Although offshoring is the predominant delivery model among L&P insurance BPO active contracts, the degree of offshoring within the L&P segment varies by process
Although technologies such as AI, blockchain, and IoT can assist insurers in digital transformation, legacy back-end can be a barrier to the realization of its full potential
Key Factors
If you are a sourcing professional, you have our deepest respect, because now, more than ever, your job is a tough one. The sourcing industry is changing fast, disrupted by emerging technologies, shifting talent requirements and evolving service provider capabilities. Moreover, fluctuating geopolitical and legislative issues are causing enterprises to rethink substantial, long-held sourcing strategies and provider relationships. Sourcing professionals face formidable challenges in the global economy as the new year approaches and they look for better strategies in an industry experiencing unparalleled turbulence.
It used to be that a sourcing professional’s No. 1 responsibility was finding a way to get the work done as cheaply as possible. Not any more. Technology has changed the game. In nearly every industry, digital technologies are driving the development of innovative products and services and improved customer experiences. To keep pace in this digital world, enterprises are now pursuing a digital-first rather than arbitrage-first strategy. In fact, the global services market has seen a threefold increase in digital-focused deals.
Automation, once merely a service delivery tool, is now “front end,” with enterprises demanding strategy, vision and strong Proof-of-Concepts (POCs) for advanced automation in 33 percent of all application services contracts in 2016. Similarly, artificial intelligence, cognitive computing and robotics will soon begin to pervade the enterprise portfolio and will eventually become mainstream in sourcing landscape.
The increasing adoption of digital strategies is changing the workforce skills that enterprises seek, and, in turn, forcing sourcing professionals to revamp their location portfolios in the midst of a dynamic landscape. Location options for traditional global sourcing continue to expand, and new locations are emerging for unique talent demands, such as digital capabilities.
Sourcing professionals also must anticipate and react to numerous geopolitical disruptions that keep the sourcing landscape shifting like windblown sand. In the past year, for example, we have seen a significant decrease in demand from the United Kingdom given the uncertainty with Brexit; uncertainty about healthcare legislation in the US has dampened the healthcare sourcing market; and the uncertainty due to visa reforms has led to increased local hiring and onshoring in the U.S.
Sourcing professionals also are challenged to stay abreast of changes in the provider landscape. Mergers and acquisitions are on the rise, and leading providers are making fundamental changes to their talent and service delivery models. Between April of 2016 and March of this year, Everest Group witnessed 40 acquisitions to expand digital capabilities, 140 alliances between providers and technology providers or startups, and the setup of 35 new centers and digital pods to help clients rethink their digital strategies.
In the midst of this complexity, buyers of global services are tasked with making critical decisions. Recompeting an outsourcing contract, selecting a location for a global in-house center, or contracting for new tech services—these are the types of decisions that can significantly impact an organization’s performance and an executive’s career.
That’s why Everest Group has announced that it is doubling down on its commitment to provide fact-based comparative assessments. We’re consolidating our comparative analysis offerings – previously offered under a variety of product names – under our flagship PEAK Matrix brand, which will now evaluate services, solutions, products and locations. Additionally, we’ll be expanding the market segments addressed to include new functions, processes and industry verticals. Read more about it here.
In the midst of all the complexity and change that sourcing professionals face, one thing remains the same: Everest Group is your source for the fact-based analyses you need to make informed decisions that deliver high-impact results.
The global third-party BPS industry has evolved rapidly over the past decade or so, in breadth and depth of services. What started as largely a cost optimization play focused on non-core back-office business processes today has expanded to encompass the entire business process value chain supporting a wide variety of business objectives, including agility, flexibility, compliance, and improved business outcomes, among others.
With that evolution has come growth – the BPS industry today is valued at about $150 billion – and, as you might anticipate, interest among service providers from a broad range of backgrounds and heritages. In fact, Everest Group estimates that there are more than 200 service providers with more than US$50 million in revenues around the globe, some pure-play BPS providers, some that offer BPS as part of a broader portfolio, some focused on a particular domain or geography, some broad-based.
Yet, with all that expansion, what’s lacking in the industry are reference points to identify and compare the largest providers by size globally. Until now.
Everest Group is unveiling our first ever BPS Top 50 to fill this gap. With this list, enterprises can now identify the largest providers and their functional coverage. Service providers can now compare themselves against others in the industry. In the coming years, all industry stakeholders will be able to understand the broad dynamics of the growth and success in the industry.
Download the BPS Top 50 |
As a USD$70-75 billion market that has been growing steadily at 5-7 percent over the last few years, contact center outsourcing (CCO) has captured the interest of multiple non-CCO specialist service providers in the recent years. In fact, the more generalized ITO and BPO providers that have started CCO operations in the last decade have realized appreciable growth and success in recent years, some of them outdoing the market growth and growing in excess of 8 percent CAGR.
However, it’s not been an easy journey for these relatively new entrants, given their relative small scale and scope of operations compared to the incumbent players, some of which make billions in revenue through contact center services alone and have operations across all major geographies. To differentiate themselves, these new players have tried to stand out from crowd through innovation, and by tapping areas within the CCO space that have showed the maximum growth in the last few years and have emerged as value propositions for CCO clients.
Most of these high-growth players are, in fact, relatively smaller players, such as Genpact, HCL, HGS, TCS, and WNS. While many have had long-standing contact center capabilities, it has only been more recently that these firms have taken a more strategic go-to-market approach to pursuing the stand-alone CCO market. Their revenues from CCO operations are in the USD$100-450 million range, which is miniscule in size when compared to some of the bigger players such as Convergys and Teleperformance. To sustain their above market growth, these providers have adopted multiple steps to emerge as serious contenders. Instead of merely tapping the traditional CCO markets such as North America and Europe, these players have aggressively expanded their footprint in emerging buyer geographies such as Asia Pacific, Eastern Europe, and Middle East & Africa. By building their capabilities in languages specific to these areas, they have been able to cater to client demands better. They have also been making their presence felt in some of the fastest growing verticals in the CCO market, such as retail, healthcare, and travel & hospitality. Many of them have effectively leveraged their organization’s overall investments in vertical industry expertise to further enhance CCO capabilities and offerings. A key differentiator for many of these players is their ability to link the consumer interaction in the contact center with downstream industry-specific processes by delivering front-back office integrated solutions. These investments seem to have paid off well, as the revenues from these verticals have shown sharp growth for these service providers.
Our research shows that buyers are looking more towards building deeper working relationships with fewer CCO service providers. This means that buyers no longer expect service providers to just deliver on SLAs, but are looking for value beyond labor arbitrage. More contracts being signed now involve value-added processes, and include non-voice channels such as email, chat, and social media. To address these new value propositions, these high-growth players have invested in multiple technologies to build their capabilities in these domains. Most of them have leveraged their vast IT and BPO expertise to deliver solutions specific to contact center needs.
They have also made it a priority to focus on building strong relationships with their clients. They have performed quite strongly on Everest Group’s buyer satisfaction survey, and have frequently been cited for their flexibility, responsiveness, consistency, and execution. With buyers looking to consolidate their portfolio of work with fewer strategic partners, it becomes more essential to have a stronger client-service provider relationship, which the service providers can only achieve by walking that extra mile to keep clients happy with their services.
With the changing scenario in the CCO market, where the focus has shifted from improving the bottom line to adding more value to the operations and thus improving the top line for clients, scale can no longer be considered the primary metric for assessing a service provider. The focus has shifted to cost savings through process improvement and business outcomes, and this provides these relatively new generation high-growth players enough opportunity to prove their mettle in the market where they have been aligning their capabilities with changing client needs. Everest Group’s findings show that clients are taking notice and giving these providers a chance to prove themselves.
Photo credit: Flickr
With no rest for the weary, a wave of regulatory overhaul and technological disruptions made the first half of 2015 very busy for enterprises in the banking, financial services, and insurance (BFSI) sector. Indeed, rather than being an enabler of efficiencies and operations, technology is now the fundamental differentiator for banks to grow their revenue and increase market share.
To keep up with all the activity, Everest Group in the past six months published a number of research reports examining the health of the market, the service provider landscape, and the digital effectiveness of BFSI organizations.
Following are some key insights and highlights from our research.
So what is in store for the next few months? Lots! Our upcoming reports through the end of 2015 include:
Everest Group’s goal is to help ensure enterprises and service providers achieve maximum success from their sourcing initiatives. Thus, we encourage you to reach out to us directly with your questions and comments.
Jimit Arora, VP and Global Head of IT Services Practice, [email protected]
Aaditya Jain, Senior Analyst, [email protected]
Archit Mishra, Senior Analyst, [email protected]
Ronak Doshi, Senior Analyst, [email protected]
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