Global Sourcing Market Vista: Q Preview Deck

Transcription

1 Global Sourcg Market Vista: Q Preview Deck

2 Contents Product overview Illustrative contents 2

3 The creasg complexity of outsourcg market has amplified risk exposure for companies Factors drivg creased risk Vendor and model proliferation Multiple service providers and busess models Large span of functions Typically combation of many IT, BPO and some KPO services Increasg scope Significant proportion of operations now low cost locations Global delivery cha Services often delivered from multiple locations with diverse risk footprt Dynamic economies Most delivery locations are emergg economies gog through rapid change Examples of risks Regulatory risk Ensurg compliance with regulatory guideles source and destation countries across suppliers Busess case risk Managg wage flation without affectg quality of service Concentration risk. Currency risk Performance risk Managg quality of service delivery, attrition, knowledge retention Data security and tellectual property risk Implementg measures to safeguard data and tellectual property Busess contuity risk Most large companies have capabilities global risk management. However, level and type of risk exposure that is emergg from globalization of services is unprecedented 3

4 Sourcg leaders are beg asked to manage risks associated with global sourcg and support delivery of transformational results What are my peers dog? What new service delivery models/ suppliers are my peers leveragg? Are re opportunities to optimize my pricg? How can I better manage forex changes? What is real flation and how does it compare to price creases my portfolio? Are re new govt. centives that I can avail? What new risks are my suppliers takg on? Who are emergg suppliers my areas? How are relative costs movg across locations? Are ir any new political or macroeconomic risks I need to be aware of NOW? Key decisions that Sourcg managers need to support Comparison with peers Location risk management Supplier selection and optimization Design of new deals Price benchmarkg and contract renewals 4

5 Market Vista provides contuously updated facts and analysis every quarter to enable effective management of global services portfolios Each quarterly Market Vista report captures developments across three key areas 1 Market overview Outsourcg transactions trends Transaction analysis By dustry, geography, etc. Listg of major BPO/IT outsourcg deals Large offshore deals Captives analysis New captive set-ups, divestures Focus on Fancial Services players Transaction analysis Developments across global majors 2 Location trends and risks Key location developments Establishment of new offshore delivery centers Risk dashboard capturg key current and emergg risks Geo-political/economic changes Government itiatives Q2 focus Fact-base on Lat American cities Sustaability of arbitrage Operatg costs across 9 leadg cities, flation rates, and currency trends 3 Supplier developments Key developments among 20 leadg global suppliers Fancial performance Transaction activity Changes delivery footprt M&A and alliance activity Q2 highlight landscape of knowledge services suppliers India Detailed profiles for each player capturg key developments across dimensions 5

6 Contents Product overview Illustrative contents 6

7 Each section of quarterly report comprises 30+ pages of sight and data Illustrative Table of Contents (page 1 of 2) Topic Section I A: Trend analysis outsourcg, offshorg, and captives I-3 Outsourcg transactions analysis I-4 Offshore transaction analysis I-10 Change outsourcg transactions (Q-o-Q) I-11 Captive developments I-12 Section I B: Focus topic fancial services outsourcg and offshorg I-16 Fancial services developments I-17 Large fancial services deals signed Q I-21 Section I C: Data snapshots I-22 Examples of large BPO and IT deals signed this quarter I-23 List of new captive announcements made this quarter I-25 List of captives with announcements for expansion I-27 Key developments for global BFSI majors I-28 Section II A: Trend analysis Risk and Opportunity dashboard and analysis II-3 Risk and Opportunity Dashboard II-4 Risk and Opportunity Dashboard analysis II-5 Section II B: Focus topic Lat America II-10 Lat America: Sustaability of arbitrage II-11 Operatg costs leadg Lat America cities II-14 Operatg cost flation II-15 Currency trends II-18 Page no. 7

8 Each section of quarterly report comprises 30+ pages of sight and data Illustrative Table of Contents (page 2 of 2) Topic Page no. Section II C: Data snapshots II-19 Market activity: Delivery centers established Q II-20 Market activity: Delivery centers planned Q II-23 Market activity: Expansion announcements Q II-25 Regional developments: Geo-political, macro-economic II-26 Regional developments: Leadg economic dicators II-28 Regional developments: Investment environment II-29 Section III A: Trend analysis Key developments across suppliers III-5 Supplier developments analysis III-6 Section III B: Focus topic Landscape of knowledge service suppliers India III-15 Knowledge services market India III-16 Landscape of India-based knowledge service providers III-18 Section III C: Data snapshots Key developments and activity profiles by supplier III-21 Summary of supplier ratgs III-22 Recent M&A activity by suppliers III-23 Recent alliances and partnerships forged by suppliers III-26 Recent location activity by suppliers III-28 Supplier activity profiles Key developments by supplier III-31 8

9 Section I Market section Overview Captures outsourcg transactions trends, captive developments with an emphasis on Fancial Services players Includes over 15 pages of data tables across transactions, captives and fancial services 9

10 Section I Market section Illustrative output Transaction analysis for each quarter helps assess market momentum and trends over time ACV of outsourcg transactions signed US$ million 100% = 180,091 3,804 4,011 Ors 3 Both BPO 4% 6% 5% 16% 25% 14% 25% 16% Number of outsourcg transactions signed Number of transactions 2, % = 12, Ors 3 Both 3% 3% 4% 2% BPO 22% 26% 26% 28% ITO 80% 59% 69% 81% ITO 75% 71% 70% 70% 1 2 To date Q Q Q To date Q Q Q ACV ACV of of outsourcg outsourcg transactions transactions was was lower lower Q2 Q2 despite despite an an crease crease number number of of transactions transactions due due to to relatively relatively fewer fewer large large deals deals Q2 Q2 compared compared to to Q1 Q For purpose of this analysis, Q cludes all transactions announced Oct-Dec For purpose of this analysis, Q cludes all transactions announced Jan-Mar Ors cludes deals for which functional scope was not publicly disclosed 4 ACV values were also lower Q owg to a large number of deals for which deal values were not disclosed Source: Everest Research Institute Transaction Intelligence Database 10

11 Section I Market section Illustrative output Analysis is furr detailed at a functional level Q-o-Q change number of BPO transactions, by process 1 Decreased from last quarter Similar to last Quarter Increased from last quarter Q-o-Q change number of ITO transactions, by process 1 Process category Q to Q Q to Q Process category Q to Q Q to Q F&A Application outsourcg HR Procurement Real estate Customer care Infrastructure outsourcg Both Ors 3 Industry specific Ors 2 1 Includes transactions which functional scope may have multiple processes 2 Ors cludes processes such as document management, market development, collections & mailroom scanng, R&D, engeerg, safety & environmental analysis reportg, prtg, product development & marketg services, logistics & supply cha management 3 Ors cludes processes where functional scope was not publicly disclosed Source: Everest Research Institute Transaction Intelligence Database 11

12 Section I Market section Illustrative output Coverage also cludes captives, with a focus on setup, divestiture and or trends among captives Caterpillar Divestiture of captive operations to Satyam Caterpillar has sold off its Market Research and Customer Analytics operations to Satyam for US$60 million Satyam will set up a center for excellence and novation Chennai jotly with Caterpillar, which will act as a separate busess unit Satyam will provide support to Caterpillar product development, service, validation, etc. RSM McGladrey Divestiture of captive unit to Quatrro BPO Solutions Gurgaon-based Quatrro BPO has acquired captive accountg unit a 100% buyout Around staff of RSM McGladrey (cludg 200 US), will move to Quatrro The Indian BPO company will also get McGladrey s accountg technology platform and senior leadership Aviva Captive BPO operations may soon be acquired by WNS 1 WNS Holdgs appears to have emerged as highest bidder for Aviva Global Services, with an offer of over US$200 million When completed, WNS will absorb around 6,500 employees of Aviva s consolidated operations spread across Bangalore, Pune, Noida, Chennai, and Colombo 1 WNS announced its acquisition of Aviva Global Services on July 10, Furr details of WNS Aviva deal GS Market Vista Q Source: Everest Research Institute analysis 12

13 Section I Market section Illustrative output Developments among leadg fancial services players are profiled Citigroup Proposed reduction IT spendg and IT staff Citigroup plans to cut down its IT costs by about US$3 billion with next three years; IT budget cut represents a fifth of overall cost reduction planned across busesses. Citigroup will also be targetg to improve operational efficiency by leveragg IT platforms across busesses, replacg systems unique to particular busesses Divesture plans for Citigroup Global Services Citigroup is believed to have revived plans for sale of its offshore BPO unit, Citigroup Global Services and its frastructure outsourcg unit, Citos. IBM is reported to be a leadg contender for purchase Technology solution agreement Citigroup s Global Transaction Services Unit will leverage Ariba s payment solution system to deliver enhanced voice and payment solutions to Citi s clients Bank Of America Acquisition related concerns Bank of America s acquisition Countrywide Fancial Corp. (CFC) has sparked concerns about future of combed entity s offshore operations. Currently both firms have captive operations India American Express Customer service bought back onshore American Express Australia has decided to support Australian customers locally and has created 150 call center jobs Melbourne and Sydney for this purpose. Earlier bank had offshored its customer service to India and Philippes Source: Everest Research Institute analysis 13

14 Section II Locations section Overview Key developments and emergg risks across locations Includes over 20 pages of data tables on market activity, costs, wage flation, etc. 14

15 Section II Locations section Illustrative output The Location Risk Dashboard identifies key emergg risks across proment offshorg regions Legend Significant risk factor requirg attention Potential near-term risk; may need monitorg Positive change sce last assessment A Brazilian government troduced centives for export sector, that can reduce operatg costs and taxes by ~2% B Despite record flation levels India, IT/BPO wages are set to crease less as compared to last year C Extension of tax holiday available under STPI and EOU schemes by one year D Tier-II cities Cha are becomg credible options, unlike many or offshore locations E Non-voice BPO delivery gag momentum Philippes Potential real estate shortage Santiago, Chile. Vacancy rates at record lows of below 1% Concerns on economic and political stability contue Argenta. High flation, protests over taxes, revision S&P country ratgs from stable to negative Source: Everest Research Institute analysis 15

16 Section II Locations section Illustrative output Key risks are furr detailed. For example - In Brazil, troduction of a new policy reduces operatg cost and taxes In May, Brazilian government troduced a policy to boost exports and sectors hit by contued appreciation of Real. Incentives offered to IT/ICT companies clude: Reduction employers' contribution to social security tax on payroll, dependg on participation of export come company s gross come Double deduction of trag expenses, calculatg base for come tax Total cost per FTE US$ Taxes 1-2% savgs , ,100 IT SERVICES Operatg cost 1 ~5% savgs on tax due to ~1% savgs on trag salary cost due 68,000 subsidy to reduction social security 67,400 tax 1 Operatg cost cludes salary, facilities, equipment, telecom, trag, and attrition cost 2 Savgs illustrative for 25%-50% export share revenues Source: Everest Research Institute analysis 16

17 Section II Locations section Illustrative output The market activity heatmap identifies spikes of activity across regions Legend No major activity (0-5 centers) Nascent location (5-15 centers) Emergg location ( centers) Mature location ( > 50 centers) Source geographies Increase offshore activity last quarter 1 Mexico Poland Czech Republic Romania Hungary Bulgaria Morocco Egypt India Cha El Salvador Costa Rica Panama Philippes Malaysia Sgapore Brazil Chile South Africa Argenta 1 Details on new delivery centers opened provided followg pages section Note: Includes delivery centers of global suppliers and F2000 captives only Source: Everest Research Institute Transaction Intelligence Database 17

18 Section II Locations section Illustrative output The section also contas quarterly data on mes such as sociopolitical, macroeconomic, and promotion itiatives across regions 18

19 Section II Locations section Illustrative output Each quarterly report will cover a deep-dive on a specific geography Q report cludes a deep-dive on Lat America coverg costs, flation, currency trends, etc. 19

20 Section III Supplier Developments Overview Profiles developments across 20 leadg suppliers, highlightg key implications for sourcg managers Includes over 40 pages of data tables on M&A, new delivery centers, management changes, etc. 20

21 Section III Supplier Developments Illustrative output This section cludes a perspective on relative momentum across suppliers Trends transaction announcements over previous quarter Suppliers ITO BPO Traditional global Accenture ACS Atos Orig Capgemi Convergys CSC EDS Hewitt HP Services IBM Global Services Perot Systems Offshore-centric Cognizant EXL Services Genpact HCL Technologies Infosys Satyam TCS Wipro WNS Overall Note: Analysis based only on publicly announced transactions Source: Everest Research Institute (2008) Decreased from last quarter Increased from last quarter Similar to last quarter Across Across group group of of suppliers, suppliers, new new transactions transactions were were announced, announced, accountg accountg for for US$8 US$8 billion billion terms terms of of TCV TCV With With group, group, transaction transaction announcements announcements across across ITO ITO were were higher higher Q2 Q as as compared compared to to Q1 Q On On or or hand, hand, share share of of BPO BPO transaction transaction signgs signgs decled: decled: For For ITO, ITO, transaction transaction announcements announcements among among traditional traditional global global suppliers suppliers creased creased quarter. quarter. However, However, for for offshore-centric offshore-centric suppliers, suppliers, activity activity Q2 Q was was largely largely similar similar to to that that precedg precedg quarter quarter For For BPO, BPO, transaction transaction announcements announcements among among traditional traditional global global suppliers suppliers saw saw a a slight slight decle decle compared compared to to previous previous quarter. quarter. For For group group of of offshore-centric offshore-centric suppliers, suppliers, transaction transaction activity activity remaed remaed consistent consistent over over last last quarter quarter Key Key transactions transactions signed signed this this quarter: quarter: CSC CSC signed signed a a seven-year seven-year ITO ITO contract contract with with Bombardier Bombardier worth worth US$1.2 US$1.2 billion billion Perot Perot Systems Systems signed signed a a 13-year, 13-year, US$1 US$1 billion billion contract contract with with Harvard Harvard Pilgrim Pilgrim Healthcare Healthcare to to provide provide IT IT frastructure, frastructure, busess busess applications, applications, and and admistrative admistrative services services 21

22 Section III Supplier Developments Illustrative output Each supplier is profiled detail across multiple dimensions Sample profile - Accenture (page 1 of 3) Recent transaction activity Buyer name Signg date TCV 1 estimate (US$ million) Duration Services New York City DoITT April years AO Baltimore Gas and Electric April 2008 N.A. N.A. AO EdiPower April 2008 N.A. N.A. AO Contental Casualty Company May 2008 N.A. 5 years Customer Care Safeco May 2008 N.A. N.A. AO ICAP June years AO Location footprt Location Status Employees Description Monterrey (Mexico) New centre N.A. Accenture expanded its Global Delivery Network with openg of a delivery center Monterrey, Mexico, strengng systems tegration and outsourcg capabilities it provides to clients North America Services Systems tegration, ADM, testg, and technology consultg 1 Total Contract Value Sources: Everest Research Institute (2008); company Websites 22

23 Section III Supplier Developments Illustrative output Each supplier is profiled detail across multiple dimensions Sample profile - Accenture (page 2 of 3) Mergers & Acquisitions (M&A) and alliance activity Type of activity Target/partner firm Description Acquisition Acquisition Acquisition Acquisition Alliance Alliance Alliance Alliance AddVal Technology Inc. (USA) ATAN (Brazil) Orig Digital, Inc. (USA) SOPIA Corporation (Tokyo) SprgSource (USA) Sun Microsystems (USA) TechniData (Germany) UniStar Nuclear Energy (USA) Accenture signed an agreement to acquire busess of AddVal Technology Inc. (AddVal), a privately owned provider of shipment-management products and services to global freightmanagement and airle-cargo companies. Based Cuperto, California, AddVal has a software development center Chennai, India Accenture acquired ATAN, a privately held provider of dustrial formation technology (IT) and automation solutions based Belo Horizonte, Brazil. The acquisition will accelerate Accenture s expansion to automation and dustrial IT services globally and furr enhance company s capabilities management consultg, systems tegration and technology consultg with global metals and mg, energy and utilities dustries Accenture acquired Orig Digital, Inc., a privately held New Jersey-based company that provides rich video capture, transformation and delivery services to content owners. The acquisition will expand Accenture s capabilities media, entertament and communications dustries Accenture acquired SOPIA Corporation, a privately held, Tokyo-based consultg and formation technology solutions company. The acquisition will extend Accenture s Oracle capabilities Japan Accenture and SprgSource teamed up to deliver production version of open source framework for batch processg, called Sprg Batch Accenture and Sun Microsystems unveiled new technology solutions for busesses and governments to protect ir formation systems from growg security threats. Accenture and Sun Microsystems formed an alliance relationship 2007 to build security solutions that could be deployed quickly while providg a high degree of identity assurance Accenture and TechniData announced partnership to develop global environmental, health and safety (EH&S) solutions for chemical companies, based on SAP UniStar Nuclear Energy (UNE) announced partnership with Accenture to develop an advanced formation technology (IT) platform capable of supportg lifelong data needs of a potential new fleet of nuclear power plants. UNE is a strategic jot venture between Constellation Energy and EDF Group, Europe s electric energy producer Sources: Everest Research Institute (2008); company Websites 23

24 Section III Supplier Developments Illustrative output Each supplier is profiled detail across multiple dimensions Sample profile - Accenture (page 3 of 3) Or significant developments Type of announcement Headcount related Description Accenture announced plans to expand operations Poland by creasg its headcount from 500 at present to approximately 2,000 its Warsaw-based BPO facility, over next few years. The company also plans to establish anor facility Poland at Szczec, Lubl, or Bialystok Accenture announced plans to ramp up its Indian operations by hirg 13,000 people with a year. The Company has a headcount of about 37,000 India at present, and tends to scale up this figure to 50,000 next 12 months Accenture announced plans to expand its Cebu operations. The company opened its technology delivery center re August 2007 Ors Accenture strengned its systems tegration and outsourcg capabilities for European clients by tegratg its delivery center Casablanca to its Global Delivery Network Accenture s delivery centers for technology and busess process outsourcg India received British Standards Institute s (BSI) BS :2007 certification for busess contuity Accenture opened a new facility at its research and development technology lab Sophia Antipolis, France. The facility, called Accenture Payments Innovation Showcase, will focus on origal research and development all facets of payments busess, cludg mobile communications and or pot-of-sale technology, bank-to-corporate connectivity, processg, process models, biometrics, regulation such as Sgle Euro Payments Area (SEPA) itiative, and security 24

25 Section III Supplier Developments Illustrative output In addition, section cludes matic snapshots such as supplier landscape for knowledge services India Broad-based IT and BPO suppliers Traditional offshore IT and BPO services suppliers that have expanded ir service portfolio to clude knowledge services Pure-play, diversified knowledge services suppliers Specialist suppliers providg only high-value knowledge services across a range of dustry verticals Landscape of Indiabased knowledge service providers Specialist knowledge services providers Specialist suppliers providg knowledge services for focus dustries (e.g., BFSI or pharma) or focus segments (e.g., legal services) 25

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