Results of a survey with large enterprise QA leaders on the vision of QA in commercial model, people, process, and technology for the future
The share of digital services in new outsourcing deals doubled in the last three years
Much has been written and said about the Bimodal IT model Gartner introduced in 2014 – with forceful arguments for and against. Not at all intending to bash that model, it’s safe to say that the digital explosion over the last three years demands that enterprises’ technology strategies be much more nuanced and dynamic.
Let me explain with the help of the following chart. I call it the Maintain-Optimize-Reimagine-Explore – the MORE – model.
I’ve tried to plot (intuitively) a bunch of technology and service themes on their current and future innovation potential.
It’s interesting to note that many of these reimagination exercises are based on three common foundational principles:
Over the next several months, Everest Group is going to publish viewpoints on each of these topics and more. But we’d love to hear any comments and questions you have right now. Please share with us and our readers!
Technology + domain expertise = best-in-class FAO
In New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1, we talked about the emerging trend of convergence of engineering services and new technologies, and why it is important for enterprises to deliver an enhanced customer experience. Now, let’s turn our attention to the steps and measures enterprises and service providers are taking to tap into the trend and enhance their value proposition.
Implications for the industry
So what does this all mean for the ER&D services industry outlook, and for players in the domain? As it becomes increasingly crucial for enterprises and service providers to gain new capabilities in engineering and technology, there will be increased merger, acquisition, and partnership activity. Enterprises will look at partnering with niche technology firms or innovative startups for new product development. Service providers will pursue targeted acquisitions, and try to strengthen their value proposition for clients by increasing investment and focus on the segment. It will be exciting to see what happens in this space in the next 5-ten years.
For more insights and information on the ER&D services industry, please refer to our latest report, “The Evolving Demand Paradigm in the Engineering and Research and Development (ER&D) Services Industry.”
It is interesting times for the engineering services and R&D (ER&D) market. Industry demand for engineering services coupled with technology innovations is transforming the market landscape, and leading to the emergence of new business models – in particular, the convergence of engineering services with new technologies, such as digital, IoT, and analytics for product development.
The proliferation of digital technologies is compelling enterprises to relook at their product development strategy, and integrate new technologies with products to deliver an enhanced customer-centric experience. Service providers in the ER&D industry are looking to expand their engineering service offerings by tapping into new technologies that can help them differentiate their position in the market and deliver increased value to their clients.
The convergence trend is manifesting itself in many ways in the industry, and fundamentally transforming the normal course of business for both enterprises and service providers:
Time-to-market pressure for product development is making enterprises and service providers look at avenues to deliver enhanced value to their customers. Make sure to visit our blog page later this week to read our follow-up post on the different ways they’re keeping up with this trend.
Maps enterprises’ technology investment priorities along two axes: priority and impact timing
New deal activity tops 18 percent growth as service providers from all backgrounds, diverse regions taste success in highly competitive, fragmented RPO market.
The global Recruitment Process Outsourcing (RPO) market continued to remain one of the fastest growing single-process HRO markets. Buoyed by a resurgence of growth in the North American market, RPO posted a strong growth rate of 17 percent in 2015 over 2014 and touched the US$2.4 billion mark. A majority of the global growth is attributed to new deal activity, which grew at a rate of more than 18 percent year on year.
From a regional perspective, the United States, United Kingdom and Australia are the relatively more mature and bigger RPO markets, and they account for a large chunk of the global deal activity. Nonetheless, 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.
“Across the globe, the key challenge in today’s recruitment landscape is the need to find and engage the required talent, especially for high-skilled roles, and buyers are expecting greater proactiveness and innovation from service providers in that regard,” said Arkadev Basak, practice director, Business Process Services, at Everest Group. “Providers are responding to this opportunity by developing niche areas of expertise, adding talent advisory capabilities, and improving their internal efficiencies, by leveraging technology, providing targeted training, and addressing division of labor fundamentals.”
Over 40 percent of RPO deals are bundled with a technology capability. In particular, many service providers are making dedicated investments in developing bundled RPO offerings that include advanced analytic services.
“Service providers are using technology as a productivity lever as well,” adds Ranjan. “For example, we are beginning to see providers adopting Robotic Process Automation to improve efficiency and save on costs, and we expect RPA adoption to rise rapidly in the future.”
These and other research findings are explored in a recently published Everest Group report: Recruitment Process Outsourcing (RPO) Annual Report 2016 – Opportunities Abound in a Buoyant Market.
This report provides comprehensive coverage of the RPO market across dimensions such as market overview, key business drivers, buyer adoption trends, solution and transaction trends, emerging themes and areas of investment, and service provider landscape.
Other key findings in the report:
The RPO market continues to remain intensely competitive and fragmented. Providers from all backgrounds (including staffing, broader BPO, and pure-play RPO) have tasted success in this fast-growing market
High cost pressures, market uncertainty drive decline in application outsourcing deals and rise in vendor consolidation.
Capital market firms—which are operating under difficult market conditions, facing an increasingly complex regulatory environment and competing with aggressive new financial technology entrants—find themselves needing to invest in next-generation technologies while holding IT budgets steady, according to new research from Everest Group. This implies that the only plausible way to continue technological advancement will be to fund change initiatives with money saved by run-the-business initiatives.
“Capital markets firms are struggling with increasing costs, increasing regulation, and a period of low growth,” said Jimit Arora, partner at Everest Group. “In addition, technological advancement, especially digital, has created a new set of competitors that are not weighed down by the burden of legacy in their product portfolio, customer relationships and IT setup. The imperative for capital market firms is to focus on growth, profitability and managing risk, and their IT investment must be focused on cost optimization and improving the customer experience.
“As a result, the implications for IT service providers serving capital market firms are to tailor their offerings with next-generation technologies and offer utility-based services that help clients achieve their business objectives quickly. They also should look to collaborate with clients to invest in innovation and form alliances with leading platform providers.”
These recommendations and research findings are explored in two recently published Everest Group reports available at https://www.everestgrp.com/:
In the 2016 PEAK Matrix™ Assessment of IT outsourcing in global capital markets, Everest Group identifies seven Leaders among the 27 firms assessed: Accenture, Cognizant, HCL Technologies, IBM, Infosys, TCS and Wipro.
In addition, the report identifies five service providers—Capgemini, EPAM, Hexaware, Luxoft and VirtusaPolaris—as the Star Performers based on their positive forward movement over time in terms of both market success and capability advancements.
Other key findings in the reports:
Robotic process automation, analytics and consumer-facing technology solutions drive 10 percent growth in banking BPO market.
“If banks do not get their act right, they might soon lose their relevance,” claims Everest Group in new research addressing the business process outsourcing (BPO) market in the banking industry. The fight to remain relevant in an evolving market of new-age consumer preferences and unprecedented external pressures is driving demand in the banking industry for technology solutions and third-party assistance, as reflected in an approximately 10 percent compound annual growth rate in the banking BPO market.
Describing the future outlook for banks, Everest Group points to evolving consumer preferences, macroeconomic and regulatory pressures, and increased competition from non-traditional players. Traditional, brick-and-mortar bank branches are losing significance as consumer interest in traditional banking channels declines. Banks are also under serious pressure to reduce costs, increase profitability and respond to greater regulatory and compliance requirements. Furthermore, competition from non-traditional sources is on the rise. Financial technology companies (FinTechs) are a serious threat as they provide a better consumer experience and benefits such as ease of use and improved functionality. Also, the market for digital wallets (e.g., Apple Pay), person-to-person (P2P) transfers (e.g., Facebook Messenger and SnapCash) and new-age banking solutions (such as applications for wearables, voice-activated assistances and personalized interfaces) is growing rapidly.
“Consumer preferences are evolving fast, and banks need to align themselves with consumers’ desires,” said Anupam Jain, practice director at Everest Group. “The consumer wants their financial partner to be integrated with their daily life and to be easy to access. They want real-time advice based on their own transactions and behavior. This is why we are seeing growth in banking BPO: service providers can support banks by offering domain expertise and analytics; by leveraging technology to offer modern services; and by using tools like robotic process automation (RPA) to improve efficiency and cut costs.”
Jain points to four case studies cited in the research:
Other key findings:
These results and other findings are explored in a recently published Everest Group report: Banking BPO Annual Report 2016: Riding on the Digital Wave and Advancing in Automation. The report provides comprehensive coverage of the global banking BPO market including detailed analysis of market size and growth, buyer adoption trends, solution characteristics and the service provider landscape.
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