Category: Press Releases

Everest Group Research Finds Global In-house Centers/Captives Continue to Offer Significant Cost Competitiveness | Press Release

Study Released in Collaboration with NASSCOM also Determines India’s Cost Competitiveness Likely to Remain Sustainable for 12-15 Years

DALLAS, April 4, 2012 ─ Global In-house Centers (GICs) or captives continue to provide significant cost savings to their parents in most offshore locations and this is likely to remain sustainable for medium-term duration, according to Everest Group, an advisory and research firm on global services.

NASSCOM and Everest Group recently conducted joint research to understand the extent of the cost savings achieved, levers for driving cost savings, and future sustainability of the same. This research relied heavily on inputs and perspectives from GICs and their parent organizations in onshore locations. Some of the key findings include:

• The GIC model is established and continues to grow across newer industries, functions and geographies. GICs have delivered 40-70 percent savings over source locations even from a total cost of ownership perspective that includes costs associated with set-up and management besides operating cost of delivery

• Contrary to popular perception, wage inflation is not likely to wipe out GIC cost savings in the near term, given that net cost inflation experienced by GICs (6-8 percent) is much lower than numbers (12-15 percent) commonly cited.

• Arbitrage-driven costs savings in India  is likely to remain sustainable for 12-15 years from a U.S. perspective (similar estimates for other source geographies)

• GICs have several levers to improve their cost position and further prolong their cost advantage.

“Additionally, while direct cost savings will always be important, many mature GICs realize that they can leverage the platform they have built to deliver significant business value to the parent organizations. These organizations have started to make substantive investments in their engagement and delivery models to re-orient towards value impact beyond arbitrage-led savings,” states Eric Simonson, Managing Partners – Research, Everest Group.

The research findings were first presented at the NASSCOM GIC Conclave 2012 in New Delhi on March 20, 2012.

“While GICs have increased focus on generating impact on business outcomes, cost still remains a dominant focus for onshore stakeholders. This research with Everest Group reaffirms the fact that despite the maturity of India as an offshoring destination, it still offers significant long term cost advantage,” states Sangeeta Gupta, senior vice president, NASSCOM. Everest Group’s research has the reputation of consistently serving as a reality check on the topics of the day. This latest report on the cost competitiveness of GICs lives up to this reputation by shedding light on the true value that GICs deliver and the sustainability of the model.”

The full report titled Cost Competitiveness of Global In-house Centers (GICs): The Reality of Wage Inflation and the Sustainability of Cost Arbitrage is available for complimentary download at research.everestgrp.com.

For more information about Everest Group and its consulting and research capabilities, visit www.everestgrp.com, email [email protected].

Joint Everest Group and Shared Services and Outsourcing Network (SSON) Survey Reveals Shared Services and Outsourcing Are Moving Beyond the Back Office into the Business | Press Release

Study’s Results Revealed at SSON’s U.S. Flagship Conference  in Orlando on March 7-9, 2012

DALLAS, March 6, 2012  ─  Everest Group and the Shared Services and Outsourcing Network (SSON) today announced the results of their joint survey reveal noteworthy trends and diversity in the of use of shared services and outsourcing, including differences related to centralization, sourcing models, technology and improvement initiatives, across vertical industries.

The first-ever study of industry-specific strategies in shared services and outsourcing titled Vertical Industry Strategies in Shared Services and Outsourcing (VISSSO), captures the current state of shared services and outsourcing strategies, as well as the initiatives organizations are using to capture increased value from their strategies. In addition to reviewing traditional Selling, General & Administrative, or SG&A, functions, such as finance, human resources, and procurement, the study looks at the patterns emerging in how vertical-specific functions – those processes that are often more integral parts of the business compared to SG&A functions – are being supported. The study included more than 160 vertical-specific functions across 26 industries. Survey respondents included shared services and outsourcing professionals working for enterprises. The survey also included an alternative branch for which service providers, consultants and analysts answered questions.

“Our analysis reveals that services industries, such as financial services and healthcare, have a greater inclusion of vertical-specific functions in shared services and outsourcing strategies than product-oriented industries, such as manufacturing,” said Eric Simonson, managing partner of Research. “Further, vertical-specific functions are less centralized and shared services are more frequently used than third-party outsourcing for these functions – even though many enterprises stated they try to follow a ‘best-fit’ sourcing philosophy.”

Other findings of the VISSSO study include:

• Improvement initiatives and associated technology models across vertical-specific functions vary significantly by industry and the objectives for the function
• Third-party outsourcing service provider investments are largely aligned with enterprise interest areas but primarily in the largest and most mature industries for global services, such as banking, insurance, and telecommunications
• More mature users of shared services and outsourcing have already optimized processes and are now looking to optimize other levers, such as collaboration with end users and exploiting their strength in successfully executing change efforts
• Mature users see additional benefits from improved technology but still do not view cloud and software-as-a-service solutions as core components of their future technology strategies

SSON and Everest Group will reveal and facilitate industry-specific discussions of the study’s results at SSON flagship conferences throughout 2012, beginning at SSON’s U.S. flagship conference, the 16^th Annual North American Shared Services & Outsourcing Week, in Orlando, Florida on March 7-9, 2012.

Sarah Clayton, global director of strategy for SSON said, “In recent years, attendees at SSON’s 40 flagship conferences from Panama, Shanghai, London and Berlin to Sao Paulo, Tokyo and Bangalore have been expressing an increased interest in industry-specific information that they can use to help plan their outsourcing and shared services strategies. We are pleased to be able to arm them with the important results of the Vertical Industry Strategies in Shared Services and Outsourcing study.”

For a complimentary one-on-one briefing of the results, visit Everest Group’s booth at the 16^th Annual North American Shared Services & Outsourcing Week in Orlando this week or submit a request to [email protected].

For more information about Everest Group and its consulting and research capabilities, please visit www.everestgrp.com, email [email protected] or call +1-214-451-3000.

Everest Group: Global sourcing market dipped slightly in 2011, captive activity almost doubled previous year | Press Release

Firm releases market activity reports for Q4 2011 and 2011 in Review

DALLAS, February 8, 2012 ─ The global sourcing market saw a marginal decrease in outsourcing transaction volumes in 2011 compared to 2010 due to decreased transactions in the second half of the year, according to Everest Group, an advisory and research firm on global services. After a strong start, transaction volumes dropped in the second half of the year including fourth quarter activity numbers that were the lowest since Q1 2009. Although captive activity also dropped in the second half of last year, 2011 saw captive set-ups almost double in number compared to 2010. These findings and other market insights are detailed in Everest Group’s Market Vista: 2011 in Review and Market Vista: Q4 2011 reports, which capture key developments in the outsourcing and offshoring industry. A one-hour webinar will be held Feb. 16, 9 a.m. CST, to present findings and insights from both studies as well as a discussion of options for tier-2/3 service delivery locations in the United States.

Everest Group’s quarterly and annual Market Vista reports include analyses of outsourcing transaction trends, captive-related developments, market activity by locations, location risks and opportunities, key service provider developments, and implications for sourcing industry stakeholders.

“In 2011, the first two quarters showed a continuation of the upward, positive market traction we began to see in 2010, but activity dropped during the last two quarters, leveling out the year and thereby resulting in almost a repeat of the previous year,” said Eric Simonson, managing partner of Research. “We also saw strong captive activity in the first two quarters of 2011, which further validated our firm’s long-held opinion and research findings that the captive model can be a viable core component of sourcing strategies for many organizations. Our outlook for 2012 is cautious given several factors including financial volatility in Europe, anti-offshoring sentiments in the United States and United Kingdom, and the adoption of new technologies, particularly in ITO deals.”

Last year saw 1,929 outsourcing transactions compared to 1,979 in 2010, and annual contract value (ACV) of transactions decreased compared to the previous two years. Contract renewal and restructuring activity was higher in 2011 compared to previous years, accounting for one-fifth of transaction volumes and almost one-third of the market’s total annual contract value (ACV). IT Outsourcing (ITO) contracts accounted for two-thirds of total transaction activity; 32 percent were Business Process Outsourcing (BPO) contracts.

The Market Vista: Q4 2011 report includes a special focus section on the emerging offshoring locations of El Salvador, Guatemala, Mauritius, South Africa, Thailand, Turkey, Ukraine and Vietnam. The Q4 report also examines global locations with French language capabilities, continued political unrest in Egypt, China’s new insurance scheme for expats, downside of Sao Paulo’s rapid IT market growth, and effects of the rapidly depreciating Indian rupee. Additionally, the Q4 report includes the companion study, Global Location Insights: Perspectives on Tier 2/3 Cities of the United States as Locations for IT Services Delivery.

Other findings in the Market Vista: 2011 in Review and Market Vista: Q4 2011 reports include:

• Financial services and manufacturing sectors continued to dominate outsourcing activity while healthcare activity increased significantly and public sector adoption dropped.
• While North American transactions decreased marginally last year, activity in the United Kingdom increased by 32 percent compared to the previous year.
• Although Q4 saw the signing of four mega deals, each valued at over US$1 billion in total contract value (TCV), the trend for mega deals shows a continued and steady decrease over the past three years with 11 signed in 2011 compared to 19 in 2010.
• Asia continued to see the most new captive developments but notable activity also occurred in Eastern Europe, Middle East and Africa.
• Last year saw the emergence of Brazil and Poland as mature global sourcing locations, underscoring their relevance in the global delivery footprint of leading players.
• Political unrest in North Africa, examined in the Market Vista Q2 2011 report, reinforced the importance of risk management in sourcing portfolios.
• Currency depreciation eroded arbitrage potential in Brazil, Chile and Malaysia while the rapidly depreciating Indian rupee created near-term opportunities for service providers and new entrants.
• Revenues of leading service providers increased in 2011 compared to 2010, but operating margins fell.
• Service providers continued to consolidate with Market Vista Index providers reporting about 50 merger and acquisition activities in 2011.

“The last year witnessed the continued trend towards service provider consolidation with many high-profile mergers and acquisitions,” said Salil Dani, research director. “Within leading providers, the offshore-centric providers witnessed higher growth in both revenue and operating margins compared to traditional global majors.”

Market Vista reports comprise key developments among 20 leading global service providers. Traditional service provider profiles include Accenture, ACS Xerox, AON Hewitt,  Atos, Capgemini, Convergys, CSC, HP Enterprise Services, IBM, Dell Services and Unisys. Offshore-centric service provider profiles include Cognizant, EXL, Genpact, HCL, Infosys, Mahindra Satyam, Tata Consultancy Services, Wipro and WNS.

The webinar will be held Feb. 16, 9 a.m. CST; 3 p.m. GMT Standard Time. To register, please visit: research.everestgrp.com/Events/Webinars.

Market Vista is a subscription service with four reports published per year, including location datasets, Breaking Viewpoint briefings, Market Vista Primer and Global Locations Insights newsletter. For information about Market Vista reports or other research services, please visit research.everestgrp.com, e-mail [email protected] or call +1-214-451-3110.

Survey to Reveal Vertical Industry Specific Current and Emerging Trends in Global Services | Press Release

Joint Everest Group and Shared Services and Outsourcing Network Survey to Launch in Early January 2012

DALLAS and ORLANDO, Fla., Dec. 15, 2011 ― Everest Group and the Shared Services and Outsourcing Network (SSON) today announced that they will launch a global survey to understand the current and emerging state of global services by industry and geography in early January 2012. Sign up now to be notified when the survey launches!

This will mark the first-ever study of industry-specific strategies in shared services and outsourcing. Covering more than 10 different industries, the study, titled Vertical Industry Strategies in Shared Services and Outsourcing, will analyze traditional Selling, General & Administrative, or SG&A, functions and industry-specific functions across the value chain to understand how companies are approaching increasing the benefits derived from their global services initiatives.

The study is intended to provide a unique understanding of each function in each industry, the role, structure and involvement level of the shared services group and the levers (for example, analytics, process re-engineering, technology enhancements) being pursued to capture the next state of value for each function. The primary target audience and contributors are shared services and outsourcing professionals working for enterprises. The survey will also have alternative branches with questions created for service providers, consultants and analysts.

Eric Simonson, managing partner, research, Everest Group, stated, “Much of the market got its start with traditional SG&A functions, and to a large extent, the current research is based on these functions and related processes. This study will be important, as it will uncover the trends related to specific industries and processes – which are often more integral parts of the business compared to SG&A functions. The findings will shed light on how the maturation of shared services and outsourcing are impacting the delivery of value more directly to enterprises.”

Sarah Clayton, global director of strategy for SSON observed that “given SSON’s global footprint with well over 40 flagship conferences focusing on shared services and outsourcing everywhere from Panama, Shanghai, London and Moscow to Sao Paulo, Tokyo and Bangalore, and Everest Group’s reputation for deep-dive industry insights, it was a logical decision for us to launch this groundbreaking survey together.”

SSON and Everest Group will publish and discuss the Vertical Industry Strategies in Shared Services and Outsourcing survey results in keynote addresses on the “State of the Union” at SSON flagship conferences throughout 2012. The two organizations will also share the survey results on their websites throughout next year.

Clayton said, “When we launch the survey in January 2012, we anticipate broad participation in this important initiative for the shared services and outsourcing community. We plan to have analysis completed by mid-February in time for SSON’s U.S. flagship conference in Orlando, Florida on March 7-9, 2012.”

Survey details will be available in early January 2012 on www.ssonetwork.com and www.everestgrp.com.

Sign up now to be notified when the survey launches!

You can follow and join the discussion regarding the survey on Twitter by using the hashtag #VISSSOS.

Everest Group: Expect sluggish global sourcing market in 2012 | Press Release

Complimentary 2012 Market Predictions report predicts the year’s focus on sourcing management and consolidation

DALLAS, December 14, 2011 ─ Due to worldwide macroeconomic and political uncertainty, global sourcing activity is projected to be sluggish in early 2012, but business confidence is likely to be restored toward the end of the year, according to a complimentary research report issued by Everest Group, an advisory and research firm on global services. The firm predicts next year will see increased attention to global sourcing management and consolidation initiatives as companies seek more leverage from existing channels across sourcing lines.

Everest Group’s complimentary 2012 Market Predictions report, available at research.everestgrp.com, presents insights in the following areas:

• Banking, Financial Services and Insurance (BFSI) Outsourcing: Business Process Outsourcing (BPO)
• BFSI Outsourcing: Applications Outsourcing (AO)
• Information Technology Outsourcing (ITO)
• Finance & Accounting Outsourcing (FAO)
• Procurement Outsourcing (PO)
• Human Resources Outsourcing (HRO)
• Global Sourcing
• Service Provider Intelligence

“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 of Research. “While the economy in the United States is still in recovery mode, demand from European markets will likely remain sluggish due to uncertainties surrounding monetary and fiscal policy actions as well as sovereign debt risk. Despite the downside effects from economic conditions, buyers will see service providers bring forward new concepts to remain competitive. We also expect to see momentum in emerging areas such as social media, mobility, green IT and cloud computing that will foster innovation and evolution of new specialty providers.”

Other predictions for the global sourcing market include:

• BFSI will continue to be the dominant industry segment in 2012 with verticals such as healthcare and MDR (manufacturing, distribution and retail) continuing to witness increased traction.
• North America will continue to be the dominant buyer geography, followed by Europe, with the Asia Pacific seeing growth above the industry average.
• Global sourcing stakeholders will continue to pursue new locations due to talent, cost arbitrage and risk diversification-related considerations.
• In addition to Central and Eastern Europe (CEE) and Latin America, emerging geographies such as Africa will continue to attract interest as global sourcing locations.
• Labor market pressures in established markets, such as India and the Philippines, will ease in early 2012 due to softening demand. These pressures may gradually return toward the end of the year if the global economic outlook improves.
• Companies will continue adoption of hybrid captive/third-party sourcing models, and efforts will be made to improve captive value by focusing on high-value processes.
• Captive investments will continue with the majority of setups and expansions occurring in the Asia Pacific and CEE geographies.

For information about Everest Group’s research services, please visit research.everestgrp.com, e-mail [email protected] or call +1-214-451-3110.

Everest Group Study Finds Enterprise Crowdsourcing Delivers up to 70 Percent Cost Advantage Compared to Traditional BPO Outsourcing | Press Release

Study Reveals That ‘Private Crowd’ Models are Gaining Traction with Large Organizations with Lower Risk and Higher Quality

Specific findings of the study can be found here and include:

• Large corporations are adopting crowdsourcing as a model to support new areas such as content localization, translation to replace traditional BPO and contingent labor staffing models
• Crowdsourcing offers significant economic advantages – up to 70 percent savings – compared to a similar outsourced model in both onshore and offshore service geographies
• Given the “on-demand” nature of crowdsourcing and the ability to access qualified, globally distributed talent more quickly, employers enjoy compelling wage cost advantages, higher utilization and lower total costs of recruitment, training, supervision and turnover.
• Mature enterprise crowdsourcing benefits from a third-party intermediary that provides governance, quality assurance and contractor management infrastructure

The study also cited companies that are leveraging crowdsourcing for as much as 50 percent of their product-related projects, such as packaging, design, marketing, research, testing, engineering and technology.

“We are witnessing a second fundamental inflection point for crowdsourcing where large corporations in a post-recession era are increasingly using global professional crowdsourcing services in new application areas, often as a cost-effective alternative to traditional BPO,” said Sarthak Brahma, Practice Director, Pricing Assurance, Everest Group. “Our study finds that crowdsourcing utilization has evolved from small- to medium-sized businesses to an increasingly accepted business practice for large corporations. As cost advantages are progressively augmented by greater accountability, quality assurance and timeliness assurances, the ‘on-demand’ talent model will continue to gain a greater foothold.”

Enterprise crowdsourcing is designed for any company with large-scale contingent staffing needs. It allows corporations to leverage a broad range of creative and technical skills from a pre-qualified global talent pool or “private crowd” to manage and complete business projects. Increasingly, managed service providers are delivering the necessary project management, risk mitigation, contracting and payment mechanisms to allow enterprises to effectively leverage crowdsourcing.

“One effect of the recent global recession is that companies are shifting from ‘job-based’ hiring to ‘task-based’ resource management.  This Everest Group study is a valuable resource for organizations that are looking for new ways to reduce costs and increase flexibility through a qualified, managed community of global resources,” said Paul McBride, General Manager Global Crowdsourcing and Search, Lionbridge.  “As a pioneer in global crowdsourcing, Lionbridge is helping a growing number of large organizations enjoy the benefits of this new model which include lower overhead and recruiting costs, output-based payments and access to a greater pool of qualified, globally-distributed experts to address new offerings.”

The Everest Group study anticipates an increased demand for professional services providers that are capable of managing the resources of a private crowd to better enable crowdsourcing engagements. In order for buyers to feel secure in crowdsourcing relationships, Everest Group noted that vendors will need to engage with clients as enterprise crowdsourcing service providers, capable of managing private crowds.

Additional Findings

The study also notes that the main business case for enterprise crowdsourcing utilization is relatively low-cost compared to both contingent labor staffing and traditional outsourced labor models. Whether deployed as a spot solution for low end tasks or more broadly viewed as an emerging alternative to traditional sourcing, the advantages are delivered through dramatically lower labor costs and the absence of employee benefits, training or supervision costs, as well as investments in infrastructure, facilities or support. Crowdsourced engagements also offer 100 percent utilization due to the on-demand nature of work being undertaken.

The study also concluded that if crowdsourcing models are to be adopted more broadly by larger enterprises, solutions providers must create a compelling proposition beyond pure cost advantages. The areas most cited include: service level management, oversight and protection of intellectual property, closely mapped recruiting skills, proven ability to perform due-diligence checks on works, arbitrage wage structures and payment and overall project management and accountability.

For more information about the report, please visit research.everestgrp.com, email [email protected] or call +1-214-451-3110.

About Lionbridge
Lionbridge Technologies, Inc. (NASDAQ: LIOX) is a provider of translation, development and testing solutions. Lionbridge combines global resources with proven program management methodologies to serve as an outsource partner throughout a client’s product and content lifecycle – from development to translation, testing and maintenance. Global organizations rely on Lionbridge services to increase international market share, speed adoption of global products and content, and enhance their return on enterprise applications and IT system investments. Based in Waltham, Mass., Lionbridge maintains solution centers in 26 countries and provides services under the Lionbridge and VeriTest brands. To learn more, visit http://www.lionbridge.com.

About Everest Group

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 middle-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 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.

Everest Group’s Scott Bils to Chair Cloud Connect Track Focused on Organizational Readiness for Cloud Computing | Press Release

2012 Cloud Connect Event Dedicates Four Sessions to Culture, Skills Development and Enterprise IT Transformation

Everest Group’s Scott Bils will chair a first-of-its-kind track at the 2012 Cloud Connect event focused on how enterprise IT can prepare for the cultural and organizational structure shifts made necessary by the move to cloud computing. Cloud Connect will take place February 13-16, 2012 at the Santa Clara Convention Center.

The emergence of enterprise-class cloud services, documented use cases and reference architectures have led a growing number of enterprises to become comfortable with public and private cloud models. Implementations on services such as Amazon Web Services, Microsoft Azure, Rackspace Cloud and VMware’s vSphere have produced reliable cloud economics models and proven cost-benefit analyses. These have further bolstered the business case for cloud adoption.

As a consequence, CIOs and IT department leaders have become more comfortable with the technical and engineering challenges of cloud migration. The next hurdles to overcome for many of these organizations, however, are cultural. Today’s enterprise IT organizational charts were designed when client/server architectures were the norm. Cloud services, however, require fundamental shifts in technical skills, internal customer relations, pricing and evaluation criteria to achieve the benefits cloud promises.

To address this need, Bils will chair a track on organizational readiness at the 2012 Cloud Connect event in Santa Clara, Calif. on Wednesday, February 15. The four-session track will feature topics that include:

• How to keep legacy cultures from eating your next generation strategy
• Why flexible governance models will become the norm in cloud IT
• Grief counseling for the CIO: What can the executive team do to support IT leadership as the transformation to cloud unfolds?
• Where to find – and how to cultivate – the cloud computing skills your IT function must have to be successful

“For the most part, enterprises understand that cloud technologies will need to be a critical component of their IT environments if they’re to remain competitive,” said Bils, who is the partner leading the firm’s Next Generation IT practice group. “They also understand that if their people are not supported in making the tectonic shift from client/server to cloud, the effectiveness of their cloud migration will be compromised. We conceived this track with Steve Wylie and Alistair Croll as a way to provide useful, practical information on a critical topic facing enterprise IT.”

“We’re pleased to be the first major cloud conference to dedicate an entire track to exploring organizational readiness for cloud computing,” said Steve Wylie, Cloud Connect General Manager. “This track will explore emerging models for successful next generation IT organizations, and the roles, skills and processes required to drive business agility.”

About Cloud Connect
Cloud Connect, produced by UBM TechWeb, is the defining event of the cloud computing industry. As both a conference and an exhibition, Cloud Connect’s goal is to chart the course of cloud computing’s development by bringing together enterprise IT professionals, developers, infrastructure and service providers and cloud computing innovators. UBM TechWeb has produced cloud events that define and frame cloud computing discussions since June 2008, and recently expanded the Cloud Connect event brand to Chicago and Bangalore, India, in addition to the flagship Santa Clara event. Cloud Connect is a one-of-a-kind event that encompasses the entire cloud computing ecosystem featuring a Launch Pad program, IT & Developer workshops and a full conference program. For more information visit: http://www.cloudconnectevent.com.

About Everest Group 
Everest Group is an advisor to business leaders on next generation global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-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 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.

For more information about Everest Group and its consulting and research capabilities, please visit www.everestgrp.com, email [email protected] or call +1-214-451-3000.

Everest Group: China’s global services market projected to grow 20-25 percent CAGR by 2015 | Press Release

Cost arbitrage is expected to remain sustainable over the next 13-14 years

DALLAS, November 17, 2011 ─ Global services exports revenue in China is projected to increase to US$9.5-10 billion by 2015 at a CAGR of 20-25 percent from US$3.5 billion in 2010, according to Everest Group, an advisory and research firm on global services.

Global services exports from China increased from about US$1.2 billion in 2007 to US$3.5 billion in 2010, according to Everest Group’s study, Global Locations Compass: China.  The study reports IT Outsourcing (ITO) services contribute about 65 percent towards China’s total export revenue, largely driven by the in-country presence of several top-tier global IT providers. Business Process Outsourcing (BPO) work comprises the remaining 35 percent.

“China offers a compelling regional language advantage and cost arbitrage and is thus best leveraged to serve the Asia region, which accounts for about 60 percent of China’s global sourcing revenues,” said Amneet Singh, vice president – Global Sourcing. “While lack of clear cost and English language skills translate to a limited competitive advantage over India and the Philippines for work exported to North America and Europe, these regions still account for about 40 percent of China’s global sourcing exports. China can serve as a risk diversification alternative to serve North America and Europe.”

Last year’s market growth in China prompted its reclassification as a mature offshore destination on Everest Group’s Market Vista Locations Maturity Heatmap. According to Everest Group’s Offshore Locations Survey of buyers earlier this year, China has emerged as a leading destination after India and the Philippines.

Other findings:

• More than 15 delivery centers were established or expanded across Tier-1 and Tier-2 cities during the last 12 months.
• Market growth also has been propelled by several government initiatives, development/promotion organizations and government-backed incentives.
• China offers more than 20 cities for global services delivery, some of which are Tier-2 cities that are emerging as credible alternatives to Tier-1 options.
• Cost arbitrage is expected to remain sustainable over the next 13-14 years.

“Players defining their ‘China Delivery Strategy’ should assess China’s role in their global services delivery models and understand the costs and talent pool available in context of the envisaged role for China. Cities in China offer varying levels of attractiveness across global, regional and local delivery from China,” said H Karthik, vice president – Global Sourcing. “Companies planning to enter or expand in China also need to invest in talent engagement and development, monitor progress of recent data protection guidelines and examine Tier-2 cities to lower delivery costs.”

The report provides an in-depth analysis of China’s global services landscape across captives and third-party service providers for ITO and BPO services to include market characteristics, education system and future outlook. The study also provides detailed data and perspectives on seven key cities – Shanghai, Beijing, Dalian, Guangzhou, Chengdu, Hangzhou, and Suzhou – spanning across labor pool, cost, market activity and risk analysis.

For more information about the report, Global Locations Compass: China, other Global Sourcing and Location Optimization research reports or other research services, please visit research.everestgrp.com, email [email protected] or call +1-214-451-3110.

Everest Group: Report analyzes leading service providers of IT Application Outsourcing in insurance sector | Press Release

Offshore service providers witness fastest growth in revenues and new accounts over last three years

DALLAS, November 8, 2011 ─ The leading global service providers of IT Application Outsourcing (AO) services to insurance companies hold the majority of active annual contract value (ACV) and total contract value (TCV) of large insurance AO contracts, but the leading offshore service providers have witnessed the fastest growth in revenues as well as new accounts over the last three years, according to Everest Group, an advisory and research firm on global services.

Everest Group’s study, Application Outsourcing in Insurance: PEAK Into the Evolving Service Provider Landscape, analyzes the capabilities of 18 leading service providers for IT Applications Outsourcing in the insurance vertical. The insurance AO market represented by the 18 service providers assessed in the report scaled up to over US$5.3 billion in revenues and 66,000 full-time employees spread across 20 delivery countries. While global majors dominate the market in terms of revenue, offshore majors are seeing improved revenues and transaction activity built on strategies that include positioning more FTEs in strategic nearshore and offshore delivery locations.

Analyzing performance and capabilities displayed last year, Everest Group classified leading service providers on its Performance/Experience/Ability/Knowledge (PEAK) matrix into categories of Leaders, Major Contenders and Emerging Players:

• Leaders are Accenture, Cognizant, CSC, IBM and TCS
• Major Contenders are Capgemini, CGI, HCL, HP, Infosys, L&T Infotech, MphasiS and Wipro
• Emerging Players are Atos, Hexaware, Mindtree, Softtek and Syntel

“During the slowdown phase of the economy, Leaders lost share when discretionary spending was put on hold whereas other service providers with more specialized offerings saw an uptick in business as buyers sought to execute smaller contracts for specialized requirements,” said Amneet Singh, vice president – Global Sourcing. “With the economy returning to growth in 2010, the market-leading service providers benefitted at the expense of the smaller, specialized providers as the result of buyers regaining their appetites for broader and larger outsourcing contracts.”

Insights from the AO PEAK performers analysis include:

• Leaders have the strongest portfolio of proprietary solutions for insurance AO delivery.
• Major Contenders have augmented their delivery capability by establishing relevant product partnerships in this vertical and are growing scale through acquisitions.
• Emerging Players have leveraged their strength in broader application services and tailored their offerings to meet the specific requirements of insurance AO buyers.
• Multi-tower contracts are more commonly signed by Leaders and Major Contenders whereas Emerging Players focus on pure AO services.
• Leaders have a much broader global delivery footprint compared to Major Contenders and Emerging Players.

“Buyers need to prepare for changes in the evolving service provider landscape. As economic conditions improve, service providers are gaining confidence to participate in M&A activity to improve competitive position, grow in new markets, offer end-to-end services and acquire domain capabilities,” said Jimit Arora, research director. “In line with this trend, buyers must familiarize themselves with their service provider’s evolving strategy, assess impact on existing services and prepare for changes in their service portfolios.”

This year, Everest Group is releasing 15 outsourcing reports for the BFSI (banking, financial services and insurance) industry focused on ITO and BPO themes. This includes nine reports on AO: market trends and outlook, service provider landscape and service providers’ profiles compendiums for AO in banking, capital markets and insurance. Everest Group’s research studies are based upon analysis of about 350 large, multi-year BFSI AO contracts and ongoing analysis of more than 20 leading service providers.

For more information about the report, Application Outsourcing in Insurance: PEAK Into the Evolving Service Provider Landscape, other BFSI outsourcing research reports or other research services, please visit research.everestgrp.com, email [email protected] or call +1-214-451-3110.

Everest Group Q3 Report: Global outsourcing transaction volume declines substantially for first time in four quarters | Press Release

Report includes focus on Asia’s sourcing market

DALLAS, November 3, 2011 ─ The global outsourcing and offshoring market saw significant drops in transaction volumes during the third quarter this year, a substantial decline for the first time in four quarters, according to Everest Group, an advisory and research firm on global services. The sluggish market witnessed 472 outsourcing deals compared to 508 and 516 transactions in the first and second quarters of this year, respectively. Following a record spike in captive announcements last quarter, captive activity also fell back to a more “normal” level of 20 setups. A one-hour webinar will be held November 8, 9 a.m. CST, to present study findings and insights.

Everest Group’s Market Vista: Q3 2011, a quarterly report on global outsourcing and offshoring activity, reports third quarter global transaction volumes reached about US$2.7 billion in annual contract value (ACV), an increase of 6 percent over the previous quarter, primarily as the result of three mega deals signed during the quarter. Compared to Q2 2011, the market saw a decrease in Business Process Outsourcing (BPO) transactions by 12 percent and IT Outsourcing (ITO) transactions by 7 percent.

“The global outsourcing and offshoring market is beginning to show signs of slowing growth in selective areas, but we’ll need to see a few more quarters to determine if this is the beginning of a downturn trend,” said Eric Simonson, managing partner of Research. “Although captive setups dropped during the quarter, the captive continues to be a core component of global sourcing strategies, adoption activity remains healthy, and significant activity is spreading across industry verticals such as manufacturing and healthcare. Despite a decline in transactions, high location activity, particularly by service providers, provides indications that the outlook for the global sourcing market continues to remain cautiously optimistic in the medium term.”

Other third quarter 2011 findings include:

• The BFSI (banking, financial services and insurance) sector continued to lead transaction activity and the MDR (manufacturing, distribution and retail) vertical saw transaction volumes rise 8 percent. While there was a large drop in deals signed by government and defense organizations, the energy and utilities sector saw the largest percentage increase in contract activity.
• Both transactional and ACV volumes marginally decreased in North America and Continental Europe whereas declines were sharper in the United Kingdom and Rest of World (Asia Pacific, Middle East, Africa and Latin America).
• Three megadeals, each valued at over US$1 billion in total contract value (TCV), were signed in the quarter.
• India dominated the captive market but considerable activity also was witnessed in Europe, Middle East/Africa and Rest of Asia. The first captive divestiture of the year occurred during the quarter.
• Offshore activity saw 46 delivery centers established in the third quarter compared to 38 in the previous quarter. Significant activity occurred in India and Africa.
• Service providers’ consolidated revenues increased over the second quarter, but consolidated margins fell over the same period. (Financials lag other service provider activity by one quarter.)

Everest Group’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive landscape, current and emerging locations and key service provider intelligence insights. Everest Group’s industry trends research complements the Market Vista reports through quarterly updates focused on industry-specific global sourcing data, developments and insights across the BFSI, MDR (manufacturing, distribution and retail), Healthcare, Energy and Utilities, Technology, and Telecom sectors.

The Market Vista Q2 report also includes these focus sections:

• Asia: analysis of labor arbitrage sustainability, operating costs, operating cost inflation, arbitrage sustainability and currency trends. Cities profiled include Jaipur, Pune and Bangalore, India; Manila, Philippines; Guangzhou and Shanghai, China; and Kuala Lumpur, Malaysia.
• Location optimization insights include a focus on the rise of Poland for BPO and IT work; China’s “1000-100-10” project that is boosting the outsourcing services industry; emergence of Vietnam a low-cost alternative for small-to-medium scale IT/software delivery; erosion of arbitrage potential in Brazil, China and Malaysia due to currency appreciation against the U.S. dollar; and emergence of high-cost locations such as Australia, Canada and Singapore as credible alternatives to established locations for knowledge process services.

Quarterly Market Vista reports comprise key developments among 20 leading global service providers. Traditional service provider profiles include Accenture, ACS Xerox, AON Hewitt,  Atos, Capgemini, Convergys, CSC, HP Enterprise Services, IBM, Dell Services and Unisys. Offshore-centric service provider profiles include Cognizant, EXL, Genpact, HCL, Infosys, Mahindra Satyam, Tata Consultancy Services, Wipro and WNS.

The webinar will be held November 8, 9 a.m. CST; 2 p.m. GMT Standard Time. To register, please visit: research.everestgrp.com/Events/Webinars.

Market Vista is a subscription service with four reports published per year, including location datasets, Breaking Viewpoint briefings, Market Vista Primer and Global Locations Insights newsletter. For information about the Market Vista: Q3 2011 report or other research services, please visit research.everestgrp.com, e-mail [email protected] or call +1-214-451-3110.