NEAT EVALUATION FOR CONDUENT: Learning BPS Market Segment: Overall This document presents Conduent with the NelsonHall NEAT vendor evaluation for learning BPS (Overall market segment). It contains the NEAT graph of vendor performance, a summary vendor analysis of Conduent in learning BPS, and the latest market analysis summary for learning BPS. An explanation of the NEAT methodology is included at the end of the document. The vendors evaluated are: Accenture, Ascender, Capita, Conduent, Delta College Corporate Services, Expertus, GP Strategies, IBM, InfoPro Learning, Infosys, LearningMate Solutions, NIIT, QA, Raytheon, Tech Mahindra, and The Learning Factor. Introduction NelsonHall has assessed and evaluated Conduent s proposition against demand for learning business process services (learning BPS), and has identified Conduent as a Leader in the Overall market segment, as shown in the NEAT graph on page 2. NelsonHall 2017 1 April 2017
NEAT Evaluation: Learning BPS (Overall) The Overall market segment reflects Conduent s overall ability to meet future client requirements as well as delivering immediate benefits to learning BPS clients. Buy-side organizations can access the learning BPS NEAT tool (Overall) here. NelsonHall 2017 2 April 2017
Vendor Analysis Summary for Conduent Overview Conduent is a learning BPS provider. Its learning services include learning consulting, content design and curation, instructor facilitation, learning administration, strategic sourcing, and learning technology. Over the last 18 months, Conduent has experienced a slight decline in the number of learning BPS opportunities, but a significant increase for project-based learning services work. Selective learning BPS bundles typically include learning administration and instructor facilitation, and now tend to include strategic sourcing services as well. Sometimes clients with selective learning BPS contracts including learning admin, delivery, and vendor management, tend to add on content development work on a project basis. NelsonHall estimates that Conduent has approximately eight full learning BPS clients. Conduent is technology agnostic and will provide managed services across all major LMS or will implement its new proprietary platform, Knowledge Connection. The company primarily targets large domestic and multinational organizations with more than 10k employees for its learning BPS services. Learning BPS services have primarily been sold to organizations headquartered in the U.S. or Europe. Conduent has ~1.1k employees in its learning BPS business, and uses a combination of onshore, nearshore, and offshore support for the delivery of its learning BPS services. Financials NelsonHall estimates that Conduent s 2015 learning BPS revenues were ~$155m, and that its 2016 learning BPS revenues will be ~$158m. By geography, revenues were distributed approximately as: North America: 74% Europe: 26%. Strengths Performance-centric approach to learning BPS Emphasis on incorporating RPA/automation to drive efficiencies. Challenges Scaling Knowledge Connection outside of Conduent s existing client base (there are currently ~600 LMS in the market) Limited emphasis on certain industries, such as financial services, that relies heavily on outsourcing learning BPS. NelsonHall 2017 3 April 2017
Strategic Direction To grow its business, Conduent is focused on leading with a performance-centric approach with its learning BPS clients and prospects to drive business value and business results. Its performance-centric approach focuses on the following five pillars: Strategic transformation: for organizations that are experiencing a major change, such as an M&A integration, restructure, new product launch, etc.; objectives of the learning solution will focus on onboarding employees, training sales teams, customers, and channel partners, etc. with content design and curation services and learning delivery via ILT and VLT Cost reduction: for organizations seeking to reduce the overall cost of training employees by leveraging labor arbitrage, standardization, and RPA across learning administration and vendor management services Future workforce: for organizations seeking to train a diverse workforce that includes Baby Boomers, Generation X, Generation Y, Millennials, and Generation Z that prefer different training modalities; objectives focus on consulting services to find the approach mix, curated content, and leveraging technology that facilitates social and informal learning Increased revenue and speed to profit: for organizations seeking to increase top line revenue growth or launching a new revenue stream by improving product knowledge for the sales force and channel partners by employing just-in-time learning by focusing on content curation and curriculum design Risk mitigation: for organizations seeking training support to remain in compliance with regulations as well as to lower overall risk by leveraging content design and curation and learning administration services to realize cost savings. Outlook Conduent s performance-centric approach, coupled with its focus on immediate and personalized learning through digital modalities while leveraging automation, positions the company well for learning BPS growth over the next several years. The majority of Conduent s growth will come from existing clients seeking to expand the scope of their relationship with Conduent. By learning function, demand is currently strongest for content development along with Conduent s proprietary platform (i.e., Knowledge Connection). Growth for learning BPS will be focused on both the U.S. (via scope expansions with existing clients) and Europe (with new clients). Industry sectors in Conduent s pipeline include financial services, technology, and pharmaceuticals. NelsonHall estimates that Conduent s 2017 revenues will experience low single digit growth. NelsonHall 2017 4 April 2017
Learning BPS: Market Summary Buy-Side Dynamics Learning BPS buyers have begun to purchase learning BPS services by focusing on specific performance objectives. There are five performance objectives: Strategic transformation: for organizations undergoing a significant change and seeking to quickly align business objectives Revenue and competency: for organizations launching a new product/service, entering a market, or seeking to onboard employees Compliance: for organizations seeking to manage risks Cost reduction: for organizations seeking to standardize processes while reducing costs Learner engagement: for organizations seeking to leverage technological innovations to provide continuous learning. The principal benefits derived from each performance objective vary as follows: Strategic transformation: improved employee knowledge and productivity Revenue and competency: increase in sales/revenue per learner and decreased time to learner proficiency Compliance: increased standardization and greater uniformity across the organization Cost reduction: cost savings typically ranging from 20% to 30%; the average is 25% Learner engagement: personalized training tailored to individuals, typically based on job roles and skill set. The overall average contract lengths for learning BPS deals continue to shorten as organizations seek shorter engagements. Success Factors The critical success factors, by performance objective, include: Strategic transformation: ability to show the impact of Kirkpatrick level 3 and level 4 analytics to the training material Revenue and competency: demonstrating a link between the training material and an increase in revenues Compliance: ability to curate content around compliance Cost reduction: ability to adopt a common set of tools and processes to offer centralized, standardized, and highly automated training enterprise-wide Learner engagement: ability to incorporate other technologies (either directly or via partnerships) to enhance the LMS and create an adaptive learning environment for individual learners. NelsonHall 2017 5 April 2017
Market Size & Growth The global learning BPS market was valued at $3.3bn in 2016 and is forecasted to grow at 6.3% per annum, to reach $4.5bn in 2021. The government sector accounts for approximately one third of the global learning BPS market. In terms of overall private sector learning BPS activity, manufacturing, high tech, and financial services account for nearly ~50% of the market. Outlook Over the next few years: The majority of learning BPS activity will come from EMEA, specifically the U.K. and the Nordics The performance driven model will be the preferred model, leveraged by the majority of learning BPS buyers The scope of learning BPS deals will be small, focusing on one or two learning functions that are directly tied to a specific performance improvement objective The emphasis of content services will be on curation, with vendors likely specializing in what they will curate content around; spaced microlearning will be leveraged to increase learner retention Learning delivery modalities will be heavily skewed toward digital learning, including interactive videos; VCT will be favored over ILT RPA adoption within learning BPS will increase, especially around administration services, as vendors are able to demonstrate not only the business case, but expected ROI AI and cognitive capabilities will be leveraged for adaptive learning, and will likely be generally available to the market in early 2018. NelsonHall 2017 6 April 2017
NEAT Evaluation for Learning BPS NelsonHall s (vendor) Evaluation & Assessment Tool (NEAT) is a method by which strategic sourcing managers can evaluate outsourcing vendors and is part of NelsonHall's Speed-to- Source initiative. The NEAT tool sits at the front-end of the vendor screening process and consists of a two-axis model: assessing vendors against their ability to deliver immediate benefit to buy-side organizations and their ability to meet client future requirements. The latter axis is a pragmatic assessment of the vendor's ability to take clients on an innovation journey over the lifetime of their next contract. The ability to deliver immediate benefit assessment is based on the criteria shown in Exhibit 1, typically reflecting the current maturity of the vendor s offerings, delivery capability, benefits achievement on behalf of clients, and customer presence. The ability to meet client future requirements assessment is based on the criteria shown in Exhibit 2, and provides a measure of the extent to which the supplier is well-positioned to support the customer journey over the life of a contract. This includes criteria such as the level of partnership established with clients, the mechanisms in place to drive innovation, the level of investment in the service, and the financial stability of the vendor. The vendors covered in NelsonHall NEAT projects are typically the leaders in their fields. However, within this context, the categorization of vendors within NelsonHall NEAT projects is as follows: Leaders: vendors that exhibit both a high ability relative to their peers to deliver immediate benefit and a high capability relative to their peers to meet client future requirements High Achievers: vendors that exhibit a high ability relative to their peers to deliver immediate benefit but have scope to enhance their ability to meet client future requirements Innovators: vendors that exhibit a high capability relative to their peers to meet client future requirements but have scope to enhance their ability to deliver immediate benefit Major Players: other significant vendors for this service type. The scoring of the vendors is based on a combination of analyst assessment, principally around measurements of the ability to deliver immediate benefit; and feedback from interviewing of vendor clients, principally in support of measurements of levels of partnership and ability to meet future client requirements. NelsonHall 2017 7 April 2017
Exhibit 1 Ability to deliver immediate benefit : Assessment criteria Assessment Category Offerings Delivery Presence Assessment Criteria Overall learning BPS capability Learning administration capability Content services capability Learning delivery capability Learning technology capability Learning consulting capability Overall scale of learning BPS delivery Delivery capability in N. America Delivery capability in U.K. Delivery capability in Continental Europe Delivery capability in APAC Delivery capability in LATAM Use of low-cost locations for labor arbitrage Application of RPA/process automation & AI/cognitive Ability to benchmark & establish roadmap Application of analytics for process improvement Application of digital modalities Link to talent management services Scale of learning operations overall Scale of operations for learning administration Scale of operations for content services Scale of operations for learning delivery Scale of operations for technology support Scale of operations for consulting Scale of learning operations in N. America Scale of learning operations in U.K. Scale of learning operations in Continental Europe Scale of learning operations in APAC Scale of learning operations in LATAM Continued NelsonHall 2017 8 April 2017
Continued Benefits Achieved Level of cost savings Improved standardization, consistency & efficiency Improved business results Increased learner satisfaction Reduction in training cycle times Improved learning content Acceleration of employee time to competence Improved adoption/usage of training by learners Improved reporting Modernization of learning technology Improved learning effectiveness Exhibit 2 Ability to meet client future requirements : Assessment criteria Assessment Category Investment Innovation Future Commitment Assessment Criteria In learning administration In content services In learning modalities In learning platforms & tools In cloud-based learning technologies In learning analytics In RPA & AI/cognitive In developing new geographic capability In learning process roadmaps Mechanisms in place for innovation Client perception of innovation delivered Client perception of automation delivered Future suitability Commitment to learning BPS market NelsonHall 2017 9 April 2017
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