State of the Global Services Market 2013 Predictions.pdfState of the Global Services Market: 2013 Predictions

7/29/2019 State of the Global Services Market 2013 Predictions.pdfState of the Global Services Market: 2013 Predictions

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2013 Predictions: State of theGlobal Services Market

January 23, 2013

Live Tweeting #Predictions2013


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Proprietary & Confidential. 2013, Everest Global, Inc. 2

Areas o f coverage

Introductions and 2012: Year-in-Review

IT Services

Business Process Outsourcing (BPO)

Global Sourcing

Pricing

Summary and Q&A


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I n t roduc t ions

Katrina Menzigian (moderator)Vice [email protected]

H. Karthik

Vice President Global [email protected]

Jimit AroraVice President IT Services

[email protected]

Rahul GehaniPractice Director Pricing [email protected]

Rajesh RanjanVice President [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Healthcare

Information

technology

Finance & accounting

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201 2: Yea r-in -Review

1 Everest Group webinar document: 2012 Market Predictions (presented in Dec 2011)

What we predicted at the beginning of 20121 How has the market fared to date?

While BPO margins did go upsomewhat, IT Servicesmargins slipped modestly

Emerging geos continue toincrease LATAM, Africa,Mid East, CEE

Rates across BPO vary, butall remain robust - especiallytrue in the case of BFSI BPO

M&A in this space is aboutbuilding out cloud breadthand depth enhanced valuepropositions to increase cloudappeal

Comments

Pricing pressures will squeeze providersmargins, especially offshore, forcinginvestment in newer customer-centricsolutions and innovative engagementmodels

Global sourcing leaders will seek newlocations; Emerging geographies willcontinue attracting attention

BPO markets will continue to grow atdouble-digit rates

Service providers will make strategicinvestments in driving value from cloudservices moving beyond technicallimitations and focusing on client adoptionrequirements

1

2

3

4

Same as prediction Similar but with some variations Different than prediction


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Areas o f coverage


IT Services


Global Sourcing

Pricing

Summary and Q&A


7/32Proprietary & Confidential. 2013, Everest Global, Inc. 7

IT Serv ic es | K ey 2013 Pred ic t ions

Enterprise IT vs. Business IT: Enterprise IT will strike back

Verticalization in infrastructure services an emerging reality

SMAC (especially MAC) will fuel IT services growth

Application services will witness greater appetite for top-to-bottom delivery

Market consolidation will blur the lines across service provider categories



Cloud adopt ion w i l l acc e le rat e as buyers cont inuet o rea l ize va lue f rom t hese de l ivery m odels

Trend in cloud related global service deals

2011-2012; Percentage of deals with clouddelivery in scope

4%

8%

12%

H1 2011 H2 2011 H1 2012

1047 900 704

Majority of adopters are meeting their cloud objectives signaling a confidence shift going forward

Source: Everest Group Cloud Vista (2012); Everest Group Cloud Connect Survey (2012)

18% 23% 19%

16%

25%

38%

25% 27%

21%

21%

27%24%

31%

14%24%

27%

1% 2% 2% 1%

Strongly agree

Agree

Somewhat agree

Neither agreeor disagree

Somewhat disagree

Disagree

Strongly disagree 2% 1% 1%

2% 2% 1% 2%

2%

Metobjectivesfor costsavings

Metobjectivesfor flexibleinfra

Metobjectivesfor quickertime tomarket

Metobjectives forhighersatisfaction ofbusiness

64%

82%

71%67%

N = 88

Enterprise Cloud adoption objective fulfillment

Buyer responses XX% Overall agreement %



SaaS m odules have been adopted m ost w ide ly ; IaaSadop t ion i s ex pec t ed to g row fast es t in 2013

57%

38%

31%

30%

17%

28%

28%

25%

26%

36%

27%

27%

10%

27%

26%

23%

36%

22%

5%

10%

18%

11%

20%

23%

Software as a Service(SaaS)

Platform as a Service

(PaaS)

Public cloud(IaaS)

Private cloud(IaaS)

Hybrid cloud(IaaS)

Business Process asa Service (BPaaS)

Enterprise Cloud adoption trends by cloud layer Buyer responses

Already adopted Adopt in distant future

Adopt in near future No plans to adopt

N= 81

N= 73

N= 78

N= 80

N= 70

N= 64

IaaS adoption plans Buyer responses

48%

34%

18%

Plan toimplementcloudinfrastructure

Alreadyhave cloud

infrastructure

No plansfor cloud

infrastructure

100% = 89

More than cost reduction, flexible infrastructure andreducing time to market are the top two drivers for IaaSgrowth

Source: Everest Group Cloud Connect Survey (2012)



M& A in 2013 w i l l ex t end beyond convent iona lad jacenc ies as serv ice prov iders respond t o an evo lv ingdemand env i ronment

Drivers fortransformational

IT services

Regulatorycompliance

(BFSI,Healthcare,

Europe)

An evolving demand profile causing interesting marriages in the IT services

supply landscape

BPO pure-plays

Global MNCs WITCH

Tier-2/specialists

Regional majors Cloud providers

Product vendors Telcos

2013 will witness the emergence of a new breed of converged service providers

Source: Everest Group (2013)



Areas o f coverage


IT Services


Global Sourcing

Pricing

Summary and Q&A



BPO | K ey 2013 Predic t ions

The adoption of SMAC in BPO will increase but will trail the hype; analytics willbe the most sought after services within this stack

Traditional deliverygeography will increasingly be the new demandgeography

The BPO world will be increasingly vertical

Beyond stand-alone technology capability, providers ability to blend it effectivelyinto the BPO solution will lead to success

A balancedBPO model will be more successful rise of the ANDsolution


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Tradi t iona l del ivery geography w i l l inc reas ing ly becomedemand geography; prof i tab le serv ice de l ivery w i l l be t he key

Insurance BPO deal signing trend

Number of contracts

74 24100% =

Source: Everest Group (2013)

90%

73%

10%

27%

Up to 2010 2011

531 81100% =

91%

71%

9%

29%

Up to 2010 2011-2012

Asia Pacific andLatin America

North Americaand Europe

FAO deal signing trend

Number of contracts

North Americaand Europe

Asia Pacific andLatin America


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A ba lanced m ode l tha t harnesses t he pow er o f AND

w i l l be more suc c essfu l

Sourcing

Scope

Solution

Pricing model

Delivery model

Internal shared services

Focused

Customized

Simplicity

Onshore

Third-party outsourcing

End-to-end

Standardized

Impact

Offshore/Nearshore


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To what extent do you expect organizations toinvest hard cash in capturing global servicesvalues beyond savings in 2013?

7%

65%

24%

4%

Priority area expect significant newinvestments in 2013

Area of ongoing focus will continue tomake strategic investments as previously

planned

Business as usual no new or additionalinvestments anticipated

Area of least focus strategic investmentstargeting other areas in 2013

Source: Live polling conducted during the 2013 Predictions: State of the Global Services Market webinar on January 23, 2013


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Areas o f coverage


IT Services


Global Sourcing

Pricing

Summary and Q&A


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Global Sourc ing | K ey 2013 Predic t ions

Increased focus on complementing onshore and offshore, not competing

Tier-2 locations to become must-have from good to have

New buyer segments will drive global sourcing

Growth in GICs coupled with sophistication in sourcing model leverage

Global talent management an increasing priority


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Whi le a few w i ldcards w i l l emerge, Ind ia andPh i l ipp ines w i l l c on t inue t o re ign

South Africa

Bulgaria

Vietnam

Peru

Turkey

Colombia

Ireland

Significant untappedpotential

Attractive costsand Spanishlanguage skills

Preferred locationfor UK voice; largedomestic market

Low-costalternative for IT

Emerging R&Ddestination

High end financialservices and IT skills Multilingual

support

NOT EXHAUSTIVE


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Tier -2 loca t ions to bec ome m ust -have f rom goodt o have

3740

Asia Pacific

Proportion of Tier-2/3 citiesin new delivery center set-ups

2011-20121; Percentage

2011

2012

Stronger imperative forTier-2/3 cities in 2013, willbecome a must-have forservice providers

Share of Tier-2/3 locationsin incremental demand willincrease, especially inAPAC and Latin America

37

50

Latin America

53

84

CEE

Predictions for 2013

1 Includes analysis from Q1-Q3 (January-September) 2012Note: Tier-1 cities are mature cities for global services delivery, typically characterized by large talent pool and significant market activity. Examples include Bangalore

(India), Shanghai (China), Metro Manila (Philippines), Sao Paulo (Brazil), Mexico City (Mexico), and Krakow (Poland)Tier-2/3 cities are upcoming cities for global services delivery, typically characterized by relatively smaller talent pool and lesser market activity. Examples includeJaipur (India), Dalian (China), Cebu (Philippines), Curitiba (Brazil), Guadalajara (Mexico), and Lodz (Poland)


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Del iver ing value beyond c os t sav ings w i l l becom e ast rong imperat ive and mandat e for GICs

What should GICs deliver over the next three years?

GIC responsesPercentage of total respondents

15

66

18

Parent responsesPercentage of total respondents

Primarily focus on deliveringcurrent cost savings and

meeting/exceeding expectations

on service levels

Strive towards delivering otherforms of value1 in addition to

maintaining cost savings

Focus on delivering other formsof value, even if it means

reducing focus on driving costadvantage

1 Standardize processes or systems across the enterprise, create new services/products, etc.

4

60

37


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Areas o f coverage


IT Services


Global Sourcing

Pricing

Summary and Q&A


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Pric ing | 2013 Predic t ions

Adoption of fixed-price models will strengthen in IT deals

BPO pricing is expected to have a positive bias

IT pricing is expected to be stable

Prevalence of hybrid pricing structures will increase in BPO deals


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Pr ices o f ITO serv ices are expec t ed to rem ain s tab le ordec l ine m arg inal ly a t o f fshore as w e l l as onshoreloca t ions

Source: Everest Group PricePoint

100 100 10099

9899

96

98

100

102

104

Trend in blended FTE price at offshore (India)

Indexed

Trend in blended FTE price at onsite (U.S.)Indexed

H2 2011 2012 H1 2013

100 100 101 100 100 101

96

98

100102

104

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012E Q1 2013 Q2 2013H2 2011 2012 H1 2013

IT-ADM EXAMPLES


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BPO pr ic ing is ex pec t ed to inc rease at o f fshore asw e l l as onshore loca t ions

100101

103 103 103 103

98

100

102

104

106

H2 2011 2012 H1 2013 Est.

100 101

101 101 101 101

96

98

100102

104

Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012E Q1 2013 Q2 2013

VOICE-BPO EXAMPLES

H2 2011 2012 H1 2013 Est.

Trend in blended FTE price at offshore (India)

Indexed

Trend in blended FTE price at onsite (U.S.)Indexed

Source: Everest Group PricePoint


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ITO and BPO deals w ould be c harac t er ized by t headopt ion of m ore soph is t ic a ted pr ic ing m ode ls

36% 36%44%

32%

41%44%

48% 46%

Provider A Provider B Provider C Provider D

Fixed price adoption trends in ITO deals

2008

2011

2013 Est.

Composition of hybrid

pricing structuresFrequency of inclusion

Distribution of pricing

models in PONumber of contracts

Hybridpricing

100% = 290

Onlymanaged

service fees

Onlygainsharing

OnlyFTE-based

Buyers and service providers are realizing multiple objectives byadopting hybrid structures which combine input-based, output-based and outcome-based pricing models

46%

36%

15%3%

89%

71%

44%

Managedservice fees

Gainsharing

FTE-based

Buyers are preferring fixed-price engagementsto control the overall IT spend

Service providers are keen to adopt fixed-priceto maintain profitability


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Areas o f coverage


IT Services


Global Sourcing

Pricing

Summary and Q&A


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Mac ro-Them es for 2013: Sum m ary

The march toward verticalization continues

M&A more about chess than checkers

The realities of SMAC are taking hold

Global sourcing continues pushing the

variety & complexity of delivery models

Pricing remains in a dead-band, withlimited movement on either side

Relevant across IT Services and BPO Driving services provider differentiation and

supporting buyer competitiveness

Expanded capabilities the target Consolidation will lead to newly formed

competitive landscapes

Buyer satisfaction validating the concept Adoption pace varies by market, IT layer,

buyer segment

Clients seeking varied options for integrating

geos, models, processes, etc.

Cost and margin pressure will challengeproviders, but buyer demand will be thekey price driver


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For advice or research, please contact: Katrina Menzigian, [email protected] H. Karthik, [email protected] Rajesh Ranjan, [email protected]

Rahul Gehani, [email protected] Jimit Arora,[email protected]

Q& A

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Rela ted c onten t

Market Vista: Q3 2012

Webinar Deck: Global In-house Centers vs. Service Providers: Who is Winning?

PricePoint Q2 2012 Update: Points to Consider in the Pricing of Outsourcing Services

Enterprise Cloud Quarterly Review: Q3 2012

IT Services Landscape - Market Size, Trends, and Buyer Insights

Finance and Accounting Outsourcing (FAO) Annual Report 2012: Signaling Towards Maturity

Procurement Outsourcing (PO) Annual Report 2012: Steadily Marching Forward

Multi-process Human Resources Outsourcing (MPHRO) Annual Report 2012: ContinuedReinvention
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About Everest Group

Everest Group is an advisor to business leaders on the next generation of globalservices with a worldwide reputation for helping Global 1000 firms dramaticallyimprove their performance by optimizing their back- and middle-office businessservices. With a fact-based approach driving outcomes, Everest Group counselsorganizations with complex challenges related to the use and delivery of globalservices in their pursuits to balance short-term needs with long-term goals. Through

its practical consulting, original research, and industry resource services, EverestGroup helps clients maximize value from delivery strategies, talent and sourcingmodels, technologies, and management approaches. Established in 1991, EverestGroup serves users of global services, providers of services, country organizations,and private equity firms in six continents across all industry categories. For moreinformation, please visit www.everestgrp.com and research.everestgrp.com.
http://www.everestgrp.com/http://research.everestgrp.com/http://research.everestgrp.com/http://www.everestgrp.com/


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Documents

State of the Global Services Market 2013 Predictions.pdfState of the Global Services Market: 2013 Predictions