential. © 2013, Everest Global, Inc. 2
  3. 3. Introductions Katrina Menzigian (moderator) Vice President katrina.menzigian@everestgrp.com Jimit Arora Vice President – IT Services jimit.arora@everestgrp.com Rajesh Ranjan Vice President – BPO rajesh.ranjan@everestgrp.com H. Karthik Vice President – Global Sourcing h.karthik@everestgrp.com Rahul Gehani Practice Director – Pricing Assurance rahul.gehani@everestgrp.com Proprietary & Confidential. © 2013, Everest Global, Inc. 3
  4. 4. Everest Group: 2013 research offeringsSubscription information Market Vista If you want to learn whether Global services tracking across functions, sourcing models, locations, and your organization has a service providers – industry tracking reports also available subscription agreement or request information on pricing Banking, financial Healthcare Finance & accounting and subscription options, services, insurance please contact us: – info@everestgrp.com Information – +1-214-451-3110 Procurement Cloud Vista technology In addition to published research, a subscription may Human resources Recruitment process Global sourcing include analyst inquiry, data cuts, and other services Service Provider Transaction PricePoint Intelligence Intelligence Custom research capabilities  Benchmarking | Pricing, delivery model, skill portfolio  Peer analysis | Scope, sourcing models, locations  Locations | Cost, skills, sustainability, portfolio  Tracking services | Service providers, locations, risk  Other | Market intelligence, service provider capabilities, technologies Proprietary & Confidential. © 2013, Everest Global, Inc. 4
  5. 5. 2012: Year-in-Review Same as prediction Similar but with some variations Different than predictionWhat we predicted at the beginning of 20121 How has the market fared to date? Comments 1 Pricing pressures will squeeze providers’ While BPO margins did go up margins, especially offshore, forcing somewhat, IT Services investment in newer customer-centric margins slipped modestly solutions and innovative engagement models 2 Global sourcing leaders will seek new Emerging geos continue to locations; Emerging geographies will increase – LATAM, Africa, continue attracting attention Mid East, CEE 3 BPO markets will continue to grow at Rates across BPO vary, but double-digit rates all remain robust - especially true in the case of BFSI BPO 4 Service providers will make strategic M&A in this space is about investments in driving value from cloud building out cloud breadth services – moving beyond technical and depth – enhanced value limitations and focusing on client adoption propositions to increase cloud requirements appeal1 Everest Group webinar document: 2012 Market Predictions (presented in Dec 2011) Proprietary & Confidential. © 2013, Everest Global, Inc. 5
  6. 6. Areas of coverage Introductions and “2012: Year-in-Review” IT Services Business Process Outsourcing (BPO) Global Sourcing Pricing Summary and Q&A Proprietary & Confidential. © 2013, Everest Global, Inc. 6
  7. 7. IT Services | Key 2013 Predictions“SMAC” (especially MAC) will fuel IT services growth“Enterprise IT” vs. “Business IT”: Enterprise IT will strike back“Verticalization” in infrastructure services – an emerging realityApplication services will witness greater appetite for “top-to-bottom” deliveryMarket consolidation will blur the lines across service provider categories Proprietary & Confidential. © 2013, Everest Global, Inc. 7
  8. 8. Cloud adoption will accelerate as buyers continueto realize value from these delivery modelsTrend in cloud related global service deals Enterprise Cloud adoption – objective fulfillment2011-2012; Percentage of deals with cloud Buyer responses XX% Overall agreement %delivery in scope N = 88 12% Strongly disagree 2% 1% 1% 2% Disagree 1% 2% 2% 2% 2% 1% 1% 2% Somewhat disagree 14% Neither agree 24% 31% 82% 27% or disagree 8% 21% 71% 67% 64% 27% Somewhat agree 21% 24% 38% 4% Agree 25% 25% 27% 18% 23% 19% Strongly agree 16% Met Met Met Met H1 2011 H2 2011 H1 2012 objectives objectives objectives objectives for 1047 900 704 for cost for flexible for quicker higher savings infra time to satisfaction of market business Majority of adopters are meeting their cloud objectives signaling a confidence shift going forwardSource: Everest Group Cloud Vista (2012); Everest Group – Cloud Connect Survey (2012) Proprietary & Confidential. © 2013, Everest Global, Inc. 8
  9. 9. SaaS modules have been adopted most widely; IaaSadoption is expected to grow fastest in 2013Enterprise Cloud adoption trends by cloud layer – Buyer responses IaaS adoption plans – Buyer responses Already adopted Adopt in distant future Adopt in near future No plans to adopt 100% = 89 57%Software as a Service 28% (SaaS) N= 81 10% 5% No plans 38% for cloudPlatform as a Service 25% infrastructure N= 73 (PaaS) 27% 18% 10% 31% Public cloud 26% Plan to N= 78 implement (IaaS) 26% 48% 18% cloud infrastructure 30% Private cloud 36% 34% 23% N= 80 Already (IaaS) 11% have cloud infrastructure 17% Hybrid cloud 27% 36% N= 70 (IaaS) 20% 28%Business Process as 27% More than cost reduction, flexible infrastructure and a Service (BPaaS) 22% N= 64 reducing time to market are the top two drivers for IaaS 23% growthSource: Everest Group – Cloud Connect Survey (2012) Proprietary & Confidential. © 2013, Everest Global, Inc. 9
  10. 10. M&A in 2013 will extend beyond conventionaladjacencies as service providers respond to an evolvingdemand environmentAn evolving demand profile… …causing interesting marriages in the IT services supply landscape Regulatory Global MNCs WITCH compliance (BFSI, Healthcare, Europe) Tier-2/specialists BPO pure-plays Drivers for transformational IT services Regional majors Cloud providers Product vendors Telcos 2013 will witness the emergence of a new “breed” of converged service providersSource: Everest Group (2013) Proprietary & Confidential. © 2013, Everest Global, Inc. 10
  11. 11. Areas of coverage Introductions and “2012: Year-in-Review” IT Services Business Process Outsourcing (BPO) Global Sourcing Pricing Summary and Q&A Proprietary & Confidential. © 2013, Everest Global, Inc. 11
  12. 12. BPO | Key 2013 PredictionsThe BPO world will be increasingly verticalThe adoption of SMAC in BPO will increase but will trail the hype; analytics willbe the most sought after services within this stackTraditional delivery geography will increasingly be the new demand geographyBeyond stand-alone technology capability, provider’s ability to blend it effectivelyinto the BPO solution will lead to successA balanced BPO model will be more successful – rise of the AND solution Proprietary & Confidential. © 2013, Everest Global, Inc. 12
  13. 13. Traditional delivery geography will increasingly becomedemand geography; profitable service delivery will be the keyFAO deal signing trend Insurance BPO deal signing trendNumber of contracts Number of contracts100% = 531 81 100% = 74 24Asia Pacific and Asia Pacific and 10% 9% Latin America Latin America 27% 29% North America North America 90% 91% and Europe and Europe 73% 71% Up to 2010 2011 Up to 2010 2011-2012Source: Everest Group (2013) Proprietary & Confidential. © 2013, Everest Global, Inc. 13
  14. 14. A balanced model that harnesses the power of ANDwill be more successfulSourcing Internal shared services Third-party outsourcingScope Focused End-to-endSolution Customized StandardizedPricing model Simplicity ImpactDelivery model Onshore Offshore/Nearshore Proprietary & Confidential. © 2013, Everest Global, Inc. 14
  15. 15. To what extent do you expect organizations to invest hard cash in capturing global services values beyond savings in 2013? Priority area – expect significant new investments in 2013 7% Area of ongoing focus – will continue to make strategic investments as previously 65% planned Business as usual – no new or additional investments anticipated 24% Area of least focus – strategic investments targeting other areas in 2013 4% Proprietary & Confidential. © 2013, Everest Global, Inc. 15Source: Live polling conducted during the “2013 Predictions: State of the Global Services Market” webinar on January 23, 2013
  16. 16. Areas of coverage Introductions and “2012: Year-in-Review” IT Services Business Process Outsourcing (BPO) Global Sourcing Pricing Summary and Q&A Proprietary & Confidential. © 2013, Everest Global, Inc. 16
  17. 17. Global Sourcing | Key 2013 PredictionsNew buyer segments will drive global sourcingIncreased focus on complementing onshore and offshore, not competingTier-2 locations to become “must-have” from “good to have”Growth in GICs coupled with sophistication in sourcing model leverageGlobal talent management – an increasing priority Proprietary & Confidential. © 2013, Everest Global, Inc. 17
  18. 18. While a few “wildcards” will emerge, India andPhilippines will continue to reign NOT EXHAUSTIVE High end financial services and IT skills Multilingual support Ireland Bulgaria Turkey Significant untapped potential Emerging R&D destination Vietnam Low-cost Colombia alternative for IT Peru Attractive costs South Africa Preferred location and Spanish for UK voice; large language skills domestic market Proprietary & Confidential. © 2013, Everest Global, Inc. 18
  19. 19. Tier-2 locations to become “must-have” from “goodto have”Proportion of Tier-2/3 cities in new delivery center set-ups 20112011-20121; Percentage 2012 84  Stronger imperative for Tier-2/3 cities in 2013, will 50 53 become a “must-have” for 40 service providers 37 37  Share of Tier-2/3 locations in incremental demand will increase, especially in APAC and Latin America Asia Pacific Latin America CEE Predictions for 2013 1 Includes analysis from Q1-Q3 (January-September) 2012Note: Tier-1 cities are mature cities for global services delivery, typically characterized by large talent pool and significant market activity. Examples include Bangalore (India), Shanghai (China), Metro Manila (Philippines), Sao Paulo (Brazil), Mexico City (Mexico), and Krakow (Poland) Tier-2/3 cities are upcoming cities for global services delivery, typically characterized by relatively smaller talent pool and lesser market activity. Examples include Jaipur (India), Dalian (China), Cebu (Philippines), Curitiba (Brazil), Guadalajara (Mexico), and Lodz (Poland) Proprietary & Confidential. © 2013, Everest Global, Inc. 19
  20. 20. Delivering value beyond cost savings will become astrong imperative and mandate for GICsWhat should GICs deliver over the next three years? GIC responses Parent responses Percentage of total respondents Percentage of total respondents Primarily focus on delivering current cost savings andmeeting/exceeding expectations 18 37 on service levels Strive towards delivering other forms of value1 in addition to 66 60 maintaining cost savings Focus on delivering other forms of value, even if it means 15 4 reducing focus on driving cost advantage1 Standardize processes or systems across the enterprise, create new services/products, etc. Proprietary & Confidential. © 2013, Everest Global, Inc. 20
  21. 21. Areas of coverage Introductions and “2012: Year-in-Review” IT Services Business Process Outsourcing (BPO) Global Sourcing Pricing Summary and Q&A Proprietary & Confidential. © 2013, Everest Global, Inc. 21
  22. 22. Pricing | 2013 Predictions IT pricing is expected to be stable Adoption of fixed-price models will strengthen in IT deals BPO pricing is expected to have a positive bias Prevalence of hybrid pricing structures will increase in BPO deals Proprietary & Confidential. © 2013, Everest Global, Inc. 22
  23. 23. Prices of ITO services are expected to remain stable ordecline marginally at offshore as well as onshorelocationsTrend in blended FTE price at offshore (India) IT-ADM EXAMPLESIndexed104102 100 100 100100 99 99 98 98 96 Q3 2011 2011 2011 H2’ Q4 Q1 2012 Q2 2012 2012 2012 Q3 Q4 2012E Q1 2013 2013 2013 H1’ Q2Trend in blended FTE price at onsite (U.S.)Indexed104102 101 100 100 101 100 100100 98 96 Q3 2011 2011 2011 H2’ Q4 Q1 2012 Q2 2012 2012 2012 Q3 Q4 2012E Q1 2013 2013 2013 H1’ Q2Source: Everest Group PricePoint Proprietary & Confidential. © 2013, Everest Global, Inc. 23
  24. 24. BPO pricing is expected to increase at offshore aswell as onshore locationsTrend in blended FTE price at offshore (India) VOICE-BPO EXAMPLESIndexed106104 103 103 103 103102 101 100100 98 Q3 2011 2011 2011 H2’ Q4 Q1 2012 Q2 2012 2012 2012 Q3 Q4 2012E H1’ 2013Q2 2013 Q1 2013 Est.Trend in blended FTE price at onsite (U.S.)Indexed104102 101 101 101 101 101 100100 98 96 Q3 2011 2011 2011 H2’ Q4 Q1 2012 Q2 2012 2012 2012 Q3 Q4 2012E H1’ 2013Q2 2013 Q1 2013 Est.Source: Everest Group PricePoint Proprietary & Confidential. © 2013, Everest Global, Inc. 24
  25. 25. ITO and BPO deals would be characterized by theadoption of more sophisticated pricing modelsFixed price adoption trends in ITO deals Distribution of pricing Composition of hybrid models in PO pricing structures 2008 Number of contracts Frequency of inclusion 2011 2013 Est. 100% = 290 Only gainsharing Managed 48% 46% 89% service fees 41% 44% 44% Only36% 36% FTE-based 3% 32% 15% Hybrid 46% Gainsharing pricing 71% Only 36% managed service fees FTE-based 44% Provider A Provider B Provider C Provider D Buyers are preferring fixed-price engagements  Buyers and service providers are realizing multiple objectives by to control the overall IT spend adopting hybrid structures which combine input-based, output- Service providers are keen to adopt fixed-price based and outcome-based pricing models to maintain profitability Proprietary & Confidential. © 2013, Everest Global, Inc. 25
  26. 26. Areas of coverage Introductions and “2012: Year-in-Review” IT Services Business Process Outsourcing (BPO) Global Sourcing Pricing Summary and Q&A Proprietary & Confidential. © 2013, Everest Global, Inc. 26
  27. 27. Macro-Themes for 2013: Summary  Buyer satisfaction validating the conceptThe realities of SMAC are taking hold  Adoption pace varies by market, IT layer, buyer segment  Relevant across IT Services and BPOThe march toward verticalization continues  Driving services provider differentiation and supporting buyer competitiveness  Expanded capabilities the targetM&A more about chess than checkers  Consolidation will lead to newly formed competitive landscapesGlobal sourcing continues pushing the  Clients seeking varied options for integratingvariety & complexity of delivery models geos, models, processes, etc.  Cost and margin pressure will challengePricing remains in a dead-band, with providers, but buyer demand will be thelimited movement on either side key price driver Proprietary & Confidential. © 2013, Everest Global, Inc. 27
  28. 28. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on right side of your screen. This opens Q&A Be sure to keep the default set to “send to All Panelists” Type your question in the box at the bottom of the Q&A box and click the send button Attendees will receive an email with instructions for downloading today’s presentation For advice or research, please contact: – Katrina Menzigian, katrina.menzigian@everestgrp.com – H. Karthik, h.karthik@everestgrp.com – Rajesh Ranjan, rajesh.ranjan@everestgrp.com – Rahul Gehani, rahul.gehani@everestgrp.com – Jimit Arora, jimit.arora@everestgrp.comStay connectedWebsites Twitter Blogswww.everestgrp.com @EverestGroup www.sherpasinblueshirts.comresearch.everestgrp.com @Everest_Cloud www.gainingaltitudeinthecloud.com Proprietary & Confidential. © 2013, Everest Global, Inc. 28
  29. 29. Check out our blog for the latest perspectiveson global services Experts in the global services terrain www.sherpasinblueshirts.com Proprietary & Confidential. © 2013, Everest Global, Inc. 29
  30. 30. Related content Market Vista: Q3 2012 Webinar Deck: Global In-house Centers vs. Service Providers: Who is Winning? PricePoint Q2 2012 Update: Points to Consider in the Pricing of Outsourcing Services Enterprise Cloud Quarterly Review: Q3 2012 IT Services Landscape - Market Size, Trends, and Buyer Insights Finance and Accounting Outsourcing (FAO) Annual Report 2012: Signaling Towards Maturity Procurement Outsourcing (PO) Annual Report 2012: Steadily Marching Forward Multi-process Human Resources Outsourcing (MPHRO) Annual Report 2012: Continued Reinvention Proprietary & Confidential. © 2013, Everest Global, Inc. 30
  31. 31. About Everest GroupEverest Group is an advisor to business leaders on the next generation of globalservices with a worldwide reputation for helping Global 1000 firms dramaticallyimprove their performance by optimizing their back- and middle-office businessservices. With a fact-based approach driving outcomes, Everest Group counselsorganizations with complex challenges related to the use and delivery of globalservices in their pursuits to balance short-term needs with long-term goals. Throughits practical consulting, original research, and industry resource services, EverestGroup helps clients maximize value from delivery strategies, talent and sourcingmodels, technologies, and management approaches. Established in 1991, EverestGroup serves users of global services, providers of services, country organizations,and private equity firms in six continents across all industry categories. For moreinformation, please visit www.everestgrp.com and research.everestgrp.com. Proprietary & Confidential. © 2013, Everest Global, Inc. 31
  32. 32. Everest GroupLeading clients from insight to actionEverest Group locations Dallas (Headquarters): info@everestgrp.com +1-214-451-3000 New York: info@everestgrp.com +1-646-805-4000 Toronto: canada@everestgrp.com +1-416-865-2033 London: unitedkingdom@everestgrp.com +44-207-129-1318 Delhi: india@everestgrp.com +91-124-496-1000 www.everestgrp.com | research.everestgrp.com | www.sherpasinblueshirts.com Proprietary & Confidential. © 2013, Everest Global, Inc. 32

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