GS100: Global Services Compendium 2012
The Global Services 100, now in its seventh year, is a tool for buyers of business and technology services to identify and select the right vendor. The study is done under the guidance of Neogroup, a globalization advisory firm. Service providers opt-in to participate in the study that is conducted online. The GS100 analytical model is based on four key criteria: performance and leadership, quality and maturity of customers, breadth of services offered, and spread of global delivery capabilities.
www.globalservicesmedia.com Annual Issue 2012 Annual Global Outsourcing Industry Analysis 2012 Global Services Compendium GS100 Survey � GS100 List � GS100 Categories � ITO Segments � BPO Segments� editor's note Facing the New Realities n 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 revealed 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. 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 Ed Nair, Editor email@example.com Contact center outsourcing is seeing renewed growth with customer interactions moving over to non-voice channels and social media. The HR space is being redefined with greater breadth of cloud-based offerings ranging from recruitment to talent management. The impact of social media in managing workforce also requires major reorientation in terms of policies and practices. n 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 offering 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 technology 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! Contents 46 27 Segment Analysis n Application Development & Maintenance: On The Road To Recovery/ 27 OPD: Market is Expected to Reach $19B/ 38 Infrastructure Management Services: Cloud Comes With a Promise/ 46 ITO: Status Quo Sustained/ n 38 n n n 56 66 Contact Centers: Growth Momentum Continues Amidst Turbulence/ 66 FAO: All Signs Suggest Maturity/ ISBPO: Being Explored Aggressively/ 86 PO: The Expanding Scope of PO Contracts/ 94 HRO: From Cost Savings to Strategic Advantages/ 100 Analytics Outsourcing: Inside The World of Numbers/ 106 n n 75 75 56 94 86 106 100 GlobalServices n n n | September 2012 6 Survey Analysis The 2012 Global Services 100: Defining Leadership in Global IT and Business Advertisers Lists � Hildebrando 3 GS100 Lists � The GS100 List/ 13 � The GS100 Category Lists/ 19 Editorial Team Ed Nair Editor, firstname.lastname@example.org Smriti Sharma email@example.com Smita Vasudevan firstname.lastname@example.org Sourabh Chandra Pushp Sourabhc@cybermedia.co.in Sales & Marketing Satish Gupta AVP, satishg@cybermedia. co.in Gary Bindra email@example.com GlobalServices � Quatrro � Endava � Belatrix � Hexaware � IBA � Prokarma � Cybage � Harbinger � Great Idea � Mexico IT � EPAM � Luxoft 7 13 17 21 29 31 36 41 44 49 53 59 Gulnar Oberoi firstname.lastname@example.org Design Team Bhagbat Pattnayak Harnek Singh Pramod S Rawat Cover: Pramod S Rawat Pradeep Gupta Chairman & MD Hoshie Ghaswalla CEO, Media Business Ibrahim Ahmad Group Editor September 2012 | SpecialReport Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis | August 2012 GlobalServices Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Survey analysis Quatrro Global Services� Spearheading BPO Industry to "Beyond the Existing" Q uatrro is recognized as one of the leading Business Process Outsourcing 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 customers and 500,000+ individual customers in multiple geographies with diverse services covering Risk Management, Financial Processing, Technical Solutions, Mortgage Processing, Interactive Entertainment and Knowledge Services. Quatrro has realized the benefits of first mover by offering state-of-the-art platform based solutions 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 different 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 empower 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 multi- national companies for their franchise operations is a colossal endorsement 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. Advertorial cover story The 2012 GS100: Defining Leadership in Global IT and Business Process Outsourcing 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... | September 2012 GlobalServices survey analysis T his 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 that evaluates each company across multiple dimensions, measured both quantitatively and qualitatively. The study presents a complete view of the dynamics 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. IT Outsourcing Segments Total- $21.2B Testing 5% OPD 7% ES 8% SO Others 4% 5% ADM 38% IMS 14% EA 19% BPO Segments Total- $11B I/S 20% FAO 8% HRO 5% The GS100 Methodology Companies who opted to participate in the survey 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 categories are derived using a scientific research methodology based on several qualitative parameters. KPO 9% PO 4% CC 53% Customer BaseIT Outsourcing (# Customers, 130 Cos.) New Customers-2011 Existing Active Customers Others 987 342 IT Strategy and 809 420 Consulting Total IT O/S 1775 IM OPD ES EA ADM 0 2876 1586 885 551 4021 5977 967 1474 697 CONTRACT SIZES ITO Upto $5M $5M to $19M $20M to $34M $35M to $50M $51 M to $99 M 15444 357 177 55 23 14 4 4 3 1 BPO 2586 165 54 28 27 3 3 7 8 2 0 583 285 $100M to $299 M $300M to $499 M $500M to $749 M $750M to $ 1B $ 1 B to $ 2 B More than $ 2 B 1000 2000 3000 4000 5000 6000 7000 8000 (# of contracts, 130 companies) GlobalServices September 2012 | cover story survey analysis Revenue by Geographies ($65B, 130 cos.) North America South America Europe Africa & ME Asia Japan Australia Australia 5% Japan 2% Asia 14% Africa & ME 3% Customer Base- BPO (# Customers, 130 Cos.) New Customers-2011 Existing Active Customers Industry-specific 960 328 KPO 3809 780 Procurement 222 60 North America 47% CC 3145 610 HRO 396 34 Europe 24% South America 6% FAO 0 733 96 1000 2000 3000 4000 5000 Verticals Row 4 Telecom Retail & Consumer Products Media & Informa tion Services Manufacturing % Rev. 2011 Life Sciences Insurance High Tech Healthcare Government Energy, Resources & Utilities Banking & Financial Services 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 5.86 6.48 15.84 16.00 18.00 8.27 7.24 11.26 9.11 8.40 10.45 11.11 12.93 10 | September 2012 GlobalServices coming soon... To know more write to email@example.com GS100 GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list GS100 list Quality. Productivity. innovation. Endava PErhaPs it's timE to think again about whErE you outsourcE Endava is a leading IT services organisation, with offices in London, New York, and Glasgow, and delivery centres in Romania and Moldova. Utilising our distributed agile delivery model we are able to deliver significant improvements to quality and productivity enabling our clients to deliver better results from their budgets -- ApplicAtion Development -- testing -- ApplicAtion mAnAgement -- DigitAl meDiA -- infrAstructure Hosting AnD support london nEw york glasgow romania moldova endava.com 2012 Finalist 2012 GS100 List 2012 GLOBAL SERVICES 100 COMPANIES Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 14 | September 2012 Company Name Achievo Corporation Aditya Birla Minacs Worldwide Limited Aegis Limited Affinity Express AJUBA iNTERNATIONAL LLC Altisource Portfolio Solutions S.A Aspire Systems (India) Pvt. Ltd. Auriga Inc. Beyondsoft Corporation BLEUM INC. Blue Star Infotech Limited Capgemini Chinasoft International Ltd. Ci&T Ciklum City Park Technologies Collabera Inc CompuCom Systems Inc. Convergys Corporation Corbus, LLC CSC Cybage Software Private Limited GlobalServices 2012 GS100 List Sl. No. 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 GlobalServices Company Name DataArt Datamatics Global Services Limited Dextrys eClerx Services Ltd. Endava UK Limited EPAM Systems Inc. Exigen Services EXL Service Holding Inc. Expert Global Solutions First Line Software Firstsource Solutions Ltd FPT Software Co. Ltd. Freeborders, Inc. Genpact Limited GlobalLogic Globant Harbinger Systems Private Limited HCL Technologies Ltd. Hexaware Technologies Limited Hildebrando Hinduja Global Solutions Limited IBA Group iGATE Corporation Indecomm Global Services (I) Pvt Ltd Infosys Ltd. Infotech Enterprises September 2012 | 15 2012 GS100 List Sl. No. 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 16 | September 2012 Company Name Innominds Software Pvt. Ltd. Insigma Technology Co., LTD InterGlobe Technologies Intetics Co. iSoftStone Information Technology (Group) Co., Ltd ITC Infotech Itransition Software Development Company KPIT Cummins Infosystems Ltd. Lionbridge Lohika Systems, Inc Luxoft MAVERIC SYSTEMS LIMITED MERA Microland Mindteck (India) Ltd. MindTree Limited Mistral Solutions Pvt. Ltd. Nagarro, Inc. Neilsoft Limited Neoris Neusoft Corporation NIIT Technologies NorthgateArinso Omnitech InfoSolutions Ltd. Persistent Systems Limited ProKarma, Inc GlobalServices 2012 GS100 List Sl. No. 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 18 | September 2012 Company Name Quatrro Global Services Pvt. Ltd. RCG Global Services Reksoft SaM Solutions Scicom (MSC) Berhad Serco Global Services Sitel Operating Corporation SoftServe, Inc. Sonata Software Limited SPi Global Stream Global Services Sutherland Global Services, Inc. Symphony BPO Solutions Sdn Bhd Symphony Teleca Corp Synapsis SpA Syntel Inc. Talentica Software (India) Pvt Ltd Unisys Corporation VADS Business Process Sdn Bhd ValueLabs VanceInfo Technologies Virtusa Corporation WNS Global Services PVT. Ltd Xceed Xchanging Plc Zensar GlobalServices 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 HCL Technologies Ltd. iGATE Corporation Infosys Ltd. Insigma Technology Co., LTD Syntel Inc. Top Mid-tier ADM Companies Chinasoft International Ltd. Collabera Inc GlobalServices 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 September 2012 | 19 2012 GS100 category Lists 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 CompuCom Systems Inc. CSC HCL Technologies Ltd. Infosys Ltd. Microland Limited 20 | September 2012 Leading Mid-tier Infrastructure Management Vendors Aegis Limited Chinasoft International Ltd. Collabera Inc Genpact Limited Insigma Technology Co., LTD MindTree Limited NIIT Technologies Sonata Software Limited Leading Global OPD Vendors EPAM Systems Inc. GlobalLogic HCL Technologies Infosys Infotech Enterprises Lionbridge Persistent Systems Limited Symphony Teleca Corp VanceInfo Technologies Leading Mid-tier OPD Vendors Beyondsoft Corporation Cybage Software Private Limited GlobalServices PARTNER WITH A TEAM OF EXPERTS Global IT Services and Consultancy Provider with the expertise and resources to meet and exceed your expectations every time Verticals Banking, Financial Services Travel and Transportation Insurance and Healthcare Manufacturing Energy and Utilities Horizontals Enterprise Services (SAP, PeopleSoft, Oracle, Microsoft) Quality Assurance and Testing Services (QATS) Infrastructure Management Service (IMS) Business Intelligence & Analytics Business Process Outsourcing Human Resource Information Technology / HR Outsourcing Enterprise Risk Management Certifications CMMI Level 5 ISO 9001 ISO 27001 SAS 70 Type II PCI DSS www.hexaware.com 2012 GS100 category Lists Globant Hildebrando iGATE Corporation Luxoft MindTree Limited Leaders- Global Enterprise Applications Deployment Capgemini CSC HCL Technologies Ltd. Infosys Ltd. KPIT Cummins Infosystems Ltd. Leaders- Mid-market Enterprise Applications Deployment EPAM Systems Inc. Genpact Limited Hexaware Technologies Limited iGATE Corporation Insigma Technology Co., LTD iSoftStone Information Technology (Group) Co., Ltd Neoris Sonata Software Limited VanceInfo Technologies 22 | September 2012 Leading Engineering Services Vendors Collabera Inc HCL Technologies Ltd. Infosys Ltd. Infotech Enterprises Insigma Technology Co., LTD iSoftStone Information Technology (Group) Co., Ltd KPIT Cummins Infosystems 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. Hexaware Technologies Limited Hildebrando S.A Luxoft MindTree Limited GlobalServices 2012 GS100 category Lists 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 Hexaware Technologies Limited Indecomm Global Services (I) Pvt Ltd GlobalServices InterGlobe Technologies 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. HCL Technologies Ltd. Hinduja Global Solutions Limited Quatrro Global Services Pvt. Ltd. Serco Global Services SPi Global Syntel Inc. Global Customer Management Leaders Aditya Birla Minacs Worldwide Limited Aegis Limited Capgemini Convergys Corporation September 2012 | 23 2012 GS100 category Lists Expert Global Solutions Firstsource Solutions Ltd Genpact Limited Hinduja Global Solutions Limited Sitel Operating Corporation VADS Business Process Sdn Bhd Mid-tier Customer Management Vendors Altisource Portfolio Solutions S.A CompuCom Systems Inc. HCL Technologies Ltd. Infosys Ltd. Scicom (MSC) Berhad SPi Global Sutherland Global Services, Inc. Xceed Global FAO Vendors Capgemini EXL Service Genpact Limited Infosys Ltd. WNS Global Services Xchanging 24 | September 2012 Leading Mid-tier FAO Vendors Datamatics Global Services Limited HCL Technologies Ltd. Insigma Technology Co., LTD Quatrro Global Services Pvt. Ltd. Sutherland Global Services, Inc. Global Leaders- Industry-specific BPO Altisource Portfolio Solutions S.A Genpact Limited Infosys Ltd. Stream Global Services Sutherland Global Services, Inc. Unisys Industry-specific BPO Niche Leaders Aditya Birla Minacs Worldwide Limited Aegis Limited Ajuba International Datamatics Global Services Limited HCL Technologies Ltd. Hexaware Technologies Limited Hinduja Global Solutions Limited Indecomm Global Services (I) Pvt Ltd GlobalServices 2012 GS100 category Lists InterGlobe Technologies Mindteck (India) Ltd. Neusoft Corporation Quatrro Global Services Pvt. Ltd. SPi Global Global Procurement Management Leaders Capgemini Corbus, LLC Genpact Limited HCL Technologies Ltd. Infosys Ltd. WNS Global Services Xchanging Global HRO Vendors Capgemini NorthgateArinso Global Knowledge Process Leaders Aditya Birla Minacs Worldwide Limited Capgemini eClerx Services Ltd. Genpact Limited SPi Global Syntel Inc. Leaders- Specialty KPO Aegis Limited Affinity Express Chinasoft International Ltd. CompuCom Systems Inc. Corbus, LLC Datamatics Global Services Limited HCL Technologies Ltd. Infosys Ltd. Insigma Technology Co., LTD InterGlobe Technologies Quatrro Global Services Pvt. Ltd. Sutherland Global Services, Inc. VanceInfo Technologies GlobalServices September 2012 | 25 SpecialReport Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis | August 2012 GlobalServices Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment analysis Segment Analysis ADM Application Development & Maintenance : On the Road To Recovery By Sourabh Chandra Pushp 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 GlobalServices September 2012 | 27 Segment Analysis ADM S oftware 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 expect more from their ongoing IT applications. ADM outsourcing offers the full scope of services that accelerates IT spend return-- development, implementation 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. 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 The ADM Market The 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 development services to approach $69B USD. The key ADM themes that dominated the market in 2011 were Cloud, Agile, Security, Analytics. These themes have held sway as providers and buyers both look at taking advantage of the transforming AMD landscape. The explosion of technology 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 continues to be the leading offshore location. The in-house delivery of IT application, maintenance and processes are still dominant in 20122013. 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. 28 | September 2012 GlobalServices Segment Analysis ADM 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 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 significant 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 galvanized 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 development 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 developers 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 series of conflicting and contrasting economic news reports, and the full impact of the economic uncertainty 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-critical software; integrating and securing established systems and infrastructure; and software as a service (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 increase from 2011 spending of $115.2B. With increasing number of organizations demanding application's functionality as a cloudbased services rather than on-premises infrastructure, 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 30 | September 2012 GlobalServices Segment Analysis Cloud computing conversations are slowly morphing the ADM market in terms of cloud computing application platforms more cost-effective and as a way to counter the effects 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 application use, enterprise ADM market continues to evolve. As tighter capital budgets demand accurate leaner alternatives the ADM growth graph varies within geographies. 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 Saxena Head, India Engineering Centre, Kronos Cloud and Android Based Application Development Cloud computing conversations are slowly morphing the ADM market in terms of cloud computing 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 Centre, 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 software development for cloud computing that takes advantage of benefits but also issues that will open up opportunity for new software development verticals. Industry experts believe, the impact of cloud service on the ADM market will change the selling and licensing of IT-applications, the way application data are handled will undergo a major shift which will induce the data driven applications into the mainstream market. However, for software development the underlying 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 Android 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 development has taken vital transformation, both in terms 32 | September 2012 GlobalServices ADM of development and strategy. Application development companies are focused to help subscribers realize the potential of rapidly evolving mobile technologies." Application Maintenance and Testing All application products need sufficient maintenance 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 maintenance 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 applications 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 largest destination for outsourcing of software maintenance and testing services, accounting for 32 percent of the total global ADM outsourcing share. The application maintenance industry for India is growing, 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 GlobalServices September 2012 | 33 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 independent 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 testing. Today, it has become one of the fastest growing 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. 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 Conclusion With the economy of developed countries stagnating 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 fundamentally 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 initiatives today � be they Saas, cloud or enterprise mobility � 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 competitive price. They will also offer outcome-based engagement models that fit each client's needs. 34 | September 2012 GlobalServices Application Development & Maintenance ADM Top Global ADM Leaders Capgemini Infosys Ltd. HCL Technologies Ltd. Syntel Inc. Insigma Technology Co., Ltd iGATE Corporation CSC Top Mid-tier ADM Companies Chinasoft International Ltd. EPAM Systems Inc. Infotech Enterprises MindTree Limited Neoris Neusoft ITC Infotech VanceInfo Technologies Zensar Collabera Inc Genpact Limited 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 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 Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance GlobalServices September 2012 | 35 Stretching Value. Scientifically. T o be able to `differentiate' innovatively and effectively holds a key to attaining global leadership in the business world. The natural 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 differentiators. "Pick any one of the two sides, and then inherit the one from the other," goes the hypothesis! This differentiating tactic certifies the vendor's dual robustness. The seeds of Cybage thought leadership are sown in the innovativeness of our `differentiator'. 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 differentiators 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 prospective vendor. The overlap between these two variables 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 determines 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 efficiency of the vendor to leverage the fact-file into relevant deliveries. The customer's loyalties 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, Responsiveness, 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 organization-wide at Cybage through this sophisticated business management software system called the ExcelShore� Model of Operational Excellence. Advertorial Segment Analysis OPD Market is Expected to Reach $19B By Smriti Sharma By 2015, technology analyst Forrester expects the market for product development services to approach $19B T he business of developing new and solution-customized software is the nucleus of thriving technology industry. Product development plays a significant role in getting economic returns as well as establishing market influence. However, whilst introducing a new product 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 38 | September 2012 GlobalServices OPD companies through the journey of transition from traditional product development to value development. 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, mobility, 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 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 initiatives today � be they Saas, cloud or enterprise mobility � 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 competitive price. They will 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 Higgins chief marketing officer, Symphony Services 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 witnessed 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. Increasingly, buyers are employing risk-reward partnership model, where the vendors are GlobalServices September 2012 | 39 Segment Analysis OPD willing to absorb a certain amount of business 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 management and project teams should be increased, employing additional valuable resources, switching to alternative software development methodology, bringing in assistance (advisories) to enhance vendor relationships, encouraging partnering with different vendors to offer more cost-effective engagement, etc. Buyers while zeroing upon a geography should keep in mind the following pointers: low costs of software development and IT resources, availability of IT talent pool, positive references from the fellow companies/local business community, geographical and cultural proximity, strong research and development (R&D) legacy, political and economic stability, Intellectual Property (IP) security, proficient English language skills etc. Gartner's study Predicts 2010: Agile and Cloud Impact Application Development Directions, highlighted, "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- 40 | September 2012 GlobalServices 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 development 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 requirements'. This is especially true for web-based application 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 1. 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 finances 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 technologies for their clients. They will then use these innovative technologies to create products for their customers as trusted partners. 2. 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 commercial engagement model with their services partners. Higgins opined, "We predict this will create a significant opportunity for specialist service providers, as more ISVs will move to a multi-source model involving a spectrum of trusted partners. ISVs will actively seek out specialist help to address specific pain points in their businesses, speed innovation and reduce costs. They will not hesitate to call on the best talent available. Incumbency is no longer the advantage it once was." 3. According to a recent Gartner survey, 30 percent 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 enterprise mobility as a managed service. 4. Gartner predicts that 75 percent of all computing will be in public clouds by the year 2020. Cloud computing has revolutionized the manner in which companies operate. The manner in which companies employ cloud technology is changing too. A mixture of cloud applications, platforms and infrastructure is sourced by organizations. As cloud-based companies are becoming more specialized, they are encapsulating cloud-based tools in their offerings. 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 developer 5. The high adopted rate of personal health management 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 planning 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.". 42 | September 2012 GlobalServices Outsourced Product Development OPD Leading Global OPD Vendors EPAM Systems Inc. GlobalLogic HCL Technologies Infosys Infotech Enterprises Lionbridge Persistent Systems Limited Symphony Teleca Corp VanceInfo Technologies GlobalServices Leading Mid-tier OPD Vendors Beyondsoft Corporation Cybage Software Private Limited Globant Hildebrando iGATE Corporation Luxoft MindTree Limited September 2012 | 43 A City of Financial Center Delivery Hangzhou, China H angzhou 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. 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. Demonstration City of Chinasourcing Hangzhou segment analysis INFRASTRUCTURE MANAGEMENT OUTSOURCING: CLOUD COMES WITH A PROMISE By Sourabh Chandra Pushp High volatile economic downturn coupled with the ease of cloud delivery is resulting in a surge of demand for IM outsourcing 46 | September 2012 GlobalServices IMS Two prominent trends that will shape the IM landscape are "Asa-Service" Offerings and Enterprise Services A lthough, the global macroeconomic uncertainty will result in sluggish IM outsourcing activity, the current infrastructure market is evolving rapidly. Combined with advances in standards-based infrastructure, data center transformation, and utilitybased 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 Management (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 trillion 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. Most of services offered by software vendors today will soon be offered as `asa-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 Manning President & Managing Director, CSC India Deals and Contracts Most 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 computing, will introduce new benefits and challenges that the market didn't see five years ago. As buyers 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 GlobalServices September 2012 | 47 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 perception 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 continue to be the dominant infrastructure segment; other verticals such as healthcare and hospitality will also witness strong infrastructure activity. Speaking of geographies, North America, will continue to dominate whereas Asia Pacific is expected to grow much faster. 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 Enterprise Services. Both trends are increasingly becoming 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 outsourcing segment has consistently been the fastest growing segment within IT servicesshare in the overall IT services segment has increased from about 15 per cent in FY2008 to about 17 per cent in FY2012. Trends That will Reshape the IM Landscape IT 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 Cloud Computing Comes with a Promise Cloud scripts the story of Infrastructure Management (IM) and there is a reason for that. Cloud computing 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 storage market, competition is increasing with leading infrastructure vendors. Although the external 48 | September 2012 GlobalServices 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 users 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 worldwide revenue from public IT cloud services exceeded $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 packaged software, server, and storage offerings will be through the public cloud model. The cloud movement 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, usage 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. 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 Brian J Manning, President and Managing Director, CSC India, says "While no one can predict 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 application 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 delivery of IT services more efficient and cost-effective. He adds, "This new class of outsourcing has the potential to unlock tremendous value for customers." 50 | September 2012 GlobalServices IMS 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 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 inhouse to take advantage of it. Cloud Predictions The 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. 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 infrastructure services, Raman Sapra, Executive DirectorStrategy and M&A, Applications & BPO, Dell Services asserts how cloud will play a game changer role together with enterprise mobility and analytics. "With the rise of cloud, infrastructure management 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 infrastructure 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 infrastructure� some businesses can cut their operational 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- SMB and Cloud Gone 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 independent 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, representing 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 GlobalServices September 2012 | 51 segment analysis IMS 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 businesses, for say-cheaper operational infrastructure and opex agility. The most commonly used cloud services are email, instant messaging, voice communications, 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 technologies 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 enterprise counterparts. 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 offpremise, often off-continent, management of IT infrastructure. Ben Trowbridge CEO-Alsbridge State of the RIM Market In 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 maturing 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 signings are indicative of new trends, such as increasing 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 attained, usually within the first two years of the engagement. The banking, financial services, and insurance industries are leading RIM offshoring growth. 52 | September 2012 GlobalServices segment analysis IMS 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 complicated revenue and cost recovery business models, which has some influence on the adoption of global RIM. Even before the arrival of the global economic downturn, senior business leaders were being challenged to increase profitability 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 essentially due to the prospect of reducing operational costs and increasing productivity in one IT function. Future An open technology and business environment, 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 outsourcing 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 market will grow 4.4 per cent by 2015. Ovum's Infrastructure 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-recessionary levels, the market will return to healthy growth of over 4.5 per cent in 2013. 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 transaction 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- 54 | September 2012 GlobalServices INFRASTRUCTURE MANAGEMENT OUTSOURCING IMS Top Global Infrastructure Management Vendors HCL Technologies Ltd. CompuCom Systems Inc. Infosys Ltd. Microland Limited CSC Capgemini Leading Mid-tier Infrastructure Management Vendors Insigma Technology Co., LTD Sonata Software Limited NIIT Technologies Collabera Inc Aegis Limited MindTree Limited Genpact Limited Chinasoft International Ltd. 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 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 Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance GlobalServices Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance September 2012 | 55 Segment Analysis IT Outsourcing Status Quo Won't Sustain By Sourabh Chandra Pushp 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 56 | September 2012 GlobalServices IT Outsourcing W hile 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, 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." 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. 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 Kokes vice president, global product management, Sitel 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 percent 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 leading 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 consolidation will evolve a fair degree of system integration, process improvement and process optimization. These three are some of the areas that are expected to go up. The outlook for 2013 is slightly brighter with independent research forecasting that software will lead the tech market with 5.5 percent growth, followed 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 GlobalServices September 2012 | 57 Segment Analysis IT Outsourcing 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 onesize-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 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 hardware maintenance and IT consulting and integration services, which will grow by 3.3 percent and 2.8 percent, respectively. Recent data from TPI Index shows outsourcing market improved in second quarter-2012 with Total Contract Value (TCV) up by 7 percent yearover-year data. Despite decline in major outsourcing/IT spending activity, one can exhibit a marginal growth in outsourcing especially for Asia Pacific region where the market if largely driven by megadeals. The study reveals, 173 contract awards during 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-overyear 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-quarter-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. Speaking 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 contracts 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, Everest Group. 58 | September 2012 GlobalServices &OHJOFFSJOHXJMMUBLFZPVGSPN"UP# *NBHJOFFSJOHXJMMUBLFZPVBOZXIFSF 'PMMPXJOH UIJT JEFB XF CVJMU B HMPCBM DPNQBOZ XJUIPWFSIJHIMZTLJMMFETPGUXBSFFOHJOFFST 8F DSFBUF TPMVUJPOT GPS XPSMET MBSHFTU CSBOET DPOUJOVPVTMZHPJOHCFZPOEDMJFOUTFYQFDUBUJPOT 5IFXJOOFSPG*50VUTPVSDJOHA1SPKFDUPGUIF:FBS BXBSECZ&VSPQFBO0VUTPVSDJOH"TTPDJBUJPO XXXMVYPGUDPN Segment Analysis IT Outsourcing 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 contracts now have smaller parcels and in many cases contracted across multiple providers. The renegotiated contracts also saw a variety of innovative engagement models, investment lead and skinin-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 multiple suppliers into one or two. 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 Sengupta research director, Everest Group Vendor Landscape John Cotterell, Chief Executive at Endava asserts, 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. These nearshore locations are becoming more attractive for IT projects, due to time zone, proximity, cultural empathy and quality 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 requiring highly-transactional, complex `agile' IT projects, with evolving business requirements and new technologies. This enables them to match their IT requirements 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 60 | September 2012 GlobalServices Segment Analysis 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 Sinha ITO & president, Xchanging 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 asset-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 operations seamlessly across a multi-vendor environment has increased. He opines how independent cloudbased 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 relationships, 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 achievement of strategic goals. Buyers will be lured by cost structures and cloud portfolio from various providers 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 Russia, there are extraordinary growth stories." Speaking of the negative 62 | September 2012 GlobalServices IT Outsourcing global economic conditions and it's impact on outsourcing and IT services, weak consumer demand will continue to challenge organizations in 2012. The most optimism on improving economic conditions 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 providers. 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 services providers. Findings from the report show that Indian providers will be some of the most aggressive innovators in PaaS through 2013. By leveraging Cloud delivery models and client trust these providers will attempt to break their linear headcount-torevenue 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 Cotterell chief executive officer, Endava 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 position is that "non-traditional" services providers may be the logical front-runners in the race for extending 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 methodologies and it would also revitalize the traditional IT GlobalServices September 2012 | 63 Segment Analysis IT Outsourcing 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. 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 outsourcing 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 suppliers 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 mainstream. 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 convergence 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 investments 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 outsourcing will be adopted by organizations to help them work through financial challenges. 64 | September 2012 GlobalServices IT Outsourcing Top Global ITO Leaders CSC Infosys Ltd. HCL Technologies Ltd. CompuCom Systems Inc. Capgemini Unisys SEGMENT ANALYSIS Contact Center Outsourcing: Growth Momentum Continues Amidst Turbulence By Smita Vasudevan 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 66 | September 2012 GlobalServices Contact Centre OUTSOURCING T he 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 communication 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 customer 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 evermore-complex transactions on the go, personalized service at every instance, and seamless movement 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. 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 Cholak vice president, Convergys Analytics Market Scan Cost efficiency and language skills continue to be the drivers. Asia Pacific, North America, Latin America 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 nearshore 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. GlobalServices September 2012 | 67 SEGMENT ANALYSIS 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 Narsapur strategic 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 Natarajan SVP, business transformation, Firstsource Solutions Some Important Contact Center Deals in 2012 Deals Universal American & C3 UK Government & Xerox Airtel Africa & Avaya Contract Value $10 million $20 million Not available CCO Expanding Into Emerging Economies Enterprises operating in the EMEA are likely to face increased complexities as each region exhibits a different level of maturity. For emerging markets 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 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 Philippines overtook India in business process outsourcing (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. Companies 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 CCO The major drivers for contact center outsourcing in 2012 will be: Optimizing the cost of servicing customers. Concentrate on core business areas, while relying on experts for non core areas like customer service Access to better technologies and cloud based services Philippines Vs India There 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 68 | September 2012 GlobalServices Contact Centre OUTSOURCING 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 Baidya industry manager, ICT, Frost & Sullivan APAC, 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 Kokes global product management, Sitel 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. Search For Improved Customer Experience Drives Investments The 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 service providers would be to offer an optimal customer experience on all these channels. Cholak says, "The experience needs to be consistently applied across every touchpoint--customers need "anytime, 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 Transition from Voice to Non Voice Interactions 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 options 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 The Power of "Big Data" Analytics is playing a major role in filtering out useful information from the large pool of unstructured data coming out of multiple communication GlobalServices September 2012 | 69 SEGMENT ANALYSIS Contact Centre OUTSOURCING allow customers to look for solutions and resolve queries on their own and Convergys shares some real world examples of how technology has helped cut down the dependence improve client key performance indicators: on agents. A large North American telecommunications company saw a 27% But where to draw the acceptance rate for highly targeted IPTV and DSL cross-sells in their retail stores after implementing a Convergys Cross-sell/Upsell Solution line? Subramanya. C, Chief A top 10 North American retail bank implemented the Convergys Intelligent Technology Officer, Hinduja Self-Service Solution and increased IVR containment from 89% to 93%, Global Solutions, says, "All resulting in a substantial annual savings a customer wants from us One of the largest PC manufacturer in the world experienced a 32% increase is to `know her', `help her' in the average number of posts worked per agent per week using the and `remember her'. The Convergys Social Interactions Solution knowing and remembering parts can always be automated. However, helping always involves human made by enterprises to cut down call volumes in order to reduce costs. Although non-voice interactouch." So striking the right balance between automation and live support is going to be the tions are going up at an alarming rate, it is not key. Sitel shares a similar opinion that the idea will likely to takeover voice anytime soon. Experts be to cut down costs through technology without say that if the percentage ratio is around 80-20 right now, this is expected to shift to 60-40 by sacrificing the human touch. 2015. Narsapur adds, "Non voice communication The Need For "Super Agents" is expanding at an alarming rate. So the situation is not inconceivable where the two will be Nothing is going to eliminate the need for agents very close in volumes." But one thing is clear now. in a contact center. In fact the agent's role has only become more complex now with the emergence Voice is no longer going to dominate customer interactions, its only going to be the part of a bigof multiple channels. Cholak, says,"The use of ger service offering. alternate channels for customer care will undoubtedly continue to grow, but the agent will remain a critical focal point in a diverse range of chanNew Ways to Interact While 2011 Convergys Customer Scorecard Renels." Agents have to be trained not for one but every type of interaction possible. Whatever be search found that consumers clearly still prefer the medium that a customer opts for, the agent to talk to agents when dealing with a company, has to be prepared to listen and deliver the right their interest in other channels is strong, with 13% saying they've used mobile applications or text kind of response. What these changes mean for service providers is that they need to train contact messaging for customer care, 11% saying they've center agents for each and every channel of interacused social media for customer care, and 7% saying they've used webcam or video support with an tion. Cholak adds that the need today is for `super agent for customer care. agents' that are adept at all interaction methods, especially in handling interactions with the ultimate multitasking communicators, the Millennials. "These Humanization of Technology agents could be moved around a call center to acEnterprises are using technology to interact and count for channel volume changes in a given client's engage with their customers in innovative ways, so program, driven by new product launches and other that cost is optimized and the effort is much lesser. Artificial intelligence tools and Self service options high traffic, multichannel events" he says. Contact Center Technologies Helping Enterprises 70 | September 2012 GlobalServices CyberMedia Announces its new Platform to Subscribe Magazines on iPad, Android & PC http://digisub.ciol.com DATAQUEST PCQUEST VOICE&DATA BIOSPECTRUM For collaboration opportunities please get in touch with Manish Verma firstname.lastname@example.org SEGMENT ANALYSIS Contact Centre OUTSOURCING 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 system 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 strategy that gives a unified view of all the different interaction channels being used by a customer. Automation will continue 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 attracting significant investments. Social Media Puzzle Social 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 percentage of customers are turning to social media sites and forums to solve problems, search for information and voice complaints. And this is acting as a wake up call for enterprises to build up their presence 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 answered before enterprises decide to take the leap. Top CCO Trends in 2012 Enterprises will invest for better customer expe 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 quality. As cloud offerings mature and its benefits get acknowledged, contact center operations too are gradually being migrated to the cloud. 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 technology will likely be the strategy for service providers. 72 | September 2012 GlobalServices Contact Center Outsourcing Global Customer Management Leaders Aditya Birla Minacs Worldwide Limited Aegis Limited Capgemini Convergys Corporation Expert Global Solutions Firstsource Solutions Ltd Genpact Limited Hinduja Global Solutions Limited Sitel Operating Corporation VADS Business Proces Sdn Bhd Mid-tier Customer Management Vendors Altisource Portfolio Solutions S.A CompuCom Systems Inc. HCL Technologies Ltd. Infosys Ltd. Scicom (MSC) Berhad SPi Global Sutherland Global Services, Inc. Xceed 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 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 Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance Application Development & Maintenance GlobalServices September 2012 | 73 Segment Analysis 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 74 | September 2012 GlobalServices F&A Outsourcing T he global Finance and Accounting Outsourcing (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 market 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 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." 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 contracts. Along with fewer new contracts signed and some terminations, we also saw a drop in size of multi-process contracts largely due to cautious buyers opting for risk-averse phased approaches." In current scenario, the deals are fragmented. 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 Menon research director, Everest Group Explaining this further, R U Srinivas,chief executive officer & executive director, Caliber Point, Hexaware BPO, articulated. "More single process (e.g. Accounts Payable) contracts are evaluated separately; 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 consulting, 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 market share of the top three providers has reduced from 65 percent to 50 percent. 2011's highest new contracts had Accenture, Capgemini and Infosys GlobalServices September 2012 | 75 Segment Analysis Many of these providers have evolved because of initial IT capabilities that have expanded, either organically or through acquisition, into competitive BPO expertise. David Borowski senior associate, Pace Harmon BPO's name as service providers. Accenture, TCS, and IBM accounted for about 50 percent of total contract value signed in 2011, including new contracts, renewals and extensions. Market leader Accenture claims its scale, integration and specialization continues to differentiate 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, providing 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 outcomes 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 solution 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 service providers on the PEAK Matrix, Everest Group identified `2012 FAO Market Star Performers' as Accenture, 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-tower outsourcing providers, e.g., IBM, Accenture, provide 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 acquisition, 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 particular F&A service tower, often stem from a compelling technology-based differentiator. Examples include API for procure-to-pay expertise and VWA for order-to-cash expertise (prior to the Capgemini 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 & Accounting 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 transformation/ 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: 76 | September 2012 GlobalServices F&A Outsourcing 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 performing well today, both with a clear vision of market 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-Intelenet, and iGate-Patni. Menon speaking about the service provider landscape added, "While the market continues to be led by three service providers (Accenture, Genpact, and IBM), other service providers are aggressively 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 Space SMB 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 GlobalServices September 2012 | 77 Segment Analysis Kashyap, senior vice president, new product development and operations, Quatrro said, "Studying 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 manager-technologies, Quatrro, "Most of the large players 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 package 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 78 | September 2012 GlobalServices F&A Outsourcing 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 manufacturing, 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, chemicals 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, professional services, hotel, auto, educational institutions, not for profit organizations, grocery etc. Some of Steria's big clients come from healthcare, telco and media, banking and retail. For HGS, FAO's end-to-end accounting the area is equity/fund advisory companies and minor subsidies of MNCs. In the case of volume transaction it is the BFSI sector. 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 articulated, "Accenture is helping clients consolidate more back office processes, leveraging the shared Clients are increasingly taking an end-toend 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 Chambliss global offering lead for F&A BPO, Accenture 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 procurement--to achieve greater savings. Another example is moving toward business outcome based solutions, 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 president, strategic initiatives, HGS shared, "One is the end-to-end accounting model where we act as the CFO role including accounting advisory on statuto- The Models As the FAO space matures, the value proposition moves away from cost and thus solutions transform too. Everest report stated that, beyond transactionintensive processes (AP, AR and GL), judgmentintenstive 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 processagnostic solutions across different process areas. GlobalServices September 2012 | 79 Segment Analysis 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. 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 Matters Technologies play in this domain has advanced from the basic `tie-and-run' model to an `augmentation' model. Menon pointed, "In 2011, technology augmentation had become the new "normal". Nearly 45 percent of the contracts in 2011 leveraged add-on tools such as workflow engines, interfaces, document digitization, business intelligence tools, user portals/dashboards, and projectmanagement tools." He added, "While most FAO buyers prefer a technology augmentation approach, there exist situations where buyers are amenable to platform-based FAO. Year 2011 witnessed a significant 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 technology architecture is designed with a `wrap-around approach' to interface with a variety of ERP solutions. Their toolsets give flexibility to interact seamlessly with client's existing ERPs and has flexibility to perform analytics within the toolsets not being limited by clients ERPs. Quatrro has created a platform. Sahgal explained, "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 logics that are build in to make sure the transactions The Leader's domain Accenture 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." 80 | September 2012 GlobalServices F&A Outsourcing 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." Genpact Since 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." 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," 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. TCS TCS' 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 - FORETM 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." 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." GlobalServices September 2012 | 81 Segment Analysis Industry Trends Predict 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 softwareas-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 --Tony Chambliss F&A BPO is seeing an increased demand for analytics information derived from the global offering lead for financial processes we manage to enhance client decisions and support functions--the F&A BPO, Accenture 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 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 Ramakrishna director, marketing, Steria India 82 | September 2012 GlobalServices F&A Outsourcing ed by the Industry 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 `fullscale' deals have become fewer � buyer are evaluating single processes (Accounts --R U Srinivas Payable, Record-tochief executive officer & Report, etc.) as opposed executive director, Caliber to multiple processes at Point, Hexaware BPO one go. Another trend is interest towards transformational sourcing, to improve/re-structure the business processes, with help of technology enablement and domain knowledge. 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, Recordto-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 GlobalServices September 2012 | 83 Segment Analysis F&A Outsourcing As per the Everest report, buyers continue to focus on an endto-end processdriven approach to FAO, as opposed to a traditional functional and piecemeal approach 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 Locations The 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-Pacific 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-/nearshore-centric, 2011 witnessed a significant increase in onshore delivery center. Recent times have also noted a significant change in buyer expectation. A major transformation 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 increasingly getting included, primarily during extensions. Adopting more end-to-end approach as opposed to siloed and piecemeal approach in order 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 bigbang approach. This is also reflected in new contract signings and contract extensions/renewals: We saw increase in the number of single process contracts 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 destination 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 delivery locations in India namely Noida, Chennai and Pune. Sachdev Ramakrishna, director, marketing, 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 penetration 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 presence 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 referring 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. 84 | September 2012 GlobalServices F&A Outsourcing Global FAO Vendors Capgemini EXL Service Genpact Limited Infosys Ltd. WNS Global Services Xchanging Leading Mid-tier FAO Vendors Datamatics Global Services Ltd. HCL Technologies Ltd. Insigma Technology Co., LTD Quatrro Global Services Pvt. Ltd. Sutherland Global Services, Inc. Segment Analysis IndustrySpecific BPO: Being Explored Aggressively By Smriti Sharma, Smita Vasudevan, Sourabh C. Pushpa The ever increasing pressure to curtail costs and the expectation to drive better business outcomes is acting as a big push for the global industryspecific BPO 86 | September 2012 GlobalServices industry specific BPO E nterprises 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 industryspecific BPO opportunities to drive better business 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. 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 Gopalan executive vice president, international operations, Hinduja Global Solutions cially in the Healthcare and Life Sciences space. The market is also witnessing the trend towards combining technology and BPO into a single service offering. Bundling together BPO processes along with IT offerings is giving service providers the opportunity to expand their footprints. Although enterprises seem to be a lot more industry focused now, the trend towards industryspecific 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 healthcare clients are doing it through industry-specific processes. "In the healthcare space, industry-specific processes account for more than 80 percent of the market share, while horizontal services are only less than 20 percent" adds Gopalan. 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 offerings are being aggressively pursued. Enterprises 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, enterprises 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 specific 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- Market Estimates & Geographies Over the next 5 years, vertical specific BPO is expected to offer a larger opportunity as compared GlobalServices September 2012 | 87 Segment Analysis to horizontal BPO. According to the Nasscom-Everest 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. Important nearshore destinations include South and Central America and South Africa. Some Prominent Industry-specific Processes Healthcare outsourcing: According to a report published by US based marketresearch.com, the global 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 industry, 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 ICD10, 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 ICD9. The people who are ICD-9 trained are having difficulty in passing for the ICD-10 level. They are facing difficulty with the existing 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 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 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 players 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 88 | September 2012 GlobalServices industry specific BPO at it as a strong revenue spot. Apart from tackling cost pressure, the key drivers for publishing outsourcing 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 banking institutions face are rising interest rates, increasing instances of borrower default, competitive pressures etc. Mortgage BPOs spread their services across various levels of the mortgage value chain. The functions of mortgage BPO can be categorized under four divisions: distinct headers;New Business Acquisition, Appraisal Title 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 underwriting, 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 pharmaceutical firms have started outsourcing clinical development programs to outside clinical research organizations (CROs). Companies depend on CROs to lower costs, access new patients, and comply with complex regulatory requirements. In return, CROs should aim at becoming long-term strategic partners offering GlobalServices September 2012 | 89 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 companies suggest continued growth in clinical development 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 90 | September 2012 GlobalServices industry specific BPO service. Current CRO relationships appear to leave significant room for improvement. Patient recruitment, 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 management etc. On the internet customers talk in real time and companies have comprehended the fact that mere online monitoring tools are not sufficient. Software'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 market skills and also cost effective. Social Media Examiner's Michael Stelzner report titled 2012 State of the Social Media Marketing Industry stated, "In 2010, only 14 percent of marketers outsourced 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 media'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, telecom, insurance, supply chain management, technology, 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 scaling up their business competency levels in handling high value business projects. Everest study states that primarily one demanding 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 impact. Industry reports predict that industrycentric BPO capabilities will emerge as an opportunity 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 highly 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 GlobalServices September 2012 | 91 Segment Analysis industry specific BPO concentrated as the industry relevance approach is now a key ingredient in BPO offerings. For industryspecific BPO services, Analytics and Cloud are playing game changing roles. But talent and skill issues are are gripping the industry. Service providers are spending huge amounts on training and development. 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, analyzing 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 development, 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 requirements. 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 expected to be relatively slow in 2012 compared with 2011. But looking forward, we expect to see industry-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 business results alongside the traditional cost-cutting approach." 92 | September 2012 GlobalServices industry specific BPO IndustrySpecific BPO Global Leaders- Industryspecific BPO Altisource Portfolio Solutions S.A Genpact Limited Infosys Ltd. Stream Global Services Sutherland Global Services, Inc. Unisys Industry-specific BPO Niche Leaders Aditya Birla Minacs Worldwide Limited Aegis Limited Ajuba International Datamatics Global Services Limited HCL Technologies Ltd. Hexaware Technologies Ltd. Hinduja Global Solutions Ltd. Indecomm Global Services (I) Pvt Ltd InterGlobe Technologies Mindteck (India) Ltd. Neusoft Corporation Quatrro Global Services Pvt. Ltd. GlobalServices SPi Global September 2012 | 93 segment analysis The Expanding Scope of By Smita Vasudevan PO Contracts Despite a sluggish macroeconomic outlook, the global PO market has retained its momentum. Fresh deals, renewals, new technologies and emerging players - there is lot for procurement outsourcing buyers to look forward to this year P 94 | September 2012 ost the 2008 global recession the demand for PO (Procurement 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 GlobalServices procurement outsourcing 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 pressure to attain cost savings is more evident now, and outsourcing is coming out to be the most desired medium. Global Market Scenario The 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 Procurement Outsourcing Annual Report 2012, 60 new multi-process PO contracts and 53 renewals/extensions 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. 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 Evans Vice President, Corbus Geographic adoption will also continue to expand in terms of global contracts as well as adoption by source geographies such as AsiaPacific 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 coordination 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. Transactional procurement, strategic sourcing, compliance management, category management, tactical procurement and reporting are the common types of services being offered today. PO Market in 2011 60 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 Projections End-of-term activity will be significant as 57 percent 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 revenues 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 GlobalServices September 2012 | 95 segment analysis An interesting trend is the growing preference for procurement outsourcing among mid market companies. Emerging technologies, especially, cloud-based offerings have made PO services affordable for the mid market. The increasing 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 increasing." Enterprises are focusing on core direct spending, preferring to keep it in house, while outsourcing non-core direct spend categories, such as maintenance, 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 expectations. Today enterprises want their PO service providers to come up with endto-end solutions in source-to-procure and procureto-pay contracts. The spate of M&A and consolidation 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 & Verticals North America will be the most dominant market followed by Europe and Asia Pacific. Emerging geographies will be attracting a lot of buyer attention 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 locations in Eastern Europe, Middle East and Latin America are gaining popularity. Also since unemployment levels in the US and UK are pretty high, 96 | September 2012 GlobalServices procurement outsourcing Merger & Acquisition Deals in 2011 Deal Infosys BPO Acquires Portland Group IBM Completes Acquisition of Emptoris Objective To establish presence in the Australian market with more offerings in the value-added segment To expand Smarter Commerce initiative 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 Rajesh Vice President, Everest 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 feature of sourcing-related processes, therefore, a key value creation lever for sourcing-focused buyers." The service Provider Landscape It 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 - people, process and technology. The focus has been on hiring and retaining talented people with knowledge and experience in niche areas like negotiations, spend analytics etc. As clients are becoming more and more demanding, providers are under pressure to offer access to cutting edge technologies. 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. buyers will be forced to turn to nearshoring rather than offshoring. Across verticals, demand coming from manufacturing, 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 tremendous pressure to cut down costs and are ready to look for alternative avenues. Major Drivers Process optimization and compliance are the primary factors that are contributing to growth in demand for PO globally. The cost base for procurement 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 PO Service Providers' Landscape IBM, 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. GlobalServices September 2012 | 97 segment analysis procurement outsourcing 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 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 towards 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 Ahead Its a transformational phase for the PO market. The industry has definitely come of age with some significant changes happening. The value proposition for procurement outsourcing is quite high but the challenge is in attaining its full value. There are expectations of adoption rates picking up across all verticals and the market is entering 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 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." A lot will also depend on how production facilities 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. 98 | September 2012 GlobalServices procurement outsourcing Global Procurement Management Leaders Capgemini Corbus, LLC Genpact Limited HCL Technologies Ltd. Infosys Ltd. WNS Global Services Xchanging GlobalServices September 2012 | 99 Segment analysis From Cost Savings to Strategic Advantages: Global HRO Evolves By Smita Vasudevan 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. 100 | September 2012 GlobalServices HRO O ver 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-changing 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 estimated to reach US$199.6B by the year 2017, driven by the increasing need for alignment between business operations and HR, cost reduction, 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 The need to evolve HR practices in order to cater to a younger workforce will be felt more. Rajiv Raghunandan strategic business practice head, HRO and S&F, Infosys BPO single process HRO space and is the fastest growing segment right now. Market Estimates According 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 functions like RPO and Learning are relatively fragmented markets with numerous service providers playing together. The market is still in a phase of cautious optimism and growth in 2012 is expected to be very much in line with what we saw last year. The MPHRO 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 enterprises 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 GlobalServices September 2012 | 101 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 example 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, "Recruiting 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." 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 Khan group president, HR outsourcing and solutions, ACS Bpaas Opens Up New HRO Opportunities Saas-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 outcome-based contracts, and flexible ways of engaging with specialist providers. As a trend, HR service providers will be tying up with SaaS providers to offer platform based HRO offerings. Joining hands with a service provider. One example is Workday partnering with Accenture and Wipro to offer integrated saas Bpo services. 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 102 | September 2012 Mobility and Self Service High on Demand Mobile HR applications are high on enterprises' demand list and service providers will face increased 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- GlobalServices HRO 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 trol over their data and organizations will be able to reduce administrative overheads. 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 Growth Across Segments and Geographies The 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 geographies 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. How Innovative HR Technologies Are Helping Enterprises? Rajiv Raghunandan, Infosys, points out three ways in which HR technologies are helping organizations: Ensuring greater compliance Better end user experience by making transactions simpler Making HR policies flexible enough to accommodate a global and mobile workforce Key Highlights of 2011 While 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 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 GlobalServices September 2012 | 103 Segment analysis HRO 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 technology capabilities, creating a an attractive mix. The acquisition of Taleo, an on-demand talent management software company by Oracle is a good example of this. BPaaS will help overcome some of the shortcomings of both BPO and SaaS. It will add an additional layer of subjectmatter 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 Hot HRO Deals in 2011 MPHRO 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 Demand for Short Term Deals Continue 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. 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 reshape the global HRO landscape. Even against the backdrop of a dull and gloomy economic scenario, optimism remains as enterprises aim to reap strategic advantages out of HR outsourcing deals. There are huge opportunities that are yet to be fully explored, 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 innovations will play a big role in the long term. As the HR demographics change and a new Facebook generation 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. 104 | September 2012 GlobalServices human resource outsourcing HRO Global HRO Vendors Capgemini NorthgateArinso GlobalServices September 2012 | 105 Segment Analysis Analytics Outsourcing: Inside the World of Numbers By Smriti Sharma Advanced analytics will increasingly become a necessity for competitive differentiation 106 | September 2012 GlobalServices Analytics Outsourcing T oday, all organizations operate in a global 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 organization 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 relying 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 developing 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 traditional 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/predictive analytics. With volume and variety of data ever increasing, and with constant evolution of platforms 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 necessity for competitive differentiation, for strategic analysis, and for better forecasting, and performance management etc. Growing competition and globalization has made analytics critical for all businesses to support strategic decision making. 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 Joshi senior research analyst, ValueNotes Sourcing Practice Reetika Joshi, senior research analyst, ValueNotes 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 complexity, 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 analytics services mix, in ascending order of complexity: 1. 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 dedicated to data preparation. 2. 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. 3. 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 business problems/opportunities at hand. In terms of offshoring, modeling is done by captives as GlobalServices September 2012 | 107 Segment Analysis 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 Ranjan vice president, Everest Group well as third-party vendors depending on the maturity of the clients' in-house teams. 4. Solutions: Solutions generally entail "bundled" analytics components, delivered to clients to address their needs. Providers take a consultative approach and leverage technology to deliver value. The aim is to render the client self-sustaining and create a unified analytics delivery mechanism. This may be done by deploying 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 processes, identify problem areas or sub-processes with costsaving 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. 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 include 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 clients 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, innovation 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 108 | September 2012 GlobalServices Analytics Outsourcing to happen in conjunction to be able to bring in the right value for the buyers side." Extracts from TCS report titled, Future Proofing the Organization through Analytics, A significant 40% of the buyers felt the functional 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 organization, 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 elements 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 major: 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 question 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, manufacturing, supply chain etc. were initially not very active in this space. However, now they offer good opportunities. Web and web related services, package 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. Essentially, 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 warehouses. 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 GlobalServices September 2012 | 109 Segment Analysis Analytics Outsourcing 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, Cognizant, 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 environment and try to stay competitive by keeping a close check on various business performance metrics. 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 portion of this business." Anoop Sagoo, BPO cross operating group lead, Accenture, expressed, "BPO today is about mining 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 opportunities 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 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 Sagoo BPO cross operating group lead, Accenture 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 performances, etc. and Smart Metering related analytics 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 outsourcing in the coming years. Also, with the adoption of platforms and applications on the cloud, analytics-as-a-service, or dataintegration-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. 110 | September 2012 GlobalServices Analytics Outsourcing Leaders- Specialty KPO Aegis Limited Affinity Express Chinasoft International Ltd. CompuCom Systems Inc. Corbus, LLC Datamatics Global Services Limited HCL Technologies Ltd. Infosys Ltd. Insigma Technology Co., LTD InterGlobe Technologies Quatrro Global Services Pvt. Ltd. Sutherland Global Services, Inc. VanceInfo Technologies Global Knowledge Process Leaders Aditya Birla Minacs Worldwide Limited Capgemini eClerx Services Ltd. Genpact Limited SPi Global Syntel Inc. 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