“I see Infosys about half way through the shake out that these changes are driving and would expect more executive change as the strategies progress. I think Infosys needs to look outside the firm for some of its new leaders,” [Peter Bendor-Samuel] said. Read more.
Arbitrage sustainability for GICs varies by location and function.
The services industry is facing a big issue. The market for ERP implementation cycle and corresponding transformation projects has matured and is coming to an end.
We can see the ERP decline in the reported results from IBM and Accenture and HCL. These three providers have had very big SI practices around large-scale ERP implementations. I’m not saying there are no more ERP implementations or transformation projects; it’s just that this market is in decline.
Factors driving the market decline
One of the contributors of the decline is maturity. Most large companies that need ERP now have ERP. Furthermore, they are now in their second or third generation of their ERP and are much smarter about how they use ERP. So there is much less transformation.
The green field is gone. Much of the ERP market it now add-ons to the existing base. And companies have learned how to implement ERP within the guidelines of ERP manufacturers, SAP and Oracle, which enables less costly implementation when new releases come out. Further, moving into an as-a-service or cloud future will continue to erode or diminish the re-implementation markets driven by software upgrades because they become a monthly occurrence via SaaS products.
So ERP implementations and its associated SI and transformation projects is hitting a wall, and we’re going to see far less of it in the future.
What will drive future growth?
The decline is a big issue for the industry because much of the discretionary spend used to be captured by the ERP implementation and renewal cycle. It has been one of the big secular drivers of growth in the services space since the mid-1990s, but we’re now seeing its decline as a primary driver for growth.
Many SI consultants, shared services consulting companies and BPO firms that ride the ERP wave have, wittingly or unwittingly, linked their growth engines to the dislocation and transformation activities that happen around ERP implementations.
So the current decline has very significant implications in terms of where these service providers will find growth in the future services market.
What we know about technology is that, given enough time, there is always another big technology disruption that will drive large integration services. Right now the best case for this is the digital revolution and the huge company-wide implications that embrace the digital marketplace for large organizations. Much like ERP, digital affects everything and requires significant transformation for alignment.
So the open question is: will digital take up the mantle that ERP is shedding?
Tuesday, June 17, 2014 | 12 p.m. CDT, 1 p.m. EDT
Register for the webinar
ADP® is sponsoring an HR BPO webinar on Tuesday, June 17. Guest speakers will be Katrina Menzigian, Vice President – Research Relations, Everest Group and Catherine Garrett, HR Administrative Management Director with Comerica Bank.
Everest Group is known for helping organizations drive insights in to action. Katrina will be discussing the business climate pressures and trends driving the need for more robust HR functionality. Catherine will join her to share Comerica’s experience with HR BPO and the role outsourcing and the strategic role HR can play in impacting overall business strategies.
Today, business agility is a hot topic. At first glance, HR’s role in increasing business agility might not be so apparent. New research by Everest Group can help you make the connection. Join us to learn the characteristics of agility and the role HR can play in driving a standardized, scalable operational structure that can help drive profitability.
This event can help you:
Your HR function could be untapped potential that could be the game-changing mechanism that helps you respond quickly and drive bottom line impact. With an industry analyst and a client on-hand to answer your questions, you won’t want to miss this event.
“The demand for global services remains steady when we look at the number of outsourcing transactions, and the number of GIC set-ups,” says H. Karthik, Vice President – Global Sourcing, at Everest Group. “This is still driven largely by demand from North America and Europe. The growth in emerging markets has been slower than expected. It’s taking longer to open up those markets.” Read more.
At Capgemini global analyst event in London last week, the company provided a holistic view of its business growth strategy and internal initiatives to enhance skills and sales capabilities.
Capgemini management was relatively upbeat about growth opportunities while acknowledging the continuing headwinds in its main market in Europe. Economic uncertainty continues in continental Europe, but the need for cost cutting and efficiency is driving demand for services. Capgemini also expects growth from wider adoption of outsourcing and offshoring in continental Europe with a number of large deals on the horizon. Disruptions from cloud and offshoring continue to negatively impact revenue growth but improve margins. At the same time, cloud and other disruptive technologies such as big data, are increasing demand for services and boosting business.
Against this backdrop, Capgemini provided guidance of 5% – 7% organic revenue growth for the mid-term. Paul Hermelin, Group CEO, also indicated that the company is well on its way to achieving an operating margin of 10%. Assuming a 2-3 year period for mid-term, this is in keeping with outlook at the end of Q1 2014: organic revenue growth of 2% to 4% and an operating margin rate between 8.8% and 9.0% for 2014.
In terms of services, industrialization, standardization, innovation and pre-packaging dominated the company’s strategy. In infrastructure services the strategy has seen service delivery standardized and globalized with increasing focus on RIM, automation, cloud migration, orchestration and brokerage services. Capgemini saw +19% growth in cloud bookings year on year in 2013.
Application management has turned into a success story for Capgemini too. This is something of a turn around with dwindling bookings reversed into an increase of 60% in 2013 and 40% in Q1 2014. This has been achieved through industrialization and taking a factory approach to AM. Capgemini highlighted circa 30% cost savings for clients through this approach. It is also offering a new approach to AM services with a business process focus – where KPI’s include related business process metrics. This is a novel approach to AM that Everest Group will cover in a separate piece.
Another key lever for growth is innovation with Capgemini investing in IP in its strategic offerings (which are based on major technological transformation themes such as customer experience, cloud, mobility, big data, and social media). In keeping with this strategy, Capgemini will continue to target demand in the market for digitization of services and for transforming big data into new business opportunities. Similar opportunities from the Internet of things is also on its radar.
The widening of the strategic offerings portfolio with more IP is to boost profitability with higher margin services. Capgemini has shown that it can do well in these. Its strategic offerings grew by 19% in 2013 and are on the way to grow by 20% in 2014.
The drive for innovation is likely to lead to more acquisitions and partnership co-development. The latter brings with it the risks of investing in ambitious technology that proves too difficult to bring to market in a timely fashion e.g. Skysight, the cloud service orchestration product which Capgemini is developing in partnership with Microsoft, has been delayed.
Verticalization is another growth lever for Capgemini. One example is industry managed services offerings with OnePath Suite. This consists of pre-packaged SAP solutions that have been pre-configured for specific verticals, such as CPG, Energy and Life Sciences, and which will be delivered and set up as part of hosted and managed services with the potential to add business process services on top of bundled infrastructure and software integration.
BPO services are also being extended from the core F&A offerings to a broader set of services aimed at CFOs, including spend analytics, internal audit, SC analytics and MDM, and tax efficient accounting.
Internal organizational measures include:
With globalization of services have come the challenges of managing resources better and increasing utilization rates. Capgemini needs a robust global organization to support its evolving delivery model. The HR strategy is addressing this requirement.
Capgemini has had an entrepreneurial culture with many P&L centers. This has led to a sales structure that has adapted to local market conditions. The implementation of a ‘One Group’ approach to major accounts is needed to tap into large multi-national opportunities that can now be supported by Capgemini’s global delivery model.
Overall, Capgemini has made excellent progress in transforming itself to ride the wave of demand in the market for modernized services and to compete with India-based vendors who are targeting Europe, Capgemini’s biggest market. Offshoring and globalization of service delivery has been largely achieved. Other aspects of the strategy are still work in progress but with the economic outlook generally brighter across the globe, the company is set well to achieve its latest guidance.
“What has also changed since 2004 is the fact that Airtel’s ability to find higher technical expertise in the market now is quite different from back then,” said Peter Bendor-Samuel, chief executive and founder of outsourcing advisory Everest Group. Read more.
Rise of global and regional deals demonstrates renewed confidence in comprehensive HRO
Multi-Process Human Resources Outsourcing (MPHRO) – Annual Report 2014: The Times Are Changing: Market Insights
Visit the report page
MPHRO new deal buyer adoption trends by signing region, 2013
Higher ACV per deal drives MHPRO market growth
Third Party BPaaS solutions significantly impacted MPHRO deals in 2013
European and APAC enterprises more strategic about MPHRO than are those in North America
Rise of global and regional deals demonstrates renewed confidence in comprehensive HRO
Financial services, retail, and energy picked up momentum in MPHRO in 2013; services industry adoption fell off
MPHRO continues its offshore move
Advancements in FAO solutions empower buyers to switch providers in search of greater value creation, improved customer experiences, and organizational transformation.
DALLAS, May 28, 2014 — A moderate growth rate of approximately 8 percent in the Finance and Accounting Outsourcing (FAO) market belies a significant disruption taking place below the surface.
In a just-released report, Everest Group attributes a variety of factors to rising turbulence in the market, such as deal switching, competitive bidding, hybrid pricing models, analytics, onshore delivery, and robotic automation. Findings and analysis are discussed in “Finance and Accounting Outsourcing (FAO) Annual Report 2014 – Transformational Agenda to Combat Reducing Stickiness.”
Key Findings from the Report
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Graphics illustrating the report’s key takeaways can be included in news coverage of the report with source attribution to Everest Group and a link to the graphic source page on the Everest Group website. Graphics include:
“We witnessed a surge in deal switching in 2013 as buyer organizations sought providers who would better cater to their transformational agendas,” said Saurabh Gupta, vice president at Everest Group. “Buyers are searching for world-class performance and solutions with strategic impact; this is borne out on the supply side by increasing adoption of embedded analytics and technology-led solutions—which are moving beyond theory to successful, high-impact examples.”
The FAO Annual Report 2014 provides insight into the changing dynamics of the FAO market and identifies trends for 2014. The report provides comprehensive coverage of the global FAO market, including detailed analysis on market size and growth, buyer adoption trends, FAO value proposition, solution characteristics and service provider landscape.
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