Tag: FTE

Are the Automation Savings Numbers You Hear Real? | Blog

While today’s enterprises turn to automation for a multitude of competitive advantages, cost savings is at the top of their list. Through their marketing initiatives, often backed by client case studies and references, third-party service providers often boast automation-driven FTE reductions that save their clients millions of dollars.

Indeed, we’ve seen claims of savings to the tune of 30-70 percent FTE reductions. But our own data, culled from BPO deals on which we advise, show FTE reductions that are one-third to two-thirds lower.

Why is there such a significant gap? It’s because the service providers are calculating the reduction at the project level, instead of at the process level. While the numbers show well using a project level calculation, they’re very misleading, and often lead to disappointment.

Let’s take a quick look at an invoice processing example to see the glaring differences.

invoice processing example

As you see, an automation-driven invoice data extraction project in North America results in a 60 percent FTE reduction. Yet, when you expand the calculation to include invoice coding and exception handling in all operating regions – i.e., the enterprise-wide end-to-end invoicing process – the number drops to 10 percent. A 60 percent FTE reduction is highly enticing, and technically it’s correct. But it doesn’t show you the whole picture.

In order to properly assess the value of automation and develop your business case, you need to look at the percentage savings for the entire process. This is the only way you’ll obtain objective, realizable benefits data.

How can you find the automation savings data you need?

Your first thought might be to try and collect it from similar enterprises that have already implemented automation. But the numbers won’t be particularly reliable, as most enterprises are in the early days of their automation journey.

The most practical and valuable approach is to look at the BPO deal-based data for the entire process to be automated. Doing so gives you a realistic view of the automation-driven FTE savings for a couple of reasons. First, the FTE base for automation benefit calculation in deals is clearly defined in the baselining/RFP phase as the total number of FTEs in the process. And second, the FTE benefit numbers within deals are slightly more aggressive than the current norm, but because providers are continually refining their capabilities, they are comfortable with contractually committing to the higher numbers.

And remember that your BPO and/or RPA implementation provider should present this data to you to set realistic expectations. If they don’t, you’ll be armed with the ammunition you need.

Automation has the potential to greatly reduce your expenses. But before you leap, you need to carefully evaluate how the savings are being calculated. Your satisfaction depends on it.

If you’d like detailed insights on the FTE reduction numbers across different BPO processes within live BPO deals, please connect with us at [email protected] or visit https://www.everestgrp.com/research/domain-expertise/benchmarking/.

Surge in Onshoring Shapes Global Sourcing Market | Press Release

Despite macroeconomic uncertainties and reduced investor confidence, global sourcing industry witnesses stable growth in 2016

The global sourcing industry has experienced a surge in setup activity in onshore locations, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing. The proportion of onshore versus offshore delivery centers jumped from 45 percent in 2014 to 52 percent for the period of 2015-H1 2016.

Onshore setup activity increased among the top 20 service providers, with North America’s share surpassing 2012 levels after experiencing significant declines in 2013 and 2014 due to a global slowdown. North America is the most favored onshore location followed by Continental Europe.

According to Everest Group, the factors contributing to this rise in onshoring include:

  • a need for a deeper talent pool to support complex services,
  • the desire for easier coordination and better alignment/training with clients,
  • new data security regulations
  • tier-2 onshore locations gaining credibility for service delivery.

Overall, the global services market grew at a rate of 8-10 percent in 2015, reaching US$161-166 billion, a slight slowdown compared to the 9-11 percent growth rate of 2014.

“We expect that the global services market growth will be lower in 2016—likely 7-9 percent—due to the overall macroeconomic slowdown, currency fluctuations and volatility in equity and investment markets,” said Anurag Srivastava, vice president and director of the Global Sourcing practice at Everest Group. “Political instability associated with Brexit in the United Kingdom and the Trump presidency in the United States will continue to affect the growth rate as well.”

Global technology spending remained flat in 2015, a statistic that obscures the impact that new technologies are having on the industry.

“Going forward, countries such as India are expected to witness a slowdown in the growth of IT services exports, although digital services will continue to grow at a fast pace,” added Srivastava. “Analytics will be one of the key contributors of growth in the BPS segment; conversely, adoption of technologies such as automation will result in a decline in contract sizes and revenue growth.”

These findings and more are discussed in Everest Group’s recently published report “Global Locations Annual Report 2016: Persistent Growth in Uncertain Times.” 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 affecting global locations (changes in investment environment and exposure to various risks). 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.

Other Key Findings

  • Asia-Pacific (APAC) share of market has been consistently declining since 2012 but continues to constitute more than 60 percent of the share of the global services FTEs. India and the Philippines account for more than 90 percent of the share in the APAC region. APAC also holds the largest share (more than 70 percent) of the global services market in terms of revenue.
  • India and the Philippines retained their leadership status in the global services market, continuing to hold more than one-third of the share in new delivery center setups globally.
  • Nearshore Europe witnessed strong growth in activity during the period of 2015-H1 2016, emerging as the second largest region after Asia Pacific, with the majority of new center activity in Poland, Ireland and Romania.
  • New center setup activity increased in 2015, surpassing pre-2013 levels and reaching a new high since 2011.
  • All locations witnessed a decrease in GIC activity during the period of 2015-H1 2016. In total, global in-house center (GIC) setups continue to outnumber service provider setups. In terms of percentage share, service provider setups exceeded GIC setups for the first time during H1 2016 since dropping below in 2013.
  • Among all regions, Nearshore Europe witnessed the largest increase in new center setups in 2015 compared to 2014.

Everest Group Identifies Digital Sourcing Hot Spots | Press Release

As the search for digital talent intensifies, Everest Group offers a “MAP” of the world’s top locations for digital service delivery

Where in the world is the best location for digital services? Enterprises need to know, says Everest Group—a consulting and research firm focused on strategic IT, business services, and sourcing—which is today releasing key insights from its recent research on top locations for digital services delivery, “Global Hotspots for Digital Services.”

“Global delivery has become talent-centric as enterprises, thinking beyond arbitrage and efficiency, intensify their search for digital talent to support digital business initiatives such as social and interactive, mobility, analytics, cloud, Internet of Things (IoT), robotic process automation (RPA), digital cybersecurity and more,” said H. Karthik, partner, Global Sourcing, at Everest Group. “As a result, the choice of locations for digital service delivery has become a key strategic decision and will become even more critical as the delivery of digital services witnesses robust adoption in the next two to three years.”

Everest Group estimates that the global digital services market is currently 300,000 to 350,000 FTEs strong and accounts for 5 to 7 percent of the global information technology / business process (IT-BP) industry. Going forward, Everest Group expects this share to increase owing to the faster annual rate of growth of the digital services market (14 to 18 percent) as compared to the overall IT-BP industry (7 to 9 percent) during the past four to five years.

Digital srvcs delivery global FTEs (004)

Key Findings:

– India is the largest destination for delivery digital services (accounting for approximately 55 percent of the market in terms of FTEs), driven by the availability of high-quality talent, synergies with existing sourcing operations in the area, and low operating costs.

– Onshore tier-two North America and tier-two Europe constitute approximately 24 percent of global digital FTEs and are important geographies for real-time innovation and speed-to-market for existing and next-generation digital technologies.

– Nearshore Europe constitutes approximately 14 percent of the global digital FTEs, attractive to buyers due to multilingual service delivery for social media, analytics and mobility services.

– Asia-Pacific (excluding India) accounts for approximately 7 percent of global digital FTEs, with selective evidence of high-end digital services delivery in cities such as Singapore, Beijing and Malaysia.

– Latin America is relatively less mature for digital services delivery as compared to India and Nearshore Europe; however, it is witnessing traction in supporting regional demand and also in providing medium-to-low complexity digital services to North America.

Everest Group also assessed the leading digital services delivery locations on the dimensions of talent and cost, and grouped them in its proprietary MAP Matrix™ according to maturity, arbitrage, and potential.

MAP Matrix (003)

– The cities of Bangalore, Mumbai and Hyderabad are clear Leaders.

– Major contenders include Manila, Prague, Sao Paulo and Dublin, which have sizable digital IT talent driven by cloud services.

– Aspirants are typified by Beijing, Buenos Aires, Kuala Lumpur and Krakow.

Are You Paying too Much for Outsourced Resources? | Sherpas in Blue Shirts

CIOs need to check for “outsourcing bloat.”

Many companies in mature, offshore, FTE-based outsourcing environments experience substantial bloat. From our knowledge of our clients’ situations and our research for companies seeking objective data to help them determine the return on investment in outsourcing, it’s clear that many companies today are paying too much for the resources. And they’re blissfully unaware of the outsourcing bloat — which means that they are paying for 30 percent or more of FTEs than they need. Moreover, they don’t have visibility into what could be done to rationalize the bloat. This is a significant problem.

The outsourcing bloat grows in two dimensions: (1) paying for too many FTEs and (2) paying too much per FTE. The problem has an even bigger impact when you consider that outsourced FTEs will cheerfully respond to system problems, but not address the underlying issues which cause them. Our observation is companies that have fixed underlying systemic problems are operating with 30 to 40 percent fewer FTEs.

Read more at CIO online.

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