Finance and Accounting BPO Market Landscape, 2013

Transcription

1 The Knowledge Community for Global Business & IT Services Finance and Accounting BPO Market Landscape, 2013 Market Evaluation, Forecast and Competitive Analysis Conducted with the support of KPMG s Shared Services and Outsourcing Advisory Practice March 2013 Phil Fersht Founder & CEO, HfS Research phil.fersht@hfsresearch.com Ron Walker Principal, Shared Services and Outsourcing Advisory, KPMG LLP rwalker@kpmg.com Brian Dubiel Principal Analyst brian.dubiel@hfsresearch.com

2 Table of Contents Topic Page Executive Summary 3 Research Methodology 7 Market Size and Forecast 11 Key Market Dynamics 18 Competitive Landscape 28 Multi-Process F&A BPO Deal Trends 38 Market-Wrap and Recommendations 50 About the Authors 55 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity HfS Research Ltd. Proprietary Page 2

3 Executive Summary

4 Introduction to the HfS Finance and Accounting BPO Industry Landscape, 2013 The HfS Finance and Accounting BPO Industry Landscape, 2013 is based on the following inputs: F&A Enterprise Buyer Interviews 399 enterprise buyers were recently surveyed per their buying intentions and attitudes towards F&A BPO services during December 2012 and January Up to 5 client references have been sought per F&A service provider. 30 additional qualitative interviews conducted to add context and insight into key trends and dynamics. Service Provider Briefings and F&A Contract Information 750 live F&A BPO contracts across the 16 major F&A services providers were collected and analyzed. Each F&A BPO contract encompassed more than two core F&A processes bundled and was over $1M in Total Contract Value. HfS Analysts and Industry Influencers Inputs and opinion from key influencers in the market, including KPMG experts in F&A services, were included, in addition to the HfS analyst team. HfS Sourcing Executive Council Members Members of HfS buyer community were consulted on their experiences, attitudes towards F&A BPO issues and the market HfS Research Ltd. Proprietary Page 4

5 Key Highlights: F&A Adoption and Outlook Deal activity rebounds. F&A BPO market has shown growth of 13% increase in deals 2012 after several years of downturn. Deal size has stabilized at $25M (ACV). Market forecasted to grow. Total F&A Outsourcing is expected to surpass $25B in 2013, at a growth rate of 8%. F&A multi-process BPO expected to surpass $5B for the first time. 4 out of 10 enterprises ($5B+) intend to expand their F&A BPO operations over the next year. Attitudes towards F&A BPO have gone back to basics. Motivations to adopt F&A have reverted back to cost and standardization of process. While enterprise value innovation and analytical value, they want to get the basics right first. With 90% of BPO engagements meeting cost reduction and efficiency goals there is a host of enterprises now looking to augment of start their F&A BPO initiatives. Attitude of buyers has shifted from the we can t to the why can t we? Buyers are running of excuses with F&A as operations heads seek great cost efficiencies and process standardization in transactional process areas. Key industries of growth. These include Telecom, Software / High Tech, Media and Publishing and Retail/Hospitality. Major industries show slowed growth. BFSI and Manufacturing still dominate a third of the market, but growth has slowed. Market still nascent. All F&A functions are still predominately managed in-house by enterprises. This market have a very long way to go to reach maturity and saturation HfS Research Ltd. Proprietary Page 5

6 Key Highlights: Competitive Environment Market ripe for consolidation. Too many providers are chasing too few deals. Ambitious challenges looking to break into the leading tier will need to consider acquisitions. The F&A Big Four dominate. Accenture consolidates its command of market share. IBM, Genpact, and Capgemini make up the Winner s Circle. F&A Service Providers are bifurcated onto two camps. The Winners Circle, clearly dominates the market in terms of market share and footprint and the Challengers Circle which are some way behind in terms of large enterprise deals. Differentiation takes center stage. The leading service providers are attempting to become more innovative in the F&A BPO space, but the market still remains focused on execution and delivery. While some providers lead in certain areas, there are few clear differentiation points in terms of innovation, analytics and capability. Most of the providers are overly reliant on sourcing advisors for their business channel. With as many as 12 providers being brought into advisor-led deals, relying purely on the advisor channel is becoming a costly and dangerous strategy, especially for the second tier. Providers need to invest in consultative talent. In order to increase more sole-source opportunities and open up more client conversations, many of the providers need to recruit F&A experts who can engage in strategic conversation with enterprise executives. The legacy model of having sales people attempt to sell low-cost, as opposed to having a value-based conversations us fading into the past. Many providers market themselves very poorly. With a couple of exceptions, most of the providers appear incapable of develop compelling thought leadership and winning mindshare and awareness from enterprise executives. Most have the resources, but fail to invest them wisely HfS Research Ltd. Proprietary Page 6

7 Research Methodology

8 Research Methodology Data Summary More than 58 data points were collected on over 750 live multi-process F&A outsourcing contracts. Data was collected in Q4 of 2012, covering 1355 buyers, providers and advisors/influencers of FAO and business services. Participating Service Providers This Report is Based On: Tales from the Trenches: Interviews with buyers who have evaluated service providers and experienced their services. Some are supplied by service providers, but many are interviewed through interviews conducted with HfS Executive Council members and participants in our extensive market researches. Sell-side Executive Briefings: Structured discussions with service providers intended collect data necessary to evaluate their innovation, execution and market share and deal counts. HfS State of Outsourcing Survey: The industry s largest quantitative survey, conducted with the support of KPMG, covering the views, intentions and dynamics of 1355 buyers, providers and influencers of FAO and business services. Publically-available information: Financial data, website information, presentations given by senior executives, and other marketing material HfS Research Ltd. Proprietary Page 8

9 HfS Research is Based Upon a Key Framework of Assessment - Distinguishing the Typical Service FAO Service Providers Offer the Market Activities include but not limited to: Strategic Importance Transformational Responsibility Controller-ship Activities Transactional Accounts Consultancy like products and services. Identifying the long term strategy of F&A. Higher level and more analytical focused F&A activities and process. Low level and process based activities in the F&A sphere. Financial Process Consulting Change Management & Communications Support Supporting Innovation Roadmap Inter Company Accounting Regulatory/Statutory Reporting Management Reporting Risk Management / Treasury Accounts Payable Travel and Expense, Billing/Invoicing Cash and Accounts receivable Internal Auditing Financial Planning and Analysis Business Intelligence Other Credit 2013 HfS Research Ltd. Proprietary Page 9

10 Definition of Finance and Accounting Outsourcing F&A Value Chain Procure to Pay Accounts Payable Travel & Expense Credit Order to Cash Cash App/ Accounts Receivables Billing/Invoicing Collections Revenue Accounting Record to Report Fixed Asset Accounting Tax Filing Payroll Controllership Activities Inter-Company Accounting Regulatory/Statutory Reporting Management Reporting Transformational Financial Process Consulting Supporting Innovation Roadmap Change Management & Communications Support Risk Management/ Treasury Internal Auditing Business Intelligence Financial Planning/Analysis HfS Value Chain Definition: Value chain refers to the series of departments which carry out value-creating activities to design, produce, market, deliver, and support a company s product or service. In this usage, we refer to the range of primary processes and support services that providers offer to their clients HfS Research Ltd. Proprietary Page 10

11 About the Authors

12 Phil Fersht Founder and CEO, HfS Research Overview Over 17 years business experience in the global outsourcing and shared services industry across US, Europe and Asia An acknowledged industry advisor, strategist, author, speaker, practitioner and blogger Advised on 100s of global IT & BPO engagements Previous Experience Practice Head for IT Services & BPO Practice, AMR Research (Gartner Inc.) BPO Marketplace Leader at Deloitte Consulting Vice President for Everest Group, leading research and consulting teams based in the US and India. Prior Career Regional Director, IDC Asia/Pacific Program Manager, European IT Markets Services, IDC Europe Education BS with Honors in European Business & Technology from Coventry University, United Kingdom Diplôme Universitaire de Technologie in Business & Technology from the University of Grenoble, France 2013 HfS Research Ltd. Proprietary Page 56

13 Ron Walker Principal, Shared Services and Outsourcing Advisory, KPMG LLP Overview Member of the SSOA practice, specializing in transformation, shared services, outsourcing, and G&A processes. Leader for hundreds of improvement initiatives, including more than 80 shared services and/or new outsourcing relationships Leader for multiple outsourcing transactions from $1.5M - $1.5B across many functional areas including IT, HR, F&A, Supply Chain, Customer Care, and RE & FM Early practitioner in the business process outsourcing (BPO) industry and was a founding member of an F&A BPO service provider. rwalker@kpmg.com Previous Experience Led strategic sourcing assessment for a global 1000 FSI in its efforts to develop a new service delivery model for their back-office general and administrative functions. Provided the account leadership for FORTUNE 100 telecommunications company in its process of outsourcing real estate and facilities management functions in North America. Led strategic engagement to evaluate and implement service delivery model options for a leading software provider in the healthcare industry. Led initial evaluation and assessment for a large natural resources company as it evaluated internal and external G&A cost enhancement strategies HfS Research Ltd. Proprietary Page 57

14 Brian Dubiel Principal Analyst, HfS Research Overview Covers the Finance and Accounting and Procurement Outsourcing industries for HfS Research An acknowledged industry expert in BPO operations, having worked on multiple engagements including areas such as KPO, FAO, PO and LPO domains Previous Experience Served as the outsourcing category manager for State Street s Bank Initiated and developed State Street s Outsourcing Center of Excellence, creating corporate outsourcing tools and methodology, and standardizing knowledge for internal business lines to better govern their outsourcing providers and sourcing events Education Dual BA in Economics and Philosophy from Trinity College MBA with an Operations and Supply Chain concentration from Northeastern University 2013 HfS Research Ltd. Proprietary Page 58

15 About HfS Research 20 dedicated analysts across US, Europe and Asia/Pac Industry leading focus on demand-side trends, market landscapes, competitive evaluations, pricing dynamics, market sizing and forecasting Educates and facilitates discussion among the world s largest knowledge community of services and operations executives, currently comprising 120,000 subscribers. 19,000 LinkedIn Group members; leading blog and research portal in the services industry The largest web and social media presence in the sourcing industry A major following from the buy-side: 40% of readership comes from sourcing buyers We leverage our vast community of sourcing professionals to deliver rapid insights on global sourcing industry trends & developments - Surveyed over 15,000 organizations in on their sourcing intentions and dynamics 2013 HfS Research Ltd. Proprietary Page 59

16 About HfS Research HfS Research ( is a leading independent global analyst authority and knowledge community for the business and IT services industry. HfS is unique in the fact that it serves the research and strategy needs of business operations leaders across finance, supply chain, human resources, marketing, customer management, IT and core industry functions. In addition to researching business operations strategies, HfS educates and facilitates discussion among the world's largest knowledge community of enterprise services professionals, currently comprising 120,000 subscribers. HfS Research also facilitates the HfS Sourcing Executive Council, the acclaimed elite group of sourcing practitioners from leading organizations, which meets on a bi-annual basis to share the future direction of the global services industry and discuss the future enterprise operations framework. Led by recognized industry expert Phil Fersht, HfS Research differentiates itself with its global team of expert services analysts with real industry experience, provocative and opinionated research, unrivalled market analytics, and a view of technology as an enabler for business process improvement. Its on-demand expertise relationship model helps clients leverage HfS knowledge and strategic insight in a rapid, responsive and engaging manner. In 2010 & 2011, HfS was awarded Analyst of the Year by the International Institute of Analyst Relations (IIAR), the premier body of analyst-facing professionals, and achieved the distinctive award of being voted the research analyst industry's most Innovative Analyst Firm in Now in its sixth year of publication, HfS Research's acclaimed blog Horses for Sources is widely recognized as the leading destination for unfettered collective insight, research and open debate of sourcing industry issues and developments. To learn more about HfS Research, please research@hfsresearch.com HfS Research Ltd. Proprietary Page 60

17 About KPMG s Shared Service and Outsourcing Advisory KPMG is a leading provider of global sourcing advisory services, has the ability to help member firms clients transform enterprise services to help improve value, increase agility, and create sustainable business performance. Who we are: Shared Services and Outsourcing Advisory brings a specialized global team of more than 400 professionals within KPMG s global network of independent member firms operating in 152 countries. What we do: We help clients align their business strategy, organization, and execution to enable them to manage the entire IT and business process life-cycle, improving business performance, and laying the groundwork for genuine business transformation.. How we do it: We apply focused research, automating tools, proprietary data, clear business acumen, and a forwardthinking mind-set to provide timely, objective, actionable advice and practical approaches for clients HfS Research Ltd. Proprietary Page 61

18 More From KPMG on Related Topics KPMG Shared Services & Outsourcing Institute ( About Global Sourcing Advisor Pulse Surveys ( KPMG Advisory Institute Home ( KPMG Institutes Home ( Blog: Advice Worth Keeping ( Podcasts: Advice Worth Keeping ( KPMG RSS Feeds KPMG International s Trademarks are the sole property of KPMG International and their use here does not imply auditing by or endorsement of KPMG International or any of its member firms KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative ("KPMG International"), a Swiss entity 2013 HfS Research Ltd. Proprietary Page 62

19 The Knowledge Community for Global Business & IT Services Phil Fersht Founder & CEO, HfS Research Ron Walker Principal, Shared Services and Outsourcing Advisory, KPMG LLP Brian Dubiel Principal Analyst