Global Services - Outlook 2012 issue

Outlook 2012 Expert Articles from
Survey Analysis p. 8 Sourcing Advisors p. 81

www.globalservicesmedia.com

O utloo k

Where do we go next?

The Way Ahead
Grim economic outlook, mounting
expectations, bigger challenges...
and few lessons to be learnt

p.20

Editor’s Note

Outsourcing in
2012: Surely,
Politics Will Not
Ed Nair, Editor
ed@cybermedia.co.in Matter

I
t being the election year, this is the time to pull out the political cards
against outsourcing. The anti-outsourcing machinery has already begun to
stir— the proposed Call Center Bill, restrictions on L1 visas, and what not.
Our survey indicates that politics will not have any impact on outsourcing.
Businesses have adopted outsourcing, or more specifically global sourcing
of services, as a strategic business practice. This is because organizations
One should expect
believe that not only does outsourcing help save costs, but also that out-
modest, guarded
sourcing frees up organizational bandwidth to pursue strategic growth
growth in out-
opportunities that matter more to the business.
sourcing this year.
One should expect modest, guarded growth in outsourcing this year.
Organizations will
Organizations will want to do it cheaper and better, but face minimal disrup-
want to do it cheap-
tive change. Therefore, cloud as an infrastructure service would see adoption.
er and better, but
But far-fetched experiments in cloud computing has been voted out of favor.
face minimal disrup-
Service providers can expect strong pressure on pricing because clients
tive change.
would force price renegotiations to get more ‘mileage’ from their trips with
service providers. Clients would also ‘maintain’ their vehicles, call it out-
sourcing relationships, using various management tools, to get the best
performance.
The good news is that leading service providers are geared to handle the
demands. Over the past decade, both buyers and service providers have
matured to this level. Our interviews with nearly 30 service providers during
the month clearly reveal this and more.
This issue is packed with insights and ideas about the outlook for the
coming year. Do let us know your opinions, comments, feedback, insights by
writing to me at ed@cybermedia.co.in.
Wish You a Very Happy New Year!

Contents
8
GLOBAL SERVICES OUTLOOK 2012 SURVEY

20
The Way Ahead
Lessons from the Past and Some More 22
Services Spends Will Happen Despite Budget Cuts 30
The Changing Landscape of the Global Services Industry 36
IT Outsourcing Slow, Deliberate March 43
FAO: Helping Really Handle the ‘Finance’ Function Better 49
Analytics Outsourcing 2012: What do the Cards Say? 53
Contact Centers Being Redefined 58
A Cautious Optimism Continues To Drive HRO 63
3 Pointers by Industry Leaders 68
What Service Providers Say? 76

Pradeep Gupta Smriti Sharma Global Services
Chairman Managing smritis@cybermedia.co.in Cyber Media (India) Ltd.
Director Smita Vasudevan CyberHouse, B- 35, Sector 32
Cyber Media (India) Ltd. smitav@cybermedia.co.in Gurgaon-122001, India
E. Abraham Mathew Sourabh Chandra Pushp Tel: +911 24 4822222
President sourabhc@cybermedia.co.in Fax: +911 24 2380694
Ed Nair Design
Editor, ed@cybermedia.co.in Suresh Kumar
Satish Gupta sureshk@cybermedia.co.in
AVP, satishg@cybermedia. Nitin Kumar Srivastava Contact:
co.in nitinks@cybermedia.co.in globalservices@cybermedia.co.in
Gary Bindra
gurdeepb@cybermedia.co.in Disclaimer: All rights reserved. No part of this
Niketa Chauhan publication may be reproduced by any means without
niketac@cybermedia.co.in prior written permission from the publisher.

81
EXPERTS
Global Services Trends: 2012 82
MARCH 15
Future of Outsourcing in 2012 89
NEW YORK 94
A Year of a Profound Change in Software Development CITY
Small Frames and Big Pictures: Keys to Success in 2012 100
Predictions on the Cloud Age: 2012 104
Knowledge Services Will be Most Important in 2012 Growth Strategies 107
IT Outsourcing in 2012 111

March 15, 2012 | New York City
|
www.globalservicesconference.com

8 G S S U R V E Y

GLOBAL SERVICES
OUTLOOK 2012 SURVEY

Tempered Expectations,
Moderate Outlook

GlobalServices www.globalservicesmedia.com January 2012

9

While the outlook for outsourcing is modest, the
direction is positive. Reducing operational costs
remains the prime driver, but organizations are
equally looking at outsourcing to create bandwidth
for pursuing strategic growth.

Ed Nair

G
lobal Services did an online survey in the second
week of December 2011 to gauge the sentiments
of how the services industry would fare in 2012.
The participants of the survey included all stakeholders in
the industry- services buyers, service providers, and sourc-
ing advisors- at a global level. We received 149 responses
that included services providers among the top 50 global
vendors, 30 buyer organizations with two-thirds being $1 B
plus organizations, and a near complete representation of
top advisors in the industry. Here are the top-line findings:


10 G S S U R V E Y

Overall Outlook is Modest

The overall outlook for the global services industry (answered in terms of change in the level
of outsourcing activity) is encouraging despite all talk of the adverse impact of the worsening
global economy on the industry.

Nearly half of the sample (46%) expects a moderate increase of outsourcing activity in 2012.
A quarter expects to maintain current levels of activity. Taken together, it means that over
two-thirds of the sample have voted for a positive year. Considering the fact that this includes
most organizations that currently have significant level of outsourcing activity, the overall out-
look is definitely encouraging.


12 G S S U R V E Y

Business Drivers for Outsourcing

‘Reducing operational costs’ remains the top driver for outsourcing services. In fact, this was
the only driver that was rated the highest amongst ‘highly important’ drivers. This is under-
standably so in a tough economy with organizations facing the threat of budget cuts. Also,
companies believe that there is a lot more scope to cut operational costs by increasing the
level of outsourcing activity.

The second closest dominant driver that emerged was ‘Create more bandwidth for strategic
growth’. Organizations appreciate that strategic growth has become all the more important
during the prolonged phase of economic downturn and that outsourcing can help release
management bandwidth to pursue strategic growth opportunities. Underlying this fact is that
organizations would want to do more with existing resources.

Interestingly, these two drivers taken together, suggests that the core value propositions of
outsourcing driven by globalization of services have remained unchanged.

An accompanying driver, the third most important one is ‘Gaining access to skills and resourc-
es not available’. This bears testimony to the value organizations find in pursuing globalization
of services. It also bears evidence to the continuing rise of new global destinations and scaling
up of existing ones.


14 G S S U R V E Y

Do Inhibitors to Outsourcing Remain the Same?

Indisputably, cloud computing has been hailed as the next shift in IT architecture and it has
been named as the game changing force in IT because of its disruptive nature. Precisely that’s
the reason cloud computing could become a temporary inhibitor to outsourcing.

More than half of the respondents cited ‘Need to rethink issues in light of adopting cloud-based
models’ as the top inhibitor. Amidst the hype about cloud and its implications on how IT and IT
services get delivered, there is increasing uncertainty on how to adopt these models. Organiza-
tions do not want to make the wrong investments. They would rather wait for the dust to settle
down so that both IT strategy and sourcing strategy work in sync in the longer term.

The next significant inhibitor is equally interesting. After having outsourced many activities,
‘internal organization is not convinced about the merits of more outsourcing’. Why would this
be? One reason is that vendors have been able to deliver cost benefits till now, but have not
been to specify definite plans for more cost reductions. The other two reasons, which also figure
as strong inhibitors, are: a) ‘Reduced budgets’—It is assumed that additional outsourcing en-
tails new upfront investments in managing outsourcing relationships. Under reduced budgets, it
is difficult to add new allocations. b) ‘Organization not ready for change’— Additional outsourc-
ing would mean more organizational changes to be embraced. Organizations are not in a mood
to take on the additional burden of change.

Organizations are willing to reach out for more outsourcing if ‘more can be done with less’; less
investment and less change. Else, it is an inhibitor.

Interestingly, the political and social factor about outsourcing, bears no credence.


15


16 G S S U R V E Y

Investment Areas in ITO and BPO

The responses resonate with the earlier finding of a moderate increase or maintenance of
outsourcing at current levels.

The top three areas in IT that are likely to see an increase in activity are:
1. Application development and maintenance (including packaged business applications)
2. Infrastructure management services
3. Staff augmentation services (closely tied in with Testing Services)

Responses for BPO were much more muted. The growth spots here are:
1. Industry-specific processes
2. Analytics outsourcing
3. Customer care


Hungary Belarus
Poland Russia
Sweden Ukraine
Switzerland Kazakhstan
Germany
UK

United States

Excellence in Software
Engineering
EPAM Systems a leading global IT services provider with delivery centers
throughout Central and Eastern Europe focused on complex software
product development services, software engineering and
www.epam.com vertically-oriented custom development solution.

Experience: since 1993 Services Industries
Talents: 7,000+ Product Development ISVs and Technology
Quality: CMMI Level 4, SAS
70 Type II, ISO 9001:2000, Application Development Banking Financial Services
ISO 27001:2005 Enterprise Application Platforms Business Information
Application Testing Media
Application Maintenance Support Travel and Hospitality
ASM Infrastructure Services Retail CPG
Emerging Vertical

Our Awards Sample client:

01 1
1

1 1
1 1
10 0 1 010 1 1 0 0 1 1 0 1 0 10 1 0 0 1 1 0

18 G S S U R V E Y

Trend-spotting in Global Sourcing

In the survey we checked out the strength of agreement to certain trend statements in the
market. This should help us in gauging the definiteness with which these trends would rule.

The three top-ranking and therefore definite trends are:
1. Pricing pressure and price negotiations will be common throughout 2012.
2. Companies will adopt vendor management tools, benchmarking and performance
management tools to manage their outsourcing relationships.
3. Cloud-based infrastructure services will move mainstream.

Opinions are mixed on trends such as:
a. Transformation through outsourcing
b. Platform-based BPO

Opinions are inconclusive on issues such as:
i) 2012 will see very little new scope being added, most outsourcing will be in the form
of project extensions.
ii) Convergence of IT and BPO will remain confined to niches.
iii) Investments in analytics do not measure up to the hype attached to it.


19

OUTLOOK 2012 SURVEY METHODOLOGY

Global Services conducted an online survey in early December. The survey was conduct-
ed within the Global Services reader community, two-thirds of which is based in the US.

Sample Profile

Total number of qualified responses= 149
Number of services buyers= 30
Number of service providers= 71 (representing 54 companies)*
Number of advisors/ analysts/ consultants= 48 (representing 28 organizations)*

* Multiple responses from companies were allowed..

MARCH 15
NEW YORK CITY

|

GlobalServices Welcome to the 7th Ann
www.globalservicesmedia.com January 2012

Outl oo k

t?
ex
n
e go
ow
ed

her
W

The Way Ahead
Grim economic outlook, mounting
expectations, bigger challenges...
and few lessons to be learnt

22 O U T L O O K 2 0 1 2

Global Services 2012:
Lessons from the Past and Some More
The lessons from the recession economy led to permanent
changes in making outsourcing more effective. While these
will continue to hold, service providers will need to focus on
developing deep skills in business and industry domains,
leveraging opportunities in new geographies, and managing
risk to ensure scalable growth.

Smita Vasudevan

T
he year 2011 was tough indeed. The global
economic turmoil has had a knock-down
impact on most areas. The strains were
visible on the outsourcing industry too. The pace
of activities was rather slow and experts mark the
year as one with relatively sluggish growth.


24 O U T L O O K 2 0 1 2

Sweet Lessons from the Recessive Economy
Interestingly, even though the pace was slow, the transformations happening around
the industry like the quest for more business value (albeit in the form of cost savings and
more), increased accountability placed on service providers to deliver value and business
outcomes, heightened awareness for performance management and the recognition of the
need to manage and measure risks, were permanent. These are the sweet lessons from the
adversity of a recessive economy.
European and US enterprises will continue to battle rising costs and productivity issues.
The struggle has also resulted in a huge surge in what these companies expect out of their
outsourcing deals. Strategic outsourcing relationships, emerging verticals and new geo-
graphical areas were increasingly looked for by buyers, so that every possibility of efficiency
gain is made use of.
The economic outlook for 2012 does not augur the rapid recovery of the world economy.
Therefore, changes are here to stay and some trends may deepen.
The basics still remain the same as cost still continues to be one major driver. Just that
the focus has grown much beyond that and the aim is to build strategic partnerships that
help contain costs and at the same time attain long term objectives. The hunt is for service
providers that can add value and bring a mix of everything-low cost, innovation and overall
efficiency.

Not an Ugly Noun- 'Verticalization'
Efficiency improvement is something all enterprises are looking for, irrespective of
what industry or vertical they belong to. Demand is thus likely to come from most areas.
Healthcare is expected to consume a significant chunk of outsourcing services. Traditional
areas like banking and financial services will see growing demand for e-banking, online
authentication and automation services. Hospitality is another opportunity area; a grow-
ing number of hotels will use technology like GDS (Global Distribution Systems) and IDS
(Internet Distribution Systems) to increase online visibility and enable guests to book
online. “In addition, hotels are looking at outsourcing non-core technology functions like
managed services, internet marketing and loyalty
management” said Binu Mathews, President and
COO, IDS Next.
'Verticalization' will be an important trend to
watch out for. Service providers need to have
improved domain knowledge to be able to play in
different verticals. It goes beyond understanding
the technology requirements of different verticals to
developing deep-seated domain expertise to bring
about changes at the fundamental level of business
model.


26 O U T L O O K 2 0 1 2

“ Hospitality is a big opportunity area. Hotels are looking at
outsourcing non-core technology functions like managed
“
services, internet marketing and loyalty management.
—Binu Mathews, President and COO, IDS Next.

Hunt for New Geographies
When the going gets tough it is natural for enterprises to look for greener pastures. The
search for destinations was for a long time driven mainly by cost considerations. Offshore
locations like India and China have thus always been prominent spots on the global out-
sourcing map. Though these established locations still hold their value when it comes to
advanced service requirements, unexplored areas are increasingly being sought after for
their untapped potential. Tier II and Tier III locations in these countries are hence coming
out to be more attractive.
Multiple language capabilities have become more important as enterprises look for a
global presence. Cultural affinity, booming infrastructure, cheap workforce are few other
factors driving the hunt for new destinations. Certain regions in Europe and Middle East
are seeing high nearshore demand from United States and Western European businesses.
Latin America too is gaining prominence for its Spanish language capabilities. Amit Singh,
Partner, Avasant, says, Spanish is a major language requirement for the US. Some support is
coming from Philippines. But most of the Spanish language work is going to Latin America.”
Geographical proximity, similar times zones and cultural affinity make these locations
attractive.

“ Spanish is a major language requirement for the US. Some
“
support is coming from Philippines. But most of the Spanish
language work is going to Latin America.
—Amit Singh, Partner, Avasant.

While new and emerging locations offer certain unique capabilities and competitive
advantages, there are important factors to be considered. Europe, for say, is vast and
growth is scattered across different countries. It is thus important to analyze and look at
each country and region separately. Moreover, the current crisis has sapped the strength
of most European locations. The impact is also fairly visible on other regions like parts of
Middle East and Africa and Latin America. Economic stability thus becomes an important
factor be considered for expanding into these regions. GS


case study

A Fortune 500, Global Technology Company
Achieves Business Transformation through
its Partnership with HCL
The Client: Solution: at a glance
Headquartered in the U.S., the HCL Technology Infrastructure
Client
company is a Fortune 500 global Services Division, also known as A Fortune 500, Global
giant, a corporation of com- HCL ISD, offered end-to-end Technology Company
plementary business units that IT infrastructure services deliv-
design, manufacture, distribute ery. It undertook several trans- Service Provider
and service engines and related formational projects for backup HCL
technologies. The customer was
tape optimization, application
looking for a reliable outsourc- Service Provided
consolidation, database optimi-
ing partner to consolidate all its Consolidating all its internal
internal client services includ- zation, server virtualization and
client services including IT,
ing IT, HR, Accounting and more such. Besides, HCL ISD
HR, Accounting and
Professional Support into a sin- well-executed a major area of
Professional Support into
gle operation. concern for the customer i.e. data a single operation.
center consolidation. It handled
Situation Analysis: all data center operations tasks Industry
The customer wanted its internal without any external support; IT
IT organization to focus on areas successful migration of servers
that would create strategic dif- from Australia to Singapore data Solution
ferentiators for business and con- center being one. HCL ISD
tribute to the organization’s core
IT. The customer challenges were:
• Heterogeneous IT environ-
ment Success Metrics
• Wide scope of engagement HCL ISD introduced tools in the client environment and automated
that included end user com- processes that enabled client to improve IT services while taking out
puting, data center manage- costs.
ment, infrastructure applica- • Consolidation of helpdesk across geographies decreased support
tions, network and security, costs and reduced ticket resolution by 30%
and process consulting and • Focus on SLAs, process standardization across the globe, and
tools implementation resource optimization with zero impact on service improved CSAT
• Globally spread business oper- • Moreover, successful completion of Six Sigma projects saved client
ations on an average $ 50k to 100k annually per project.

For more information please visit
www.hcltech.com

28 O U T L O O K 2 0 1 2

Moving to New Areas
• Local knowledge and understanding of specific contexts of each region is
essential.
• Risk diversification is going to be important. There needs to be a right balance
between offshore, onshore and nearshore activities.
• the current scenario, economic stability in different regions is an important fac-
In
tor to be considered.
• Scalability is another factor that becomes important in the long run.

MARCH 15
NEW YORK CITY

|


case study

Lanit-TERCOM Creates iOS Application
for a Russian Bank
The Client: cedures are performed on the server, at a glance
A major Russian Bank which has so the application on the mobile
device acts as a client to display data Client
a network of branches and ATMs
throughout Russia and the CIS. received from the server. A major Russian Bank
The Bank is the leader in terms of The application allows a user to:
its own capital. It’s also the larg- Service Provider
• View banking services points on
est bank in terms of deposits and JSC Lanit-Tercom
the map or as a list, with an option
the main creditor of the Russian of obtaining detailed information
economy. The Bank has the largest Service Provided
on the selected object (address,
branch network across the country: Application Development and
hours of operation);
it includes 17 regional banks, about Server Management
• View the location of the service
20 000 retail outlets, a large number
provision point of interest in rela- Industry
of ATMs, and 241 000 employees.
tion to a user’s current location;
The Bank has representative offices Banking
in Germany, India and China. • Estimate the distance to the
selected object; Solution
Situation Analysis: • View detailed information about Client server solution for
The main task of the project is the services provided there; iOS platform
the full cycle development of an • View the rating of the selected
application for iOS (iPhone / iPad / service point and vote with user’s In the subsequent versions the func-
iPod), namely the mobile bank with rating tionality has been improved upon,
a geopositioning feature. • File complaints which are auto- and a mobile bank feature has been
matically routed to a client request added, which is easy to use and
Solution: processing center; enable users to:
The developed application allows • See the going currency exchange • Pay fares on public transportation;
to promptly obtain necessary infor- rates and the dynamics of their
mation regarding the provision of • Check the balance of a user’s
changes; account in the standby mode;
banking services and is intended to
help users find the nearest branch • View the current prices of pre- • Receive notifications of bank
or service point providing such cious metals; transfers;
banking services as money trans- • Convert one currency into another • Make micropayments.
fers and payments, opening deposit
accounts, cashier services, services
for credit card holders. Search results Success Metrics
include all points of service available • Over 40 thousands active users
nearby – branches, ATMs and cash • Over 30 thousands requests per day
machines. Due to large amounts of • Over 100 feedback messages to customer support service per day
data and with the view to facilitating • Over 3 thousands new active users per month
information updates, all search pro- • Over 40 feedback messages to application support service per month

For more information on Mobile Bank contact Vadim Sabashny
Vadim.Sabashny@lanit-tercom.com

30 O U T L O O K 2 0 1 2

Services Spends Will Happen
Despite Budget Cuts
There is no denying that the environment is fairly turbulent.
When there is uncertainty, capital investments get impacted.
Pricing pressure will thin out service providers’ margin. This
will in turn force service providers to come up with newer cus-
tomer-centric solutions and innovative engagement models.

Smriti Sharma
A
rvind Thakur CEO, NIIT Technologies Ltd. articulated,
“Both for the IT as well as the BPO industry, I do not
anticipate there to be budget cuts because we are
seeing renowned focus on outsourcing. The cuts really
would be on capital investments and not on operating
expense related activities.”
As per Thakur, three types of actions will hit the invest-
ment front. One would be just to keep the business run-
ning; this one would be budgeted for. Then, there may
be certain strategic initiatives -such as moving to a new
platform- that makes the business more competitive. This
one would be planned and also budgeted for. And then,
there would be activities that independent businesses
may feel appropriate to invest in. Here, the funding would
be sought for from the user itself.


31

IT Spending $2.7 Trillion in 2012
Gartner predicts that IT spend is projected to total $2.7 trillion in 2012. The slowdown in
US and Europe economic growth could suppress IT spends. According to Forrester Research,
IT spends are expected to decrease to 5.5 percent in 2012 for a total of $2.15 trillion, from
estimated growth of 11 percent this year.
Emerging economies such as India will account for $1.013 trillion. According to Gartner,
the telecommunications market is the largest IT segment in India with IT spending forecast
to reach $54.7B in 2012 followed by the IT services market with spending of $11.1B. The
computing hardware market in India is projected to reach $10.7B in 2012 while software
spending will total $3.2 billion.
Buyers are increasingly trying to consolidate their IT services as portfolio and thereby
arrive at cost savings.

“
I
nstead of having a multitude of contracts spread all over the
world, with a variety of service providers, buyers are increasingly
trying to consolidate their portfolio and implement global con- “
tracts with uniform standard SLA. This leads to a fair amount of cen-
tralization of spends and consequently cost savings for the client.
Chirajeet Sengupta
Research Director, Everest Group

Sengupta believes Infrastructure Outsourcing is one of the areas where we can expect to
see a change, as there is a steady increase in offshoring. Traditional onshore infrastructure
support services are going to go down. This entire wave of consolidation will evolve a fair
degree of system integration, process improvement and process optimization. These three
are some of the areas that are expected to go up.
In addition, enterprise mobility, cloud computing, managed services, machine-to-
machine communications, product engineering service are some of the areas that will wit-
ness growth.
Even though there have been major concerns around the macro economy over the past
year, it is still very difficult to envisage any significant budgetary cuts from the customer
standpoint going into 2012 and beyond.

“
A
t worst, budgets might remain flat as customers offset
the need for a technology refresh arising out of expo-
nential data growth, security and compliance concerns
by embracing fast emerging delivery models like virtualiza-
tion, cloud computing and unified communications. The tran-
sition towards an ‘As a Service’ IT economy has surely gained
“
momentum in the year gone by and is certainly the future of
IT services and solutions,
Brian J Manning
President and Managing Director, CSC India


32 O U T L O O K 2 0 1 2

Significant increase in IT spends in outsourcing are likely to come from emerging com-
panies and economies. These companies and economies have matured to a level where
they can significantly upgrade their IT infrastructure or want to get there soon enough by
leveraging best in class IT.
In Q1 2012, 350 companies are expected to invest more than $1B in IT. The main reason
behind this is they comprehend that IT impacts their business performance and that there
are many benefits to by spending on moving applications to the cloud.
Lalit Dhingra, president of NIIT Technologies expressed, “Hardware and technology
refresh is perceived to be optimized. With the spread of cloud computing, progressive
enterprises will use shared or dedicated computing power on cloud at a fraction of cost.
Traditional vendors who used to lease computing equipment and power in the old data
center hosting model will see a shift in consumer behavior.”
While innovation is the buzz word, RD spendings are expected to be scrutinized. Sanjay
Dhawan, president and CEO, Symphony Services Corp. opined, “Research and Development
spendings may come under pressure. Having said that, the pressure to innovate and intro-
duce new products has never been higher.” He expects customers to look for help from their
outsourcing partners in three ways:
1. Taking over mature products to drive down costs and add enhancements to extend the
lifespan, and using those savings to fund new products and initiatives,
2. Improving automation through new cloud-oriented processes and tools also unearths
product development life-cycle savings that can be used to fund new initiatives and
3. Delivering new product frameworks (software and hardware) to shorten time and cost
to market for new solutions.


33

In the end, as Everest Report titled 2012 Market Predictions pointed, “Larger buyers will
continue to drive the spending budgets in both infrastructure outsourcing and ADM, and
will focus on vendor consolidation, providing growth opportunities to larger players, both
offshore and MNC. This will lead to further growth disparity between large and small sup-
pliers IO deals will increase, driven by next generation models such as cloud computing
and RIMO.”

BPO: Win-Win Situation for Both the Customers and the Vendors
At the onset of the downturn, many organizations had put new projects on a pause; now
most of them are looking at a long-term outsourcing strategy.
Recently, HGS won a big public sector contract in the UK. The contracts are expanding
to include more service lines. Financial services institutions will move towards lesser and
more strategic relationships with service providers, resulting in longer contract terms and
larger contract sizes.

“
T
he focus is not as much on decreasing costs as
it is on increasing efficiency. This will translate
into a bigger average contract size in the coming
years. Driven by the imperatives of the austerity meas-
“
ures, there may be a significant increase in outsourcing
spends by government bodies in Europe.

Partha De Sarkar
CEO,Hinduja Global Solutions(HGS)

Unlike IT, BPO is more of an ongoing expense not a discretionary expense. Companies
will continue to look for ways to cut costs out of their operations.
Rajesh Ranjan, research director, Everest Group, enunciated, “Most of the organizations
are going to look for a balance set of outcome. Balance set of outcome means taking a deci-
sion that will help realize some of the short term objective, without compromising on long
term benefit. In fact, I am expecting organizations to take those decisions that while help-
ing them realize short-term objectives will create a foundation for the long term success.
This is also a mark of reflection of the maturity of BPO.”
Earlier buyers approach revolved primarily around cost cutting without due consid-
eration on the long term perspective. Or there were wholesome transformation approach
where it would take 2-3 years to start seeing some benefits. Ranjan thinks neither of these
has really provided the right set of value. Most of the organizations as we move forward are
going to look for balance set of outcome.
Neil Bentley, founder and managing director, Active Operations Management India(AOMi)
feels headcount is expected to come under pressure as a large part (over 70 percent) of con-
trollable cost in BPOs is associated with staffing. However, in cases where deals have already


34 O U T L O O K 2 0 1 2

been struck there may be zero incentives to reduce head count; in transaction-based deals
the scenario may be different.

“
C
ompanies seeking to make budgetary cuts may
well turn to BPO as an option - maybe even some
operations that have never previously considered
the option such as parts of the public sector. This may
lead to some growth in BPO but with it would come com-
petition and pressure on price and service delivery. The
successful BPOs would therefore be the ones that stand
“
out as being able to offer the most competitive package
- price plus assurance of delivery.

Neil Bentley
Founder and Managing Director, AOMi

Sitel is seeing a significant cost-savings opportunity for global call center BPO providers
to achieve optimal operational efficiency by transitioning from on-premise legacy systems
to cloud-based call center offerings that scale as a direct operating expense. This will also
open the door for companies to replace large, captive operations with faster and cheaper
outsourced operations, particularly in areas where customer experience can be enhanced
by specialists.

“
T
echnological, social and economic changes have made
at-home agents a viable business model, especially for
experienced outsourcing providers. With broadband
access now available in much of the US, end users can sup-
plement existing call center operations by drawing from
and connecting to a new and substantial labor pool. In
2012, Sitel believes the BPO industry will see a decrease in
traditional call center environments where agents work in
a typical office setting. Instead, work-at-home agents will
“
emerge as a customer-care solution that favors a more flex-
ible labor environment.

Andrew Kokes
Vice President, Global Product Management,Sitel

Investments will take place in building more robust analytics and integrated talent man-
agement offerings.


35

Highlights from Everest's Report titled 2012 Market Predictions
Restoring growth while improving profitability and reducing operational complexity
will be the primary imperatives for banks, leading to investments in legacy moderniza-
tion, application consolidation and ERP initiatives. In addition, adapting to changing cus-
tomer preferences will create demand in areas such as mobility, social media, and channel
integration.
Within banking BPO, increase pressure on margins and profitability, and the rising cost of
servicing each loan, is causing lenders to seek out solutions that can help them standard-
ize loan origination and convert fixed to variable costs; this will drive greater adoption of
technology-enabled BPO solutions within the leading segment.
Pricing pressure will squeeze providers' margins, especially offshore, forcing investment
in newer customer-centric solutions and innovative engagement models.
Captive investments will continue, and the majority of setups/expansions will be in Asia
Pacific and CEE.
The final word is BPO spends could increase as they have low impact on business and
help organizations save cost. Satya Gottumukkala, executive vice president, Anthelio
Business Technologies Pvt. Ltd. voiced, “I see more of shared services being outsourced – in
fact the vendors will look for newer opportunities to save costs of their customers. This will
be a “win-win” situation for both the customers and the vendors.” GS

MARCH 15
NEW YORK CITY

|


36 O U T L O O K 2 0 1 2

The Changing Landscape
of the Global Services Industry
Increasing attention to global sourcing management
consolidation initiatives.

Smriti Sharma

S
ervices buyers are looking for value beyond cost
arbitrage and efficiency gains. They will increas-
ingly look to vendors with deep domain expertise in
specific verticals. The year ahead will see more attention
being paid to global sourcing management and consoli-
dation initiatives.
Andrew Kokes, vice president, global product manage-
ment, Sitel articulated,“In 2012, Sitel believes outsourc-
ing will continue to see growth driven by cost pressure,
increasing complexity to deliver the latest technologies
and the need to align scalability to market demand. Call
center BPO’s with the right people, process and technol-
ogy will be in a great position to deliver solutions that
organization do not have the ability to invest in deliver-
ing, or would take years to develop their own operating
best practices.”


ePublishing - The New Success Paradigm
for the Media Sector
Author: Vasanth Kumar Mani
Online Publishing Media Solutions Expert,
Datamatics Global Services Limited.

O
ver the last decade wide availability falling costs of bandwidth with rapidly evolving
mobile computing devices have driven a paradigm shift in the way people organiza-
tions around the world create, access and distribute information. Rapid evolution of the
social media has further driven this growth in tendency to take everything online and expect
everything online. The internet is fast evolving into a powerful channel for marketing across
industries, more so for the publishing media sector.
Reader preferences are shifting towards electronic versions from the traditional print medi-
um. According to a recent industry report, e-books sale in the US market in the year 2010 was
$500 million; expected to cross $1000 million in 2011 and $2000 million in 2015.
Convenience of reading carrying, lower costs, novelty value, intelligent tagging and cross-
linking, multimedia, and ease of search are features driving demand for electronic versions of
print publications. Dropping prices and rapid evolution of eReaders tablets are further driv-
ing demand. Worldwide media tablet spending is projected to reach $29.4 billion in 2011, up
from $9.6 billion in 2010 by Gartner Inc. Global spending on media tablets is forecast to increase
at an annual average rate of 52 percent through 2015. By 2014, 6.7 billion devices will be con-
nected to the Internet.
Adapting to the ePublishing paradigm is not simply about creating digitized versions of
content in print. It requires a thorough rethink of the entire workflow from content acquisition
through editorial, creative representation and distribution processes. Relative ease of distribu-
tion, better margins on higher volumes and high level of flexibility makes it an attractive busi-
ness proposition for publishers too, to change lanes to the e-way.
There has been a mixed reaction from the publishing sector to this market trend towards
greater adoption of electronic versions of print media. Thought leaders in the sector were quick
adapt their organizations to maximize the potential of this opportunity while most other pub-
lishers are in a wait and watch mode. Datamatics joined hands with the thought leaders and
early adopters to help them venture into the field and has been an advisory partner for the
latter.
Datamatics is committed to delight publishers with intelligent technology leverage that helps
them enhance their user experience, expand reach and drive efficiency in their operations.
Datamatics online publishing and media experts are already working with some of the lead-
ing companies in the online publishing retail space, processing over 2 million pages a year.
Besides rapidly increasing volume, the depth and breadth of services in these areas has also
widened. Today, Datamatics is one among the few companies that is a preferred partner for
publishers and online companies for any new ventures into the technology space, be it produc-
tion or testing of new devices and e-book formats or even in Social Media marketing. .
For any further information on how Datamatics can help your organization in effectively
tapping the e-Publishing opportunity, please write to us at onlineprintmedia@datamatics.com.
Advertorial

38 O U T L O O K 2 0 1 2

The Dawn of the ‘As-a-Service’ Economy
Some of the dynamics have started to kick in with a definite shift towards ‘as-a-service’
economy.

“
T
his not only helps businesses put a cap on capex which
is at a premium, but also transition towards an opex
model. With businesses suffering two major hiccups
in the space of three years, there would be an incremental
demand for innovative service models aimed at mitigating
risk, possessing high domain knowledge as well as robust
security and compliance delivery models. Service providers
would also look towards innovative service delivery models
to sustain demand and major moves towards restructuring
“
internally as well as developing domain expertise and capa-
bilities can be expected.

Brian J Manning

The three key main forces in the marketplace are: a) price-performance ratios keep
improving, b) consumer expectations are changing dramatically, as they are exposed to
technology choices that empower them as never before and c) emerging technologies
are positioning IT to drive innovation and growth, rather than targeting cost-cutting and
efficiencies. These forces are driving the following trends - the rising importance of data,
analytics, cloud computing, services-centred architecture, IT security, data privacy, social
platforms, and user experiences.

The Role of the Service Integrator
Accenture believes that ‘transformational’ and ‘bundled’ outsourcing will become an
increasingly important strategy for companies in the current market. By outsourcing sev-
eral business processes and IT systems to one provider, companies can free up cost and
management resources while acquiring the strategic flexibility and capability for growth
and to embrace the trends to drive competitive differentiation.
In addition, significance of the role of the service integrator will continue to rise. The
cloud brings a set of third parties into the mix whose services cut across traditional lines.
It takes specialized skills in service integration as well as business processes and tools (aka
the service integration bus) that automate and monitor IT to ensure coordination and over-
sight between third party providers and in-house IT. The cloud has magnified the issues of
a multi-sourced environment and strategic sourcing has become not just an integral but a
critical part of IT and business strategy agendas. The key to being a service integrator is to
adopt a services mindset across all internal and external capabilities provided in IT. It is not
just cloud services; it is all services IT provides to enable the business.


39

Nearshoring and Consolidation
Another line on rise is a move
towards near-shoring of services. This
continuous pursuit of new locations is
driven by the demands of geographi-
cal proximity, similar time zones and
cultural affinity. Partha De Sarkar, CEO,
Hinduja Global Solutions (HGS), voiced,
“From the providers’ point of view the
focus is on geographical and verti-
cal diversification. The opportunities
are springing up in hitherto untapped
pockets and we need to be prepared
to capitalize on all of them. The indus-
try is also seeing consolidation, with
growing demand for new capabilities
and new geographies.”

Increased Competition
As the market has matured, it has
become much more competitive
also. Discussing the reasons behind
the competitive nature of the mar-
ket, Joy V Santosh, CEO and country
head, Active Operations Management
India(AOMi)expressed, “The market is
much more competitive for a number
of reasons. Hence, the landscape is
promising.” The market is competitive
because with quality and service being givens, the focus is once again on cost. Other rea-
sons include trends such as the consolidation of cheaper offshoring hubs; transitioning
of contracts from FTE-based to output/ outcome based; and the transition from standard
BPOs to more knowledge based platform services.

“
T
he big change that will take place over the next few
years is the shift in the center of gravity for plan-
ning and control from onshore to offshore, even for
resources still located onshore. This could cause raised
eyebrows in some quarters but the crucial factor is that
implementing a standard methodology that allows capacity
to be managed transparently in whatever manner suits the “
culture and objectives of the company (including spanning
across company boundaries into outsource providers).
Richard Jeffery


40 O U T L O O K 2 0 1 2

As it has been observed, in the last two years, enterprises prefer working with credible
outsourcers who focus on effectiveness than efficiencies. It is about partnering with ven-
dors who have demonstrated that they can create business value – e.g. increase the client’s
revenue by architecting new product and services and skin-in-the-game contracts.
Traditionally, call centers are limited by their geography to a job-recruiting radius of about
50 miles, and the hiring constraints that come with that geographical location. Talking
about home-based labor pool, Kokes shared, “In 2012, Sitel expects to see an increase in
the utilization of a flexible home-based labor pool to drive operating efficiency. The vir-
tual model will provide a wider hiring footprint with the hub-based environment focused
on hiring and training at a physical location to improve work/life balance for employees.
This concept will ultimately overcome the rigid scheduling challenges of call center-based
operations while complementing existing in-center customer care support, providing vari-
ous types of talent, shifts and scale for seasonality and call volume, regardless of location.”

“
W
e see a significant acceleration across various
governments – federal, state and local gov-
ernment. Government is going to increase as
a significant component of the outsourcing industry.
There were certain type of healthcare services that
buyers were reluctant to outsource. However, there is
a lot more desire and willingness to outsource them
today. Banking and financial services has always been
“
a leading edge exponent of outsourcing industry and
it continues to be in the same space.
Deepak J Patel
CEO, Aditya Birla Minacs

There is another phenomena, that is happening especially in North America -inhouse
unionized operations of the customers.
Over the last few months, significant amount of business is coming out from unionized
shops into the outsourcing environment and we will see an acceleration of that as well.

“
I
n 2012, Sitel believes outsourcing will continue to see
growth driven by cost pressure, increasing complexity to
deliver the latest technologies and the need to align scal-
ability to market demand. Call center BPO’s with the right
people, process and technology will be in a great position
to deliver solutions that organization do not have the ability
“
to invest in delivering, or would take years to develop their
own operating best practices.

Andrew Kokes
Vice President, Global Product Management, Sitel


41

The Hitch with Outcome-based Pricing
In the recent past, market has observed large, more complex deals where buyers demand
complex SLAs and consequently more complex pricing models as opposed to FTE-based
models.
In the year 2012, outcome based pricing will gain prominence. However, it will not
become the norm.

“ O
n papers, outcome pricing looks pretty inter-
esting and appears to be aligned with the
objectives of both buyers and providers. But,
in reality making it work is difficult. Simply because
unless the service provision is directly associated
“
with the service provider of the outcome it becomes
very difficult to connect.

Rajesh Ranjan
Research Director, Everest Group

For example, in procurement outsourcing, the service provider is actually managing the
budget on behalf of buyer. Here the provider can actually influence that spend and get it
down by identifying the right set of vendors and negotiating the contracts. Hence there is
a direct connect between what the service provider is doing and the actual dollar impact.
The degree of separation is very minimal.
Contrary to procurement, in the case of HR outsourcing, the degree of separation increas-
es. One of the objectives of HR outsourcing, providers wish to realize is to increase employ-
ee productivity, that will eventually result in revenue growth. However, in this case there is
separation as there are lot of other factors that play into employee productivity - such as
motivational factors, hiring factors - that are not directly in the control of service provider.
As the degree of separation increases anything to link it to outcome becomes challenging.

“ I
t is a given in now that most BPO deals (especially the recent
ones) have been bagged basis a transaction on outcome
based pricing model. Another theme might be supply chain
integration. A likely theme to follow on from Lean operations
is to take the concept one step further and look at the end to
end process. Just as the likes of Toyota spread their production
control method all along their supply chain, we might antici-
pate a similar move towards standardisation as companies seek
“
to strengthen their BPO and more importantly outsourcing/
Offshoring partnerships.
Neil Bentley


42 O U T L O O K 2 0 1 2

2012 will witness more of output based pricing; we'll also see traction of outcome based
pricing. However, output based pricing will become more dominant trend compared to
outcome based pricing.
Speaking about the buyers expectations, Abhinav Sharma, founder and director, Aceicon
pointed, “As an IT service provider we have learnt that customers are becoming more
demanding and are having high expectations from the company’s products and services
and you have to continuously deliver on those expectations.They expect not just any soft-
ware solution. What they desire is a complete package that comprise of the product, train-
ing, support services and after sales maintenance. The customer is interested in the value
being delivered by that product.”

In addition, the balancing act between captives and third-party models will continue. GS

MARCH 15
NEW YORK CITY

|


43

IT Outsourcing
Slow, Deliberate March
Smaller deals, more standardization of services, mix of
sourcing models, and cloud adoption are the key trends
in IT outsourcing for 2012.

Sourabh Chandra Pushp

“
T
he year 2012, will be marked by the inking of smaller
IT services deals, many of them by first-time buyers
who sat on the sidelines in 2010-11. Contract activity
“
will creep back throughout 2011, as the recover stutters and
buyers pull the trigger on sourcing activity.

Phil Fersht
Founder-Outsourcing Analyst Firm-HfS Research.


44 O U T L O O K 2 0 1 2

Rigor and Standardization
Clients will be increasingly open to changing their internal processes and accepting stand-
ard services in 2012, predicts Bob Mathers, principal consultant for Compass Management
Consulting. Service providers will put renewed emphasis on internal initiatives to standardize
their own offerings to leverage economies of scale and stabilize profit margins. It's the stuff of
benchmarking dreams, but economic conditions may turn it into a reality. Stan Lepeak, man-
aging director of global research for outsourcing consultancy EquaTerra KPMG, also predicts
more process, technology, and location standardization including platform-based solutions.

“
I
n 2012, there would be an incremental demand for inno-
vative service models aimed at mitigating risk, possessing
high domain knowledge as well as robust security and
compliance delivery models. IT outsourcing service provid-
ers would also look towards innovative service delivery mod-
els to sustain demand and major moves towards restructur-
“
ing internally as well as developing domain expertise and
capabilities can be expected.

Brain J. Manning

Sluggish Demand and Pricing Pressure
“The demand environment for service providers will remain tentative in 2012 given the
watchful approach of global buyers, and optimization
will be a strong focus for organizations looking to
extract more value from their sourcing models,” said Eric
Simonson, managing partner-Everest Research.
For year 2012, sluggish activity is expected due to
macroeconomic and political uncertainty, with greater
confidence likelier later in the year; but more attention
will be paid to global sourcing management and consoli-
dation initiatives.
Buyers’ IT budgets may be suppressed by fears of a sec-
ond economic slowdown due to the debt environment
in Europe and the macro environment in the U.S.
Pricing pressures will squeeze providers’ margins,
especially offshore, forcing investment in newer custom-
er-centric solutions and innovative engagement models.
Domain/micro-vertical expertise will be emphasized as
buyers focus on business innovation.
Overall, margin pressures will continue to be a chal- Eric Simonson
lenge for service providers. There will likely be continu- Managing Partner, Everest
ing strategic convergence between offshore and MNC Research
service providers.


Smart Technology to Manage Power Consumption

Author: Sanjeet Banerji
Head, Engineering Services Embedded
Software Business Unit
Datamatics Global Services Limited

M
ost economies across the world are struggling to address the challenge of managing
power consumption. Individuals and enterprises are also actively looking for ways
to conserve power consumption. Intermittent peaks in demand also pose a challenge
for power generation, transmission and distribution companies, which they try to address with
variable tariff slabs and other such means.
The first step towards managing anything effectively is to first be able to measure it. Same
applies to energy consumption. The next step would be then to analyse the processes/entities
that consume the most energy, the third being how to save and the fourth being able to predict
the energy demands and its use in the most effective way
Automated Meter Reading (AMR) is the first step towards near-real-time measurement of
energy as it is being consumed. The next step is the AMI (Automated Meter Infrastructure) for
managing the data so obtained in analysing the current usage patterns. The next step of energy
planning is to arrive at a re-sequencing of processes to obtain a sensible and economically viable
allocation of resources for production and consumption of energy. From the customer perspec-
tive it means better control of managing energy consumption, and for the utility provider it
means better control of production and distribution of energy in the most effective manner.
AMI is not only a means to reduce time and cost of meter readings, it also contributes towards
efficient energy management through load profiling and supply automation, enabling dynamic
pricing for suppliers and consumers to balance demand and supply, balance loads, tamper
notification, revenue assurance through timely and accurate billing, outage management and
lot more in terms of being able to supply and consume energy in a smart manner.
A typical system may vary from a simple deployment to a very complex system where
energy could be dynamically priced, leading to possibilities of innovative service offerings as
well as ability to schedule energy consumption by the consumers in the most effective way. One
such application is local monitoring of energy consumption in an enterprise to gain insight into
its energy needs and consumption patterns. Our experience has shown that such systems have
brought good value in terms of managing its peak demands, power factor, and wastage. The
discounts availed on a disciplined usage of power not only contributes to a lower power bill
but also contributes to a greener earth. The system also acts as an indicator and allows audit of
energy usage in real time, giving an early indication of power bills.
Datamatics provides end-to-end services from design and development of smart meter soft-
ware, remote management of meters, connectivity via MUCs, to systems that acquire meter
data, to management systems that remotely manage and monitor supply, and finally create
bills to be presented electronically to consumers. The whole comprehensive solution includes
a set of data modelling and smart analytical tools to predict and manage energy distribution
consumption.
To know more please write to business@datamatics.com .
Advertorial

46 O U T L O O K 2 0 1 2

Vendor Landscape
Larger buyers will continue to drive the spending budgets in both infrastructure out-
sourcing (IO) and ADM, and will focus on vendor consolidation, providing growth oppor-
tunities to larger players, both offshore and MNC. This will lead to further growth disparity
between large and small suppliers. Regional service providers will increasingly emerge glo-
bally and significant MA will continue, with Tier-2 suppliers the prime targets.

“
E
ven though the IT industry will follow along
the same transformational path as it did in
2011, the events, the choices, and the stakes
will be very different in 2012. The urgency to act
and to make the right decisions will dramatically
increase. By the end of 2012, we should be able
to see much more clearly which players have suc-
cessfully positioned themselves in the 'lead pack'
of the marathon-like race for industry leadership in
the decade ahead. In 2012, ITO deals will increase,
“
driven by next generation (NGIT) models such as
cloud computing and RIMO.

Frank Gens
Senior Vice President, Chief Analyst-IDC

Cloud Adoption
In the past, technical and perception issues have caused cloud adoption challenges.
But continued capital investments will result in new and sophisticated solutions that will
lead to new hybrid models and new integration approaches, making cloud adoption more
mainstream.
The rapidly accelerating use of enterprise mobility, social networking and cloud services
in workplaces will increasingly require integration into mainstream corporate networks,
driving more corporate spend in this area.

Smaller Deals
In 2012, macroeconomic factors could force reduced IT spend, with buyers doing smaller
number of deals with simpler pricing models, amid strategic convergence between offshore,
MNC service providers. Global sourcing stakeholders will continue to pursue new locations
due to talent, cost arbitrage and risk diversification-related considerations.


Achieving Non-Linear Growth Using Smart
Technology and Smart Outsourcing
Author: Punit Jain
Head – Smart Document Processing Practice
Datamatics Global Services Limited.

W
ith economic turmoil and increasing competition in the global markets, process
owners and operations managers are facing increasing pressure to build dynamic
scalability, cut costs and improve speed of processing. The biggest challenge for any
organization is not just attaining growth but to do so in a non-linear way.
Industry research indicates that an average office worker annually uses 10,000 sheets of copy
paper whilst most business decision makers spend over 40% of their time searching for infor-
mation. Documents, in paper or electronic form, constitute the lifeline of any organization as
they are vital for every operational success. With growing business velocity, increasing com-
plexity of business operations, ever stricter regulatory compliance requirements pressure to
cut operational costs, optimizing document-intensive business processes has become a business
imperative.
The world is moving towards smart technology to enhance the productivity of document-
intensive processes with break-through cost, quality, and scalability speed benefits through
intelligent automation. An intelligent platform can help automate the entire end-to-end process
workflow and significantly reduce manual effort of document processing.
Use of smart technology helps in reducing Value/Productivity Leakage which impacts both
revenue and cost, specifically in operational areas. Organizations are speedily moving towards
tools which emphasize on;
• Leveraging smart technology for process automation
• Reducing operational cost and continuous quality improvements through deployment
of workflow tools, and processes which adopt Industry Best-Practices
• Increased ROI by moving from manual to automated document management workflow
system
• Using artificial intelligence in capture of information from documents, both physical
and electronic
The evolution of an organization in the direction of process automation for document cap-
ture and process workflow, significantly reduces manual data entry, improves data accuracy,
frees valuable resources and dramatically speeds up processing time.
Are your business processes document driven? If yes, move to smart technologies consist-
ing of imaging, workflow and intelligent capture tools, and derive the stated benefits. Explore
outsourcing options which leverage these smart technologies. Smart outsourcing based on
smart technology can provide real, measurable value in terms of cost reduction, productivity
improvement, customer satisfaction and turn around time. Arguably, your documents can be
perceived as a valuable asset which you can leverage towards gaining competitive advantage.
To know more about how Datamatics can help you achieve break-through business benefits
with intelligent automation, please write to business@datamatics.com

Advertorial

48 O U T L O O K 2 0 1 2

Hybrid and Captive Sourcing Models
Companies will continue adoption of hybrid captive/third-party sourcing models in
2012, and efforts will be made to improve captive value by focusing on high-value proc-
esses. Captive investments will continue with the majority of setups and expansions occur-
ring in the Asia Pacific and CEE geographies in the year to come.
For example, in the year 2011, IT service providers opened 32 new outsourcing deliv-
ery centers in the third quarter compared to 17 the previous quarter. HP led the way by
announcing ten new locations, followed by Dell, which announced four. Convergys, IBM
and Tech Mahindra each announced three new centers. GS

MARCH 15
NEW YORK CITY

|


49

FAO: Helping Really Handle the
‘Finance’ Function Better
FAO clients expect their providers to undertake analytics
on transactions, gather functional insights, and then
identify opportunities to improve and add value. The focus
is on improving the performance of the finance function.

Smriti Sharma

A
ccording to a report by Everest Group, the FAO
market will continue to attract strong activity,
resulting in a year-on-year growth of 15 percent in
2012, with the total number of active multi-process FAO
contracts expected to reach 700. In terms of total contract
value, renewals worth $2.5B and annualized contract
value of $4.5B-$5B are expected. Strong tractions will be
visible in healthcare, financial services, energy utility
industry segments and mid-market. There will be contin-
ued upward growth in India-to-India domestic BPO and
the Middle East and APAC regions.
Accenture, IBM, Genpact, Capgemini, Infosys BPO and
HP dominate the FAO space. The reason being, recent
years, have witnessed these players bag multiple engage-
ments in the $50M+ range.
Tony Chambliss, global offering lead for FA BPO serv-
ices at Accenture articulated, “The ability to undertake


50 O U T L O O K 2 0 1 2

analytics on transactions, understand the insights and then identify opportu-
nities to improve and add value is what our clients expect from
BPO. For FA BPO clients we process their invoices, collate
the spend, map that back to their strategic sourc-
ing agreements and identify rogue
spending outside that agreement
– that is money sifting through
their hands. We’re focused on
finding it and 'giving it back' to
help drive savings. We’re also seeing more
emphasis on deep industry expertise.
More and more, clients are looking for
providers that have a deep understanding
of the industry environment in which they operate.”
Second tier vendors are eying the mid-market and are distinguishing themselves by cre-
ating differentiated offerings. Their focus areas will be innovative value propositions such
as industry-specific solutions, end-to-end processes solutions, specialized process offerings
etc, strategic alliances between pure-play FAO service providers and technology providers
to offer platform/SaaS-based offerings and increasing presence and foray into emerging
destinations such as Africa, Latin America.

Shifting Gears
1. Buyers’ expectations revolve around transforming the processes towards best-in-class
performance, although cost continues to be the key driver.
2. FAO value propositions will be shaped by verticalization of FAO services and industry-
specific FAO offerings, moving away from the traditional assumption that FAO is a horizon-
tal function. Many service providers are coming up with industry-specific FAO solutions
(e.g., focused offering in travel, telecom, utility etc.). Service providers are also aligning their
sales and delivery team along key verticals to make a targeted market approach.
3. Expanding role of technology will focus on augmentation/and add-on tools. As per the
Everest report, “The next year will observe a stronger push on platform and BPaaS-based
offerings (primarily catering to small and mid-market buyers) as service providers attempt
to integrate them in their FAO value proposition.
Sachdev Ramakrishna, director marketing, Steria India added, “Historically, FA out-
sourcing has not been a technology intensive service. The focus has been more on adher-
ing to processes, backed by a strong manual work component. This is starting to change
and for the first time, a growing number of FA suppliers are offering standardized IT
platforms with their FA services. While there are challenges to overcome regarding data
security, ERP architecture integration, these options will continue to evolve, particularly
in the near term for mid-market buyers who typically are more inclined to buy in standard
solutions.”
Saurabh Gupta, vice president Everest Group, stated technology strategies that are being
deployed across all FAO:
• Tie-and-run: Limited role of technology where service provider plugs into the
buyer’s existing systems to deliver pure-play BPO services


51

• Technology augmentation: Service provider implements tools that serve as “add-
ons” around the periphery of the existing buyer systems to address specific gaps
• Core FA technology replacement/ implementation: IT infrastructure and/or
core FA application implementation bundled with FAO services. Technology own-
ership resides with buyer
• Platform-based FAO: Pre-integrated applications and pre-built processes, owned
by service provider, with pricing built into the FAO contract
4. The demand for analytics and other specialized FA services such as regulatory com-
pliance, internal audit will continue to increase.
5. Pricing models namely outcome-based and transaction-based pricing will find
increased mention in FAO contracts. Chambliss spoke about how many companies are
moving from just a transactional basis of BPO toward outsourcing higher value added func-
tions in their decision making and FPM areas. He opined, “Access to better information to
communicate to their line of business owners seem to be driving more value add for the
FA organizations and making the opportunities to grow analytics and improvements in
the bottom line for companies. Value propositions are centered around improvements to
cash performance.”
WNS has adopted several mod-
els of implementations such as-
lift and shift, shift and fix, and a
combination of fix whilst lifting
and shifting. Tasneem Lakdawalla,
business unit leader, Finance and
Accounting shared, “WNS delivers
a full range of FAO processes to
support all functions in the CFO’s
office. We perform over 650 proc-
esses ranging from simple transac-
tions to complex analytical proc-
esses including industry-specific
processes such as royalty and
passenger revenue accounting.
Specifically, we deliver end-to-end
services across the full spectrum of
finance and accounting functions,
including procure-to-pay, order-to-cash and record-to-report.”
6. Demand in the emerging markets- whether it is India or Asia Pacific or Latin America-
for FAO services is expected to increase this year.
Shantanu Ghosh, senior vice president and global head of practices, solutions and transi-
tions, Genpact opined, “The reason being a lot of multinationals - which are US and continen-
tal Europe based- have done their first wave of FAO, where they obviously focused on high
impact geographies like US or UK or continental Europe are now focusing on their second or
third wave outsourcing through the new market. These economies are creating companies
that are growing from small to medium to big and they are expanding outside their home
territories. They are also looking not only from the prospects of labor arbitrage but also from


52 O U T L O O K 2 0 1 2

the prospect of creating growth platforms along with delivering process excellence through
use of process management expertise.”
7. FAO will continue to increase in the developed markets. Demand will continue to come
from late adopters. These are the people who have not jumped on the FAO bandwagon
earlier, but now have seen the model get proven and have got enough confidence that this
works and they are therefore now coming in the market.
8. An end-to-end process-driven approach to FAO is also emerging as opposed to a tra-
ditional functional and piecemeal approach.

Service Providers Landscape
Experts from the Everest Report titled 2012 Market Predictions:
Driving non-linear growth through investments in technology-led solutions (platform
and BPaaS-based offerings) and process-led solutions (process maturity models and
frameworks).
Creating differentiated offerings through industry-specific and go-to-market strategies,
specialized process offerings and bundled FAO-PO offerings to leverage synergies across
the FA and procurement functions.
Service providers will push to increase penetration in the small and mid-market buyer
segments and also in emerging buyer geographies such as India, the Middle East, and
APAC. They will also continue and South America, the Middle East Africa, and Tier -2/3
locations in India etc.
The MA activity witnessed in 2011 will continue to an extent in 2012 with acquisition of
niche players by established suppliers trying to augment their capabilities to enter newer
MARCH 15
geographies. Private equity investors looking to either invest in mid-market FAO suppliers
or exit their positions held with large suppliers. GS NEW YORK CITY

|


53

Analytics Outsourcing 2012:
What do the Cards Say?
Analytics outsourcing will continue to grow as businesses
would turn to analytics to understand customer
behavior and optimize various business measures.

Smriti Sharma

I
nitially, analytics did not perfectly plug into the con-
ventional outsourcing model, as the level of data sensi-
tivity is exceptionally high. These vulnerabilities made
some of the clients set up or expand captive units instead
of outsourcing their secure data. However, in the past
decade, third-party providers have armed themselves
with commendable expertise in analytics. Thus, the ana-
lytics space that was once dominated by captives of large
companies is now embracing large vendors offering end-
to-end specialized solutions to specific verticals.
For those companies, whose data security concerns are
still making them hesitant about AO, vendors are offering
onsite delivery teams – at clients’ premises, client country-
so data is not required to reach offshore.


Global Services - Outlook 2012 issue

Global Services - Outlook 2012 issue

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (20)

Similar to Global Services - Outlook 2012 issue

Similar to Global Services - Outlook 2012 issue (20)

Recently uploaded

Recently uploaded (20)

Global Services - Outlook 2012 issue