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Analyst Relations Newsletter Q3 2019: Key Highlights from Custom Research

By | Uncategorized

Key highlights from recent Everest Group custom research projects

Case #1: A leading BPS provider asked for our assistance in developing a differentiated value proposition in the healthcare market.

The client, a leading provider of healthcare payer and provider BPO services wanted to understand emerging trends and their impact on the claims processing ecosystem within the healthcare market. The client also sought to understand the key gaps in its current offerings portfolio and to develop a way forward to address these gaps.

Everest Group’s approach: Everest Group conducted a detailed assessment of the claims processing technology and services ecosystem, and identified and evaluated multiple paths that the provider could pursue. We also helped the service provider create a targeted pitch deck, along with internal strategy documents, to help the sales team effectively converse with clients.

Case #2: A leading Recruitment Process Outsourcing (RPO) provider engaged us to help in identifying, assessing and prioritizing target market opportunities.

Everest Group’s approach: We conducted a detailed analysis on more than 20 single-country markets and prioritized the identified countries based on market attractiveness of the opportunity. For each country, the analysis covered the following dimensions:

  • Market size and growth (historic and projected)
  • Potential and penetration
  • Single-country and multi-country RPO prevalence
  • Competitive landscape
  • Opportunity size over the next three to five years

We presented detailed, actionable insights and recommendations for each target country on go-to-market strategy, target buyer segments, and solution elements to consider, all of which helped the client shape its approach, market entry, and growth strategy.

Capgemini-Altran Acquisition: Upping the Ante in Engineering Services | Blog

By | Blog, Mergers & Acquisitions, Uncategorized

Back in December 2017, Altran’s acquisition of Aricent for US$2 billion was one of the biggest inorganic growth initiatives in the engineering services space. The acquisition helped Altran draw synergies across key verticals and strengthen its leadership position in the global engineering services space.

Fast forward just a short year and a half later to a much larger deal: Capgemini on June 24, 2019, announced its plan to acquire Altran for a cash consideration of ~US$4.1 billion and also assume Altran’s financial debt of ~US$1.6 billion, which is primarily attributable to its Aricent acquisition. The transaction is expected to close by the end of 2019.

Based on our calendar year 2018 estimates, the combined entity will hold over 10 percent of the global engineering services outsourcing market and will have nearly US$1.4 billion higher revenue than its nearest competitor.

Engineering Services revenue for leading service providers1 CY 2018; US$ billion

1 Includes Everest Group estimates

The acquisition reinforces the fact that the global services industry views engineering services as an avenue to offset the low headroom for growth in the IT and business process services. While players such as HCL Technologies and Tata Consultancy Services have primarily followed the organic route to drive growth in this space (both the companies have a spot in the list of global top 10 engineering services companies,) Capgemini has become the largest engineering services company with this mammoth acquisition.

The acquisition also highlights how service providers are increasingly reckoning with the need to develop capabilities to cater to the Information Technology – Operational Technology (IT-OT) integration needs of today’s connected world. An IT-OT play helps service providers demonstrate capabilities across multiple value elements and capture a larger share of enterprise spend.

What this acquisition means for Capgemini

Altran reported year-on-year growth of 27.1 percent for calendar year 2018, and its organic growth stood at 8 percent. Capgemini will certainly benefit from Altran’s robust portfolio growth. But it stands to gain more benefits:

  • Top spot in the engineering services industry: The combined entity will be the undisputed leader in engineering services, with over US$4 billion in engineering services revenue, and ~54,000 professionals
  • Enhanced capabilities across key verticals: With Altran’s stronghold in the automotive, aerospace, electronics & semiconductors, medical devices, and software products spaces, and Capgemini’s strength in sectors including manufacturing and energy and utilities, the combined entity will have a leadership position across the majority of engineering verticals
  • Asset and infrastructure dividend: Altran has developed numerous labs, solutions, innovation centers, etc., that will add rich depth and breadth to Capgemini’s capabilities
  • Enhanced value proposition: Capgemini will not only be able to cross-sell its enhanced IT-OT value proposition to Altran’s existing, top R&D-spend clients – including six of the top 10 Independent Software Vendors (ISVs) and all of the top five automotive Original Equipment Manufacturers (OEMs) –– but also to its own engineering-heavy verticals
  • Enhanced nearshore delivery capabilities: Altran has a sizeable delivery presence in Eastern Europe, which is a hub for high-quality engineering talent, and a significant delivery presence is viewed as a differentiator in the engineering services space
  • Access to Altran’s hand-picked portfolio of companies: Capgemini will be able to enhance its capabilities in niche areas including design and cyber security through Altran’s previous acquisitions of companies like Frog Design and Information Risk Management (IRM.)

What it means for Altran

In its mid-2018 “The High Road, Altran 2022” plan, Altran presented the key objectives it aimed to achieve by 2022:

  • Compound Annual Growth Rate (CAGR) of 6.5-7 percent (organic) during 2017-2022
  • 25,000 engineers in near/offshore locations, including India, up from 16,000 in 2018
  • Momentum in high-growth segments such as ISVs, electronics, automotive, and medical devices
  • Leadership in North America, while pursuing selective growth in the APAC region
  • Complete integration of Aricent by 2020

With Capgemini coming into the picture, the growth plan for Altran will likely be redefined. Nonetheless, assessing how Capgemini impacts the objectives Altran’s leadership laid down is still worthwhile.

While Altran has been managing steady growth on its own (8 percent year-over-year organic growth in calendar year 2018,) integration with Capgemini will help generate greater exposure to clients and accelerated market growth in North America. It will also accelerate Altran’s delivery expansion in offshore locations.

As a downside, Altran will be integrating with Capgemini – which could come into play as soon as early 2020 – while it continues to attain full synergy with Aricent. This multi-faceted integration will require meticulous planning and execution to ensure success. It may result in increased attrition among the talent Altran acquired from Aricent.

Cues for the broader engineering services outsourcing industry

This acquisition further enhances the dominance of Europe-headquartered firms on the leaderboard of the global engineering services industry. Further, once the acquisition is complete, Capgemini – as the largest engineering services provider – will have developed a sizeable offshore delivery presence and will be capable of going to market with an optimum combination of four key factors: capabilities, scale, client proximity, and cost-effectiveness. Offshore-heritage service providers will need to step up their game to continuously invest in building and enhancing capabilities for new and emerging areas.

We expect the inorganic growth wave to continue in this space. While it is unlikely that we will soon see another acquisition of this scale, we expect both large and mid-sized players to explore smaller acquisitions that address their unique objectives. While large service providers will flex their financial muscle to gain market share and niche capabilities, mid-sized service providers will look to build adjacent capabilities. And when this happens, both the providers and their clients will win.

Dassault Systèmes Acquires Medidata to Ride the Platform Wave in Life Sciences | Blog

By | Blog, Healthcare & Life Sciences, Uncategorized

When news first hit in late April 2019 of speculation around Medidata Solutions being acquired by Dassault Systèmes – a France-based software company that develops 3D design, 3D digital mock-up, and product lifecycle management software – Medidata’s stock value went soaring. The deal immediately made sense. The fact that Dassault Systèmes was looking to ramp up its offerings for life sciences companies made Medidata, which we recently recognized as a Leader and Star Performer in our PEAK Matrix™ for Clinical Trials Products 2019, an attractive acquisition prospect.

 

Everest Group Life Sciences Clinical Trials Products PEAK Matrix Assessment 2019

 

Fast forward to June 2019 and the deal is done. The all-cash transaction is valued at US$5.8 billion and represents Dassault Systèmes’ largest acquisition to date. It will finance the deal with a €1 billion loan, a €3 billion bridge-to-loan facility, and available cash. It’s the first time the French company has resorted to external funding, which only accentuates how much it prizes Medidata as an asset.

The strategic intent behind the deal

Dassault Systèmes began focusing on the life sciences market a few years ago with the vision to improve the penetration of digital technologies in the industry. Its last life sciences-focused acquisition was that of Accelrys in 2014, which helped Dassault Systèmes establish BIOVIA, its brand for biological, chemical, and materials modeling and simulation, research, and open collaborative discovery.

With the acquisition of Medidata Solutions, Dassault Systèmes makes a statement that it is serious about achieving this vision. The acquisition will make life sciences Dassault Systèmes’ second largest industry focus, after transportation and mobility. Medidata grew at a CAGR of 17 percent during 2015-2018, driven by its dominance in electronic data capture through its flagship product, Rave.

Dassault Systèmes prides itself on its 3DEXPERIENCE platform, which is meant to enhance digital collaboration in complex sectors like aerospace, infrastructure, and mobility. Dassault Systèmes now looks to extend these benefits to life sciences. By adding Medidata’s clinical and commercial offerings to its own 3D experience expertise, Dassault Systèmes aims to create a platform that offers complete digital continuity to the life sciences industry, addressing complex challenges such as personalized medicine and patient-centric experiences.

Unpacking the companies’ synergies

Synergy area

Dassault Systèmes

Medidata Solutions

Value proposition

 

Design, modeling, and visualization software, with leading capabilities for the aerospace, defense, and consumer goods industries. Dassault Systèmes now aims to bolster its life sciences division

 

Life sciences clinical and commercial software pure-play, with deep domain expertise and strong consulting pedigree

Coverage of the life sciences value chain

 

Drug discovery, manufacturing, and supply chain Clinical and commercial operations

Key technology offerings

Design, modeling, simulation, and virtualization software Data capture, real world evidence, advanced analytics, AI-driven insights, and operations management

Customers

Customers are mostly in the aerospace, defense, and consumer goods industries

Sizable number of European life sciences clients, including medical devices firms such as Medtronic, FEops, Novo Nordisk, and Kavo Dental

1,300 life sciences companies, three quarters of which are in America. This includes most of the Big Pharma and CRO firms

Product coverage across the value chain

Product coverage across the value chain

Key opportunities

Dassault Systèmes is sitting on a lot of cash. This will give Medidata the financial muscle it needs to make the right investments in talent and technology to compete with the big players like Oracle Health Sciences and Accenture.

The integration of capabilities could lead to the creation of a unique end-to-end platform for life sciences across the entire value chain. Medidata has clinical and commercial capabilities, and Dassault Systèmes has offerings for drug discovery, manufacturing, and supply chain.

Potential risks

It’s not clear how the integration of Medidata’s products with the broader 3DEXPERIENCE platform will take place. It could be a challenge linking Medidata’s clinical trials and commercial operations solutions with Dassault Systèmes’ design and visualization offerings.

Dassault Systèmes’ has diversified offerings across several industries. In the long run, this may dilute Medidata’s brand image as a leader and focused player for clinical trials technology.

Closing thoughts

The life sciences industry needs aggressive digitalization to realize efficiency gains and reduce the lengthy timelines between drug conceptualization and drugs reaching the market. We’ve seen technology vendors coming up with integrated solutions for clinical trials to help enhance trial efficiency. While the need for a platform is evident, technical debt and change management issues hinder this platform-centric vision. This is a high growth market, which is likely to attract more interest in the coming 18-24 months. More SaaS companies will need to pivot to the platform conversation to scale and remain relevant. We will be tracking this space closely.

How Enterprises Are Leveraging Data & Analytics to Deliver 2X More Value from Their Shared Services Centers | Webinar

By | Uncategorized, Webinars

60-minute webinar held live on Tuesday, May 21, 2019 | 9 a.m. CDT, 10 a.m. EDT, 3 p.m. BST, 7:30 p.m. IST

Download the Presentation

As technology adoption increases exponentially, organizations are challenged by the proliferation of data that the technology generates. Increasingly, Shared Services / Global In-house Centers (GICs) are leading their organizations’ efforts to tame data and derive key insights from it.

Based on our recent Pinnacle Model research on data & analytics maturity in SSCs/GICs, this webinar will show executives how they can build capabilities in their SSCs/GICs to turn this challenge into a strategic asset, generating value and enhancing service delivery.

In this fast-paced session, we’ll answer the following:

  • What roles do best-in-class GICs play in global data & analytics programs?
  • How do best-in-class GICs attract and retain talent with relevant skills for data & analytics? What supporting programs have they developed to support these efforts?
  • How are best-in-class GICs funding these initiatives?
  • How are best-in-class GICs addressing associated technology challenges that impact their data & analytics teams?
  • What actual cost savings and operational and strategic impacts are GICs creating for their parent organizations through data & analytics leverage?

Who should attend, and why?
The webinar content is geared toward global stakeholders responsible for Shared Services / Global In-house Centers (GICs) and Global Business Services (GBS), as well as their Heads of Human Resources and Senior Strategy Executives.

Attendees will walk away with five key differentiating capabilities that characterize Pinnacle, or best-in-class, GICs.

Can’t join us live? Register anyway!
All registrants will receive an email (typically within 1-2 business days of the live delivery) with the link to session slides and on-demand playback.

Presenters
H. Karthik
Partner
Everest Group

Rohitashwa Aggarwal
Practice Director
Everest Group

Shailee Raychaudhuri
Senior Analyst
Everest Group

Outsourcing Pricing: Do You Know What You Don’t Know? (Key Trends Impacting Your Agreements) | Webinar

By | Uncategorized, Webinars

60-minute webinar held live on Thursday, May 9, 2019 | 9 a.m. CDT, 10 a.m. EDT, 3 p.m. BST, 7:30 p.m. IST

Download the Presentation

Do you know what you don’t know? The method and manner of pricing outsourcing deals never stops changing. Some trends are rapid and significant – and others simply incremental. Join us as we explore the pricing changes related to IT and BPO transactions, as reported by your peers.

We’ll cover major disruptions, the impact of geopolitical restrictions, and key commercial contract terms (nothing is taboo!).

From this session, you’ll be able to answer the following:

  • What are the current pricing-related trends impacting both enterprises and service providers?
  • Are there areas of high variation in my commercial contracts that could lead to seemingly counter-intuitive deal pricing behavior?
  • Are there near-term price movements that I should expect and be prepared for?
  • What direction are outsourcing contract tenets trending toward?

Who should attend, and why?
This webinar will offer results from our recent market survey on outsourcing pricing trends, coupled with our insights into what these trends mean for you and how to take advantage of them to drive business impact.

The content is geared to senior executives –
Enterprises: Strategic Sourcing, Vendor Management, Contract Management, CPO, CIO

Can’t join us live? Register anyway!
All registrants will receive an email (typically within 1-2 business days of the live delivery) with the link to session slides and on-demand playback. In addition, you’ll also receive details on how to participate in our labor rates special offer, covering complementary price checks for up to three standard roles in three different countries.

Presenters
Michel Janssen
Chief Research Guru
Everest Group

Abhishek Sharma
Partner
Everest Group

How is RPA Assisting Businesses in Scaling Operations | In the News

By | Uncategorized

It is estimated by McKinsey & Co. that automation systems could well and truly, undertake the work of up to 140 million jobs by 2025.

Everest Group reports that Robotic Process Automation is likely to lead to a cost reduction of close to 65% with its potential to register data at the transactional level, thereby enabling decision-making which is swift, precise and predictive. Organizations that stick to a watertight RPA implementation strategy will soon outpace those who still depend on human capital for all their processes.

Read more in Customer Think

Analyst Relations Newsletter Q2 2019: Key Highlights from Custom Research

By | Uncategorized

Key highlights from recent custom research projects by Everest Group

Case #1: A large U.S.-based health insurance payer needed help in building an internal business case to seek funding for a new IT platform.

Everest Group’s approach: We took a two-pronged approach to the project:

  • Developed a framework to correlate investments in platform modernization with business, operational, and cost impact
  • Conducted peer assessment research to compare our client’s maturity with a select group of industry peers. We assessed the client and 12 other health insurers on the parameters identified and created a strong case for impact through investments

Our client realized a couple of key benefits from the research. First, the information helped the client to assess, compare, and benchmark its investments and the impact created. Second, using the information we provided, we identified gap areas, quantified differences from peers, and suggested a concrete road map for future investments.

Case #2: A leading U.S.-based healthcare services vendor engaged us to identify a select group of health systems and build account-specific insights not only enhance their understanding of each health system but to identify their propensity to adopt the vendor’s analytics-based value proposition.

Everest Group’s approach: We developed an account prioritization model to assess 4,000+ hospitals and 500+ health systems, which we down-selected to 15 based on five criteria and the vendor’s inputs. From there, we conducted deeper analysis to understand the extent each health system’s investment in value-based care, including the existing technology landscape, underlying infrastructure, value-based initiatives, and relationships with other vendors and/or service providers. With that information, we evaluated each account on six parameters/factors to determine which accounts were most amenable to adopting analytics.

The benefits for our client included the identification of account-specific insights for each potential opportunity and several detailed approaches to each account including account-specific explicit need, a CXO-level talk track, and/or account-specific investments.