2012 global services compendium - gs100

www.globalservicesmedia.com

GS100 Survey þGS100 List þ

GS100 Categories þITO Segments þBPO Segmentsþ

Annual Global Outsourcing Industry Analysis

2012 Global

Services Compendium

2012 Global

Services Compendium

AnnuAlIssue2012

The impact of the turbulent global economy on the growth of the services industry continues to be a widely discussed topic. The other such topic is the possible impact of the political backlash against outsourcing. While the latter can be dismissed as political rhetoric in an election year, the former requires some re-strategizing and deftness on the part of service providers.

Growth rates are in single digits in the mature economies and the emphasis is on shorter term, single- function deals. Labor arbitrage is still important and service providers continue to seek low-cost locations.

Our conversations with many companies during the GS100 survey re-vealed that while companies are seeking acceleration in revenue growth, profits, and other performance parameters; they are more engaged in acquiring the new capabilities required to address technological and social shifts influencing their customer’s business. n Enterprise software enters a phase of renewal driven by mobility, cloud computing

and Software as a Service (SaaS), software manufacturers, and developers are turning

to experts in product development.

n Contact center outsourcing is seeing renewed growth with customer interactions

moving over to non-voice channels and social media.

n The HR space is being redefined with greater breadth of cloud-based offerings rang-

ing from recruitment to talent management. The impact of social media in managing

workforce also requires major reorientation in terms of policies and practices.

n The real hotspot is analytics outsourcing. Developments on the technology side in

the form of cloud, big data, and business intelligence tools have simplified the area

but there is still the need for data scientists to perform analytics. This makes the case

eminent for outsourcing analytics.

n With increasing number of organizations demanding application’s functionality as

a cloud-based services rather than on-premises infrastructure, ADM vendors are of-

fering more technology as subscription-based solutions and “pay as you go” ADM

offerings.

These shifts require major investments for both organic and inorganic scale up. Mostly, global service providers are rich with good financial reserves. Therefore, there would be a slew of M&A deals when services companies would acquire technology companies to own pieces of technol-ogy that would help them offer differentiated services.

The current model of GS100 is based on market performance and leadership, breadth of services, spread of global delivery capabilities, and customer leadership. Next year, we would extend the model to measure how service providers move towards leveraging platforms and solutions to deliver the next wave of business value.

Congratulations to all the GS100 companies!

Facing the New Realities

editor’s note

Ed Nair, Editor [email protected]

� | September 2012 GlobalServices

Segment Analysis

n Application Development & Maintenance: On The Road To

Recovery/ 27

n OPD: Market is Expected to Reach

$19B/ 38

n Infrastructure Management Services: Cloud Comes With a

Promise/ 46

n ITO: Status Quo Sustained/ 56

n Contact Centers: Growth Momentum

Continues Amidst Turbulence/ 66

n FAO: All Signs Suggest Maturity/ 75

n ISBPO: Being Explored

Aggressively/ 86

n PO: The Expanding Scope of PO

Contracts/ 94

n HRO: From Cost Savings to Strategic

Advantages/ 100

n Analytics Outsourcing: Inside The

World of Numbers/ 106

38

46

86

106

100

66

56

94

75

Contents27

GlobalServices September 2012 | �

GS100 LISTS Ø The GS100 List/ 13Ø The GS100 Category Lists/ 19

ADveRTISeRS LISTS

Ø Hildebrando 3

Ø Quatrro 7

Ø Endava 13

Ø Belatrix 17

Ø Hexaware 21

Ø IBA 29

Ø Prokarma 31

Ø Cybage 36

Ø Harbinger 41

Ø Great Idea 44

Ø Mexico IT 49

Ø EPAM 53

Ø Luxoft 59

SuRveyAnALySIS

The 2012 Global Services 100: Defining Leadership in Global IT and Business

eDITORIAL TeAM ed nairEditor, [email protected] [email protected] [email protected] Chandra [email protected]

SALeS & MARkeTInGSatish GuptaAVP, [email protected] [email protected]

Pradeep GuptaChairman & MDHoshie GhaswallaCEO, Media BusinessIbrahim AhmadGroup Editor

Gulnar [email protected]

DeSIGn TeAMBhagbat PattnayakHarnek SinghPramod S Rawat

COveR: Pramod S Rawat

6

SpecialRepoRt

� | August 2012 GlobalServices

SuRvey

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analysisSurvey analySiS Survey analySiS Survey analySiS Survey analySiS Survey analySiSSurvey analySiS Survey analySiS Survey analySiS Survey analySiS Survey analySiS

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Quatrro is recognized as one of the

leading Business Process Outsourc-

ing companies, focused on offering

platform based services to Small and

Medium Businesses (SMBs) globally. The company

which is spearheaded by the Guru of Indian BPO

industry, Raman Roy, has taken rapid strides over

the years and has lent true meaning to its tagline

“Beyond the Existing”. It currently has over 130

enterprise clients, 11000+ SMB & SOHO custom-

ers and 500,000+ individual customers in multiple

geographies with diverse services covering Risk

Management, Financial Processing, Technical Solu-

tions, Mortgage Processing, Interactive Entertain-

ment and Knowledge Services.

Quatrro Global ServiceS–Spearheading BpO induStry tO

ad

vert

ori

al

Quatrro has realized the benefits of first mover

by offering state-of-the-art platform based solu-

tions to its clients. It’s businesses are remarkably

different compared to most of the other players

in the industry whose focus continues to be on

headcount, utilizing client owned technology for

process delivery and cost reduction while Quatrro’s

value proposition is primarily centered on utilizing

Quatrro owned / customized technology, platform

based services and revenue enhancement. Quatrro

leads its peers by at least 3-5 years in servicing the

mid market through right shore delivery.

Stressing that SMB needs are remarkably dif-

ferent from large enterprises, Raman says, “Mid

market clients are value conscious and actively seek

a lower total cost of ownership. Focusing on cost

and transformation led value proposition alone

will not help the service providers fulfill the mid

market needs. The focus needs to be on enhancing

the business value for SMB clients”.

Illustrated below are various drivers that em-

power Quatrro deliver significant value to its mid

market clients:

Commenting on Quatrro’s current success, Raman

adds,” The adoption of our services by over 11,000

SMB / SOHOs and leading multinational companies

for their franchise operations is a colossal endorse-

ment of our business strategy. This has been further

endorsed through the alliances that we forged with

various technology players in taking their services to

the mid-market, otherwise found unviable by them.”

Summing up, Raman says that Quatrro has

architected the birth of yet another industry in

the services space – the industry of platform based

business services that have no geographic barriers

or limitations.

“BeyOnd the exiSting”

cover story

� | September 2012 GlobalServices

the 2012 Gs100:

This is neither a study of 100 companies nor a survey aimed at choosing hundred best companies based on financial performance. Hundred best companies they are; chosen through a rigorous methodology...

DefininG LeaDership in GLobaL it anD business process outsourcinG

survey anaLysis

GlobalServices September 2012 | �

This is neither a study of 100 companies nor

a survey aimed at choosing hundred best

companies based on financial perform-

ance. Hundred best companies they are;

chosen through a rigorous methodology that eval-

uates each company across multiple dimensions,

measured both quantitatively and qualitatively.

The study presents a complete view of the dynam-

ics of the most significant segments that make up

the IT and business process outsourcing industry.

This is not a list of the 100 largest outsourcing

vendors. This list reflects the diversity and overall

landscape of the service provider community in

terms of company sizes, countries of origin and

countries of delivery.

the Gs100 MethodologyCompanies who opted to participate in the sur-

vey were asked to share exhaustive information

through an online survey done during 05/12 and

06/12. The top 100 list and the names in the catego-

ries are derived using a scientific research method-

ology based on several qualitative parameters.

Customer Base-IT Outsourcing

(# Customers, 130 Cos.)

ADM

EA

ES

OPD

IM

Total IT O/S

IT Strategyand

Consulting

Others

0 1000 2000 3000 4000 5000 6000 7000 8000

5977

4021

885

1586

2876

1775

809

987

1474

967

551

697

285

583

420

342

New Customers-2011Existing Active Customers

CONTRACT SIZES

ITO BPO

Upto $5M 15444 2586

$5M to $19M 357 165

$20M to $34M 177 54

$35M to $50M 55 28

$51 M to $99 M 23 27

$100M to $299 M 14 3

$300M to $499 M 4 3

$500M to $749 M 4 7

$750M to $ 1B 3 8

$ 1 B to $ 2 B 1 2

More than $ 2 B 0

(# of contracts, 130 companies)

ADM38%

EA19%

IMS14%

ES8%

OPD7%

Testing5%

SO4%

Others5%

IT Outsourcing SegmentsTotal- $21.2B

FAO8%

HRO5%

CC53%

PO4%

KPO9%

I/S20%

BPO SegmentsTotal- $11B

cover story

10 | September 2012 GlobalServices

survey anaLysis

NorthAmerica

47%

SouthAmerica6%

Europe24%

Africa& ME3%

Asia14%

Japan2%

Australia5%

Revenue by Geographies($65B, 130 cos.)

North AmericaSouth AmericaEuropeAfrica & MEAsiaJapanAustralia

FAO

HRO

CC

Procurement

KPO

Industry-specific

0 1000 2000 3000 4000 5000

733

396

3145

222

3809

960

96

34

610

60

780

328

Customer Base- BPO(# Customers, 130 Cos.)

New Customers-2011Existing Active Customers

Banking & Financial Services

Energy, Resources & Utilities

Government

Healthcare

High Tech

Insurance

Life Sciences

Manufacturing

Media & Information Services

Retail & Consumer Products

Telecom

0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00

15.84

6.48

5.86

8.27

11.26

7.24

9.11

10.45

8.40

12.93

11.11

Verticals

Row 4

%Re

v.20

11

coming soon...

To know more write to [email protected]

GS100

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— ApplicAtion Development— testing— ApplicAtion mAnAgement— DigitAl meDiA— infrAstructure Hosting

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endava.comlondon nEw york glasgow romania moldova

2012 Finalist

2012 GS100 LiSt


Sl. No. Company Name

1 Achievo Corporation

2 Aditya Birla Minacs Worldwide Limited

3 Aegis Limited

4 Affinity Express

5 AJUBA iNTERNATIONAL LLC

6 Altisource Portfolio Solutions S.A

7 Aspire Systems (India) Pvt. Ltd.

8 Auriga Inc.

9 Beyondsoft Corporation

10 BLEUM INC.

11 Blue Star Infotech Limited

12 Capgemini

13 Chinasoft International Ltd.

14 Ci&T

15 Ciklum

16 City Park Technologies

17 Collabera Inc

18 CompuCom Systems Inc.

19 Convergys Corporation

20 Corbus, LLC

21 CSC

22 Cybage Software Private Limited

2012 GLOBAL SERViCES 100 COMPANiES

2012 GS100 LiSt

GlobalServices September 2012 | 15


23 DataArt

24 Datamatics Global Services Limited

25 Dextrys

26 eClerx Services Ltd.

27 Endava UK Limited

28 EPAM Systems Inc.

29 Exigen Services

30 EXL Service Holding Inc.

31 Expert Global Solutions

32 First Line Software

33 Firstsource Solutions Ltd

34 FPT Software Co. Ltd.

35 Freeborders, Inc.

36 Genpact Limited

37 GlobalLogic

38 Globant

39 Harbinger Systems Private Limited

40 HCL Technologies Ltd.

41 Hexaware Technologies Limited

42 Hildebrando

43 Hinduja Global Solutions Limited

44 IBA Group

45 iGATE Corporation

46 Indecomm Global Services (I) Pvt Ltd

47 Infosys Ltd.

48 Infotech Enterprises

2012 GS100 LiSt



49 Innominds Software Pvt. Ltd.

50 Insigma Technology Co., LTD

51 InterGlobe Technologies

52 Intetics Co.

53 iSoftStone Information Technology (Group) Co., Ltd

54 ITC Infotech

55 Itransition Software Development Company

56 KPIT Cummins Infosystems Ltd.

57 Lionbridge

58 Lohika Systems, Inc

59 Luxoft

60 MAVERIC SYSTEMS LIMITED

61 MERA

62 Microland

63 Mindteck (India) Ltd.

64 MindTree Limited

65 Mistral Solutions Pvt. Ltd.

66 Nagarro, Inc.

67 Neilsoft Limited

68 Neoris

69 Neusoft Corporation

70 NIIT Technologies

71 NorthgateArinso

72 Omnitech InfoSolutions Ltd.

73 Persistent Systems Limited

74 ProKarma, Inc

2012 GS100 LiSt



75 Quatrro Global Services Pvt. Ltd.

76 RCG Global Services

77 Reksoft

78 SaM Solutions

79 Scicom (MSC) Berhad

80 Serco Global Services

81 Sitel Operating Corporation

82 SoftServe, Inc.

83 Sonata Software Limited

84 SPi Global

85 Stream Global Services

86 Sutherland Global Services, Inc.

87 Symphony BPO Solutions Sdn Bhd

88 Symphony Teleca Corp

89 Synapsis SpA

90 Syntel Inc.

91 Talentica Software (India) Pvt Ltd

92 Unisys Corporation

93 VADS Business Process Sdn Bhd

94 ValueLabs

95 VanceInfo Technologies

96 Virtusa Corporation

97 WNS Global Services PVT. Ltd

98 Xceed

99 Xchanging Plc

100 Zensar


2012 GS100 cateGory LiStS

2012 GLoBaL SerViceS 100 cateGory LiStS

Top Global ITO Leaders

Capgemini

CompuCom Systems Inc.

CSC

HCL Technologies Ltd.

Infosys Ltd.

Unisys

Top Global ADM Leaders

Capgemini

CSC


iGATE Corporation

Infosys Ltd.

Insigma Technology Co., LTD

Syntel Inc.

Top Mid-tier ADM Companies

Chinasoft International Ltd.

Collabera Inc

EPAM Systems Inc.

Genpact Limited

Infotech Enterprises

ITC Infotech

MindTree Limited

Neoris

Neusoft

VanceInfo Technologies

Zensar

Emerging Mid-Tier Global ADM Leaders

BLEUM INC.

Ci&T

FPT Software Co. Ltd.

IBA Group

InterGlobe Technologies

KPIT Cummins Infosystems Ltd.

MERA



NIIT Technologies

ProKarma, Inc

SoftServe, Inc.

Sonata Software Limited

Specialty ADM Vendors

Achievo Corporation

Cybage Software Private Limited

DataArt

Endava UK Limited

Exigen Services

Freeborders, Inc.

Nagarro, Inc.

Persistent Systems Limited

Reksoft

ValueLabs

Top Global Infrastructure Management Vendors

Capgemini


CSC


Infosys Ltd.

Microland Limited

Leading Mid-tier Infrastructure Management Vendors

Aegis Limited


Collabera Inc

Genpact Limited


MindTree Limited

NIIT Technologies


Leading Global OPD Vendors

EPAM Systems Inc.

GlobalLogic

HCL Technologies

Infosys


Lionbridge

Persistent Systems Limited

Symphony Teleca Corp


Leading Mid-tier OPD Vendors

Beyondsoft Corporation

Cybage Software Private Limited

HorizontalsEnterprise Services (SAP, PeopleSoft, Oracle, Microsoft)Quality Assurance and Testing Services (QATS)Infrastructure Management Service (IMS)Business Intelligence & AnalyticsBusiness Process OutsourcingHuman Resource Information Technology / HR OutsourcingEnterprise Risk Management

CertificationsCMMI Level 5ISO 9001 ISO 27001SAS 70 Type IIPCI DSS

VerticalsBanking, Financial Services Travel and TransportationInsurance and HealthcareManufacturingEnergy and Utilities

Global IT Services and Consultancy Provider with the expertise and resources to meet and

exceed your expectations every time

PARTNER WITH A TEAMOF EXPERTS

www.hexaware.com



Globant

Hildebrando

iGATE Corporation

Luxoft

MindTree Limited

Leaders- Global Enterprise Applications Deployment

Capgemini

CSC


Infosys Ltd.


Leaders- Mid-market Enterprise Applications Deployment

EPAM Systems Inc.

Genpact Limited

Hexaware Technologies Limited

iGATE Corporation


iSoftStone Information Technology (Group) Co., Ltd

Neoris



Leading Engineering Services Vendors

Collabera Inc


Infosys Ltd.



iSoftStone Information Technology (Group) Co., Ltd


Neilsoft Limited

Global Leaders- Testing Services

Capgemini

CSC

iGATE Corporation

Infosys Ltd.

Mid-Tier Leaders- Testing Services

Beyondsoft Corporation

Collabera Inc

EPAM Systems Inc.


Hildebrando S.A

Luxoft

MindTree Limited



Neoris

Top Global BPO Leaders

Aegis Limited

Convergys Corporation

Expert Global Solutions

Genpact Limited

Sitel Operating Corporation

Stream Global Services

Xchanging Plc

Global BPO Challengers

Aditya Birla Minacs Worldwide Limited

Firstsource Solutions Ltd

Infosys Ltd.

NorthgateArinso

Sutherland Global Services, Inc.

VADS Business Process Sdn Bhd

WNS Global Services PVT. Ltd

Global BPO Niche Leaders

Corbus, LLC

Datamatics Global Services Limited


Indecomm Global Services (I) Pvt Ltd


Scicom (MSC) Berhad

Symphony BPO Solutions Sdn Bhd

Xceed

Zensar Technologies

Leading Mid-tier BPO Providers

Altisource Portfolio Solutions S.A

eClerx Services Ltd.

EXL Service Holding Inc.


Hinduja Global Solutions Limited

Quatrro Global Services Pvt. Ltd.

Serco Global Services

SPi Global

Syntel Inc.

Global Customer Management Leaders


Aegis Limited

Capgemini

Convergys Corporation



Expert Global Solutions

Firstsource Solutions Ltd

Genpact Limited


Sitel Operating Corporation

VADS Business Process Sdn Bhd

Mid-tier Customer Management Vendors




Infosys Ltd.

Scicom (MSC) Berhad

SPi Global


Xceed

Global FAO Vendors

Capgemini

EXL Service

Genpact Limited

Infosys Ltd.

WNS Global Services

Xchanging

Leading Mid-tier FAO Vendors






Global Leaders- Industry-specific BPO


Genpact Limited

Infosys Ltd.

Stream Global Services


Unisys

Industry-specific BPO Niche Leaders


Aegis Limited

Ajuba International





Indecomm Global Services (I) Pvt Ltd




Mindteck (India) Ltd.

Neusoft Corporation


SPi Global

Global Procurement Management Leaders

Capgemini

Corbus, LLC

Genpact Limited


Infosys Ltd.

WNS Global Services

Xchanging

Global HRO Vendors

Capgemini

NorthgateArinso

Global Knowledge Process Leaders


Capgemini

eClerx Services Ltd.

Genpact Limited

SPi Global

Syntel Inc.

Leaders- Specialty KPO

Aegis Limited

Affinity Express



Corbus, LLC



Infosys Ltd.






SpecialRepoRt

� | August 2012 GlobalServices

Segment

Segment analySiS Segment analySiS Segment analySiS Segment analySiSSegment analySiS Segment analySiS Segment analySiS Segment analySiS

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Segment analySiS Segment analySiS Segment analySiS Segment analySiS Segment analySiS


ADM


SegMent AnAlySiS

By Sourabh Chandra Pushp

ApplicAtion DevelopMent & MAintenAnce :on the RoAD to RecoveRy

Software development activities in the Application Development & Maintenance (ADM) Outsourcing space may get postponed in the current downturn, but it will return with a throttle effect when the economy recovers

SegMent AnAlySiS


ADM

IT market is going through a period

of massive change. As enterprise

software enters a great renaissance

period driven by mobility,

cloud computing and Software

as a Service (SaaS), software

manufacturers and developers are increasingly

turning to experts in product

development to help them deliver innovation and to

market faster.

Keith higginS chief marketing officer,

Symphony Services

Software development activities in

the Application Development &

Maintenance(ADM) Outsourcing space may

get postponed in the current downturn,

but it will return with a throttle effect when the

economy recovers.

IT environment is facing extreme cost pressures

with increased expectations and IT executives ex-

pect more from their ongoing IT applications. ADM

outsourcing offers the full scope of services that

accelerates IT spend return— development, imple-

mentation and management. It drives measurable

improvements in product quality, reducing defect

density and increasing development productivity.

Outsourced ADM contracts are said to improve

productivity by up to 45 percent while it reduces

IT-costs by as much as 50 percent.

ADM outsourcing is a proven means by which

companies can significantly reduce their costs,

continuously improve the performance, stability

and availability of their applications and free up

their existing IT-staff to focus on their strategic

initiatives. It allows customers to reduce the cost

and maintenance risk of all ongoing applications,

while still retaining much needed control of their

IT OPEX and core business focus.

the ADM MarketThe ADM market is expected to grow from $51 B in

2010 to approx $63 B by 2014 at a rate of 5.7 percent.

By 2015, Forrester expects the market for devel-

opment services to approach $69B USD.

The key ADM themes that dominated the

market in 2011 were Cloud, Agile, Security, Analyt-

ics. These themes have held sway as providers and

buyers both look at taking advantage of the trans-

forming AMD landscape. The explosion of technol-

ogy and digital content, more pervasive network

connectivity and the continued proliferation of

smart hand-held devices has completely reshaped

the ADM market and will continue to dominate.

The ADM segment is still the mainstay of the IT

outsourcing market. Led by US-based majors such

as IBM, Accenture, HP and Cognizant and India-

based offshore vendors like TCS, Infosys, Wipro and

HCL, ADM activity still constitutes a large chunk of

the overall IT outsourcing. Recent years have seen

the entry of other mid-tier vendors like Neoris,

Auriga and Softtek who have broken ground with

non-India offshore delivery. However, India contin-

ues to be the leading offshore location.

The in-house delivery of IT application, main-

tenance and processes are still dominant in 2012-

2013. Research carried by Horses for Sources

predicts 95% of ADM buyers reporting positive

outcomes. ADM outsourcing saw near around 35

percent inshore activity together with more than

30 percent outsourced activity as sourcing model

for managing the IT business. Companies have a

renewed focus on maintenance operations and

servicing existing applications is now of a greater

importance to them.

SegMent AnAlySiS


ADM

ADM Buyers are expecting nothing less than

great quality, superior customer service and most

important of all, top-notch solutions. In the coming

time, more contracts are expected to pass on to

emerging ADM destinations, like Brazil, Russia and

Eastern Europe.

The ADM industry is going through a signifi-

cant transformation in their licensing, delivery and

support models. Despite a trend towards increased

ADM outsourcing to lower-wage economies, the

cost of developing and maintaining applications

can still consume more than half of the total IT

budget.

The most notable theme that changed almost

all ongoing trends for ADM market is the Cloud.

With its on-demand, utility-pay for what you use

and resource-sharing model, Cloud has galva-

nized businesses and vendors across the industry

and ADM market landscape. All the leading ADM

players have in 2011-12 enabled sections of their

portfolio as cloud ADM service offerings with plans

in the pipeline to widen their capability for Cloud

ADM market. Other prominent ADM market trends

are- Enterprise App Stores and Desktop Services.

The Mobile and Cloud application develop-

ment is the hottest place to be in the IT industry in

the coming year. With the rise of productivity and

collaboration tools becoming more refined, open

source ADM market gets in the play easier than

ever. Open source and collaboration tools from

Dropbox to Linux-Ubuntu and to Cloud platforms

such as AWS Elastic Beanstalk, application develop-

ers across the globe are expecting this to follow

for coming years which clearly means new market

implementations ADM outsourcing.

ADM Buyers across geographies continued

expanding their operations. While ADM market

saw larger number of less-value deals, well-known

names in the ADM space signed greater number

of contract renewals. North America continued

to hold ace spot with the largest number of ADM

deals, next to Europe, on a year-to-year basis.

Cloud computing continued to be increasingly

adopted in newer ADM deals.

changing landscape: enterprise Applications Software“The global marketplace is still experiencing a se-

ries of conflicting and contrasting economic news

reports, and the full impact of the economic uncer-

tainty on the enterprise software markets may not

be readily assessable until the end of the first half

of 2012,” asserts Tom Eid, research vice president

at Gartner in the official press statement. Spending

in 2012 is anticipated to focus on industry-specific

applications; upgrades to established, mission-criti-

cal software; integrating and securing established

systems and infrastructure; and software as a serv-

ice (SaaS) deployments representing extensions to,

or replacement of, existing applications and new

solutions.

According to Gartner, the worldwide spending

on the enterprise application software is expected

to cross $120.4B in 2012, with a 4.5 percent in-

crease from 2011 spending of $115.2B.

With increasing number of organizations

demanding application’s functionality as a cloud-

based services rather than on-premises infrastruc-

ture, ADM vendors are offering more technology

as subscription-based solutions and “pay as you

go” ADM offerings. This is expected to be a much

needed step by ADM providers positioning them as

The wOrlDwIDe SPenDInG On The enTerPrISe APPlICATIOn SOfTwAre IS exPeCTeD TO CrOSS $120.4B In 2012, wITh A 4.5 PerCenT InCreASe frOM 2011 SPenDInG Of $115.2B

SegMent AnAlySiS


more cost-effective and as a way to counter the ef-

fects of economic recession. SaaS and cloud-based

services are helping established ADM vendors to

expand their overall revenue growth.

On the account of enhanced SaaS and cloud ap-

plication use, enterprise ADM market continues to

evolve. As tighter capital budgets demand accurate

leaner alternatives the ADM growth graph varies

within geographies.

cloud and Android Based Application DevelopmentCloud computing conversations are slowly mor-

phing the ADM market in terms of cloud comput-

ing application platforms. Much of its expectation,

cloud-based ADM are becoming an IT norm and

less of an exception. In the cloud world, software

development has become more complex in terms

of security, reliability, usability and performance

and will keep the software development industry

busy.

Ashok Saxena, Head, India Engineering Cen-

tre, Kronos opines how the whole ADM space has

changed to serve the market forces and meeting

end user expectations. Ashok says, “Most of the

cloud migrations we see today are applications

for physical infrastructure and are now taking full

advantage of the cloud possibilities. The ADM

market is experiencing an ongoing boom in soft-

ware development for cloud computing that takes

advantage of benefits but also issues that will open

up opportunity for new software development ver-

ticals. Industry experts believe, the impact of cloud

service on the ADM market will change the selling

and licensing of IT-applications, the way applica-

tion data are handled will undergo a major shift

which will induce the data driven applications into

the mainstream market.

However, for software development the un-

derlying challenges of Cloud will come into sharp

focus as Cloud’s increasing benefits and risks will

prompt the ADM providers to come to grips with

it.

Besides, Cloud Android is also accelerating the

ADM landscape. The unprecedented growth of An-

droid devices and the demand for suitable Android

applications are fueling a huge demand for ADM.

Ron DuPlain, Freelance Lead Android & Mobile

Web Engineer, says, “Today when everything is

centered around mobility, application develop-

ment has taken vital transformation, both in terms

when everyone is speaking

about reducing costs especially

overhead in particular,

application’s quality cannot be

compromised, and this realization

has led to a lot of focus

on application maintenance as a

discipline over the last few years.

AShoK SAxenAHead, India Engineering

Centre, Kronos

ClOuD COMPuTInG COnverSATIOnS Are SlOwly MOrPhInG The ADM MArkeT In TerMS Of ClOuD COMPuTInG APPlICATIOn PlATfOrMS

ADM


of development and strategy. Application develop-

ment companies are focused to help subscribers

realize the potential of rapidly evolving mobile

technologies.”

Application Maintenance and testingAll application products need sufficient mainte-

nance and both–investors and developers tend to

heavily focus on it.

There has been a lot of innovation in ADM

space and several maintenance tools and processes

have evolved which enhanced the maintenance

phase which in turn translates the overall quality

of the application.

The market for discrete application mainte-

nance worldwide is expected to experience solid

growth as cloud and mobility drive next phase of

evolution, according to a latest report from IDC

research. IDC estimates that global maintenance

and testing services spending reached $9.4 B in

2010, with projections for worldwide growth

estimated at a five-year compound annual growth

rate (CAGR) of 15.4% through 2015. While the U.S.

has led other regions in adoption of maintenance

services, in terms of both traditional and newer

cloud-based maintenance services, there is an

increase in regional interest and adoption of these

services in Canada, Latin America, Western Europe,

and parts of Asia-Pacific.

Independent maintenance and testing for appli-

cations is growing at 40 to 50 percent globally and

with expected growth of about 35 to 40 percent

in offshore locations. While various industry report

forecast various geographies to evolve as major

ADM locations. India has grown to become the larg-

est destination for outsourcing of software mainte-

nance and testing services, accounting for 32 per-

cent of the total global ADM outsourcing share. The

application maintenance industry for India is grow-

ing, export revenues and the number of employees

have doubled over the last four years in domestic

space which is projected to cross $1.5B by 2020. It’s

quite interesting to note that, US alone spends a

SegMent AnAlySiS


ADM

total of $59B on software maintenance. Of this total

spend, $13 B is outsourced as a service to the Asian

countries, India in particular. The ADM market has

demonstrated a CAGR of 19-23 percent year-on-year

growth, in comparison to 47 percent by the inde-

pendent maintenance and testing services.

Kalyana Rao Konda, Vice President, AppLabs,

says-”The consumer demands are leading to

technology advancements and fierce competition

between providers. The survival of providers has

become subjective to the quality of the product

with superior service. Software maintenance and

testing plays a vital role in providing reliability

and quality to consumers to ensure that they don’t

have a bad experience on using or buying the

product they like.”

The current competitive environment and

consumer demand for sophisticated applications is

putting increased pressure on businesses to deliver

quality apps at reduced costs and within shorter

time period. This ‘no scope for error’ environment

has increased the need for effective software test-

ing. Today, it has become one of the fastest grow-

ing areas of the corporate IT expenditure. On the

other hand, meeting customer expectations has

now become a challenge for enterprises across all

the industries due to the faster delivery cycles and

increasingly competitive landscape.

Enterprises operating across various industries

and geographies have now realized the need to

deliver quality products/applications and services to

meet customer expectations.

conclusionWith the economy of developed countries stagnat-

ing and the threat of recession retuning to major

global players, companies will continue to rely on

software development outsourcing and offshoring

for cost control, lean operations and scalability in

2012.

As cloud, SaaS, mobility and other trends fun-

damentally re-shape software development, there

is a large, growing market for specialized product

development specialists. 2012 is just the beginning

of some of these massive movements. There are a

bewildering range of technologies on the market

today. The good news is that the service industry is

becoming more and more specialized. Companies

that want to take advantage of the hottest initia-

tives today – be they Saas, cloud or enterprise mobil-

ity – can get all the assistance they need. The right

software development service providers will have

in-depth knowledge of all these platforms and the

competency to deploy them quickly and at a com-

petitive price. They will also offer outcome-based

engagement models that fit each client’s needs.

There has been a drastic shift

in the amount of development

being done in the integration and

testing stages in the lifecycle

of an IT project, compared to what

was happening ten years back.

This has resulted in an increased

demand for services on Data

management/BI/Analytics,

Integration and Testing sides of

the business, which will

continue to be key opportunity

areas for all organizations.

KRiShnAMuRthy R, Senior Vice President &

Head-Global Delivery, Collabera

ADM


ApplicAtion DevelopMent & MAintenAnce

ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnceApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce

ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnceApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnceApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce

ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce ApplicAtion Development & mAintenAnce

Top Global aDM leaDersCapgeminiInfosys ltd.HCl Technologies ltd.syntel Inc.Insigma Technology Co., ltdiGaTe CorporationCsC

Top MID-TIer aDM CoMpanIesChinasoft International ltd.epaM systems Inc.Infotech enterprisesMindTree limitedneorisneusoftITC InfotechVanceInfo TechnologiesZensarCollabera IncGenpact limited

Stretching Value. Scientifically.

ad

vert

ori

al

To be able to ‘differentiate’ innovatively and

effectively holds a key to attaining global

leadership in the business world. The natu-

ral reflex of a brick & mortar company is to

adopt a customer-centric ‘differentiator’. IT Service

companies behave a little different. The fiercely

contested battle for talent forces them to oscillate

between customer centric and employee-centric dif-

ferentiators. ”Pick any one of the two sides, and then

inherit the one from

the other,” goes the

hypothesis!

This differentiat-

ing tactic certifies

the vendor’s dual

robustness. The seeds

of Cybage thought

leadership are sown

in the innovativeness

of our ‘differentia-

tor’. We believe that

the organization’s

differentiator should

not be inherited from the visible

aesthetics but from the grass root

implementation of productivities.

The customer-centric and employee-centric dif-

ferentiators are like leaves and flowers with great

visual appeal but all the flourish and greenery is

at the mercy of the root’s productivity to absorb

nourishment.

To appreciate this pivotal role of productivity,

one needs to dig a little deeper where business

partnerships are fortified. Generally, there are three

variables that a customer juggles with to close on

a vendor. The first variable is the overall IT needs.

The second variable is the fact-file of the prospec-

tive vendor. The overlap between these two vari-

ables determines whether the vendor qualifies for

the next step in evaluation. The third variable is the

cost—the ratio of the fact-file vs. cost—which deter-

mines the probability of deal closure.

Unfortunately, there is one more key variable that

is often overlooked. This variable resides between

the second and third variable; it represents the effi-

ciency of the vendor to

leverage the fact-file

into relevant deliveries.

The customer’s loy-

alties are not with the

vendor’s fact-file but

tied to satisfactory

project deliveries at a

reasonable cost. In the

IT business world, this

delivery excellence

is broadly measured

under the following

attribute equation:

Quality, Speed, Consistency, Respon-

siveness, Attrition Risk, Scalability,

and Value-add—dividends captured

with ‘Cost’ in the denominator.

Cybage thought leadership is rooted in the

innovation applied to stretch ‘productivity’ of all

the above mentioned attributes that together lead

to customer’s delight and employee’s rewards.

The above attribute equation is comprehensively

optimized, implemented, and internalized organi-

zation-wide at Cybage through this sophisticated

business management software system called the

ExcelShore® Model of Operational Excellence.


Segment AnAlySiS

OPD mArket iS exPecteD tO reAch$19B By 2015, technology

analyst Forrester expects the market for product development services to approach $19B

By Smriti Sharma

The business of devel-

oping new and solu-

tion-customized software

is the nucleus of thriving

technology industry. Product develop-

ment plays a significant role in getting

economic returns as well as establishing market

influence. However, whilst introducing a new prod-

uct in the market a company is also putting itself at

marketing and development risk.

To ensure a company wins economic returns

and market influence

while staying away from

marketing and development

risk, it imperative to engineer the

right product, manage it across the

various phases of its lifecycle, manage

the copious risks, deliver the product faster to the

market and retaining the capacity to innovate the

product. The right product strategy is the only way

to success in the business of software products.

Product mangers have repeatedly taken their

OPD


There are a bewildering range

of technologies on the market

today. The good news is that the service industry

is becoming more and more

specialized. Companies that

want to take advantage of the hottest initiatives today can get all

the assistance they need.

keith higginSchief marketing officer,

Symphony Services

companies through the journey of transition from

traditional product development to value develop-

ment. This process calls for a lot more innovation

and this occurs during the stage of engineering.

Still the question remains why outsource? It

is outsourced, much like other services, for the

reasons of getting intellectual property in the

form of principles of excellence, best practices,

methodologies, process templates, engineering

roadmaps, monitoring tools, quality assurance

procedures- carefully applied across various

stages of product development, further resulting

in innovation.

Large Independent Software Vendors (ISVs)

are creating innovation across various domains

such as Cloud enablement, SaaS, Product Lifestyle

Management, etc.

This year the product development space is

expected to become increasingly fragmented

and specialized. Mobility, cloud computing and

Software as a Service (SaaS) continue to be the

drivers of this industry. Software manufacturers

are seeking advice from experts to assist them in

driving innovation to market faster and at a lower

cost. Experts are roped in for specific initiatives

revolving around technology, for example, mobil-

ity, cloud and SaaS, their industry, business and

vertical segments.

As software development is re-shaped by

cloud, SaaS, mobility, the demand for specialized

product development is increasing. Keith Higgins,

chief marketing officer, Symphony Services, stated

in another interview, “2012 is just the begin-

ning of some of these massive movements. There

are a bewildering range of technologies on the

market today. The good news is that the service

industry is becoming more and more specialized.

Companies that want to take advantage of the

hottest initiatives today – be they Saas, cloud

or enterprise mobility – can get all the assist-

ance they need. The right software development

service providers will have in-depth knowledge of

all these platforms and the competency to deploy

them quickly and at a competitive price. They will

also offer outcome-based engagement models

that fit each client’s needs.”

market Scenario During pre-crisis times, IT outsourcing was the most

frequently adopted strategy by large companies.

Today, ITO practice has found more support amongst

the mid-market. As for this segment, cost as well as

access to skills and services is extremely essential.

This market segment is also home to some of the

most exciting and current technology developments.

Taking advantage of this opportunity some of the

independent software vendors are expanding their

footprints in this space. Software companies who

have moved to cloud computing and SaaS have wit-

nessed significantly larger opportunities.

The pricing models offered by vendors are

outcome based pricing, revenue share pricing

and risk reward pricing. These pricing models

add to the attractiveness of partnerships. In-

creasingly, buyers are employing risk-reward

partnership model, where the vendors are


Segment AnAlySiS OPD

willing to absorb a certain amount of busi-

ness model risk, across the lifecycle of products.

OPDs are expanding in Asia and Europe. The

challenges that companies who have not made to

the outsourcing map of product development face

are poor client-vendor communication, delayed

project delivery, cultural differences etc.

In order to tackle these issues, face-to-face

communication with their vendor’s project man-

agement and project teams should be increased,

employing additional valuable resources, switching

to alternative software development methodol-

ogy, bringing in assistance (advisories) to enhance

vendor relationships, encouraging partnering with

different vendors to offer more cost-effective en-

gagement, etc.

Buyers while zeroing upon a geography should

keep in mind the following pointers: low costs

of software development and IT resources, avail-

ability of IT talent pool, positive references from

the fellow companies/local business community,

geographical and cultural proximity, strong re-

search and development (R&D) legacy, political and

economic stability, Intellectual Property (IP) secu-

rity, proficient English language skills etc.

Gartner’s study Predicts 2010: Agile and Cloud

Impact Application Development Directions, high-

lighted, “By 2012 ‘agile development methods will

be utilized in 80% of all software development

projects’. Although Scrum will continue gaining in

popularity over the coming years, organizations

will not be successful in their transition unless they

move toward a team-focused culture. Very few

organizations use a pure-Scrum approach and most

rely on a hybrid approach (waterfall and Agile).

Organizations struggle to implement true collabo-


Segment AnAlySiS OPD

ration in the context of globally distributed teams.

A situation that has amplified in recent years with

outsourcing and offshoring of software develop-

ment projects. On the other hand, teams who

have successfully moved to Agile see productivity

improvements especially in ‘the flexibility of the

development team to respond to shifting require-

ments’. This is especially true for web-based ap-

plication developments where rapid responses to a

changing environment are critical.”

Organizations need to make use of key agile

practices and invest in training and supportive

tools’ infrastructure. Those who do not will end in

long-term declines in quality and productivity.

top trends Cloud, SaaS and mobility has resulted in a lot

of investments and companies have started

generating new tools and technology. Many

organizations want to use these tools; however,

they do not have domain knowledge or financ-

es to integrate the best ones. Thus, companies

are moving to outsourcing partners to get the

specialist assistance they require. Over the next

12 months, it is expected that companies will

concentrate on building best-in-class technolo-

gies for their clients. They will then use these

innovative technologies to create products for

their customers as trusted partners.

According to the global consultancy Zinnov, 70

percent of ISVs look at industry benchmarks every

year to re-negotiate contracts with their services

partner. Increasingly in 2012 ISVs will be looking

to add rigorous Service Level Agreements (SLAs)

and other outcome-based conditions to the com-

mercial engagement model with their services

partners.

Higgins opined, “We predict this will create a sig-

nificant opportunity for specialist service provid-

ers, as more ISVs will move to a multi-source mod-

el involving a spectrum of trusted partners. ISVs

will actively seek out specialist help to address

specific pain points in their businesses, speed in-

novation and reduce costs. They will not hesitate

1.

2.

to call on the best talent available. Incumbency is

no longer the advantage it once was.”

According to a recent Gartner survey, 30 per-

cent of large organizations cited enterprise

mobility as their top business priority for 2012.

Higgins explains, in the past, the enterprise

tended to be a closed and homogenous place.

Employees would typically use one type of

device – like a Blackberry – to communicate

amongst themselves. Enterprises now have to

grapple with a dizzying array of business and

connected mobile devices, all of which need

to communicate seamlessly and securely with

one another. By outsourcing their enterprise

software mobility department, organizations

are trying to address this challenge. This year, a

large number of companies are buying enter-

prise mobility as a managed service.

Gartner predicts that 75 percent of all comput-

ing will be in public clouds by the year 2020.

Cloud computing has revolutionized the man-

ner in which companies operate. The manner

in which companies employ cloud technology

is changing too. A mixture of cloud applica-

tions, platforms and infrastructure is sourced

by organizations. As cloud-based companies

are becoming more specialized, they are

encapsulating cloud-based tools in their of-

ferings. There are approximately two million

users of Salesforce.com around the world and

25 million users of Google Apps. Company’s

products assist software developers to build

private development clouds. Software devel-

oper

The high adopted rate of personal health man-

agement systems has laid eggs for an increased

demand of new applications. Higgins predicted,

“By 2015, as many as 500 million smartphones

will have a health-related application on them.

The Veterans Administration in the US is plan-

ning to rollout 100,000 iPAD tablets across 152

hospitals. Next year, we expect to see a host of

new vendors enter the market with innovative

connected healthcare solutions.”.

3.

4.

5.

OPD


OutSOurceD PrODuct DevelOPment

Leading gLobaL oPd VendorsePaM systems inc.globalLogicHCL Technologiesinfosysinfotech enterprisesLionbridgePersistent systems Limitedsymphony Teleca CorpVanceinfo Technologies

Leading Mid-Tier oPd Vendorsbeyondsoft CorporationCybage software Private LimitedglobantHildebrandoigaTe CorporationLuxoftMindTree Limited

Hangzhou is located at southern wing of the Yangtze Delta region, which is the most prosperous area in Eastern China; and also the hub of transportation for airport, rail, road and inner-river in southeast China.

As the provincial capital city of Zhejiang, Hangzhou is a city with unique charm and extraordinary potential, enjoyed a long history and culture, unique geographical advantage, healthy natural environment, abundant science and education resources, and solid economic foundation. It ranked No.1 in “China mainland Best commercial City Ranking” by Forbes magazine, reelected “China’s Happiest Cities” for eight consecutive years, China’s top ten Creative City, China’s top ten Dynamic City and top ten low carbon Cities, the highest honor of the model city of Chinese people’s livelihood and achievements.

The city will take scientific development as the main theme and focus on adjusting the economic structures. Efforts will be put in to enrich people and increase the city’s competitiveness and social harmony. The urban-rural integration and internationalization strategy being the major means, the city will prioritize the well-being of citizens, emphasize the environmental protection, strengthen its innovative power, support its real economies, boost its cultural industries and uphold its open-up policy.

The urban-rural integration and internationalization mark high-level of urbanization, which also sets path for and facilitates the sustainable development. The two tasks must be embodied in every respect of the city’s social and economic development to subsequently optimize the allocation of production factors, invigorate the economic development, expand the development space and upgrade the development level, as a result of which the city’s people will share the modern civilization and happy lives.

To prioritize the well-being of citizens, the city will be dedicated to solving problems and addressing difficulties in the aim of enriching and benefiting people.

To protect the environment, the city will aim to create the first-class ecological, living, legal, administrative and business environment in order to improve its advantage in this aspect.

Demonstration City of Chinasourcing Hangzhou

Hangzhou, China

A City ofFinancial Delivery

Center

International Financial Outsourcing Center

To strengthen the innovative power, the city will promote the innovation in idea, technology, system, culture and service so as to improve its creativity and development power.

To support its real economies, the city will view real economies as the cornerstone, and continuously improve the core competitiveness through industrial structure upgrading.

To boost the cultural industries, the city will continue to explore its cultures and traditions in order to carry along and broaden. In addition, the city will seek to realize the cultural prosperity and development in a major degree for the improvement of soft power.

To uphold the open-up, the city will widen and broaden the degree of opening up, and view open-up as the power of reform, development and innovation.

In recent years, Hangzhou has issued a series of policies to focus on the implementation of the innovation-driven strategy, accelerate the development of innovative economy, and speed the development of Hangzhou ten major industries —— cultural and creative, tourism and leisure, financial services, e-commerce, information software, advanced equipment manufacturing industry, the Internet of Tings, biomedicine, energy saving, new energy; especially, vigorously promoted the priority development of service industry, optimizing the development, and the main engine role of the services sector in the Hangzhou Economic Development was more prominent.

By the end of 2011, there are 22 Hangzhou enterprises among the top 500 Chinese enterprises, 30 companies among the top 500 Chinese manufacturing enterprises, 37 enterprises among the top 500 Chinese service enterprises, 56 private enterprises among the top 500 private enterprises in China; more than 20 national services industry high-tech service industry base, the National Electronic Information Industry Base, and the Hangzhou national software industry base, etc.

segment analysis



inFRastRUCtURe management OUtsOURCing:ClOUD COmes WitH a PROmise

High volatile economic downturn coupled with the ease of cloud delivery is resulting in a surge of demand for IM outsourcing

ims


Most of services offered by

software vendors today will soon

be offered as ‘as-a-Service’ because

it gives cost efficiency which

is acceptable to most of the customers. As

such, enterprises will eventually

be forced to standardize their

infrastructure management

processes.

BRian J manningPresident & Managing

Director, CSC India

Although, the global macroeconomic

uncertainty will result in sluggish IM

outsourcing activity, the current infra-

structure market is evolving rapidly.

Combined with advances in standards-based infra-

structure, data center transformation, and utility-

based cloud computing, the outlook for IM market

continues to be dynamic and exciting.

The Global IM market is expected to touch $180

B by 2013 and to $355 B by 2016 from $269 B in

2011. Worldwide Remote Infrastructure Manage-

ment (RIM) Market size is also expected to be in

the mark of $95 -$108 B. This is accompanied by

worldwide IT spending forecast to total $3.7 tril-

lion in 2012, a 2.5 percent increase from 2011.

Emerging markets will generate $1.22 trillion

in IT spending in 2012, representing more than

31 percent of the worldwide total. The emerging

regions of Asia/Pacific, Latin America, the Middle

East and Central and Eastern Europe, continue to

show positive IM outsourcing momentum. And,

this will see half of emerging market IT spending

activity representing nearly $658 B for the year

2012. This reasons why the market remain far from

saturated.

Deals and ContractsMost of the IM deals over the last few months

saw a renewal in 2011-12. Large deals continue to

skew the average deal size. North America saw the

maximum activity for deals and contracts followed

by UK and Rest of Europe. The IT market, Infrastruc-

ture in particular will witness a significant growth.

This is supported by the fact- a significant number

of IT contracts is coming to end. Analysts estimate,

the TCV for the deals that would come to an end in

next 18 months is around US$85 B. “Infrastructure

outsourcing, data center and network tower deals

make up a significant portion of the ITO contracts

expiring in the near term,” says Ross Tisnovsky,

senior vice president, Everest Group. “Disruptive

next generation technologies, such as cloud com-

puting, will introduce new benefits and challenges

that the market didn’t see five years ago. As buy-

ers are looking for more than just cost savings.”

Infrastructure outsourcing constitutes some of the

largest ITO contracts coming to term in both North

America and Western Europe. Cloud computing will

have clear visible impact on IM market as Remote

infrastructure management outsourcing (RIMO)

as a model is maturing quickly and entering into a

phase of sustained growth.

The buyers’ ITO spending shift will be towards

Two ProMInenT TrendS THAT wIll SHAPe THe IM lAndSCAPe Are “AS-A-ServICe” offerInGS And enTerPrISe ServICeS

segment analysis


ims

the smaller deals which will challenge the margin

pressures for service providers. It’s very obvious

that the IM deals will increasingly be driven by

cloud and RIMO. In the past, technical and percep-

tion issues caused cloud-infrastructure adoption

challenges. But, things have changed now and

investments in new innovative solutions with hard

focus to boost the IM market.

Infrastructure spending will be driven by larger

buyers and will focus on outsourcing economics

and service provider consolidation. The BFSI

vertical in particular, will con-

tinue to be the dominant

infrastructure segment;

other verticals such as

healthcare and hos-

pitality will also

witness strong in-

frastructure ac-

tivity. Speaking

of geogra-

phies, North

America, will

continue to

dominate

whereas Asia

Pacific is ex-

pected to grow

much faster.

trends that will Reshape the im landscapeIT infrastructure outsourcing

has been one of the mainstays

of IT outsourcing industry.

Over the years, its composition

has changed significantly and

traditional infrastructure model

has undergone a massive change.

With advanced technologies remote

server management has become the

de facto standard for infrastructure

landscape. This has led to new names

coming with multiple infrastructure services models

and competing with traditional IT infrastructure

outsourcing firms. This trend will become stronger

in 2012.

Two prominent trends that will shape the IM

landscape are “As-a-Service” Offerings and Enter-

prise Services. Both trends are increasingly becom-

ing the norm for Infrastructure services and have

gained a considerable adoption momentum. Cloud

infrastructure trend has have been shaping up

quite aggressively and service providers have

already embraced while clients are

adopting it.

Infrastructure outsourc-

ing segment has consist-

ently been the fastest

growing segment

within IT services-

share in the over-

all IT services

segment has

increased from

about 15 per

cent in FY2008

to about 17 per

cent in FY2012.

Cloud Computing

Comes with a Promise

Cloud scripts the story of

Infrastructure Management

(IM) and there is a reason

for that. Cloud comput-

ing is fast emerging on the

IT infrastructure scenario and is

likely to play a disruptive role, with

maximum impact visible initially in data

center and applications projects.

As cloud emerges as a new stor-

age market, competition is increas-

ing with leading infrastructure

vendors. Although the external

segment analysis


private cloud infrastructure market is still in it’s

nascent stage, both small and large enterprises are

utilizing it heavily and are the primary consumers

of Cloud infrastructure.

By 2016, at least 50 percent of enterprise us-

ers will rely primarily on enterprise-mobile client

instead of a desktop client which means a clear

shift in the traditional IT infrastructure. It’s well

supported by the fact that more than one third

of the digital data would be stored on the cloud

infrastructure by 2016. In 2011 just 7 percent of

consumer’s digital data was stored in the Cloud

which will grow phenomenally to whooping 36

percent in 2016.

Recent IDC cloud research shows that world-

wide revenue from public IT cloud services ex-

ceeded $21.5 B in 2010 and will reach $72.9 B in

2015, representing a compound annual growth

rate (CAGR) of 27.6percent. This rapid growth rate

is over four times the projected growth for the

worldwide IT market as a whole (6.7percent). By

2015, one of every seven dollars spent on pack-

aged software, server, and storage offerings will be

through the public cloud model. The cloud move-

ment is about much more than the cloud. Analysts

predict an aggregation of Cloud offerings located

in the same data center to provide appropriate

levels of performance, security, manageability and

availability.

The cloud is no longer a competitive advantage,

but has become an operational necessity. Results

from a recent KPMG survey show that 81percent

of businesses are either planning their initial cloud

computing forays, are in early or advanced stages

of experimentation or have full implementations.

But before moving to the cloud, businesses first

need to examine their current IT infrastructure, us-

age and needs.

Worldwide software-as-a-service (SaaS) revenue

is forecast to reach $14.5 B in 2012, a 17.9 percent

increase from 2011 revenue of $12.3 B, according

to Gartner, Inc. SaaS-based delivery will experience

healthy growth through 2015, when worldwide

revenue is projected to reach $22.1 B.

Brian J Manning, President and Managing

Director, CSC India, says “While no one can pre-

dict exactly how the IT services marketplace will

change, we’re confident that client demand will

grow very rapidly for cloud computing. In 2012,

the global market for cloud services is predicted

to surge to US$148.8 B in 2014. This shows that

there will be a huge transformation in the business

model of any organization.”

In the year 2012, the impact of the shift to

cloud computing will become apparent. One of

the first obvious effects will be the cloud-driven

transformation of whole industries. Cloud applica-

tion platform/PaaS wars will intensify. Phil Fersht,

founder of outsourcing consultancy Horses for

Sources, calls cloud services the foundation for

next-generation enterprise sourcing solutions. He

believes cloud services will make traditional deliv-

ery of IT services more efficient and cost-effective.

He adds, “This new class of outsourcing has the po-

tential to unlock tremendous value for customers.”

Cloud approach to infrastructure

will change the traditional

landscape as they offer a

much cheaper alternative

to traditional infrastructure–

some businesses can cut their

operational costs by as much as 85

percent if they opt for cloud

infrastructure.

sHaRmila saHani mUlligan,

Founder & CEO, ClearStory Data

ims


The growth of platform as a service (PaaS) and

cloud computing are driving infrastructure market

forward. Organizations have now passed the first

stages and are implementing cloud architectures

for their enterprise and as a result, the traditional

role of the IT infrastructure is changing.

On the question of changing role of infrastruc-

ture services, Raman Sapra, Executive Director-

Strategy and M&A, Applications & BPO, Dell Serv-

ices asserts how cloud will play a game changer

role together with enterprise mobility and analyt-

ics. “With the rise of cloud, infrastructure manage-

ment services portfolio is bound to get a complete

makeover. Emphasis will lie more onto using cloud

infrastructure to overhaul the scope and economics

of traditional infrastructure services,” says Raman.

The way in which companies utilise cloud infra-

structure is changing too. Organisations are now

sourcing complete business solutions through the

combination of cloud applications, platforms and

infrastructure. Cloud approach to infrastructure

will change the traditional landscape as they offer

a much cheaper alternative to traditional infra-

structure– some businesses can cut their opera-

tional costs by as much as 85 percent if they opt for

cloud infrastructure.

Sharmila Sahani Mulligan, founder and

CEO,ClearStory Data, asserts, “The cloud makes it

possible to store and access data from anywhere,

so it can really benefit almost anyone or any verti-

cal. Also, it provides massive compute power that

previously would have only been affordable for

select companies.”

Large Internet companies were the first to

leverage the power of the cloud infrastructure.

By virtue of their business, they had the easiest

time understanding the pros and cons of the cloud

infrastructure, and they already had the talent in-

house to take advantage of it.

Cloud PredictionsThe ability to integrate business applications on

smartphone, tablets and other wireless devices

is predicted to accelerate SaaS adoption in the

corporate business environment. Forrester forecasts

that the global market for cloud computing will

grow from $40.7 B in 2011 to more than $241 B in

2020. The total size of the public cloud market will

grow from $25.5 B in 2011 to $159.3 B in 2020. IDC

predicts that 14.4percent of applications spending

will be SaaS-based in the same time period and the

cloud computing marketplace will reach $16.7B in

revenue by 2013, a compound annual growth rate

(CAGR) of 24 percent.

smB and CloudGone are the days of large enterprises holding the

keys to enterprise-class IT and services. The cloud

levels the playing field for SMBs. Today’s SMBs

believes in the cloudy abilities. In an independ-

ent survey by Microsoft, 76 Percent of SMBs agree

that they are the backbone of the economy and

almost half of them (53 Percent) expect sales figure

to grow within next 12-18 months. But, the most

important finding remains the awareness of the

Cloud Computing. Majority of them are increasingly

moving to the cloud.

USA-SMB cloud services market grew 25 percent

in 2011 and is asserted to reach $15.1B. Globally,

that figure is set to hit $68B by 2014, represent-

ing a CAGR of 26 percent. SMB Cloud Market in

Asia-Pacific is expected to reach US$16.5B in 2012.

The market for cloud solutions will grow at more

than twice the rate of traditional ICT technologies

THe GloBAl InfrASTruCTure MArkeT wIll Grow 4.4 PerCenT And reACH £463B By 2015 And wIll HIT A 4.5 Per CenT GrowTH rATe By 2013

segment analysis


ims

As the firms across the globe

scours the landscape for ways to focus on their core

competencies and maintain

their competitive edge, the most

significant value drivers in IT outsourcing

is remote infrastructure management

(rIM) - the off-premise, often off-continent,

management of IT infrastructure.

Ben tROWBRiDgeCEO-Alsbridge

in 2011 in these markets. In addition, this region

is expected to lead worldwide expansion of cloud

computing markets.

Cloud computing is a method to deliver the

crucial IT needs for any small and midsize busi-

nesses, for say-cheaper operational infrastructure

and opex agility. The most commonly used cloud

services are email, instant messaging, voice com-

munications, and backup.

The number of very small companies (2-10

employees) using paid cloud services will triple in

the next three years. Almost half of them agree

that cloud computing is going to become more

important for businesses such as theirs. Speaking of

the worldwide public cloud services market, SMBs

will drive the market over the next five years. Total

cloud market both private and public is expected to

reach $85B by 2015. In this time frame, the growth

will be driven by SMB consumption of cloud.

The biggest motivators for migration to the

cloud among SMBs are to save money, followed

by increases in productivity. Cloud allows SMBs to

gain access to infrastructure and other IT technolo-

gies that were only leveled for big IT enterprises.

By utilizing cloud services, SMBs can stop worrying

about the details of installation and operations for

sophisticated infrastructure and services. SMBs can

gain access to the high end IT services that requires

negligible amount of IT infrastructure.

Gartner predicts Small & Medium Business

(SMB) in the insurance industry will have a higher

rate of cloud adoption compared to their enter-

prise counterparts.

state of the Rim marketIn the recent years, a major development has been

the convergence of the Remote Infrastructure

Management Outsourcing (RIMO) and traditional

Infrastructure Outsourcing (IO) models. According

to Everest study on Infrastructure Management, the

RIMO model is gaining wider acceptance across the

buyers, which in turn is witnessed by an increased

number of IM deals. RIMO, as a model is matur-

ing quickly and entering into a phase of sustained

growth. External realities such as the advent of the

big data era and greatly enhanced role of mobility

in enterprises will shape solutions that providers

propose on renewed contracts. Recent deal sign-

ings are indicative of new trends, such as increas-

ing popularity of multi-sourcing, decline of “lift &

shift” models, reinvigorated attention to pricing

models, and increased importance accorded to

analytics.

Offshoring of infrastructure management

labor typically realizes a savings of 5 to 20 percent

compared with U.S. labor rates. But do not assume

these savings are instantaneous. RIM services, as

with outsourcing in general, typically provide a

gradual saving curve as delivery maturity is at-

tained, usually within the first two years of the

engagement.

The banking, financial services, and insurance

industries are leading RIM offshoring growth.

segment analysis


ims

These industries often referred to as the “financial

services industry,” have been early. RIM service

providers have recognized the opportunity to offer

follow-the-sun delivery models, highly distributed

and flexible monitoring and support models, and

in those cases where automation has not replaced

labor arbitrage, labor cost savings.

The industries that are slow to move toward

global RIM are those that have the lowest transac-

tion volumes, such as media and entertainment

and professional services. Other industries, such as

aerospace and defense and the public sectors, face

various degrees of government regulations that in-

hibit their adoption of global RIM. The healthcare

industry has concerns with the data security and

integrity being provided in foreign, nondomestic

locations. Healthcare also has much more compli-

cated revenue and cost recovery business models,

which has some influence on the adoption of

global RIM.

Even before the arrival of the glo-

bal economic downturn, senior

business leaders were being

challenged to increase prof-

itability and efficiency and

to drive operational costs

down. The allure of

outsourcing has always

included the prospect

of cost reduction

through efficiencies

and labor arbitrage.

Not surprisingly, the

increasing interest in

RIM services is essential-

ly due to the prospect of

reducing operational costs

and increasing productivity

in one IT function.

FutureAn open technology and business envi-

ronment, enabled by cloud computing and new

outsourcing models, is creating a radically new

approach to the present infrastructure market.

Most of the global infrastructure services outsourc-

ing providers have a strong vision and strategy for

cloud-based services for future offerings.

According to the latest report by technology

analyst firm Ovum, the global infrastructure mar-

ket will grow 4.4 per cent by 2015. Ovum’s Infra-

structure market trends research suggests that it

will reach £463 B by 2015 and will hit a 4.5 per cent

growth rate by 2013.

Although 2011 growth is still not back to pre-re-

cessionary levels, the market will return to healthy

growth of over 4.5 per cent in 2013.

ims


inFRastRUCtURe management OUtsOURCing




Top Global Infrastructure Management VendorsHCL Technologies Ltd.CompuCom Systems Inc.Infosys Ltd.Microland LimitedCSCCapgemini

Leading Mid-tier Infrastructure Management VendorsInsigma Technology Co., LTDSonata Software LimitedNIIT TechnologiesCollabera IncAegis LimitedMindTree LimitedGenpact LimitedChinasoft International Ltd.

IT OuTsOurcIngsTaTus QuO WOn’T susTaIn

Get ready for a post recession era where IT outsourcing will be adopted by organizations to help them work through financial challenges. Market will not only adopt itself to the new delivery models for user focused value of outsourcing services, the longer known status quo of IT Outsourcing market won’t sustain anymore


segmenT analysIs


While an economic slowdown places

a greater need on organizations

for process excellence and reduced

process costs, and organizations

typically recognize this, it also enhances all the

main inhibitors to IT outsourcing.

In the mature economies, the IT outsourcing

market focus is returning even more strongly to

cost reduction while minimizing client investment

and this market shift leads to massive end-to-end

process service delivery transformations.

Andrew Kokes, vice president, global product

management, Sitel articulated, “In 2012, outsourc-

ing will continue to see growth driven by cost

pressure, increasing complexity to deliver the latest

technologies and the need to align scalability to

market demand.” Significant increase in IT spends

in outsourcing are likely to come from emerging

companies and economies. These companies and

economies have matured to a level where they

can significantly upgrade their IT infrastructure or

want to get there soon enough by leveraging best

in class IT. In addition, enterprise mobility, cloud

computing, managed services, machine-to-machine

communications, product engineering service are

some of the areas that will witness growth.

IT Outsourcing market & Deals Worldwide IT outsourcing revenue totaled $246.6B

in 2011, a 7.8 percent increase from 2010 revenue

of $228.7B, according to Gartner, Inc. However, the

market for IT Outsourcing will go through major

transitions in 2012-13. A spending slowdown post

recession bounce-back of 2010-11 accompanied by

debt-related macroeconomic conditions of Europe

and potentially the US will accelerate the business

shift from older technologies and providers to new

names. Independent research shows, worldwide IT

spending is on pace to reach $3.6T in 2012, a 3 per-

cent increase from 2011 spending of $3.5 trillion.

Global tech purchases will be $2,122B in 2012,

which is up by Just 5 percent when compared to

previous year. US, Japan and China are said to be

on the top for IT purchases in 2012. The slowdown

in US and Europe economic growth could suppress

IT spends whereas, the emerging economies such

as India will account for $1.013T.

Chirajeet Sengupta, research director, Everest

Group voiced, “Instead of having a multitude of

contracts spread all over, buyers are increasingly

trying to consolidate their portfolio and implement

global contracts with uniform standard SLA lead-

ing to a fair amount of centralization of spends

and consequently cost savings for the client.”

Sengupta believes Infrastructure Outsourcing

is one of the areas where we can expect to see a

change, as there is a steady increase in offshoring.

Traditional onshore infrastructure support services

are going to go down. This entire wave of consoli-

dation will evolve a fair degree of system integra-

tion, process improvement and process optimiza-

tion. These three are some of the areas that are

expected to go up.

The outlook for 2013 is slightly brighter with in-

dependent research forecasting that software will

lead the tech market with 5.5 percent growth, fol-

lowed by IT outsourcing with 3.4 percent growth.

According to a new forecast from Forrester, Europe

will see 1.2 percent growth in IT purchases in 2012.

In terms of US dollars, the European market will

shrink by almost 6 percent, while the US and Asia

Pacific will both grow by more than 6 percent. The

In 2012, outsourcing will continue

to see growth driven by cost

pressure, increasing complexity to

deliver the latest technologies and the need to align

scalability to market demand.

anDreW KOKesvice president, global product

management, Sitel

IT OuTsOurcIng


study suggests the sluggish 1.2 percent growth in

the European ICT market will be reflected in all the

tech categories except IT outsourcing and hard-

ware maintenance and IT consulting and integra-

tion services, which will grow by 3.3 percent and

2.8 percent, respectively.

Recent data from TPI Index shows outsourc-

ing market improved in second quarter-2012 with

Total Contract Value (TCV) up by 7 percent year-

over-year data. Despite decline in major outsourc-

ing/IT spending activity, one can exhibit a marginal

growth in outsourcing especially for Asia Pacific

region where the market if largely driven by mega-

deals. The study reveals, 173 contract awards dur-

ing the second quarter represented a drop of 22

percent year-over-year and 14 percent sequentially.

However, the outsourcing market saw renewed

activity in mega-deals (TCV of $1B or contracts with

ACV of $100M or more).

“The outsourcing market showed improvement

during the second quarter on both a year-over-

year and sequential basis,” John Keppel, Partner

& President, Research and Managed Services, ISG.

He further added, however, the quarter’s growth

was not enough to prevent a first-half decline

in both value and activity from last year’s record

performance. By function area, IT outsourcing

contracts accounted for $13.1B in second-quar-

ter-2012 TCV, a rise of 6 percent year-over-year

but a decline of 5 percent sequentially. By region

and geographic distributions, Asia Pacific turned

out to be the fastest growth location during the

second quarter of 2012, driven by activity the

Telecom & Media and Banking, Financial Services

& Insurance (BFSI) verticals and Greater China

and Australia New Zealand sub-regions. Speak-

ing of other regions, America’s TCV of $8.3B rose

6 percent over the same quarter a year ago but

dropped 6 percent from the first quarter. Europe

and Middle East & Africa (EMEA) registered $8.4B

in TCV, a drop of 21 percent year-over-year and 11

percent sequentially.

ISG-TPI anticipates a soft third quarter for IT

outsourcing business whereas analysts believe

the coming fourth quarter will likely pick up the

IT outsourcing activity on the account of larger

deals waiting in the queue. In an another research

conducted by Everest Research, The IT outsourcing

markets will witness a significant number of con-

tracts coming to end of term, totaling more than

US$85B TCV during the next 18 months.

The study reasons, because buyers signed

progressively larger deals until the economic

slowdown struck, more than $US55B of contracts

will expire in the next 12 months, and this declines

actually shows a dip in size compared to preceding

year. “Infrastructure outsourcing, data center and

network tower deals make up a significant portion

of the ITO contracts expiring in the near term,”

quoted Ross Tisnovsky, senior vice president, Ever-

est Group.

The five factors that affect the IT Outsourcing deals

DAVE BROWN, KPMG

Partnership and innovation: Look for your service provider to step up as a true partner on innovation. That could mean making investments to solve problems or providing industry insights to help you excel against the competition.

Cloud computing: Cloud solutions are not one-size-fits-all, so make sure your contract has the right solution for your company’s needs.

Flexibility: As your business continually adapts to the marketplace, your ITO agreements should be adaptable as well – in terms of the commercial offering, contract terms, staffing and delivery location.

Price: It will always be important, but keep in mind that next-generation contracts usually don’t offer as much opportunity for price reductions as the first time around. Remember that a myopic focus on price can threaten the quality of operations.

Cross-functional service delivery: Consider how IT services can drive new value by improving back-office functions throughout the enterprise.

Source: blog.equaterra.com

segmenT analysIs


IT OuTsOurcIng

zone, proximity, cultural empathy and qual-

ity of work - and growing rapidly as

a result. The expectation is that

this trend will continue to

accelerate.

For example, Romania

is increasingly valuable

to organizations requir-

ing highly-transaction-

al, complex ‘agile’ IT

projects, with evolving

business requirements

and new technologies.

This enables them to

match their IT require-

ments with cost-effective,

swift and successful project

delivery.

As per Gartner research, IBM

maintained the No. 1 position, as

its revenue grew 7.8 percent, and

its revenue accounted for 10.9

As outsourcing market is just looking for more

than just cost savings, service providers will likely

find themselves in an ordeal for contract renewals

if they don’t adapt to the emerging preferences of

the market.

Alok Sinha, ITO & President at Xchanging

believes the Service providers too have been busy

bidding for new contracts. Many of these are truly

not new-contracts but existing contracts which

have been brought back on the table due to the

contractual terms signed earlier. The newer con-

tracts now have smaller parcels and in many cases

contracted across multiple providers. The renego-

tiated contracts also saw a variety of innovative

engagement models, investment lead and skin-

in-the-game models, outcomes based than pure

vanilla variants, etc., being adopted by the players.

However, on the other side of the spectrum there

were many too who were consolidating from mul-

tiple suppliers into one or two.

Vendor landscape John Cotterell, Chief Executive at Endava as-

serts, the economic climate is forcing

organizations to re-evaluate

their overseas IT outsourcing

options. Offshore regions,

such as India, are prov-

ing not suitable for

everything organiza-

tions want to out-

source. There is now

an increasing trend

of organizations

looking to balance

their location risk by

moving some IT spends

away from offshore, and

utilizing alternative, near-

shore talent pools in Eastern

Europe.

These nearshore locations

are becoming more attractive

for IT projects, due to time

Instead of having a multitude of

contracts spread all over, buyers are increasingly trying

to consolidate their portfolio and implement global

contracts with uniform standard

SLA leading to a fair amount of

centralization of spends and

consequently cost savings for the

client.

chIrajeeT sengupTaresearch director, Everest

Group

segmenT analysIs


IT OuTsOurcIng

percent of ITO revenue. IBM was the No. 1 ranked

provider in all regions. HP grew below the market

growth rate, but retained the No. 2 worldwide

market share position with 6.1 percent market

share. Fujitsu, helped by currency gains, overtook

CSC for the No. 3 worldwide market share position

in 2011. Bryan Britz, research director at Gartner

asserted in the press statement, the strategies will

vary as clients are likely to pursue hybrid cloud

strategies requiring providers to deliver some as-

set-light and some asset-heavy offerings — which

will result in varying growth trajectories among

competitors over the next several years.

In a media interview, Arjun Sethi, vice president

and partner in charge of A.T. Kearney’s strategic IT

practice, asserts about how the emergence of new

vendors are challenging traditional outsourcers

with solutions that deliver capabilities at a lower

price point and thus the need to manage IT opera-

tions seamlessly across a multi-vendor environment

has increased. He opines how independent cloud-

based IT service management tools could enable

CIOs to wrestle back control of IT once and for

all. Cloud-based service management has many

benefits to offer weary CIOs. Its proactive tools

enable them to gain control over vendor rela-

tionships, experience a far greater ability to

understand and serve the needs of business

users, and unleash a powerful new source of

information for contributing to the achieve-

ment of strategic goals.

Buyers will be lured by cost structures

and cloud portfolio from various pro-

viders trying to build a strong market

share. Bill Thomas, Partner, KPMG-UK

reports in the blog post about how

the shared services and outsourcing

markets are in a state of flux. He

asserts, “In the US, the economy does

seem to be about a year or two ahead

of Europe at the moment. While in

Latin America, Africa, Asia and Rus-

sia, there are extraordinary growth

stories.” Speaking of the negative

The Service providers too

have been busy bidding for new

contracts. Many of these are truly not new-contracts but existing contracts which have been brought back on

the table due to the contractual terms

signed earlier.

alOK sInhaITO & president, Xchanging

segmenT analysIs


sulting companies will continue to enjoy superior

market growth. As Cloud business solution providers

offer integration APIs, Cloud consultants/integrators

will produce a wide range of adapters, services and

toolkits to provide added value for clients. By 2013,

“non-traditional” service providers with specific

vertical and business IP will aggressively enter the

Cloud Business Services market. Saugatuck’s posi-

tion is that “non-traditional” services providers may

be the logical front-runners in the race for extend-

ing niche vertical services from the Cloud to clients.

The ongoing transition to cloud computing will

have a measurable impact on IT outsourcing as it

would alter the old age IT spending methodolo-

gies and it would also revitalize the traditional IT

global economic conditions and it’s impact on out-

sourcing and IT services, weak consumer demand

will continue to challenge organizations in 2012.

The most optimism on improving economic condi-

tions is in the Americas, and the least is in Europe.

The continuing emphasis on cost reduction from

key markets such as the U.S. combined with wage

inflation and staff attrition in India and China will

lead vendors to enter new lower cost locations

moving to parts of India for example which have

yet to experience BPO and may deliver both lower

cost and greater employee loyalty.

cloud computing and IT Outsourcing The emerging of cloud computing has a great

impact on outsourcing. Gartner’s forecast states

that by 2015 the low-cost cloud service will erode

15 percent income the outsourcing service provid-

ers. Cloud will change the general picture of the

pricing and economics of outsourcing.

Fifty percent of new outsourcing deals will be

significantly Cloud enabled by 2015, according to a

newly released report from Saugatuck Technology

Inc., titled “The Cloud and Business Services: Key

Trends and Directions Through 2015.” Saugatuck

Technology notes that the IT and BPO services

market is undergoing a period of deep structural

change and this is bringing change in the market

positions and business models of traditional serv-

ices providers. Findings from the report show that

Indian providers will be some of the most aggres-

sive innovators in PaaS through 2013. By leveraging

Cloud delivery models and client trust these provid-

ers will attempt to break their linear headcount-to-

revenue business models. The study also indicate

that through 2013, pure-play Cloud consulting

companies will continue to enjoy superior market

growth. Through 2013, Indian providers will be

some of the most aggressive innovators in PaaS.

The Indian services providers will take advantage of

Cloud delivery models and client trust to break their

linear headcount-to-revenue business models. The

study reveals through 2013, pure-play Cloud con-

The economic climate is forcing

organizations to re-evaluate their overseas IT outsourcing

options. Offshore regions, such as

India, are proving not suitable

for everything organizations

want to outsource. There is now an increasing trend of organizations

looking to balance their location risk by moving some IT spends away

from offshore, and utilizing alternative,

nearshore talent pools in Eastern

Europe.

jOhn cOTTerellchief executive officer, Endava

IT OuTsOurcIng


delivery to cloud-based offerings. Not only this,

this shift to cloud is altering market behaviors and

is posing fresh challenges for traditional sourcing

providers. The cloud will bring integration to out-

sourcing industry in terms of innovation.

New research from the London School of

Economics and Accenture finds that the cloud will

have a strong near-term impact on the majority of

organizations. Cloud will escalate the importance

of delivering effective service—the quality of the

customer experience—as a differentiator of suppli-

ers in the IT industry. That, in turn, will change the

character of the IT Outsourcing industry.

conclusion- cloud, smaller Deals and Third party sourcing models Other factors that would have high impact on IT

Outsourcing are cloud adoption, smaller deals

and captive sourcing models. In the past, technical

and perception issues have caused cloud adoption

challenges. But continued capital investments will

result in new and sophisticated solutions that will

lead to new hybrid models and new integration

approaches, making cloud adoption more main-

stream. The rapidly accelerating use of enterprise

mobility, social networking and cloud services in

workplaces will increasingly require integration

into mainstream corporate networks, driving more

corporate spend in this area.

Smaller deals will be the talk of the town, in

2012, macroeconomic factors could force reduced IT

spend, with buyers doing smaller number of deals

with simpler pricing models, amid strategic conver-

gence between offshore, MNC service providers.

Global sourcing stakeholders will continue to pursue

new locations due to talent, cost arbitrage and risk

diversification-related considerations.

Companies will continue adoption of hybrid

captive/third-party sourcing models in 2012, and

efforts will be made to improve captive value by

focusing on high-value processes. Captive invest-

ments will continue with the majority of setups

and expansions occurring in the Asia Pacific and

CEE geographies in the year to come.

“The IT outsourcing market has matured and

price is no longer the foremost driver. Instead,

next-generation outsourcing deals are about

improving service delivery, managing risk, staying

current with the IT market, and positioning your

business for an uncertain future.”- Dave Brown,

Principal, KPMG.

Get ready for a post recession era where out-

sourcing will be adopted by organizations to help

them work through financial challenges.

What John Willmott, CEO Nelson Hall expects to see in outsourcing in 2012:

Single digit growth in the mature economies with an emphasis on quick sub-process wins rather than major transformation, with double-digit growth in the emerging and growth economies.

Increased acceleration to new lower-cost delivery locations both onshore, to meet branding and political pressures, and offshore to re-establish high levels of labor arbitrage.

Increased adoption of BPaaS, both embedded within existing end-to-end services and also increasingly in standalone form, and SaaS in ITO.

Continuing emphasis on certainty of outcome in short timescales within the mature economies with process benchmarking and roadmaps key factors in establishing certainty of outcome.

segmenT analysIs


IT OuTsOurcIng

IT OuTsOurcIng

Top Global ITO LeadersCSCInfosys Ltd.HCL Technologies Ltd.CompuCom Systems Inc.CapgeminiUnisys

SEGMENT ANALYSIS


CoNTACT CENTEr ouTSourCING:GrowTh MoMENTuM CoNTINuES AMIdST TurbuLENCE

From a post recession to a transformational phase- the global contact center industry marches ahead in tough times as enterprises gear up to increase their customer focus

By Smita Vasudevan

CoNTACT CENTrE ouTSourCING


Demand for services provided

from offshore (non-U.S.)

geographies remains strong.

Convergys continues to see demand for the

Philippines, Latin America and India.

MIkE ChoLAkvice president, Convergys

Analytics

The last two years saw the contact center

industry moving through a tough yet

interesting phase. With 2010 being the

year of gradual recovery post recession

and 2011 being the year that sparked some new

transformations. This year is probably going to be

all the more interesting as we see the impact of all

these combined forces coming to fore – technology

advancements, integration of multiple communica-

tion channels, the power of analytics and the social

media puzzle.

The good news is that amidst a sluggish global

economy, the contact center industry hasn’t lost its

growth momentum. In fact, if industry experts are

to be believed, recessionary fears might pave the

way for outsourcing growth, as enterprises look at

optimizing the cost of servicing customers and at

the same time increase their focus on improved cus-

tomer experience. “Despite the difficulties in 2010

and 2011, market participants have expressed high

expectations for multi-year engagements with new

and existing clients into 2012 going forward,” says

Michael DeSalles,Principal Analyst, Frost & Sullivan.

A notable change over last year is the way in

which contact centers are transforming themselves

to become a more strategic part of an organization

rather than just being a seen as a ‘call center’. The

idea is to attract and retain customers by offering

them the right type of experience, irrespective of

what communication channel is being used. This

might call for some investments in the short run

but can also go a long way in building customer

loyalty and brand image.

Krishna Baidya, industry manager for ICT, Frost

& Sullivan APAC, reveals, ”End customers still value

speed, accuracy and ease of use, but they added a

few elements: the convenience of performing ever-

more-complex transactions on the go, personal-

ized service at every instance, and seamless move-

ment among various channels with a consistent

experience at each.” The emergence of non-voice

channels and automated technologies have taken

customer care interactions to another level and the

expectations have never been this high.

Market ScanCost efficiency and language skills continue to be

the drivers. Asia Pacific, North America, Latin Amer-

ica and Europe continue to be the most prominent

destinations for contact centers. The APAC region

exhibits huge potential for growth and is estimated

to be the fastest growing market for contact centers

in the coming years. India, China and Philippines

will be the key locations. According to Frost and

Sullivan, the APAC market showed 8% growth in

2011 and is expected to grow at around 10% CAGR

through 2017, while the North American contact

center industry is expected to grow by 3.5% from

2010 to 2017. Latin America remains a prominent

location for contact centers, attracting both near-

shore and onshore demand and is expected to grow

at 10.8 percent through 2017.

What is expected is a combination of offshore

and onshore. High-value complex interactions are

expected to remain onshore or nearshore, while

high volume work is more likely to be sent offshore

to reduce costs.

Across verticals, Telecommunication has the

largest demand for third party contact center

services. Healthcare and financial sector are other

major contributors to growth in demand.

SEGMENT ANALYSIS


CCo Expanding Into Emerging EconomiesEnterprises operating in the EMEA are likely to

face increased complexities as each region exhibits

a different level of maturity. For emerging mar-

kets like Eastern Europe, there needs to be a good

understanding of rules of the land. This will drive

outsourcing to third party service providers.

Some emerging locations for contact centers are:

APAC - The Philippines, Malaysia

Europe - Serbia, Poland, Bulgaria , Romania

America (near shore) – Central America and

Caribbean

Philippines Vs IndiaThere is a lot of hype surrounding the Philippines’

contact center industry. For years, India was the

location of choice for its high-skilled, low cost

workforce, with few emerging competitors. But its

only now that the threat has become so visible in

the form of Philippines. According to Steve Barker,

general manager, Sitel, “More recently, the Philip-

pines overtook India in business process outsourc-

ing (BPO). The Contact Center Association reported

that the Philippines voice revenue doubled over

recent years and now exceeds India by more than

$200 million.” The reason can be a very high affinity

between Philippines and the United States. Com-

panies that are operating in Philippines are now

trying to replicate the tactics that proved successful

in India. Indian service providers are of the view that

the contact center industry in India is much more

matured and Philippines, though currently growing

at a higher rate, lacks technical capabilities.

key drivers for CCoThe major drivers for contact center outsourcing in

2012 will be:

Optimizing the cost of servicing customers.

Concentrate on core business areas, while rely-

ing on experts for non core areas like customer

service

Access to better technologies and cloud based

services

Some Important Contact Center Deals in 2012

Deals Contract Value

Universal American & C3 $10 million

UK Government & Xerox $20 million

Airtel Africa & Avaya Not available

We see no major threat from Philippines.

India’s contact center industry is going to be more multidimensional while Philippines’

industrial growth is starting to taper off.

VIjAY NArSAPurstrategic business practice

head, CS, Infosys BPO,

It is going to be a combination

of several parameters-speed

of conducting analytics and quick recommendations, real-time customer feedback, premium

support, and technological advances for

increasing sales or reducing costs

rAMMohAN NATArAjANSVP, business transformation,

Firstsource Solutions



channels. This information is helping enterprises

decode complex customer behavior and forms the

basis for framing future customer service strategies.

Predictive analytic tools allow call center agents

to identify customer concerns even before he says

hello. Convergys believes that harnessing the power

of “Big Data” will be a key trend in 2012.

The Transition from Voice to Non VoiceInteractions in contact centers are no longer

restricted to the four walls of a contact center.

Voice, the most favored medium of interaction, is

increasingly being replaced by a plethora of op-

tions like web chats, voice mail, online self service

tools, social media and so on. The whole idea is

to make customer interactions simpler and faster.

But is voice going to be lost in this quest for better

customer experience? Cholak, reveals, “While 2011

Convergys Customer Scorecard Research found

that consumers clearly still prefer to talk to agents

when dealing with a company, their interest in

other channels is strong.”

Not only is an increased preference for non

voice channels but increased efforts are also being

Key focus is likely to be in stitching

different forms of analytics across

the organization to leverage new

found actionable insights, possibly in

real-time, to make smarter decisions

throughout organization and

enhance customer experience.

krIShNA bAIdYAindustry manager, ICT, Frost &

Sullivan APAC,

Search For Improved Customer Experience drives InvestmentsThe ultimate aim for enterprises today is to create

a great customer experience and how well they

are able to do this will decide their ability to retain

and attract customers in the long run. Cost is a big

concern but there is also a growing realization that

offering the right customer experience can do a lot

in improving margins. Numerous surveys support

the fact that customers are ready to pay a little

extra for being served well.

With the explosion of new communication

channels, a big challenge for enterprises and serv-

ice providers would be to offer an optimal custom-

er experience on all these channels. Cholak says,

“The experience needs to be consistently applied

across every touchpoint—customers need “any-

time, anywhere” care. Investments in this area will

be a major trend to watch out for in 2012. There

can be no single way to great customer experience.

The Power of “big data”Analytics is playing a major role in filtering out

useful information from the large pool of unstruc-

tured data coming out of multiple communication

With easy access to real-time

information, a new generation

of ‘always-on’ consumers is more

empowered and demanding than

ever. This trend is on the rise as social media proliferates,

both online and on mobile, across

all age groups and demographics.

ANdrEw kokESglobal product management,

Sitel

SEGMENT ANALYSIS



made by enterprises to cut down call volumes in

order to reduce costs. Although non-voice interac-

tions are going up at an alarming rate, it is not

likely to takeover voice anytime soon. Experts

say that if the percentage ratio is around 80-20

right now, this is expected to shift to 60-40 by

2015. Narsapur adds, “Non voice communication

is expanding at an alarming rate. So the situa-

tion is not inconceivable where the two will be

very close in volumes.” But one thing is clear now.

Voice is no longer going to dominate customer

interactions, its only going to be the part of a big-

ger service offering.

New ways to Interact While 2011 Convergys Customer Scorecard Re-

search found that consumers clearly still prefer

to talk to agents when dealing with a company,

their interest in other channels is strong, with 13%

saying they’ve used mobile applications or text

messaging for customer care, 11% saying they’ve

used social media for customer care, and 7% saying

they’ve used webcam or video support with an

agent for customer care.

humanization of Technology Enterprises are using technology to interact and

engage with their customers in innovative ways, so

that cost is optimized and the effort is much lesser.

Artificial intelligence tools and Self service options

allow customers to look

for solutions and resolve

queries on their own and

cut down the dependence

on agents.

But where to draw the

line? Subramanya. C, Chief

Technology Officer, Hinduja

Global Solutions, says, “All

a customer wants from us

is to ‘know her’, ‘help her’

and ‘remember her’. The

knowing and remembering

parts can always be auto-

mated. However, helping always involves human

touch.” So striking the right balance between

automation and live support is going to be the

key. Sitel shares a similar opinion that the idea will

be to cut down costs through technology without

sacrificing the human touch.

The Need For “Super Agents” Nothing is going to eliminate the need for agents

in a contact center. In fact the agent’s role has only

become more complex now with the emergence

of multiple channels. Cholak, says,“The use of

alternate channels for customer care will undoubt-

edly continue to grow, but the agent will remain

a critical focal point in a diverse range of chan-

nels.” Agents have to be trained not for one but

every type of interaction possible. Whatever be

the medium that a customer opts for, the agent

has to be prepared to listen and deliver the right

kind of response. What these changes mean for

service providers is that they need to train contact

center agents for each and every channel of interac-

tion. Cholak adds that the need today is for ‘super

agents’ that are adept at all interaction methods,

especially in handling interactions with the ultimate

multitasking communicators, the Millennials. “These

agents could be moved around a call center to ac-

count for channel volume changes in a given client’s

program, driven by new product launches and other

high traffic, multichannel events” he says.

Contact Center Technologies Helping Enterprises

Convergys shares some real world examples of how technology has helped improve client key performance indicators:

A large North American telecommunications company saw a 27% acceptance rate for highly targeted IPTV and DSL cross-sells in their retail stores after implementing a Convergys Cross-sell/Upsell Solution

A top 10 North American retail bank implemented the Convergys Intelligent Self-Service Solution and increased IVR containment from 89% to 93%, resulting in a substantial annual savings

One of the largest PC manufacturer in the world experienced a 32% increase in the average number of posts worked per agent per week using the Convergys Social Interactions Solution

CyberMedia Announces its new Platformto Subscribe Magazines on iPad, Android & PC

http://digisub.ciol.com

For collaboration opportunities please get in touch with Manish Verma [email protected]

BIOSPECTRUMVOICE&DATADATAQUEST PCQUEST

SEGMENT ANALYSIS



Social Media PuzzleSocial media means big business today. Lots of

interactions happen every moment and you never

know how and what is going to have an impact on

the image of your enterprise. A very high percent-

age of customers are turning to social media sites

and forums to solve problems, search for informa-

tion and voice complaints. And this is acting as a

wake up call for enterprises to build up their pres-

ence and create a social media strategy.

And this presents the big challenge - How to

make sense of all the data. What if a social media

strategy backfires? These are questions to be an-

swered before enterprises decide to take the leap.

Contact Centers Migrate to the ‘cloud’The combination of BPO and platform based

services, BPaaS, is gaining traction more than ever.

There is increased pressure from every corner to

look for newer cost saving options and this has to

be done without compromising on service qual-

ity. As cloud offerings mature and its benefits get

acknowledged, contact center operations too are

gradually being migrated to the cloud.

Cost reduction is the prime driver, followed

by scalability and easier call center management.

Gartner research predicts that by 2013 at least 75%

of customer-focused call centers will use a form of

the cloud in their call centers.

Baidya says, “More solution vendors will offer

applications in the cloud and offer customers with

choices suiting their business needs and scale at

that time. Global service providers and large sys-

tem integrators are likely to proactively promote

such solutions to customers.”

The outlook The year is definitely not going to be a

dormant one with lots of transitions

happening. A lot of effort will be on

establishing a multiple channel strat-

egy that gives a unified view of

all the different interaction

channels being used by a cus-

tomer. Automation will con-

tinue both in voice and non

voice areas, though the scope will be more in non

voice. There are no signs of non voice channels

completely taking over voice in the near future,

but its expected to take a more dominant shape.

Social media still needs to evolve completely as a

customer interaction channel yet will be attract-

ing significant investments.

Top CCo Trends in 2012Enterprises will invest for better customer expe-

rience

A higher proportion of interactions moving to

non voice channels

Demand for offshore locations remain strong,

nearshore scores on multiple language skills

Increased efforts will be put in to harness the

power of Big Data

Possibility of clients going for consolidation of

vendors for better manageability

Combined use of agent, analytics and tech-

nology will likely be the strategy for service

providers.


CoNTACT CENTEr ouTSourCING




Global Customer Management LeadersAditya Birla Minacs Worldwide LimitedAegis LimitedCapgeminiConvergys CorporationExpert Global SolutionsFirstsource Solutions LtdGenpact LimitedHinduja Global Solutions LimitedSitel Operating CorporationVADS Business Proces Sdn Bhd

Mid-tier Customer Management VendorsAltisource Portfolio Solutions S.ACompuCom Systems Inc.HCL Technologies Ltd.Infosys Ltd.Scicom (MSC) BerhadSPi GlobalSutherland Global Services, Inc.Xceed

FAO:All SignS SuggeSt MAturity By Smriti Sharma

In 2011, ACV grew 11 percent punctuated by an all-time high in contract extensions and expansions

SegMent AnAlySiS


Key reasons behind the

‘denominator effect’ are

reduction in new contract signings,

reduction in average size of

new multi-process FAO contracts, and risk-averse phased approach to FAO.

AbhiShek MenOnresearch director, Everest

Group

The global Finance and Accounting Out-

sourcing (FAO) market echoed success

in 2010 with 18 percent growth (ACV).

However, in 2011 this growth diminished

when the market grew by mere 11 percent (ACV).

The year 2012 is expected to bring along a positive

wave of prosperity as the FAO space is projected to

rebound by 10-15 percent (ACV).

According to a new analysis titled Finance &

Accounting Outsourcing Annual Report 2012

by Everest Group, “The multi-process FAO mar-

ket is projected to rebound by 10-15 percent and

top $4 to $4.5B in annual contract value (ACV) in

2012. 2011 saw the market reach an all-time high

in contract extensions that along with contract

expansions, represented 70 percent of ACV growth

in 2011.”

The FAO market reached $3.8B in ACV in 2011,

representing about $32B in total FAO spending. Last

year also witnessed a drop in total contract values

(TCV) of new engagements in comparison to 2010.

Abhishek Menon, research director, Everest

Group explained the slow growth rate of 2011

is not a sign of worry but a sign of movement

towards maturity. He highlighted, “Key reasons be-

hind the ‘denominator effect’ are reduction in new

contract signings, reduction in average size of new

multi-process FAO contracts, and risk-averse phased

approach to FAO.”

In 2011, 72 new contracts were signed and

there were 126 extensions/renewals. The study

predicts organic growth to continue as contracts

valued $7.3B or more are up for extension within

the next three years.

Saurabh Gupta, vice president, Everest Group,

articulated, “Although the market witnessed

slower than expected growth levels last year, we

nevertheless saw strong growth with nearly 200

contracts for new, extended and renewed con-

tracts. Along with fewer new contracts signed and

some terminations, we also saw a drop in size of

multi-process contracts largely due to cautious buy-

ers opting for risk-averse phased approaches.”

In current scenario, the deals are fragmented.

Explaining this further, R U Srinivas,chief executive

officer & executive director, Caliber Point, Hexa-

ware BPO, articulated. “More single process (e.g.

Accounts Payable) contracts are evaluated sepa-

rately; Full-scale FAO deals have become fewer.

The market is gradually evolving, with a number

of service providers augmenting capabilities to

provide technology enabled solutions and con-

sulting, apart from usual business processes. This

is also supplemented by the fact that there is now

abundant availability of talent at offshore with

significant domain knowledge. So providers have

a scope to play in a larger field and higher up in

the value chain. Moreover, a number of providers

are building their expertise in FAO within specific

industries, and even positioning themselves as

niche offerings.”

the Service Providers’ territory Last year 60 percent of fresh FAO contracts were

signed by companies in the revenue bracket of less

than $5B.

Accenture, IBM and Genpact continue to have

the strongest foothold in this space. However, as

per the same report, in the last five years, the mar-

ket share of the top three providers has reduced

from 65 percent to 50 percent. 2011’s highest new

contracts had Accenture, Capgemini and Infosys

F&A OutSOurcing


BPO’s name as service providers. Accenture, TCS,

and IBM accounted for about 50 percent of total

contract value signed in 2011, including new con-

tracts, renewals and extensions.

Market leader Accenture claims its scale,

integration and specialization continues to dif-

ferentiate it in the market. Talking about their

success cards, Tony Chambliss, global offering

lead for F&A BPO, Accenture, pointed, “We have

extensive global delivery capabilities, provid-

ing a full suite of F&A BPO capabilities across all

industries from transaction processing through to

high value finance and analytics. In addition, we

bring our clients an integrated solution including

consulting and BPO that generates business out-

comes and end-to-end transformation that results

in true value, improving the performance of the

client’s business.”

He added, “Accenture’s technology delivery

experts have skills and tools to implement enabling

technology. Accenture also has extended expertise

in complementary areas to ensure successful solu-

tion delivery,such as change management and

workforce training. These capabilities, along with

the Accenture Global Delivery Network, combine to

deliver efficient and effective F&A BPO operations.”

Based on the YoY movement of different serv-

ice providers on the PEAK Matrix, Everest Group

identified ‘2012 FAO Market Star Performers’ as Ac-

centure, Capgemini, Genpact, IBM and TCS. Other

vendors whose performance significantly enhanced

on the FAO PEAK MATRIX are EXL Service, HCL,

Infosys, and WNS.

David Borowski, senior associate, Pace Harmon,

speaking about service providers said, “Multi-tow-

er outsourcing providers, e.g., IBM, Accenture, pro-

vide IT and business process outsourcing, as well

as a variety of other types of services and products

(e.g., technology, consulting). These providers

often offer comprehensive global delivery services,

significant brand recognition, and an opportunity

to leverage varied capabilities. India-based general

outsourcing providers, e.g., Wipro, Infosys, TCS,

offer a broad array of BPO and ITO capabilities, as

well as other professional services.”

He added, “Many of these providers have

evolved because of initial IT capabilities that have

expanded, either organically or through acquisi-

tion, into competitive BPO expertise. Outsourcing

providers with a more direct focus on BPO, e.g.,

WNS, Genpact, were often captive shared services

functions that spun off from parent companies

to provide back office services as a commercial

offering. FAO specialists, who focus on a particu-

lar F&A service tower, often stem from a compel-

ling technology-based differentiator. Examples

include API for procure-to-pay expertise and VWA

for order-to-cash expertise (prior to the Capgemi-

ni acquisition).”

Hexaware BPO’s strategy for 2012 vs 2011 has

changed with increased focus on FAO; they are

strongly undertaking an Account Based Mining

approach to cross-sell/ up-sell Finance & Account-

ing services within our existing customer base.

Also, Hexaware is deploying an Offshore-onshore

delivery model, supported by our strong network

of partners. Our Go-to-Market is based on transfor-

mation/ consulting oriented pitch, showcasing our

expertise in creating value apart from cost savings.

The difference between the market leaders and

major contenders is diminishing.

Gartner, Inc.’s 2012 reported titled, ‘Magic

Quadrant for Finance and Accounting BPO,’

stamped the following organizations as leaders:

Many of these providers have

evolved because of initial IT

capabilities that have expanded,

either organically or through acquisition,

into competitive BPO expertise.

DAviD bOrOwSkisenior associate, Pace Harmon

SegMent AnAlySiS


Accenture, ACS, A Xerox Company, IBM, Genpact,

Capgemini, Infosys Ltd., WNS and Wipro. Niche

players identified: HP, Steria, OPI, Cognizant, HCL

Technologies and Intelenet.

Gartner research highlighted, “Leaders are per-

forming well today, both with a clear vision of mar-

ket direction and by actively building competencies

to sustain their leaders position in the market. The

comprehensive F&A BPO players in this quadrant

generally share superior market understanding,

have a global client base, an extensive network

of well-distributed and highly populated global

delivery centers catering for multiple languages, a

good balance of transactional and high-end F&A

delivery, and innovative well-communicated and

marketed sales offerings.”

Previous year eyed some strategic M&A activity,

for example: Capgemini-VWA, EXL-OPI, Serco-In-

telenet, and iGate-Patni.

Menon speaking about the service provider

landscape added, “While the market continues to

be led by three service providers (Accenture, Gen-

pact, and IBM), other service providers are aggres-

sively expanding their market share. As a result,

in the last few years, the market share of the top

three service providers declined from 64 percent in

2005 to 50 percent in 2011.”

Service provider’s in order to differentiate

themselves are creating innovation across three

dimensions. These dimensions, as per Everest, are

non-linear growth, differentiated offering, and

new buyer segments.

the SMb SpaceSMB segments adoption rate of FAO doubled over

the previous year. One of the prominent service

providers in this space is Quatrro. Speaking about

Quatrro’s approach to the mid-market, Monica

F&A OutSOurcing


Kashyap, senior vice president, new product de-

velopment and operations, Quatrro said, “Study-

ing the mid-market space, we realized that one

key issue this segment faced was the lack of right

technology. One reason they had not outsourced

F&A, while they had outsourced payrolls, is that

they do not have the technology that can allow

finance outsourcing, they may not have the right

financial strength, to have the right technology,

to be able to outsource it, to leverage it etc. To

do FAO, it was important for us to arm ourselves

with the right processes systems and technology,

so, that we could approach the mid-market with

this offer.”

Further voiced, Neeraj Sahgal, general manag-

er-technologies, Quatrro, “Most of the large play-

ers in this market are targeting the Fortune 500

or top thousand clients. These clients do have the

ability to go buy one of finest accounting pack-

age or an ERP deployed across all organizations.

We approach the mid-market segment saying

we know you do not have the strength to buy a

SAP or oracle finance but we do. This way we can

work thousand such clients and give them the

capability. Then, they can use some of the best

practices that SAP or any other Tier 1 platform

has to offer. We help them in doing end-to-end

financial transaction; we process their financials

SegMent AnAlySiS


Clients are increasingly

taking an end-to-end process view

of their finance operations and therefore we’re

providing an expanded scope of processes—as well as bundling of services such

as F&A and procurement—to

achieve greater savings.

tOny chAMbliSSglobal offering lead for F&A

BPO, Accenture

end-to-end, save tax processes and filling of

returns etc. We take care of all those particular

statutory requirements.”

industries Last year’s leading verticals were manufactur-

ing, hi-tech & telecom, professional services, and

financial services. These verticals accounted for 60

percent of the market. Professional services is a

relatively a new industry that is gaining traction.

Accenture embraces experience in more than

forty industries covering communications, media

& technology, financial services, health and public

service, consumer goods, retail, utilities, chemi-

cals and energy. In recent times, Accenture noted

particular interest in F&A BPO from the high-tech,

telcom, manufacturing and retail sectors.

Genpact provides F&A expertise across many

verticals such as manufacturing, pharmaceutical,

consumer product goods (CPG), retail, insurance

and financial service.

Quatrro caters to retail, manufacturing, profes-

sional services, hotel, auto, educational institu-

tions, not for profit organizations, grocery etc.

Some of Steria’s big clients come from health-

care, telco and media, banking and retail.

For HGS, FAO’s end-to-end accounting the area

is equity/fund advisory companies and minor subsi-

dies of MNCs. In the case of volume transaction it is

the BFSI sector.

the Models As the FAO space matures, the value proposition

moves away from cost and thus solutions

transform too.

Everest report stated that, beyond transaction-

intensive processes (AP, AR and GL), judgment-

intenstive processes such as FP&A were increasing

included in FAO contracts. The trend towards

end-to-end solutions (P2P, O2C, R2R) continued

to gain momentum as opposed to a traditional

piecemeal solution.

Service providers are now employing process-

agnostic solutions across different process areas.

Everest report coined Wipro, Capgemini, and TCS

as the leaders in innovation with the use of new

tools and technologies.

Chambliss talking about different models of

implementing FAO Accenture has employed ar-

ticulated, “Accenture is helping clients consolidate

more back office processes, leveraging the shared

services model, hybrid BPO/shared services model,

and bundling BPO and IT outsourcing. Clients are

increasingly taking an end-to-end process view

of their finance operations and therefore we’re

providing an expanded scope of processes—as well

as bundling of services such as F&A and procure-

ment—to achieve greater savings. Another exam-

ple is moving toward business outcome based solu-

tions, enabling the F&A areas to become strategic

to the value they can generate for the business.”

HGS FAO Solutions have employed two types of

FAO. Sridhar Krishnamurthy, executive vice presi-

dent, strategic initiatives, HGS shared, “One is the

end-to-end accounting model where we act as the

CFO role including accounting advisory on statuto-

F&A OutSOurcing


ry compliances and fund management. The second

type of practice is volume transactions where we

take up the AP processes like Vendor Payments &

Employee Reimbursements.”

technology MattersTechnologies play in this domain has advanced

from the basic ‘tie-and-run’ model to an ‘augmen-

tation’ model. Menon pointed, “In 2011, technol-

ogy augmentation had become the new “nor-

mal”. Nearly 45 percent of the contracts in 2011

leveraged add-on tools such as workflow engines,

interfaces, document digitization, business intel-

ligence tools, user portals/dashboards, and project-

management tools.”

He added, “While most FAO buyers prefer a

technology augmentation approach, there exist

situations where buyers are amenable to plat-

form-based FAO. Year 2011 witnessed a signifi-

cant increase in adoption of platform-based FAO

solutions, primarily driven by increased adoption

in the mid-market and SMB segment (revenue less

than US$5B)”

Many organizations’ technology landscape is a

cocktail of their developed tools and best-of-breed,

third-party applications. For example Accenture is

flexible with the software they use. Their technol-

ogy architecture is designed with a ‘wrap-around

IndIA COnTInueS TO Be The MOST PrOMInenT deSTInATIOn On The F&A MAP. OF The FAO FTeS, 65% Are lOCATed In IndIA ACrOSS nOrTh AMerICA And eurOPe.

approach’ to interface with a variety of ERP

solutions. Their toolsets give flexibility to interact

seamlessly with client’s existing ERPs and has flex-

ibility to perform analytics within the toolsets not

being limited by clients ERPs.

Quatrro has created a platform. Sahgal ex-

plained, “This is a platform which sits in front of

the SAP. It controls the entire operational process,

so there are two set of player. One is the client

who can access this portal, he has access to all his

financial reports, he can transit with us as well as

transit all the systems using this portal. He need

not understand the nuisances of what SAP does,

or any other tier 1 platform would offer, he has a

simple interface- he knows the five things that are

critical to him and he simply goes ahead and does

it. Also, he has access to all the reports at any given

point of time.”

He added, “The other piece is Quatrro people.

That is where they access the services component

of this portal. We define our own set of workflows:

who is going to process it, how it is going be done,

somebody is going to do a review make sure all the

numbers match. Portal itself has a whole set of log-

ics that are build in to make sure the transactions

the leADer’S DOMAinAccenture For more than 20 years, Accenture has been providing F&A BPO. It has an established portfolio of more than 80 finance outsourcing contracts for approximately 70 clients in 39 different languages across 150 countries. These clients are served by more than 10,000 skilled professionals.

Mike Salvino, group chief executive of BPO, Accenture said, “Accenture’s positioning in the F&A BPO Leaders quadrant by Gartner underscores our ability to bring industry expertise, analytics and innovation to our clients, leading to better business insights and outcomes, which we call fourth generation BPO. We feel it also highlights our ability to leverage the cloud, social media, mobility and analytics to drive value for our clients, which we call fifth generation BPO.”

SegMent AnAlySiS


Infosys In 2004, Infosys BPO’s F&A unit was established. It has 11 centers in more than 7 countries such as India, China, the Philippines, the Czech Republic, Poland, Mexico and Brazil. The company employs approximately 7,000 FTEs in F&A BPO.

Gautam Thakkar, vice president and head, enterprise services, Infosys BPO asserted, “We consider this recognition as a validation of the strategic investments that we have made in the F&A practice across industry verticals. Our focus on developing and deploying cutting-edge tools have helped enhance the effectiveness and efficiency of our processes, while minimizing the risk of running accounting operations through a global delivery model.”

WnS In 1996, WNS began providing F&A BPO services and in a short period of time (fiscal 2012) F&A accounted for 19 percent of WNS’s total revenue (net of repair payments). It embraces 7,000 employees delivering from simple transactions to complex analytical processes, including industry-specific processes to more than 70 global clients.

Keshav R. Murugesh, group CEO, WNS stated, “We believe that our capability and position as a leader in the FAO space is a result of our differentiated market approach coupled with investments designed to provide our clients with the right blend of expertise, talent and technology to outperform their competition,”

Talking about what is helping WNS, Tasneem Lakdawalla, executive vice president, Finance and Accounting, WNS articulated, “Our vertically-led strategy is helping us deliver F&A offerings supported by industry-specific domain expertise, and enabling WNS to better service our clients. We will continue to invest in tools, technology, resources and strategic partnerships which will help drive platform-based solutions, increased business process efficiencies and differentiated service offerings for F&A,”

TCSTCS’ BPO revenue is over $1.1B and it houses 40,000+ employees. It has presence across 11 countries from where it delivers services to more than 200+ customers.

Abid Ali Neemuchwala, global head, TCS BPO business opined, “TCS’s investments in building industry vertical expertise in F&A,

our proven transformation methodology - FORE™ delivering best in class processes, our business model innovation of F&A Platform solution delivering Business Process as a service (BPaaS), and unrelenting focus on analytics, risk and controllership are all geared to meet the customer’s needs for an effective and efficient Finance function.”

GenpactSince 1997, Genpact has been selling F&A services. It delivers these services from 25 centers in 10 countries. In the past 18 months, it has signed many new deals and accomplished 100 percent contract renewals or extensions.

Tiger Tyagarajan, president and CEO, Genpact, articulated, “Combined with our widespread global delivery capabilities and deep domain expertise in many vertical industries, Genpact’s Smart Enterprise Processes (SEPSM) framework drives additional excellence in F&A processes and helps our clients achieve bottom-line impact.”

Xerox Xerox Services houses 24,000 professionals. They operate out of over 90 global service centers, in multiple languages in North America, Central America, South America, Europe, and Asia Pacific.

Kent Schnacker, executive vice president, ACS financial services group said, “In a communications era where consumers expect all bills, invoices and documents to be delivered exactly when and how they prefer, our finance and accounting services help organizations deliver quality service on a consistent basis. Our clients count on us to help keep their customers satisfied.”

Capgemini Christopher Stancombe, global head, FAO, Capgemini, said: “We deliver valuable business outcomes to the benefit of our clients efficiently and effectively within a strongly controlled environment.”

Capgemini’s BPO has over 13,000 BPO professionals providing services to customers worldwide. These services are provided in 36 languages and are delivered from centers located in Australia, Brazil, Canada, Chile, China, Guatemala, India, Poland, Sweden and the United States.

Wipro Wipro BPO operates from 30 centers in 11 countries, including Poland, Romania, China, Japan, Philippines, Australia, U.S, Canada, Brazil, Mexico and India (Bangalore, Delhi, Chennai, Pune, Hyderabad, Kolkata and Mumbai).

Manoj Punja, svp and global head, Wipro BPO echoed, “Our ability to leverage our extensive technology capabilities and shaping the vision for the next generation of F&A outsourcing is a clear differentiator. We feel this recognition confirms our strategy and the significant investments that we have made in our F&A practice to improve our offering and add measurable business value to our clients.”

F&A OutSOurcing


Many businesses are refocusing attention on global outsourcing not only to reduce costs but to capitalize on globalizing operations and transformation processes. While cost arbitrage continues to be a key driver, client expectation from F&A BPO is now to transform processes to align to client’s business outcomes and it is becoming increasingly standard to bundle transformation elements into contracts as a standard offering. Clients are also increasingly taking an end-to-end view of their finance operations with outsourcing bundling contracts growing.

We expect the role of technology to expand, resulting in a stronger push to software-as-a-service and mobility catalyzing further evolution of BPO. Technology enablement of F&A BPO is now becoming pivotal to development of services and there is an increase in the number contracts where service providers will provide application wrappers to enhance process standardization for buyers.

As buyers become more experienced managing F&A BPO processes they will increase their contract scope to include more customized and complex processes including management reporting processes, analytics and other specialized services. Accenture F&A BPO is seeing an increased demand for analytics information derived from the financial processes we manage to enhance client decisions and support functions—the ability to turn data into new streams of value. For example, we have built and piloted the Accenture BPO Navigator—a central portal that provides real time visibility into a client’s business performance, including operational and contractual metrics and analytics that is delivered in our private Cloud. This tool provides clients with both a snapshot and detailed view of their business performance and the dashboard shows metric thresholds, trends and compares data across business unit or country. Through analytics, we can analyze this data to provide insights to aid key business decisions. For F&A BPO clients we can process their invoices, collate the spend, map that back to their strategic sourcing agreements and identify rogue spend outside that agreement to drive savings

—tony chamblissglobal offering lead for

F&A BPO, Accenture

Increased penetration: F&A Outsourcing has not reached all industries and there are a lot of avenues where it can still prove to be useful. Untapped fields like SMEs have yet to be included in the targeted market segments of outsourcing providers.

Offshore acceleration: With over 60% of global players outsourcing to India. It is safe to assume that in today’s business environment, it is the norm to outsource finance and accounting functions.

SAAS - Software-as-a-Service and cloud-based solutions: They are gaining influence in the industry. Software programs for finance and accounting used to be unaffected by technological advancement

Buyer-side sophistication: Buyers are becoming more sophisticated and demanding in terms of service. A more informed market in a very competitive landscape increases the bargaining power of consumers, further resulting to lowering prices.

Maybe more F&A captive sales: More and more companies choose to establish an entire F&A team offshore. Divestments such as Citi Group, Lehman, AIG, however, are becoming more common as companies take advantage of the exibility offered by outsourcing.

—Sachdev Ramakrishnadirector, marketing,

Steria india

inDuStry trenDS PreDict eD by the inDuStry

SegMent AnAlySiS


The trend is major outsourcing opportunities are in the AP processes. Organizations have had these internally for years and are planning to move it outside to an offsite locations to seek more streamlined operations (arising out of best practices implemented by FAO Agencies) and to seek a better cost advantage.

—Sridhar krishnamurthy

executive vice president, strategic initiatives, HGS

We are witnessing frequent inclusion of ‘onsite component’ in recent deals. In other words, the hybrid model (combination of onshore/offshore; shared services/outsourcing) is having a good traction.

As highlighted, the comprehensive ‘full-scale’ deals have become fewer – buyer are evaluating single processes (Accounts Payable, Record-to-Report, etc.) as opposed to multiple processes at one go.

Another trend is interest towards transformational sourcing, to improve/re-structure the business processes, with help of technology enablement and domain knowledge.

—r u Srinivaschief executive officer &

executive director, Caliber Point, Hexaware BPO

Financial Planning & Analysis (FP&A) represents an emerging area in FAO. FAO has moved beyond just AP, AR and GL to realize more benefits.

An end-to-end process-driven approach to FAO is also emerging as opposed to a traditional functional and piecemeal approach. Nearly 50 percent of the new contracts in 2011 had end-to-end elements (Procure-to-Pay, Order-to-Cash, Record-to-Report)

Industry-specific F&A solutions: There is an increasing trend of “verticalization” in FAO, moving away from the traditional assumption that FAO is a horizontal function. Buyers now consider F&A process as unique to their industry. Thus, domain expertise is emerging as an important source of value from service providers. As a result, many service providers are coming up with industry-specific FAO solutions (e.g., focused offering in travel, telecom, utility etc.). Service providers are also aligning their sales and delivery team along key verticals to make a targeted market approach.

The adoption of transaction-based and performance-based pricing has increased. The changing F&A solution elements are driving buyers to reassess pricing structure and introduce pricing that provides flexibility and/or business-oriented performance.

—Abhishek Menon, research director, Everest

Group

inDuStry trenDS PreDict eD by the inDuStry

F&A OutSOurcing


F&A OutSOurcing

that are going in the system are all authentic are

all absolutely fine. This is the entire mechanism,

by virtue of this, what we are able to do is we are

able to streamline our process; it has also increased

the efficiency tremendously. Our total time to the

manual activities that were earlier involved has all

gone out of the window.”

clients and Delivery locationsThe largest client-base of this sector continues to

be based in US, followed by Western Europe. There

is also an increased trend from buyers in Asia-Pa-

cific region and in Latin America.

In the previous year, approximately 50 percent of

the fresh contacts had elements of end-to-end scope:

Procure-to-Pay, Order-to-Cash, Record-to-Report.

There was a noticeable shift from an offshore-centric

to a balanced onshore-nearshore-offshore model.

As per the Everest report, buyers continue to

focus on an end-to-end process-driven approach

to FAO, as opposed to a traditional functional and

piecemeal approach. Also, while nearly 90 percent

of the FAO FTE mix continues to be offshore-/near-

shore-centric, 2011 witnessed a significant increase

in onshore delivery center.

Recent times have also noted a significant

change in buyer expectation. A major transforma-

tion is that cost saving is no more the only need

or driver. This in turn has resulted in the change in

F&A solution elements too. Menon stated:

High-end processes such as FP&A are increas-

ingly getting included, primarily during extensions.

Adopting more end-to-end approach as op-

posed to siloed and piecemeal approach in or-

der to increase visibility, streamline, and to have

stronger link to overall business performance.

He further added, “Buyers are cautious and

they prefer phased approach as opposed to big-

bang approach. This is also reflected in new con-

tract signings and contract extensions/renewals:

We saw increase in the number of single process con-

tracts signed in 2010-2011 compared to previous years.

Also, the size of contracts extended/renewed was

larger than the size of original contracts because of

scope and scale expansion during renewals.”

India continues to be the most prominent des-

tination on the F&A map. 65 percent of the FAO

FTEs are located in India. Southeast Asia witnessed

a significant increase in the number of delivery

centers. Across North America and Europe, there is

a ramp-up in onshore delivery capabilities.

Steria has presence across three leading de-

livery locations in India namely Noida, Chennai

and Pune. Sachdev Ramakrishna, director, mar-

keting, Steria India talking about India being the

preferred location said, “India is the preferred

location for outsourcing F&A services in terms of

financial attractiveness, people skills availability

as well as the business environment. Hence more

and more delivery centers are being setup here.

Moreover, due to rapid growth in credit card,

telecom infrastructure and retail banking penetra-

tion in India, there is a phenomenal increase in

transaction processing of payments and collections

in India domestic market as well.”

HGS is planning to extend its geographical pres-

ence and also the delivery locations. Their two year

plan is to look for clients from other countries and

the same time to zero on cities that can give the

required number of knowledgeable resources &

skill sets for these types of transaction. They are re-

ferring to the volume transactions here. The end to

end accounting model will have to be in the same

location where the client office is situated.

AS Per The eVereST rePOrT, BuyerS COnTInue TO FOCuS On An end-TO-end PrOCeSS-drIVen APPrOACh TO FAO, AS OPPOSed TO A TrAdITIOnAl FunCTIOnAl And PIeCeMeAl APPrOACh

SegMent AnAlySiS


F&A OutSOurcing

Leading Mid-tier FAO VendorsDatamatics Global Services Ltd.HCL Technologies Ltd.Insigma Technology Co., LTDQuatrro Global Services Pvt. Ltd.Sutherland Global Services, Inc.

Global FAO VendorsCapgeminiEXL ServiceGenpact LimitedInfosys Ltd.WNS Global ServicesXchanging

Segment AnAlySiS


induStry- Specific BpO: Being explOred AggreSSively

The ever increasing pressure to curtail costs and the expectation to drive better business outcomes is acting as a big push for the global industry-specific BPO

By Smriti Sharma, Smita Vasudevan, Sourabh C. Pushpa

induStry Specific BpO


Cost arbitrage, maturity in service provider offerings

and rising buyer expectations to

get more out of outsourcing

deals are acting as major drivers

for the growth of industry-specific

BPO

rAmeSh gOpAlAnexecutive vice president, international operations, Hinduja Global Solutions

Enterprises in almost all verticals are

currently going through a tough phase,

plagued by mounting cost pressures

and customer expectations. What they

need is a unique solution tailor made to their

problems - a generalized BPO offering from

their service providers is not going to work

anymore. As the situation prevails, an increasing

number of enterprises are exploring industry-

specific BPO opportunities to drive better busi-

ness outcomes. According to Horses for Sources

research, there are strong signs of increased

adoption of industry-specific BPO solutions, most

notably in Financial Services and Life Sciences,

and many other emerging verticals.

What is driving demand for industry-specific BpO?Almost all industries are undergoing radical

changes and there is increasing competition

within each industry. This makes it imperative

for enterprises to look for newer avenues of

increasing efficiency and cutting down costs.

This is a major reason why domain specific of-

ferings are being aggressively pursued. Enter-

prises understand that acquiring domain specific

knowledge can help them add value and be a

differentiating factor for their business.

Financial services, Healthcare, Life Sciences,

Media, Entertainment and Retail are some of

the verticals expected to contribute largely to

the growth of industry-specific offerings in the

near future.

As the outsourcing industry matures, enter-

prises are looking beyond traditional service

offerings. They are now looking for services that

cater to the unique needs of the industry that

they operate in. Service providers are making

significant investments in acquiring domain spe-

cific capabilities. Interestingly, industry-specific

BPO is the segment where lots of new providers

are entering through niche offerings. Even the

established IT vendors have been developing

BPO niches in this space. This is evident espe-

cially in the Healthcare and Life Sciences space. The

market is also witnessing the trend towards com-

bining technology and BPO into a single service

offering. Bundling together BPO processes along

with IT offerings is giving service providers the op-

portunity to expand their footprints.

Although enterprises seem to be a lot more

industry focused now, the trend towards industry-

specific BPO is not new. Its been there for very long,

especially in the areas like mortgage processing

and healthcare. According to Gopalan, “Healthcare

has always been a very industry-focused vertical. It

started primarily with transcription processing and

evolved into customer service and collections.”

And especially after the US healthcare reforms,

the industry is undergoing lots of transformations

and the need for industry-specific skills is ever

increasing. Most of the players catering to health-

care clients are doing it through industry-specific

processes. “In the healthcare space, industry-spe-

cific processes account for more than 80 percent of

the market share, while horizontal services are only

less than 20 percent” adds Gopalan.

market estimates & geographiesOver the next 5 years, vertical specific BPO is ex-

pected to offer a larger opportunity as compared

Segment AnAlySiS


to horizontal BPO. According to the Nasscom-Ever-

est India BPO Study- Roadmap 2012, the segment

presents an opportunity of US$ 145 – 175 B, which

is around 60 percent of the entire market.

Across geographies, India and Philippines are

the only two prominent offshore destinations. Im-

portant nearshore destinations include South and

Central America and South Africa.

Some prominent industry-specific processeshealthcare outsourcing: According to a report

published by US based marketresearch.com, the glo-

bal healthcare BPO market is growing at a healthy

CAGR of 21.4 percent. Healthcare payer outsourcing

market will also grow at about 30 percent in the

forecast period. Healthcare provider outsourcing

has the highest growth rate of 31.9 percent from

2011 to 2016 due to conversion from ICD-9 coding

system to ICD-10 and ICD-10 coding system to be

implemented by October 2013 in the US.

Talking about what has worked for this indus-

try, Tony Mira, Group CEO and founder of Ajuba

Solutions, said, “The regulatory changes in the US

have been a driver for the healthcare outsourcing

industry. There are two main reasons – one is ICD-

10, this has created a lot of confusion and concern

with the healthcare community in US because the

level of education,

sophistication, and

training is much

higher than the ICD-

9. The people who

are ICD-9 trained

are having difficulty

in passing for the

ICD-10 level. They

are facing difficulty

with the exist-

ing coding in US. This is creating opportunity for

offshore company. Second, with the new offshore

reform the level of patients is expected to increase

by almost 30B. This is going to create an increase

of work for people in healthcare industry and they

are going to need professional vendors who will be

able to handle this work effectively.”

Overall, the healthcare BPO market is crumbled

and small players are trying to make their presence

felt, especially in India and China.

Accenture (Ireland), Medusind (U.S.), GeBBS

Healthcare (U.S.), Omega Healthcare (India), and

Inventive (U.S.).

The pharmaceutical

outsourcing market

is captured by play-

ers such as Quintiles

(U.S.), Covance (U.S.),

PPD (U.S.), Parexel

(U.S.), Charles Rivers

Laboratories (U.S.)

and ICON (Ireland) in

the CRO space... are

some of the major players of this space.

publishing outsourcing: The e-book market was

one of the few markets that grew during recession.

Since then, this segment has been witnessing a

positive growth and publishers have been looking

European companies have

explored locations like Ireland,

Scotland and Spain - for specific

savings in costs and geographic

proximity and South Africa is

emerging as a close favorite for the UK

companies due to the cultural affinity and good quality of

the services

SAnjAy venkAtArAmAn president, Asia customer

management, Firstsource

OVErAll, ThE hEAlThCArE BPO mArKET IS CrUmBlEd And SmAll PlAyErS ArE TryInG TO mAKE ThEIr PrESEnCE fElT, ESPECIAlly In IndIA And ChInA



Key Trends In industry-specific Specific BPO

Increased adoption in verticals like Healthcare and life sciences that are undergoing profound changes

Significant investments by service providers in enhancing and acquiring industry-specific capabilities. Industry-specific analytics and customer intelligence services are evolving

Combining BPO with technology as a single offering is a growing trend that we see in the industry-specific BPO space

BPO service providers are joining hands with clients for end-to-end service delivery and also, they are scaling up their business competency levels in handling high value business projects

Checks, Underwriting Disbursement and Servicing

Collections Maintenance.

The integration of services (For example, loan

origination, vendor management, post-closing

processing services, third party services until under-

writing, modification services, technology services

etc.) is a challenge that vendors face while offering

mortgage services.

life sciences outsourcing: Research

and development was the core of a

life science company and thus

was perceived too valuable to

pass on to others. However,

today under the growing

pressure to cut costs and

speed development, life science

companies and

large pharma-

ceutical firms

have started

outsourcing

clinical development

programs to outside clini-

cal research organizations (CROs).

Companies depend on CROs to lower costs, access

new patients, and comply with complex regula-

tory requirements. In return, CROs should aim at

becoming long-term strategic partners offering

at it as a strong revenue spot. Apart from tackling

cost pressure, the key drivers for publishing out-

sourcing are handling challenges of adapting to

new technology, lack of in-house capability and

addressing new geographies.

US is the most popular publishing outsourcing

destination. India is the most preferred offshore

destination followed by Philippines. Indian players

continue to focus more on lucrative segments such

as educational, magazines, corporate, B2B, trade

and e-books. Over the next three years, all these

segments are expected to remain attractive.

mortgage process Outsourcing: This model

has evolved the manner in which companies are

running their mortgage processing requests. The

conventional manner is costly and burdensome and

thus they do not operate successfully any longer.

BPO’s mortgage service offerings are crafted

to be in sync with the needs of mortgage banking

institutions. Some of the challenges mortgage bank-

ing institutions face are rising interest rates, increas-

ing instances of borrower default, competitive

pressures etc. Mortgage BPOs spread their services

across various levels of the mort-

gage value chain.

The functions of mortgage

BPO can be categorized under

four divisions: distinct

headers;New Business

Acquisition, Ap-

praisal Title

Segment AnAlySiS


value-added services.

Clinical development outsourcing is expected

to increase and establish its footprints in different

parts of the globe. Presently, a large percentage of

outsourcing comes from United States and western

Europe. In future, China and India are expected

to make their presence felt on the life sciences

outsourcing map. R&D outsourcing is expected to

grow and also shift geographically from the United

States and western Europe to China and India.

The study titled Outsourcing in Life Sciences A

Survey of BayBio Members highlighted, “The key

findings of our survey of BayBio life science compa-

nies suggest continued growth in clinical develop-

ment outsourcing, with a significant amount of

growth occurring overseas. The need for external

capacity and capabilities is a key driver of outsourcing

today, with a significant focus on reliable, on-time



service. Current CRO relationships appear to leave

significant room for improvement. Patient recruit-

ment, customer-centricity, regulatory compliance,

and flexibility of service plans were mentioned as

particular areas in which CROs could do a better job.

Overall, as companies look to CROs as the answer

for internal constraints, they would also like to shift

emphasis from today’s transactional relationships to

long-term strategic development partnerships.”

media outsourcing: Media outsourcing is often

looked at as the new wave of outsourcing. This is

courtesy an increase in the outsourcing of media

work such as online reputation management, data

mining, influencer identification and crisis manage-

ment etc.

On the internet customers talk in real time and

companies have comprehended the fact that mere

online monitoring tools are not sufficient. Soft-

ware’s can search conversations but they are not

intelligent enough to understand sarcasm. Thus,

human beings are required.

Also, all companies are well versed with the fact

that it is imperative to maintain a good profile on

the internet. Hence, they look out for third party

vendors who are armed with online business mar-

ket skills and also cost

effective.

Social Media Exam-

iner’s Michael Stelzner

report titled 2012

State of the Social

Media Marketing

Industry stated, “In

2010, only 14 percent

of marketers out-

sourced social media

marketing. Last year,

that number doubled

to 28 percent. And

this year, the percentage rose yet again, with 32

percent of marketers outsourcing social media.”

The report also highlighted,“Since marketers

are so confused about how to measure social me-

dia’s ROI, it’s certainly easy to be duped into using

an agency’s proprietary or third-party analytics tool

that may have tons of fancy graphs, lots of numbers,

and export complicated spreadsheets -- but it really

doesn’t tell you how to do anything actionable to

improve your social media marketing with that data.

So if you’re considering using a third party for social

media analytics, make sure that their tool not only

offers closed-loop reporting, but that the person

analyzing the data can also tell you how to use that

information to improve your marketing strategy.”

Other emerging verticals include travel, tele-

com, insurance, supply chain management, tech-

nology, transportation etc.

Opportunities and risks Despite its numerous advantages, there are some

potential risks and opportunities suppliers need to

identify, and in turn adopt mitigation strategies

for these risks. industry-specific BPO providers are

stressing hard to move up the BPO value chain. BPO

companies are joining hands with their clients for

end-to-end service delivery and also, they are scal-

ing up their business competency levels in handling

high value business projects.

Everest study states that primarily one demand-

ing factor that pushes

suppliers to opt for

industry-specific BPO is

cost. While traditional

BPO focuses heavily on

reducing operational

costs, industry-specific

BPO offerings promise

to create business im-

pact. Industry reports

predict that industry-

centric BPO capabilities

will emerge as an op-

portunity for suppliers

to create top-line impact for their clients and attain

distinctive positioning in an increasingly competitive

market in the aftermath of economic downturn.

While the overall traditional BPO market is high-

ly competitive, the industry-specific market is highly

mEdIA OUTSOUrCInG IS OfTEn lOOKEd AT AS ThE nEw wAVE Of OUTSOUrCInG, ThIS IS COUrTESy An InCrEASE In ThE OUTSOUrCInG Of mEdIA wOrK SUCh AS OnlInE rEPUTATIOn mAnAGEmEnT, dATA mInInG ETC

Segment AnAlySiS



concentrated as the industry relevance approach is

now a key ingredient in BPO offerings. For industry-

specific BPO services, Analytics and Cloud are play-

ing game changing roles. But talent and skill issues

are are gripping the industry. Service providers are

spending huge amounts on training and develop-

ment. Industry experts believe that skill shortages

are going to be a problem going ahead.

The prime concerns related to industry-specific

processes are- reducing operational errors, analyz-

ing real time business performance to standardize

business process operations on global-scale and to

gain more control over the business operations via

third party.

Everest predicts that industry-specific BPO will

emerge as an opportunity for suppliers to create

top-line impact for their clients and attain distinctive

positioning in an increasingly competitive market.

The financial pressures on vendors to maintain

their profit margins may override development of

this segment. Industry reports assert that scarce

capital, major cutbacks in corporate spending,

pressure on prices and margins together with

drastic change in the competitive landscape are

major threats to industry-specific BPO. While these

risks poses threat they also create opportunities for

strong players to achieve high performance.

While some vendors are clearly content with a

thin veneer of vertical capability, others are picking

verticals where they feel they can gain an edge

over the competition. But it’s a gradual develop-

ment, and experts say that it will take patience and

attitude on the vendors’ side to invest in the depth

of talent they need, and be less concerned about

short-term profits and demands.

The real challenge lies for the BPO companies

in the years to come, as they must-have to create

domain expertise to furnish the market require-

ments. industry-specific BPO providers will have to

showcase their expertise across the various verticals

and also align their business model.

Financial, manufacturing and business services

sectors are expected to be the fastest growing

markets. In the IDC report, titled- “Worldwide

BPO Services Market Forecaster: Vertical Markets,”

Juan Sacchi, senior research analyst, IDC European

Services, said “Industry-specific BPO demand is ex-

pected to be relatively slow in 2012 compared with

2011. But looking forward, we expect to see indus-

try-specific BPO demand recovering and growing

faster than demand for traditional key horizontal

BPO services. Despite the fact that cost cutting

and cost control continue to be top priority for

BPO investment decisions, more and more we will

see demand in the market for domain or industry

expertise and services that are able to drive busi-

ness results alongside the traditional cost-cutting

approach.”



induStry- Specific BpO

Global Leaders- Industry-specific BPOAltisource Portfolio Solutions S.AGenpact LimitedInfosys Ltd.Stream Global ServicesSutherland Global Services, Inc.Unisys

Industry-specific BPO Niche LeadersAditya Birla Minacs Worldwide LimitedAegis LimitedAjuba InternationalDatamatics Global Services LimitedHCL Technologies Ltd.Hexaware Technologies Ltd.Hinduja Global Solutions Ltd.Indecomm Global Services (I) Pvt LtdInterGlobe TechnologiesMindteck (India) Ltd.Neusoft CorporationQuatrro Global Services Pvt. Ltd.SPi Global

segment analysis


the expanding scope of po contracts

Despite a sluggish macr-oeconomic outlook, the global PO market has retained its momentum. Fresh deals, renewals, new technologies and emerg-ing players - there is lot for procurement outsourcing buyers to look forward to this year

By Smita Vasudevan

Post the 2008 global recession the demand for PO (Pro-

curement Outsourcing) has been on the rise. In the post

recession phase companies have been facing increasing

pressures to cut down procurement costs and deal with

concerns relating to volatility in commodity markets. This has been

a big driver for the global PO market. Procurement is one of the

procurement outsourcing


It is no longer just a bottom line savings target for procurement; you

have to provide savings, but in

the most efficient model that also is helping to further secure the supply chain and protect

the end customers in terms of products

to be sold.

Jason evansVice President, Corbus

most important of all the business functions as it

is directly linked to revenues and has a significant

bottom line impact. This is the reason why even

when recessionary fears are once again looming

large, PO hasn’t lost its charm. The inherent pres-

sure to attain cost savings is more evident now,

and outsourcing is coming out to be the most

desired medium.

global market scenarioThe sluggish global economy is having a knockdown

impact on almost all areas of business. Procurement

outsourcing too is under the wrath to some extent.

UK and US are two very prominent markets for PO,

and whatever happens in these markets is going to

have a very likely impact on the segment. Despite

that, growth in 2011 was pretty decent with a 14

percent growth in annual contract value, which

crossed $ 1.6 B. According to Everest Group’s Pro-

curement Outsourcing Annual Report 2012, 60 new

multi-process PO contracts and 53 renewals/exten-

sions were signed in 2011, which is the highest ever

till now. Everest predicts that the global PO market

will reach an ACV of $1.8B in 2012, representing

managed spends of US$250B.

PO Market in 201160 new multi-process PO contracts signed in 2011

ACV grew 14 percent to reach US$1.6 billion

Service providers managing more than US $190B of procurement spend on behalf of their clients

Source: Everest Report titled “Procurement Outsourcing Annual Report 2012”

2012 market projectionsEnd-of-term activity will be significant as 57 per-

cent of PO contracts, valued at nearly US$6 billion,

are up for renewal within the next four years

Adoption will be led by companies with rev-

enues over US$1 billion while adoption by

small/medium-sized businesses (SMB) segment

will remain sporadic

Adoption in the public sector is expected to

grow

Geographic adoption will also continue to

expand in terms of global contracts as well as

adoption by source geographies such as Asia-

Pacific and South America

changing face of procurement outsourcing Like most other outsourced services, procurement

too is undergoing lots of transformations in this

tough phase that demands enterprises to look for

newer ways of doing things. Buyers are looking at

PO not just as a cost saving initiative but the way

to desired business outcomes and this has added to

its strategic significance. The role of procurement

officer is expanding and there is greater coordi-

nation between the procurement officer and the

CFO. There is also a visible trend towards PO deals

bundling up with FAO.

Reliance on procurement outsourcing is going

up as enterprises look for the expert knowledge

of service providers, who usually charge a fixed

price for a certain amount of cost savings. Trans-

actional procurement, strategic sourcing, compli-

ance management, category management, tactical

procurement and reporting are the common types

of services being offered today.

segment analysis


An interesting trend is the growing prefer-

ence for procurement outsourcing among mid

market companies. Emerging technologies, espe-

cially, cloud-based offerings have made PO serv-

ices affordable for the mid market. The increas-

ing demand in this space is also encouraging

small service providers with niche expertize to

enter the market. At the same time, large service

providers are bringing out more services

in their PO offerings, especially through

cloud-based offerings. The tough

competition in the service

provider landscape between

the large and small players

will keep the momentum

going. And this will be a

good opportunity for buyers

to capitalize on, as they have

numerous options

available

to choose from.

For long, PO contracts were focused on indirect

spends. This seems to be changing now as direct

spending is also getting added more and more.

Rajesh Ranjan, Vice President, Everest, says, “The

market is shifting from classifying spend as direct

versus indirect to core versus non-core. While a

majority of contract continues to include indirect

spend, inclusion of direct spend is increas-

ing.” Enterprises are focusing on core direct

spending, preferring to keep it in house,

while outsourcing non-core direct

spend categories, such as main-

tenance, repair and overhaul.

These changes are in a way

resulting in expanding the

scope of PO contracts. Ranjan

confirms, “The functional scope

of PO contracts is expanding into

adjacent supply chain processes.”

Another change that the market is

witnessing is changing buyer expecta-

tions. Today enterprises want their PO

service providers to come up with end-

to-end solutions in source-to-procure and procure-

to-pay contracts. The spate of M&A and consolida-

tion activities that is happening in the PO market is

an indicator of the pressure that service providers

face to expand their service capabilities and come

out with complete solutions.

prominent geographies & verticalsNorth America will be the most dominant market

followed by Europe and Asia Pacific. Emerging

geographies will be attracting a lot of buyer atten-

tion in the PO space, just like most other segments.

Low cost and high skilled, talented workforce are

primary factors driving demand in these regions.

As wage inflation and rising costs have lessened

the attractiveness of offshore locations like India

and China to some extent, the unexplored loca-

tions in Eastern Europe, Middle East and Latin

America are gaining popularity. Also since unem-

ployment levels in the US and UK are pretty high,



Merger & Acquisition Deals in 2011

Deal Objective

Infosys BPO Acquires Portland GroupTo establish presence in the Australian market with more offerings in the value-added segment

IBM Completes Acquisition of Emptoris To expand Smarter Commerce initiative

of value creation varies with process focus, eg;

higher transactional nature of processes in the case

of P2P-focused buyers present more opportunities

to create value through process optimization. On

the other hand, spend reduction is typically a fea-

ture of sourcing-related processes, therefore, a key

value creation lever for sourcing-focused buyers.”

the service provider landscapeIt is definitely a tough phase for service providers

with expectations soaring high and uncertainties

prevailing in the global environment. And with

many new entrants coming up its not the same

playing field anymore. Most service providers are

focusing their strategies around three things - peo-

ple, process and technology. The focus has been on

hiring and retaining talented people with knowl-

edge and experience in niche areas like negotia-

tions, spend analytics etc. As clients are becoming

more and more demanding, providers are under

pressure to offer access to cutting edge technolo-

gies. Investing in technology is going to be another

big trend among service providers and emerging

technologies like social media, mobility and cloud

computing will have a lot of influence on the type

of offerings that providers come up with.

po service providers’ landscapeIBM, Accenture and Procurian together account

for 70 percent of the PO market in terms of ACV

In 2011, IBM, Accenture, and GEP signed nearly

45 percent of new multi-process PO contracts.

IBM, Accenture, and Xchanging accounted for

about 60 percent of total contract value signed

in 2012, including new contracts, renewals and

extensions.

The market is shifting from

classifying spend as direct versus indirect to core

versus non-core. While a majority of contract continues to include indirect

spend, inclusion of direct spend is

increasing.

ranJan raJeshVice President, Everest

buyers will be forced to turn to nearshoring rather

than offshoring.

Across verticals, demand coming from manufac-

turing, retail, BFSI, telecom and energy sectors has

helped in maintaining the momentum in the PO

market. Public sector is also likely to come out as a

huge driver as governments are also under tremen-

dous pressure to cut down costs and are ready to

look for alternative avenues.

major driversProcess optimization and compliance are the

primary factors that are contributing to growth in

demand for PO globally. The cost base for procure-

ment outsourcing is much larger than other BPO

segments and thus the opportunity is much more.

PO also has a very high impact on the bottom line

which makes the value proposition quite attractive.

But at the same time realizing full value out of it

can also be a challenge. Ranjan says, “The extent

segment analysis



consolidation The service provider landscape is a mixed lot with

different types of players competing together. This

includes source-to-contract and procure-to-pay

service providers, FAO service providers, advisory

firms, supply chain management firms and so on.

With niche offerings coming up, specialty players

are also expected to enter the scene. The trend to-

wards consolidation that started a few years back

is very likely to continue strongly, and large players

will try and acquire small and niche players to

come up with more expanded service offerings and

enhance their service capabilities. Swaminathan D,

CEO and MD, Infosys BPO, which acquired Portland

BPO in 2011, stated in a company press release,

“This acquisition would significantly deepen our

capabilities and domain expertise in our sourcing

and procurement practice. It will also enhance the

competitiveness, spread of offerings and global

reach for our clients.”

Collaboration partnerships between large and

small service providers will also be a trend to watch

out for. For instance, Genpact has expanded their

alliance with Ariba to include Ariba’s cloud based

solutions into its offerings. “The combined offer-

ing includes the full range of Ariba’s collaborative

commerce solutions with Genpact’s procurement

services led by our SEP framework for making

business processes much more effective,” said

Shantanu Ghosh, senior vice president, Practices,

Solutions and Transitions, Genpact, in a company

press release.“

the Way aheadIts a transformational phase for the PO market.

The industry has definitely come of age with some

significant changes happening. The value proposi-

tion for procurement outsourcing is quite high but

the challenge is in attaining its full value.

There are expectations of adoption rates pick-

ing up across all verticals and the market is enter-

ing a new phase of accelerated growth. As the

PO market evolves, service providers are coming

out with innovative ways to serve their clients and

attract untapped segments. Like in all areas, here

also ‘more for less’ remains the mantra for buyers.

Jason Evans, Vice President, Corbus, says, “It is no

longer just a bottom line savings target for pro-

curement; you have to provide savings, but in the

most efficient model that also is helping to further

secure the supply chain and protect the end cus-

tomers in terms of products to be sold.”

A lot will also depend on how production facili-

ties operate worldwide. The floods in Thailand and

the earthquakes in Japan has had a serious impact

on the manufacturing facilities in these countries.

Though production has resumed, it might take a

while to come to normalcy. Against this backdrop,

supply shortages are expected to remain in the first

half and recover gradually by the second half of

the year.

Global economies are still struggling to find

their way out of the economic crisis. This will be a

concern for service providers, but they also have

the opportunity to attract buyers by helping them

streamline procurement costs. Evidences of how

enterprises have attained cost savings through PO

will be a key driver for other enterprises that have

stayed away so far.

A lOT WIll AlSO DePenD On hOW PrODucTIOn FAcIlITIeS OPerATe WOrlDWIDe. AGAInST ThIS BAckDrOP, SuPPly ShOrTAGeS Are exPecTeD TO reMAIn In The FIrST hAlF AnD recOVer GrADuAlly By The SecOnD hAlF OF The yeAr


procurementoutsourcing

Global Procurement Management LeadersCapgeminiCorbus, LLCGenpact LimitedHCL Technologies Ltd.Infosys Ltd.WNS Global ServicesXchanging

Segment analySiS


From CoSt SavingS to StrategiC advantageS: global Hro evolveS

Human resources outsourcing industry retains its cautious optimism as increasing complexities in HR processes and growing uncertainties in the macroeconomic environment creates new reasons for enterprises to outsource their HR transactions.

By Smita Vasudevan

Hro


The need to evolve HR

practices in order to cater to a younger

workforce will be felt more.

rajiv ragHunandanstrategic business practice

head, HRO and S&F, Infosys BPO

Over the years the Human Resources

Outsourcing (HRO) industry has

gradually matured and the whole

HR BPO space has transformed

from a mere cost saving initiative to a driving

force for adding business value. The traditional

belief that HRO is simply a measure to reduce

the burden on HR is changing and the strategic

significance of HRO is being acknowledged more

and more.

So how has the year 2012 been for HRO?

The global HRO market retains its optimism,

very much the way it did last year. But things

are definitely not going to be the same, as

the market continues to evolve under the

influence of some significant changes-chang-

ing employee demographics being one of the

most significant.

Of all the forces acting together, two primary

forces are driving global HRO ahead in these

tough times - HRO becoming a more strategic

initiative for enterprises and HR service providers

coming out with new technology innovations.

Targeted for multinational companies for a long

time, HRO is now attracting interest from mid

market enterprises as well and this is going a be

a strong catalyst for growth in the coming years.

Also the concept of employee engagement is

going to hold a lot of significance.

According to GIA’s, Human Resource

Outsourcing(HRO): A Global Strategic Business

Report, the global market for HRO is esti-

mated to reach US$199.6B by the year 2017,

driven by the increasing need for alignment

between business operations and HR, cost re-

duction, compliance management, understand

changing policy framework and access to key

technologies.

The global HRO market is clearly divided into

two parts - MPHRO and Single process HRO.

Although some growth has been evident in all

forms of HR outsourcing contracts, its the single

process HRO space that is demonstrating an

aggressive pace of growth. RPO dominates the

single process HRO space and is the fastest growing

segment right now.

market estimatesAccording to Everest Research, the MPHRO market

remains a consolidated space with few leading

players dominating the scene. Top players like Aon

Hewitt, IBM, Accenture, NGA, ADP etc account for

around 80% of the market share. Similar is the case

with Benefits Administration where top 3 players,

including Aon Hewitt, Fidelity and Xerox account

for 70% of the market share. Single process func-

tions like RPO and Learning are relatively frag-

mented markets with numerous service providers

playing together.

The market is still in a phase of cautious opti-

mism and growth in 2012 is expected to be very

much in line with what we saw last year. The MPH-

RO space has grown around 2% over the last year

and stands at around $ 3.1 B. The RPO segment has

grown over 27% over the same time and currently

stands at around $1.4B. Benefits, the most matured

market in the HRO space, remains the largest in

terms of value, currently around $5B.

Globalization & Growth Of Emerging Markets

Multi country capabilities are high on enterpris-

es agenda as they explore new, emerging markets

and attempt to break geographical boundaries.

Enterprises that venture into new areas should be

aware of the rules of the land. Local knowledge

and experience is very crucial and if they can’t get

Segment analySiS


this on their own, they will need to partner with

a service provider that has global competencies.

Multi country HRO offerings is thus a big trend in

the current scenario.

The ability to scale up is highly essential in these

markets and this is acting as a driver for global HRO.

rPo a big driver For emerging geographies, RPO seems to be the

most highly demanded HR function. The five year

global RPO deal between pharmaceutical major Eli

Lily and HRO service provider Kenexa is a good ex-

ample of the growing significance of RPO. The deal

includes recruiting in Asia Pacific, Europe and the

Americas and according to Nelson Hall’s estimates,

the deal is worth more than $50 million, one of the

largest RPO contracts till now. Khan says, “Re-

cruiting is now one of the three fastest growing

primary services bigger businesses are expecting

outside firms to handle. Benefits administration

and payroll are the biggest two, but contracting

out recruiting assistance is a growing trend.”

bpaas opens up new Hro opportunitiesSaas-Based HR services have been around for a

while but its only now with the greater breadth of

cloud offerings in HR ERP, that its penetrating into

the mid market space as well. Saas offerings have

made HR technology affordable and reachable for

mid market enterprises.

He believes that BPaas will make traditional HR

BPO more flexible and easier to consume, with out-

come-based contracts, and flexible ways of engag-

ing with specialist providers.

As a trend, HR service providers will be tying up

with SaaS providers to offer platform based HRO of-

ferings. Joining hands with a service provider. One

example is Workday partnering with Accenture and

Wipro to offer integrated saas Bpo services.

mobility and Self Service High on demandMobile HR applications are high on enterprises’

demand list and service providers will face in-

creased pressures to offer mobile functionality.

Quite related to the emergence of mobility and IT

consumerization is the growth of self service as a

preferred way of handling HR transactions. Custers

says, “Following the rapid adoption of self service

transactions in personal banking, utilities billing,

and social media, employees and managers will

expect to be able to handle both simple personal

data changes, as well as more complex, multi-step

HR transactions via self service scenarios.” This will

have dual benefits - employees will have more con-

In 2012 we expect organizations all

over the world to have a renewed

focus on employee engagement as a way to generate better outcomes

for employees and lower costs for

employers.

roHail KHangroup president, HR

outsourcing and solutions, ACS

AS A TRend, HR SeRVIce pRoVIdeRS wIll Be TyInG up wITH SAAS pRoVIdeRS To offeR plATfoRm BASed HRo offeRInGS one exAmple IS woRkdAy pARTneRInG wITH AccenTuRe

Hro


key Highlights of 2011While the overall HRO market grew at a healthy rate, the MPHRO grew by a modest 2% to reach an annualized spend of US$3.12B in 2011

Transaction intensive processes are core but talent management components are increasingly considered

The appeal of multi-tenant BpaaS will increase

The M&A and partnership environment continues to play out in the marketplace

A striking difference over last year is the growth

in preference for emerging markets.

enterprises are moving beyond

developed markets and emerging

locations in ApAc, europe and latin

America are gaining lot of attention.

rajeSH ranjan Vice President,

Everest Research

trol over their data and organizations will be able

to reduce administrative overheads.

How innovative Hr technologies are Helping enterprises?Rajiv Raghunandan, Infosys, points out three ways

in which HR technologies are helping organiza-

tions:

Ensuring greater compliance

Better end user experience by making transac-

tions simpler

Making HR policies flexible enough to accom-

modate a global and mobile workforce

growth across Segments and geographiesThe GIA report states that the United States and

Europe account for a major chunk of global HRO

services. India still holds a significant position but

the emergence of alternate centers across geog-

raphies like Latin America, Eastern Europe and

South East Asia is a key indicator of the expansion

of HRO across geographies. Raghunandan says,

“Today Europe is where US was 4-5 years ago. The

proportion is now 40-40. Rest 20 percent is very

important. These areas could become innovation

hotbeds. Lot of what is learned there are replicable

in developed markets.”

Across different verticals, the demand from

financial services, telecom and manufacturing will

be a big driver. The retail and government sectors,

though does not look too bright right now, shows

great potential for future growth.

technology driven Consolidations The trend towards consolidation in the service

provider landscape is expected to go on strongly,

as players look to acquire better technologies and

global capabilities. Big players often bring in the

scalability while smaller players bring in niche

AcRoSS dIffeRenT VeRTIcAlS, THe demAnd fRom fInAncIAl SeRVIceS, Telecom And mAnufAcTuRInG wIll Be A BIG dRIVeR. THe ReTAIl And GoVeRnmenT SecToRS, THouGH doeS noT look Too BRIGHT RIGHT now, SHowS GReAT poTenTIAl foR fuTuRe GRowTH

Segment analySiS


Hro

technology capabilities, creating a an attractive

mix. The acquisition of Taleo, an on-demand tal-

ent management software company by Oracle is a

good example of this.

demand for Short term deals ContinueDeal tenures and sizes are likely to remain short

and small as enterprises prefer to tread cautiously.

The size of MPHRO deals is also becoming smaller

as the number of processes bundled together

in MPHRO is coming down. Raghunandan says,

“There was a one time change that happened. The

interest of clients to lock themselves into 10 year

deals has gone away a few years back. In the last

3-4 years there has not been much change in the

duration of deals.”

What lies ahead?Currently many forces are acting together to re-

shape the global HRO landscape. Even against the

backdrop of a dull and gloomy economic scenario,

optimism remains as enterprises aim to reap strate-

gic advantages out of HR outsourcing deals. There

are huge opportunities that are yet to be fully ex-

plored, especially in the form of a huge untapped

mid market segment. Foreseeing this, service

providers are bringing out customized outsourcing

models for mid market enterprises.

While cost savings and compliance with complex

HR transactions will work as short term drivers,

business transformations and technology innova-

tions will play a big role in the long term. As the HR

demographics change and a new Facebook genera-

tion gets geared up to work, organizations will have

a tough task in front of them in reorganizing their

work environment. Enterprises that start now will

definitely have an edge when this happens a few

years down the line. Raghunandan sums up “ We

have to evolve our workforce and we have started

doing that today so that we are better prepared

for it.” The message holds a lot for service providers

and buyers in the global HRO space.

deAl TenuReS And SIzeS ARe lIkely To RemAIn SHoRT And SmAll AS enTeRpRISeS pRefeR To TReAd cAuTIouSly. THe SIze of mpHRo deAlS IS AlSo BecomInG SmAlleR AS THe numBeR of pRoceSSeS Bundled ToGeTHeR In mpHRo IS comInG down

Hot HRo deals in 2011MPHRO deal between BAE Systems and Logica

Benefits Administration contract between State of California and Aon Hewitt

5 yr HR and Payroll Contract between Northgate Arinso and Family Mosaic

RPO contract between Eli Lily and Kenexa

BpaaS will help overcome some of the shortcomings of both Bpo and SaaS. It will add

an additional layer of subject-matter expertise to organizations

who have moved into SaaS and who

find it hard to be entirely self reliant

from a process level.

miCHael CuSterS vice president, global alliances

& strategic marketing, NGA

Hro


Human reSourCeoutSourCing

Global HRO Vendors

Capgemini

NorthgateArinso

Segment AnAlySiS


AnAlyticS OutSOurcing: inSide the WOrld Of numberS

Advanced analytics will increasingly become a necessity for competitive differentiation

By Smriti Sharma

AnAlyticS OutSOurcing


Today, all organizations operate in a glo-

bal environment that is set against the

backdrop of cut-throat competition and

regulatory pressure. Business decisions,

predictions, introduction of new products… all

these decisions should be drawn after analyzing

accurate data. Business analytics arm an organiza-

tion with quick and insightful decisions that assist

an organization in managing its performance and

creating value.

Data is not new to industries. For many years

they have possessed all kinds of data. However,

absence of requisite skills and tools made it difficult

for them to utilize this data. As companies continue

to lack appropriate analytics expertise, they are rely-

ing on the value of outsourcing in this domain.

Cost has never been the driver of the wheels of

analytics outsourcing. Rather, its clutch has been

pressed by highly skilled statisticians with domain

knowledge who have the capabilities of develop-

ing insights using data. When these capabilities are

married to specialized tools and technologies, the

provider can create impactful knowledge.

Sundar Varadarajan, senior vice president, BIBA

COE & PRESALES said, “Business Analytics is one of

the terms that are very broadly used. While tradi-

tional Business Intelligence (interactive reporting,

slicing and dicing of data) is referred to as analytics

by many; some may refer to analytics specifically in

the context of advanced decision support/predic-

tive analytics. With volume and variety of data ever

increasing, and with constant evolution of plat-

forms for computation (for advanced analytics on

an mpp architecture, in-memory computing, etc.)

are becoming more viable, this has also enabled

advanced/predictive analytics on petabyte-scale.”

While traditional BI will continue to flourish,

advanced analytics will increasingly become a ne-

cessity for competitive differentiation, for strategic

analysis, and for better forecasting, and perform-

ance management etc.

Growing competition and globalization has

made analytics critical for all businesses to support

strategic decision making.

Reetika Joshi, senior research analyst, Valu-

eNotes Sourcing Practice and co-author of the HFS

analytics report titled ‘Where offshore analytics is

heading in 2011’ in another interview spoke about

what covers in offshore analytics area said, with

greater usage of analytics and increasing complex-

ity, there is a tendency to break analytics projects

into distinctly executable parts and outsource to

different specialized teams.

Accordingly, there are four levels in the analyt-

ics services mix, in ascending order of complexity:

data entry/de-duplication: This includes

everything from cleaning to maintenance and

actual. It is a low-end service and offers low

revenues to service providers. A large chunk of

KPO-centric analytics work (almost half) is dedi-

cated to data preparation.

intuitive analytics: This entails running the

models and generating new insights on a

continuous basis. The outputs for these services

may be in the form of dashboards, reports (of

different frequencies), alerts, etc.

model building: This is an advanced level of

analytics, where models are designed to predict

various business outcomes. Statisticians and

econometricians build models focusing on busi-

ness problems/opportunities at hand. In terms

of offshoring, modeling is done by captives as

1.

2.

3.

With greater usage of analytics

and increasing complexity, there

is a tendency to break analytics

projects into distinctly

executable parts and outsource

to different specialized teams.

reetikA JOShisenior research analyst,

ValueNotes Sourcing Practice

Segment AnAlySiS


well as third-party vendors depending on the

maturity of the clients’ in-house teams.

Solutions: Solutions generally entail “bun-

dled” analytics components, delivered to clients

to address their needs. Providers take a con-

sultative approach and leverage technology to

deliver value. The aim is to render the client

self-sustaining and create a unified analytics de-

livery mechanism. This may be done by deploy-

ing an analytics platform or other tools.

Apart from the above mentioned IT/BPO provide

plenty of value-enhancing analytics components,

such as analytics to improve the efficiency of process-

es, identify problem areas or sub-processes with cost-

saving potential, and provide reporting and MIS for

existing processes. Often these services are delivered

to the client as value-adds minus additional cost.

What do the buyers Want?US and UK continue to be the major markets served

by analytics service providers. America and Japan

has also won the focus of some vendors.

4.

A large percentage of Genpact’s revenue comes

from America. It also has presence in Europe,

China, India and Australia.

Fortune 500 companies are the big-league

clients for this knowledge service. Carnation Auto

and GE Money are some of its clients.

Some of Accenture’s clients are BP and Verizon.

Connectiva serves service providers in telecom,

media and entertainment. Their customers in-

clude some of the world’s largest providers with

200+M subscribers as well as greenfield operators

and mid-sized companies. Their customers include

Bharti, T-Mobile, Telefonica, Alcatel Lucent, YTL,

IDEA amongst others. Capgemini’s clients include

Mazda and Baycorp.

Fortune 500 companies are the big-league cli-

ents for this knowledge services.

Innovation is what most of the buyers are

asking for. Rajesh Ranjan, vice president, Everest

Group explained, “Innovation is something which

helps you really leap from one level to another.

Buyers really want things to improve, and thus

they want service providers, who are operating the

business process function on their behalf to put

in practice some of the best things that they have

gulfed out from their experience of working with

some of the other organizations. Also, the services

BPO providers provide are their core competency.

Within their core business again, they expect the

provider to be able to bring those best practices

and bring those things they are doing internally to

optimize and provide that benefit.”

He adds, “However, I also feel that buyers also

need to plan and budget for that. In general, in-

novation costs some money, innovation does not

come free. Buyers need to plan for that in terms

of budgeting exercise, they may not know what

that innovation is going to be but at least they

have a budget and that helps them achieve the

innovation. When I say budget, I mean there are

certain things the service providers are going to

do, you have got to support for that, and if these

things bring the right results, you should be able to

reward the service provider. All these things need

Buyers need to plan for innovation in

terms of budgeting exercise. They may

not know what that innovation is going

to be but at least they have a budget

and that helps them achieve the

innovation. When I say budget, I mean

there are certain things the service

providers are going to do, buyers have

got to support them.

rAJeSh rAnJAnvice president, Everest Group



to happen in conjunction to be able to bring in the

right value for the buyers side.”

Extracts from TCS report titled, Future Proof-

ing the Organization through Analytics,

A significant 40% of the buyers felt the func-

tional expertise in the domain was the key factor

in choosing a service provider and an additional

35% sought experience in the same industry

It is also not surprising that influencers continue

to consider presence of a technology platform a

critical aspect to outsourcing. The buyers tend to

see this as a relatively low importance factor in

decision making since the business and technology

decisions are made separately.

Interestingly, among the buyers, more than

50% of those who are currently outsourcing

sought functional expertise in the partner or-

ganization, while over 60% of those planning to

outsource in the near future said they would look

for similar experience in the industry.

A buyer experienced in outsourcing is perhaps

looking at the nuances that the partner can bring,

particularly in case of analytics services. Hence, a

partner with enough experience in the domain

is desirable. For a buyer that has not outsourced

before, similar industry experience is a confidence

building factor.

Close to 50% of the buyers in our survey said

that technology and infrastructure were key ele-

ments where they looked at their partners for help.

Also, many buyers are looking to migrate to

newer technologies, particularly from the cost and

time to market perspective. Here the support and

necessary skills of a technology competent partner

for the buyer is extremely critical.

Buyers are also looking at process standardization

from their partners, with 28% of the buyers in our

survey saying that this was critical for them. People

consolidation and automation are important in as

much as they help in cutting the costs to the buyers.

Buyers who were currently outsourcing analytics

processes preferred the more traditional FTE based

or fixed price model. However, it is interesting to

note that close to 40% of the buyers planning to

outsource in the next 12 – 18 months preferred

output based or transaction based pricing models,

with about 9% even willing to opt for an outcome

based pricing model.

Service Providers landscape The players in this market space can be categorized

in three divisions. One is the global outsourcing ma-

jor: IBM, Accenture, Capgemini, TCS, Infosys, Wipro

etc., the second segment is pure play BPO provider,

though they are not many of them left now,:

WNS,EXL, and the third one is business specialist,

these are very few. In the last category, the ques-

tion is to what extend will they continue to operate

on their own vs. on getting acquired.

Analytics outsourcing started as financial and

marketing function. Shipping and logistics, manu-

facturing, supply chain etc. were initially not very

active in this space. However, now they offer good

opportunities. Web and web related services, pack-

age solutions that mix combine consulting services

with delivery are very much in demand.

Chirajeet Sengupta, research director, Everest

Group articulated, “Increasingly, there has been a

shift or blurring of lines between different kind of

market players and their competent quotient. Es-

sentially, this field is open to everyone.”

He explains why some of the large scale IT

providers are able to act well in this space. The

reason being they have expertise in handling

things like business intelligence and data ware-

houses. They have experience in handling those

huge amounts of transactional data Secondly,

they have the scale, they have the deep pockets

to invest in a particular upcoming space and their

ability to invest is larger than a start-up analytics

house. The third factor is they are able to offer

certain efficiencies in terms of automation. They

are able to hire a whole bunch of statisticians

and put them behind stats terminals to churn out

insights or you can automate 70 percent of that.

That in itself is a huge advantage.

The last thing is that some of the account level

relationships these organizations have built over

Segment AnAlySiS



time have helped them mine into what seems as

a natural expansion of scope. For example, if you

are implementing business intelligence systems for

retail company and you have a healthy relationship

with that retail company for the last five years; it’s

almost a natural extension to talk about how you

are going to help them mind those insights out of

that system.

The IDC MarketScape report evaluated the

offerings and capabilities of 10 business analytics

BPO vendors namely: Accenture, Capgemini, Cogni-

zant, EXL Services, Genpact, HP, IBM, Infosys, TATA

Consultancy Services (TCS), and WNS. Accenture,

Capgemini, Cognizant, EXL Services, Genpact, HP,

IBM, Infosys, TATA Consultancy Services (TCS), and

WNS. Service providers were evaluated based on

potential key strategy measures for success in two

primary categories: current capabilities and future

strategy. Accenture, Capgemini, Genpact and TCS

were positioned as as ‘Market Leaders.’

Mukesh Dialani, research manager, Worldwide

BPO Services, was quoted, “BPO vendors find

themselves in a favorable position to assist their

clients’ transformation efforts as enterprises face

new sources of competition in this global environ-

ment and try to stay competitive by keeping a

close check on various business performance met-

rics. BPO providers that build competency around

industry-specific BPO and analytics outsourcing as

well as exhibit the capability to assist clients with

business consulting services will gain a bigger por-

tion of this business.”

Anoop Sagoo, BPO cross operating group lead,

Accenture, expressed, “BPO today is about min-

ing the huge volume of transactional data that

is being processed – and using industry expertise,

analytics and innovation to help a client operate

its business better and drive business outcomes.

The ability to undertake analytics on transactions,

understand the insights and then identify oppor-

tunities to improve and add value to the client’s

business is what our clients expect from BPO.”

Varadarajan pointed the following as new

opportunities for analytics outsourcing: Analytics

as a service on the cloud, Social intelligence and

mining, Advanced (predictive) analytics such as:

Fraud Analytics in the Financial Services, Insurance

Industry, Higher Education analytics – e.g., predict

student dropout patterns, analyze and predict per-

formances, etc. and Smart Metering related analyt-

ics in the energy/utilities and other industries.

Varadarajan also highlighted the following

upcoming trends:

In addition to the typical analytical solutions on

well-structured corporate or customer data, etc., we

are increasing seeing that organizations are having

to deal with more external data (on social networks,

internet, emails, text documents, etc.), a lot of

which is unstructured, and needs to be analyzed in

conjunction with the structured data; also, the data

volume is increasingly huge – we see that effectively

dealing with this “big data” analytics is becoming

key and will be a mainstream part of analytics out-

sourcing in the coming years.

Also, with the adoption of platforms and appli-

cations on the cloud, analytics-as-a-service, or data-

integration-as-a-service are also increasingly being

adopted – e.g., we have seen with a few customers

and prospects that as a natural extension to ERP

in a cloud model, analytical services on top of ERPs

(eg., HR analytics as a service) are also becoming

more prevalent.

The ability to undertake analytics

on transactions, understand the

insights and then identify

opportunities to improve and add

value to the client’s business is what

our clients expect from BPO.

AnOOP SAgOOBPO cross operating group

lead, Accenture



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Leaders- Specialty KPO Aegis LimitedAffinity ExpressChinasoft International Ltd.CompuCom Systems Inc.Corbus, LLCDatamatics Global Services LimitedHCL Technologies Ltd.Infosys Ltd.Insigma Technology Co., LTDInterGlobe TechnologiesQuatrro Global Services Pvt. Ltd.Sutherland Global Services, Inc.VanceInfo Technologies

Global Knowledge Process LeadersAditya Birla Minacs Worldwide LimitedCapgeminieClerx Services Ltd.Genpact LimitedSPi GlobalSyntel Inc.

2012 global services compendium - gs100

Business

gs100 survey re vealed

n analytics outsourcing

n isbpo

gs100 companies

global services

services companies

n enterprise software

n contact center outsourcing