emerging locations in the fao delivery landscape – the new frontiers

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Today’s WebinarToday’s WebinarEmerging Locations in the FAO Delivery Landscape – The New Frontiers Emerging Locations in the FAO Delivery Landscape – The New Frontiers

Synopsis: While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from Everest Group’s latest study around emerging locations in the FAO delivery location landscape

Synopsis: While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from Everest Group’s latest study around emerging locations in the FAO delivery location landscape

About Everest GroupAbout Everest GroupEverest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and p p g y p p y p gmiddle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models technologies and management approaches Established in 1991 Everest Group serves

p p g y p p y p gmiddle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models technologies and management approaches Established in 1991 Everest Group servessourcing models, technologies and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations and private equity firms, in six continents across all industry categories. For more information, please visit www.everestgrp.com and research.everestgrp.com.

sourcing models, technologies and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations and private equity firms, in six continents across all industry categories. For more information, please visit www.everestgrp.com and research.everestgrp.com.

Proprietary & Confidential. © 2011, Everest Global, Inc. 1

For more information, contact Mark Williamson at [email protected] more information, contact Mark Williamson at [email protected]

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Emerging Locations in the FAO DeliveryEmerging Locations in the FAO Delivery Landscape – The New Frontiers

WebinarSeptember 2011

Introductions

Saurabh GuptaVice PresidentEverest [email protected]

Kuldeep LullaSenior Research AnalystEverest Groupk ld l ll @ [email protected]


In today’s session, we will cover three key aspects of the expanding FAO delivery-location landscape

Global sourcing in FAO contracts Offshorability of F&A processes Direct cost benefits from offshoring

Global sourcing in FAO contracts Offshorability of F&A processes Direct cost benefits from offshoring Direct-cost benefits from offshoring Labor arbitrage across source and destination

geographies

Direct-cost benefits from offshoring Labor arbitrage across source and destination

geographies

New locations that emerged on the FAO delivery-location

New locations that emerged on the FAO delivery-location

The expansion of FAO delivery footprint beyond

The expansion of FAO delivery footprint beyond

Value proposition of global sourcing in FAO

1

landscape in 2009-2010 Spotlight on five emerging

locations

landscape in 2009-2010 Spotlight on five emerging

locations

India Key factors driving the FAO

delivery location expansion

India Key factors driving the FAO

delivery location expansion23


Note: For more details refer to our recently published report titled ‘The New Frontiers: Emerging Locations in the FAO Landscape’ available at http://research.everestgrp.com/Product/11564

Contents


Expanding FAO delivery footprint Expanding FAO delivery footprint

New FAO delivery locations

Q&A Q&A


The multi-process FAO market witnessed strong performance in 2010

Higher number of new FAO contract signings in 2010 compared to 2009

Continued momentum in FAO contract extensions in 2010Number of contracts

Activity in current year

Cumulative activity to date xx% Annual growth

6387

compared to 2009Number of contracts

15%493

58018%

9469%142

23666%

Number of contracts

430 493

2009 2010

84142

58

2009 2010

3 615%

4.9

13%23.7

28.721%

~15% growth in active ACV was witnessed in 2010 compared to ~10% growth in 2009. The current FAO market size is US$3.6 billionActive ACV in US$ billion

20%+ growth in overall TCV in 2010TCV in US$ billion

10%3.1

3.6

21.0 23.8

2.7


Dec-09 Dec-10 2009 2010

Sample size: 580 multi-process FAO contracts signed as of 2010Source: Everest Group (2011)

Poll Question: How would you describe the current and near future state of the FAO market?


Source: Live polling conducted during the Emerging Locations in the FAO Delivery Landscape webinar on September 27, 2011

More than 90 percent of the FAO contracts leverage global sourcing today

Portion of FAO contracts with offshore componentNumber of original contracts

Average FTEs at offshore locationsPercentage

396 56100% =

Contracts completely onshore

Contracts with offshore/nearshore

componentcomponent



Given that FAO is a mature market today, most F&A processes have a high degree of offshorability

Offshorability of F&A processesPercentage

Transaction-intensive processes pJudgment-intensive processes

Accounts payable

Accounts receivable

General Offshorability is defined as the

percentage of in-house scope that General accounting

Fixed assets Payroll Tax

Management reporting and

Budgeting/ forecasting

Treasury and i k

p g pcan be delivered from an offshore location

While transaction-intensive have a high degree of offshorability, judgment-intensive processes are

70-90

p ganalysis risk

management Internal audit Capital

budgeting

not offshored as much due to the complex nature of activities

Offshorability of individual F&A processes can also vary significantly depending on the buyer context and specific requirements

20-40

50-70

High Medium Low

specific requirements


High Medium Low

Source: Everest Group (2011)

Offshoring can provide significant savings on the direct cost of the entire F&A function

Impact on direct cost of F&A function due to offshoringIndexed to a total direct cost of 100 for onsite operations

ILLUSTRATIVE

Buyers of F&A services can achieve significant savings from offshore delivery due to labor arbitrage 30-40%

savings

100

Most-likely scenarioMost-likely scenario

and productivity improvements– Labor arbitrage: Labor arbitrage can range from

30 to 80 percent, depending on the delivery location mix (onshore versus nearshore versus offshore)

– Potential productivity improvements: Ongoing initiatives such as process improvements

savings

60-70

70-80% savings

initiatives such as process improvements, automation, and standardization etc. can contribute 20 to 30 percent to the cost savings

Percentage of services offshored is also impacts savings. In addition, situation-specific factors such as set-up costs, governance costs, and contract term

20-30

set up costs, governance costs, and contract term determine the actual savings achieved from offshoring

100% onsite 55-60% onsite +40-45% offshore2

100% offshore2


Note: The savings projections are for a steady-state offshore operation; the scenario is expected to be different in the first one to two years of the engagement


Contents




Q&A Q&A


India continues to be the location of choice for offshoring F&A services

Inclusion of delivery locations in FAO contractsPercentage

Number of delivery centers1

Number of service providers1

India

Central and Eastern Europe

Central/+ ne

arsh

ore

Southeast Asia

South America

China

Offs

hore

+

North America

Western EuropeOns

hore

India is the preferred location for offshoring F&A services. Nearly 55 percent of the FAO offshored F&A services from IndiaIndia is the preferred location for offshoring F&A services. Nearly 55 percent of the FAO offshored F&A services from India

1 Based on the operational details of 20+ FAO service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini,Cognizant HP EXL Service Genpact HCL IBM iGate Infosys BPO Intelenet Steria Sutherland Global Services TCS VWA


Cognizant, HP, EXL Service, Genpact, HCL, IBM, iGate, Infosys BPO, Intelenet, Steria, Sutherland Global Services, TCS, VWA, Wipro, and WNS


However, the FAO delivery-location landscape now has a truly global footprint

Offshore and nearshore F&A delivery locations

L dCentral and Eastern Europe

Delhi NCR

Budapest

Warsaw

DalianBucharest

Krakow

J iChandigarh

China and Southeast Asia

Juarez Tulsa

Sofia

BratislavaKatowice

Wroclaw

PragueBrno

Lodz

Lublin

VarnaTimisoara

Cairo

CasablancaChengdu

Cluj

Rabat

Tianjin

Okinawa

Dabrowa

San JoseBangalore

Delhi NCRShanghai

Singapore

Guangzhou

KochiChennai

Mumbai Pune KolkataManila

Jaipur India

Central and South America

Nasik

Colombo

BangkokPhilippines

Cebu

Hangzhou

Juarez

MonterreyMontego Bay

Costa RicaGuatemalaGuadalajara

Kuala Lumpur

Quito

Abu Dhabi

Cyberjaya

Rabat

Dubai

Okinawa

Hyderabad

Buenos Aires

Sao Paulo

Curitiba

Santiago Hortolandia

Montevideo

Belo Horizonte Johannesburg

Gaspar


Note: Based on information of 20+ service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, EXLService, Genpact, HCL, IBM, iGate, Infosys, Intelenet, OPI, RMS, Steria, Sutherland Global Services, TCS, Wipro, and WNS


Poll Question: Do you leverage locations outside of India for F&A offshoring/service delivery?


Source: Live polling conducted during the Emerging Locations in the FAO Delivery Landscape webinar on September 27, 2011

In 2009-2010, expansion of delivery footprint was a major investment theme among the service providers

Number of FAO delivery centers over timeNumber of centers

Number of delivery centers by regionNumber of centers

20082010

Western Europe

North America

Central & South America

Southeast Asia

Central & Eastern Europe

India China

A number of service providers including Genpact, Infosys, TCS, WNS, and Wipro etc. opened new delivery centers in above geographies during 2009-2010


Note: Based on the operational details of 20+ leading FAO service providersSource: Everest Group (2011)

There are four key drivers behind the FAO delivery-location expansion

Tapping into new source geographiesTapping into new source geographies

11

source geographiessource geographies

Drivers for FAO delivery locationDrivers for FAO delivery location

Resource constraints as established locations near

Resource constraints as established locations near

Creating a blended onshore-nearshore-offshore model to

Creating a blended onshore-nearshore-offshore model to

2244

delivery-location expansion

delivery-location expansion

locations near saturationlocations near saturation

offshore model to offer true global delivery

offshore model to offer true global delivery

Avoiding location concentration riskAvoiding location concentration risk

33



Contents




Q&A Q&A


Over 15 new locations emerged on the FAO delivery-location landscape in 2009-2010

Offshore/nearshore F&A delivery locations

Jaipur Chandigarh

SofiaVarna

Timisoara

CairoCasablanca

Chengdu

Rabat

Tianjin

Dabrowa

OkinawaJaipur g

Bangkok CebuGuatemala

Kuala LumpurQuito

Abu DhabiCa o

Cyberjaya

DubaiOkinawa

CuritibaMontevideo

Belo HorizonteJohannesburg

Gaspar


Note: Based on information of 20+ service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, EXLService, Genpact, HCL, IBM, iGate, Infosys, Intelenet, OPI, RMS, Steria, Sutherland Global Services, TCS, Wipro, and WNS


The study focuses on five from such locations

Jaipur is fast emerging as the next generation BPO destination in India– Low-cost labor, proximity to National Capital Region (NCR) region, unexploited real estate market, and

availability of good analytical skills make Jaipur a viable alternative– Key F&A processes delivered from Jaipur include accounts payable, accounts receivable, general

Jaipur

y p p p y , , gaccounting, and other transactional processes

Montevideo is a late entrant to the outsourcing map, but has attracted the attention of foreign investors due to a stable economic and political environment coupled with availability of an educated and low-cost workforce– Its strategic geographic location has also become a significant factor for selecting it as a regional center of

business operationsp– Key F&A processes delivered include accounts payable, accounts receivable, management reporting, and

tax & audit

Johannesburg, the smallest but wealthiest province of Africa already has a well established domestic outsourcing market– It is now increasingly becoming attractive as a Tier-II destination for global offshore outsourcing. This is

Montevideo

attributed to the increased awareness of potential cost savings – Key F&A processes delivered include accounting, and late stage collections

Guatemala City is an emerging location for bilingual English-Spanish talent as the wages are higher and labor supplies constrained in neighboring locations– A stable economy, strategic location and excellent telecom infrastructure lend this city the potential to

b th b t h l ti f A i li t

Johannesburg

become the best nearshore location for American clients – Key F&A processes delivered include accounts payable, accounts receivable, and management reporting

Rabat has three natural advantages that make it a highly competitive delivery location for serving Western Europe– Low cost and multilingual workforce

M d d lib li d t l t

Rabat

Guatemala City

Proprietary & Confidential. © 2011, Everest Global, Inc. 20Source: Everest Group (2011)

– Modern and liberalized telecom sector– Geographical and cultural proximity to Europe– Key F&A processes delivered include accounts payable, accounts receivable, and tax & audit

The research includes an in-depth profile of each location based on a variety of parameters

Risk assessment Evaluation of each location on parameters such as geopolitical stability, macro-economic

Risk assessment Evaluation of each location on parameters such as geopolitical stability, macro-economic

Service provider presenceService provider presence

g p y,environment, legal and regulatory framework, safety and security, infrastructure support, and labor sustainability etc.

g p y,environment, legal and regulatory framework, safety and security, infrastructure support, and labor sustainability etc.

Service provider presenceKey third-party providers and captives present at each location

Service provider presenceKey third-party providers and captives present at each location

F&A functional capability F&A functional capability Key F&A processes delivered from each locationKey F&A processes delivered from each location

Value proposition Unique advantages of each location in terms of Value proposition Unique advantages of each location in terms of

Geography covered and language competenciesGeography covered and language competencies

q goperating costs, availability of talent pool, geographic advantage, & infrastructure support

q goperating costs, availability of talent pool, geographic advantage, & infrastructure support


competenciesPrimary buyer geographies served from each location and language capability

competenciesPrimary buyer geographies served from each location and language capability

Key takeaways

More than 90 percent of the FAO contracts leverage global sourcing today

Given that FAO is a mature market most F&A processes have a high degree of offshorability especially Given that FAO is a mature market, most F&A processes have a high degree of offshorability, especially transaction-intensive processes. In contrast, judgment-intensive F&A processes are not offshored as much due to the complex nature of activities involved

Offshoring can provide significant savings on the direct cost of the entire F&A function, primarily due to labor arbitrage and productivity improvements achieved by service providers

India emerged as the global hub for FAO delivery, accounting for nearly 70 percent of the service providers’ offshore/nearshore FAO headcount. However, the FAO delivery-location landscape is now a truly global footprint In 2009-2010 expansion of the delivery footprint was a major investment themetruly global footprint. In 2009 2010, expansion of the delivery footprint was a major investment theme among service providers

There are four key drivers behind the FAO delivery location expansion:– Tapping into new source geographies

C ti t l l b l d li t k– Creating a truly global delivery network– Avoiding location concentration risk– Resource constraints as established locations near saturation

Over 15 new locations emerged on the FAO delivery-location landscape in 2009-2010


g y p

2011 FAO research plan (page 1 of 2)

Topic Goals of the research

Published To-be published

Planned release

FAO annual report 2011 –FAO is Back!FAO annual report 2011 –FAO is Back!

Overview of the overall FAO market in 2010 with size & growth of market, contract characteristics, value proposition, service provider rating and market outlook for 2011

March -2011

Meter-to-cash BPO market for Utilities –market webinar

Meter-to-cash BPO market for Utilities –market webinar

As part of its industry-specific BPO research initiatives, Everest Group conducted a study focused around Meter-to-Cash (M2C) BPO opportunity assessment and solution trends. This webinar was aimed at helping market stakeholders understand M2C BPO demand potential, drivers to outsource, service provider landscape and go-to-market characteristics

May-2011

FAO service provider landscapeFAO service provider landscape

In this research study, we analyze the fast-changing global FAO service provider landscape and its impact on the FAO market. We focus on service provider position and market shares, delivery capability assessment, and modes of differentiation

May-2011

modes of differentiation

India-to-India Domestic BPO marketIndia-to-India Domestic BPO market

While India has traditionally been a prominent delivery location for BPO services, it is starting to emerge as a notable source geography as well. In this study, we focus on the General & Administrative Outsourcing (GAO) segments (FAO PO d HRO) f th d ti BPO k t d l k t th

May-2011


(FAO, PO, and HRO) of the domestic BPO market and analyze market growth, key drivers to outsource, buyer adoption trends, service provider landscape, and future outlook

2011 FAO research plan (page 2 of 2)

Topic Goals of the research

Published To-be published

Planned release

FAO service provider profile compendiumFAO service provider profile compendium

Profile 20+ established FAO service providers across various dimensions including overall revenues, FTEs strength, key delivery locations, FAO service suite, market positioning, overall FAO delivery capability assessment, and Everest Research perspective on service provider

Jun-2011

Top 5 emerging locations in FAOTop 5 emerging locations in FAO

Beyond the established locations that feature in most leading FAO service providers’ global delivery network, newer locations are making their presence felt on the FAO delivery map. This study evaluates top five from such locations and highlights the market state therein

Sep-2011

Process maturity models in FAO – Can it be a differentiators for Service Providers?

Process maturity models in FAO – Can it be a differentiators for Service Providers?

Q4-2011 In a bid to continue growing in a competitive market, service providers are looking for ways to generate business impact beyond just labour arbitrage. Few FAO service providers have developed models to optimize the outsourced processes and shift them towards best-in-class performance benchmarks. This white paper investigates such models and their potential to create differentiation in FAO marketcreate differentiation in FAO market

Industry-specific FAO solutionsIndustry-specific FAO solutions

While FAO is largely considered a horizontal BPO offering, in recent years, service providers have increasingly shifted their focus on specific industries, both in terms of service offerings and sales strategy, to drive greater

t ti Thi t i ti t h i t i ibl i th FAO

Q4-2011


penetration. This report investigates some such instances visible in the FAO market

Contents




Q&A Q&A


Q&A

Attendees will receive an email enabling them to download today’s webinar presentation as well as access a recorded audio version

Attendees will receive an email enabling them to download today’s webinar presentation as well as access a recorded audio version

For advice or research on F&A services, please contact:– Saurabh Gupta, [email protected]– Kuldeep Lulla, [email protected]

For advice or research on F&A services, please contact:– Saurabh Gupta, [email protected]– Kuldeep Lulla, [email protected]

For background information on Everest Group, please visit:– www.everestgrp.com– research.everestgrp.com

Thank you for attending today

For background information on Everest Group, please visit:– www.everestgrp.com– research.everestgrp.com

Thank you for attending today

To ask a question during the Q&A session

Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen

To ask a question during the Q&A session

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emerging locations in the fao delivery landscape – the new frontiers

Business

everest global

fao locations3

fao deliverylandscape

delivery of global services

fao delivery landscape

current fao tcv

global footprint

multiprocess fao contracts