Although MSP currently has the lowest offshoring levels in the global Business Process Services (BPS) space, offshoring of MSP FTEs is slowly rising, and we expect to see an increase in offshoring in similarly transaction-intensive process that are offshored in other BPS areas
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:
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:
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:
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:
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:
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:
©2024 Everest Global, Inc. Privacy Notice Terms of Use Do Not Sell My Information Research Participation Terms
"*" indicates required fields
