Tag: Annual Report

Procurement Outsourcing Makes Leap to Digital-First as Market Growth Slides to 9%—Everest Group | Press Release

As procurement outsourcing market matures, buyers seek innovation, market intelligence; providers invest in technology and talent.

The global multi-process Procurement Outsourcing (PO) market slowed slightly to a single-digit growth rate of nine percent in 2016, reaching US$2.4 billion in size, according to new research from Everest Group. However, with a market penetration of just 12 to 15 percent, procurement outsourcing continues to be an attractive market, one that is experiencing a significant shift from an arbitrage-first to a digital-first model.

The arbitrage-first model, now receding in use, focuses on reducing manpower requirements and standardizing processes, offering buyers the primary value of cost-savings. However, today PO buyers are demanding more, especially better sourcing and category expertise. The fast-growing digital model addresses these demands. It focuses on improving bottom-line performance by contributing innovation, market intelligence and productivity improvements that directly support business objectives.

In this shift to digital-first, technology is a key enabler. Analytics, automation, cloud, mobile, social media, block chain and cognitive/artificial intelligence technologies are being used to create a touchless procurement ecosystem. Providers that are investing in these technologies are experiencing revenue growth of up to 15 percent by expanding existing accounts, gaining share from other players and winning greenfield opportunities.

Talent strategies are also having a major impact on the PO industry as buyers demand significant improvements from service providers in this area. For example, 45 percent of buyers have indicated that the resource pools employed by service providers do not meet their expectations, and almost half of buyers highlight the need for better training and skill enhancement. Furthermore, more than 40 percent of buyers cite attrition as negatively impacting their business. Service providers are responding to this need in two ways: either looking at acquisitions as a one-shot way to gain the necessary talent and capabilities, or investing heavily in training and development of their employees.

 “Service providers have a dual imperative to successfully navigate this sea change from arbitration-first to digital-first procurement,” said Megan Weis, vice president, Business Process Services, at Everest Group. “They must adopt new-age technology solutions and also bridge the gap with respect to talent selection and management. Going forward, technology and talent will be the chief factors distinguishing leaders in the procurement services market.”

 These results and other findings are explored in a recently published Everest Group report: “Procurement Outsourcing (PO) Annual Report – 2017 – Leap Towards Digital Transformation. This report describes the changing dynamics of the PO market, provides a market overview, identifies buyer adoption trends and examines the service provider landscape.

***Download complimentary report abstract here***

Other key findings:

  • Emerging markets have seen a robust adoption while there is a slight decline in the adoption rates in maturing markets.
  • Industries such as healthcare and pharmaceuticals as well as energy and utilities (E&U) are witnessing an increase in adoption in North America; in APAC, the traditional industries such as manufacturing are witnessing an uptick.
  • The market is moving away from a lean six-sigma model to a design thinking approach to usher in more innovation.
  • The process scope of contract is expanding as buyers recognize the value of outsourcing judgment-intensive work.
  • Multi-country deals declined as growing geopolitical and economic risks restricted buyers from making bold decisions.
  • Competitive bidding is on the rise, even when incumbents are involved.
  • Offshoring has declined in the wake of global political and economic uncertainty.
  • Hybrid pricing models predominate as buyers have moved away from transaction-based pricing.
  • Although large businesses represent the majority of PO adopters, adoption by the small to midsize business segment is growing and presents significant opportunities.
  • Everest Group has classified 15 PO service providers based on their market success and delivery capabilities:
    • Leaders include Accenture, GEP, IBM and Infosys
    • Major contenders include Aquanima, Capgemini, Corbus, Genpact, HCL, Optimum Procurement, TCS, Wipro and WNS
    • Aspirants include Aegis and Conduent
    • Star performers (charting positive movement year on year) include Accenture, GEP and WNS

Multi-Country Payroll Outsourcing, Already a $1.5 Billion Industry, Posts a 23% Growth Rate | Press Release

Employers turn to MCPO to enhance employee payroll experience, retain talent

The Multi-Country Payroll Outsourcing (MCPO) market is one of the fastest growing markets in the HR outsourcing space, growing at a compound annual growth rate of 19 to 23 percent between 2014 and 2016 to cross the US$1.5 billion mark. This momentum is likely to continue for the next two years due to the rising appreciation for the MCPO value proposition and increasing provider maturity, according to Everest Group.

Enhancing employee experience with payroll processes is likely to become a key driver for MCPO, particularly because talent retention has become a vital and challenging business requirement.

“Talent retention is one of the biggest challenges employers face today, and the payroll process is a crucial employee touch point, so employers are ramping up their investments in technology to provide a more sophisticated user experience,” said Anil Vijayan, practice director at Everest Group. “This includes getting rid of multiple sign-ins; presenting a consistent look, feel and function across all pages; offering fast-loading and friendly interfaces; providing dynamic visualizations of data; and, of course, ensuring reliable, easy-to-use mobile access.”

Enterprise buyers also are becoming increasingly aware of the other key benefits that  the MCPO construct provides:

  • better control and visibility of payroll operations across multiple countries through consolidated reporting and analytics
  • compliance with regulations, particularly as repercussions of failed compliance have become harsher and the legislative landscape is changing rapidly
  • cost reduction, directly through labor arbitrage and technology as well as through efficiencies derived from centralization, standardization and vendor consolidation

Everest Group explores these findings and others in a recently published report: “Multi-Country Payroll Outsourcing (MCPO) – Annual Report 2017 – Evolution of Drivers and Enablers in a Rapidly-growing Market.” This research provides a comprehensive analysis of the global MCPO market, including buyer adoption trends across geographies, regional trends, emerging solutions and the service provider landscape.

***Download complimentary report abstract here***

Additional key findings in this report include:

  • North America and Europe are relatively more mature and bigger MCPO markets, and they accounted for a large chunk of the global deal activity. Asia Pacific and Latin America are emerging as strong MCPO markets on their own. Local buyers in these geographies, especially Asia Pacific, are playing an important role in shaping these markets.
  • In terms of buyer size, smaller firms continue to dominate the MCPO market adoption through simple deals spanning a few countries.
  • The MCPO market is mostly industry-agnostic. Services, hi-tech and IT, and manufacturing are the leading adopters of MCPO globally, with industries such as healthcare and energy showing promising upticks.
  • While core payroll subprocesses such as “gross-to-net,” payroll distribution and reconciliation remain fundamental to the construct, ancillary processes such as those for contact centers and time-and-attendance are also increasingly being included
  • Emerging areas of technology investment include analytics, automation and enhancing employee experience through UI improvements. Other major areas of investment include enhancing in-country and multi-language capabilities and meeting compliance needs.

Recruitment Process Outsourcing Market Grows 16%, Bears Fruit for Companies of All Sizes in 2016 | Press Release

RPO providers seek more value from technology; industry leaders moving beyond efficiency solutions to advanced analytics and next-gen digital tools to enhance candidate experience

The global Recruitment Process Outsourcing (RPO) market continued to remain one of the fastest growing single-process Human Resources Outsourcing (HRO) markets in 2016, growing at a rate of 16 percent to reach a cumulative market size of US$2.85 billion, according to Everest Group. In 2016, RPO saw wider acceptance among companies of all sizes, including small (less than 3,000 FTEs) and mid-sized (3,000-15,000 FTEs) buyers, which captured an increased share of the market at 51 and 6 percent, respectively, as compared to large buyers at 43 percent.

Digital adoption is the trend most strongly attributing to this rapid growth. RPO service providers are increasingly differentiating themselves through technology, increasing their investments in both technology partnerships and proprietary solutions. The exact nature of the “partner+build” strategy adopted by each provider is dictated by the regional availability and quality of off-the-shelf talent acquisition tools. Annual technology investments vary considerably among providers, ranging from $1 million to in excess of $100 million.

Efficiency focused technology solutions such as Applicant Tracking Systems (ATSs), Customer Relationship Management (CRM) tools, and Robotic Process Automation (RPA) systems are readily available through technology partners and have essentially become “table stakes” in the industry. In fact, nearly half of all RPO engagements include provision of ATS solutions.

So, now, the focus for differentiation has shifted to technology solutions that either enhance the experience of candidates or generate better insights on various aspects of the recruitment value chain. Accordingly, RPO service providers are adjusting their “partner+build” strategies to rapidly assimilate into their service portfolios additional technology solutions such as self-service scheduling tools and chatbots (primarily acquired through partnerships) and advanced analytics (primarily developed through proprietary investments).

“The RPO service provider landscape is intensely competitive, with many players and very few with dominant market share; plus, the high growth in the global RPO market, combined with increasing adoption in emerging economies, is attracting even more new players,” said Arkadev Basak, practice director, Business Process Services, at Everest Group.  “In the coming year, technology orientation will be one of the key parameters by which RPO service providers will distinguish themselves in this fragmented market. Other key differentiators will be geographic focus; consulting capabilities, particularly with respect to strategic workforce planning and talent management; and Total Talent Acquisition capabilities.”

These and other research findings are explored in a recently published Everest Group report: Recruitment Process Outsourcing (RPO) Annual Report 2017 – Strategic Value Creation in a Rapidly Evolving Market.

This research provides comprehensive coverage of the RPO market and analyzes it across various dimensions such as market overview, key business drivers, buyer adoption trends, solution and transaction trends, and service provider landscape.

***Download complimentary report abstract here***

Other key findings:

  • The mature market of North America saw a decline in its market share, with the emerging markets of Eastern Europe and Latin America gaining at its expense. The biggest growth of single-country RPO was seen in deals outside the mature markets of the United States, United Kingdom and Australia. Many countries in different regions across the world are emerging as strong RPO markets on their own, particularly in Latin America, Continental Europe and Asia Pacific.
  • RPO as a concept continues to gain wider global acceptability as evidenced by the rising number of multi-country deals. These are more complex deals, which require both the buyer and service provider to invest more time and effort in order to understand local nuances.
  • Value-added processes such as employer branding, talent communities, workforce planning and assessment are increasingly becoming table stakes; buyers are now demanding next-gen value-added services such as consulting (especially for technology strategy and implementation), talent engagement, and content creation and communication.
  • 2016 saw heightened activity in the market around Total Talent Acquisition (TTA) services, as demonstrated by a 41 percent increase from 2013 to 2016 in number of new TTA deals.

Profitability Pressures and Technology Advancements Sustained Double-digit Growth in Property & Casualty Insurance Business Process Outsourcing in 2016 | Press Release

Growth of 12-14% anticipated in 2017, driven by scope expansion; automation, blockchain and analytics ready to transform the industry.

 The global property and casualty (P&C) insurance business process outsourcing (BPO) market continues to register high growth, attaining nearly 13 percent compound annual growth rate (CAGR) over the last four years to reach US$1.6 billion in 2016, according to new research from Everest Group. Everest Group expects the market to grow at 12 to 14 percent in 2017 as insurers face intensifying pressures on profitability.

The growth in the P&C Insurance BPO market is largely being driven by first-generation buyers—insurers who are outsourcing P&C insurance operations for access to technology solutions and cost reduction.

However, the market is also getting a boost from tenured buyers with more evolved expectations. These buyers are demanding value addition, including assistance in expanding their businesses, reducing time to market, getting higher customer mindshare and building multi-channel capabilities.

Service providers are responding by developing better solutions. For example, automation is being swiftly adopted, as its benefits include cost reduction, improved quality (reduced errors) and speed, higher compliance and enhanced security. In fact, Everest Group research indicates that robotic process automation (RPA) can yield incremental cost reduction from 15 percent for offshore operations to as high as 45 percent for onshore operations.

Another solution that service providers may soon bring to bear for insurers is blockchain, a disruptive technology that is expected to transform the way insurance operations run. Numerous insurers across the globe are currently evaluating and piloting blockchain in key P&C insurance processes such as premium collection, disbursement and subrogation.

In addition, many providers are augmenting their capabilities with analytics to deliver judgment-intensive processes, such as fraud detection/prevention, actuarial and underwriting services, customer experience management and marketing, and claims adjustment.

“Insurers are looking to service providers to move beyond the expected bottom-line impact to deliver top-line impact,” said Skand Bhargava, practice director, Business Process Services, at Everest Group. “By that we mean that insurers rely heavily on their service providers to bring in next generation technological capabilities to stay relevant and competitive in the marketplace. For example, service providers help insurers create and manage their digital presence, which is increasingly important today in addressing the ever-evolving expectations of tech-savvy customers and fending off competition from ‘InsurTechs.’ Another example is blockchain; service providers that facilitate successful blockchain deployments for their clients will be true transformation partners.”

Everest Group explores these findings and others in a recently published report: “Property and Casualty (P&C) Insurance BPO Annual Report — Embracing the Digital-First.” This report provides comprehensive coverage of the global P&C insurance BPO market, including adoption trends across geographies and buyer size, factors impacting the market, key solution characteristics, emerging trends and service provider landscape.

***Download complimentary report abstract here***

Other key findings:

  • While North America continues to lead P&C insurance BPO adoption with over three-fourths of the total contracts, the United Kingdom and other geographies, such as Australia and Europe, are driving outsourcing adoption.
  • Leverage of offshore locations to deliver P&C insurance processes continues to be high, with more than 80 percent of the total FTEs based in offshore and nearshore locations.
  • Small and mid-sized buyers are increasingly signing more comprehensive deals.
  • Increasing adoption of automation along with higher adoption of platform-based solutions within P&C insurance contracts is reducing the FTE-intensive play in transaction-based processes such as claims management.
  • With several deals up for renewal in the next three years, intense competition between service providers is expected to increase pricing pressures.
  • Claims processing and policy servicing/reporting remain the most outsourced processes.

Demand for Digital Technologies Will Fuel Continued Growth of IT Services in 2017 | Press Release

Global services market growth rate expected to decline in 2017 for the fourth straight year, hampered by political uncertainties, macroeconomic slowdown.

The growing demand for innovative and digital technologies will spur continued growth of the IT services segment of the global service market in 2017, according to Everest Group. The number of new delivery centers focusing on development of digital services increased 177 percent between 2013-14 and 2015-16. The largest digital services growth segments during this period included cloud, Internet of Things (IoT) and big data.

The global services market has witnessed a significant increase in the share of IT service delivery since 2012 (up by 7 percentage points, from 32 percent to 39 percent), while the share of business process services has declined consistently in the same period (down by 4 percentage points, from 46 percent to 42 percent). Currently, of the US$173-178 billion global services market, IT services have a 39 percent share, with business process services and engineering/R&D services commanding 42 percent and 19 percent, respectively.

Overall, the global services locations landscape continued to experience stable growth in 2016 in terms of revenue; however, the growth rate was slower in 2016 (7 to 9 percent) than the previous year (8 to 10 percent). Similarly, the growth rate of center setups dropped in 2016 in comparison to 2015.

“Going forward, we expect that the global services market growth rate will decline in 2017 for the fourth straight year, measuring 6 to 8 percent,” said Anurag Srivastava, vice president and director of the Global Sourcing practice at Everest Group. “Some of this is due to the direct impact of the macroeconomic slowdown. Other dampening factors will include the political instability associated with Brexit in the United Kingdom and the review of the H1-B visa program in United States. Volatility in equity and investment markets and currency fluctuations will hamper the growth rate as well.”

These findings and more are discussed in Everest Group’s recently published report “Global Locations Annual Report 2017: Signs of Structure in a Disordered World.”

This research offers insights into the size and growth of the global services market, global services exports by regions and country, an update of locations activity by region and country, and trends and risks affecting global locations. It also provides industry-leading comparison and analysis of key changes in maturity, arbitrage and potential of global delivery locations through Everest Group’s unique MAP Matrix™ analysis.

***Download complimentary report abstract here***

Other key findings:

  • In terms of revenue, Asia Pacific continued to hold the largest share (more than 60 percent) of the global services market, followed by Nearshore Europe, Latin American and the Caribbean, and Canada.
  • In terms of headcount, India and the Philippines continue to be the leading delivery locations, accounting for 66 percent of the share, followed by Canada, China, Poland and Ireland.
  • India and the Philippines held more than one-third of the share of the new delivery center setups in 2015-16.
  • Most onshore locations are expected to see an increase in the near future in terms of delivery setups by the top 20 service providers.
    • The United States’ share in terms of onshore delivery center setup activity is expected to increase due to likely changes in U.S. visa regulations, which could make hiring of offshore resources difficult; increasing emphasis to hire locally; and greater focus on delivery of non-traditional functions, such as digital.
    • England’s share has witnessed a significant decline in the past few years; however, its share is expected to increase once investor apprehensions about Brexit decline.
    • Continental Europe is also expected to witness an increase in its share, due in part to the direct impact of Brexit and players moving out from England. Additionally, many cities in the region are being leveraged to develop new digital technologies for global delivery.

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