bpo becomes a business imperative. but why? insights from the tbr 1q13 psbq it services benchmark

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

BPO becomes a business imperative, but why? Insights from TBR’s 1Q13 IT Services Vendor Benchmark

Technology Business Research Quarterly Webinar Series

July 16, 2013

TBR

2 TBR Quarterly Webinar Series | 7.16.13 | www.tbri.com | ©2013 Technology Business Research Inc.

PSBQ 1Q13 Research Highlights and Outlook: Webinar Presenters

Bryan BelangerAnalyst, Professional Services [email protected] @bbelangerTBR

Ramunas SvarcasSenior Analyst and Engagement Manager,Professional Services [email protected]@rjsTBR

mailto:[email protected]


TBR


• The Professional Services Practices continually covers 35 vendors, publishing quarterly and semiannual reports. • Of those vendors, 30 are included in our IT Services

Vendor Benchmark.o TBR reports are unique due to their deep, holistic

analysis of leading vendor businesses.o Financial modeling and TBR insights help customers

build a better understanding of vendor business models.o TBR reports and webinars are designed to be responsive

to client timelines, to be clear and concise, and to provide insights across multiple layers of an organization.

o TBR’s strategic assessment provides an impartial reality check on how vendors are performing regarding their strategic objectives and the overall market.

Clients are gaining advantages and are better understanding revenue opportunities through our reports and their personal relationships with TBR.

PSBQ 1Q13 Research Highlights and Outlook: Webinar Overview

TBR’s IT Services Vendor Benchmark delivers unique insight and value through in-depth analysis in a concise, consumable format

TBR


PSBQ 1Q13 Research Highlights and Outlook: Key Trends

Professional Services Vendor Trends for 1Q13

BPO is evolving into a strategic imperative:Commoditization of traditional BPO services prods vendors to transform portfolios, largely via M&As.

Analytics is driving this BPO evolution:Analytics will become the primary source of BPO differentiation for providers as creating business value beyond cost takes center stage.

BPO remains an operational imperative: BPO growth outpaces other services as buyers seek new avenues to trim costs and standardize processes.

BPO growth is poised to outpace other service lines during 2013 as customers aim to optimize processes and fuel innovation through analytics

TBR








TBR


Total trailing 12-month BPO revenue for the benchmark firms grew 5% year-to-year in 1Q13, while all other service lines except applications outsourcing faced contraction.

Leading BPO performance was driven by: • Buyers’ continued focus on achieving near-term cost takeout and

other operational goals• Aggressive investments and growth by emerging market players

such as India-centric firms• Resiliency to econonmic headwinds relative to discretionary

segments such as C&SI• Initial adoption of next-generation BPO, particularly in the areas

of vertical-specific solutions and analytics• Continued penetration of emerging markets

Professional Services Vendor Trends for 1Q13 — BPO is an operational imperative

PSBQ 1Q13 Research Highlights and Outlook: BPO Performance

Operational goals continue to drive BPO performance, with aggressive market entrants such as India-centric players leading the charge

TBR


Average trailing 12-month BPO revenue growth outpaced all other service lines for the third consecutive quarter in 1Q13 as vendors continued to turn to BPO services to cut costs and develop agile, flexible and globally standardized operations.


Near-term operational needs fuel BPO’s leading growth as customers address near-term needs and evaluate long-term options for IT investment

TBR


While trailing 12-month BPO revenue growth decelerated due to pressures on contract sizes and lengths, the fundamentals of BPO relative to other services segments allowed for greater resiliency to industry growth headwinds.


BPO displays greater resiliency to IT services industry growth deceleration than other service lines due to its favorable value proposition

BPO displays greater resiliency to industry growth deceleration

TBR


BPO growth leaders utilize acquisitions to integrate new technology and/or vertical capabilities into BPO portfolios as well invest in new delivery centers to augment nearshore and onshore capabilities to core markets.


India-centric vendors continue to gain share from established BPO peers due to M&A-led investments in new solutions and geographies

Growth driven by acquisition

TBR


Multiple strategic levers enable TCS to consistently outperform MNC counterparts and gain market share in the BPO space


Low-cost Delivery Model

Investments in Platforms, Industry Solutions

Expansion into New

Geographies

Capitalizing on Cross-selling and Vendor

Churn

TBR








TBR


Vendors are stuck in a BPO “storm,” as shifting buyer demands and preferences create tidal waves in the industry.

Providers are investing in alliances, refocusing talent recruitment efforts, establishing global centers and expanding R&D; however, M&As are the most likely to help providers succeeds.

Professional Services Vendor Trends for 1Q13 — BPO is evolving into a strategic imperative

PSBQ 1Q13 Research Highlights and Outlook: Portfolio

Vendors are making multiple portfolio investments and bets to ready their BPO ‘ships’ for rough waters created by shifting customer preferences

TBR


M&A emerges as the most efficient and effective means of developing a next-generation BPO portfolio that addresses table stakes such as cost takeout while concurrently delivering industry-aligned, analytics-driven strategic value.


M&A is the prevailing approach used by vendors in the make, buy or ally spectrum to build a next-generation BPO portfolio

Focus on Outcomes

Accelerating Analytics, Cloud, Mobility Adoption

Integration of Process and Technology

Smaller, Shorter Contracts Shift from Labor Arbitrage to Blended Global Delivery

Demand for Domain Expertise

OLD MODEL (Labor Arbitrage, Lift and

Shift)

NEW MODEL (End-to-end Process

Optimization and Business Outcome

Enablement)

M&A

Alliances

Strategic Hiring

TBR



Vendors’ M&A activity centers on adding domain expertise, augmenting delivery or folding new technologies into BPO solutions

Shifting BPO industry forces create vendor capability gaps, particularly related to technology assets, global delivery capabilities and/or vertical expertise, that are best addressed by tuck-in acquisitions activity.

Technology Assets

Global Delivery

Capabilities

Domain Expertise/

Solutions

BPO Disruptors: • Smaller, Shorter

Contracts• Demand for Domain

Expertise• Focus on Outcomes• Integration of Process

and Technology• Shift From Labor

Arbitrage to Blended Global Delivery

• Accelerating Analytics, Cloud, Mobility Adoption

M&A Targets Outcomes: Domain Expertise: Industry-specific BPO expertise or assets capable of addressing domain-specific outcomes

Global Delivery: Diversification of global presence (MNCs) or addition of onshore staff (India-centric vendors)

Technology Assets: Address business value outcomes by layering analytics into horizontal/vertical BPO offerings.

TBR


Acquisitions underpin Xerox Services’ consistent BPO growth trajectory and catalyze expansion into emerging growth areas such as cloud


Acquisitions enabled Xerox to maintain BPO growth rates in line with peer

averages, despite being the largest BPO vendor covered in the PSP IT Services

Vendor Benchmark by revenue.

Company Acquisition Date Capabilities Employees

Customer Value Group (U.K.) July 2013 Cloud F&A BPO Solutions N/A

LearnSomething (U.S.) June 2013 Custom E-learning Solutions 50

WDS (U.K.) July 2012 Customer Care BPO, Analytics 2,000

Symcor (U.S.) October 2011 Financial Services BPO 1,500

XL World (Italy) September 2011 Customer Care in Romania, Albania 1,500

Xerox Services’ Recent BPO Acquisitions

TBR








TBR


Professional Services Vendor Trends for 1Q13 — Analytics in BPO

PSBQ 1Q13 Research Highlights and Outlook: Analytics in BPO

Analytics will drive BPO investments as outsourcing shifts from a cost and efficiency model to a balanced, solutions-focused value creation model

If M&As are the “ship” guiding vendors’ development of next-generation BPO portfolios, analytics is the engine propelling the ship toward this new BPO industry paradigm.

As outsourcing buyers increasingly focus on creating value in addition to achieving cost targets, they will seek to partner with vendors that can pair analytics technology expertise and capabilities, traditional BPO, and front-end advisory services to craft holistic, transformational business process solutions.

TBR



Best-of-breed BPO vendors moved beyond offshore-centric services to focus on delivering business value via analytics

BPO Industry Life Cycle and Opportunities

Low High

Cost Takeout

Innovation/ Business

Value

Opportunity for Vendor Differentiation

Stra

tegi

c Fo

cus

Business Process Transformation

• Focuses on horizontal and vertical processes• Targets business outcomes• Uses analytics to deliver

business insights• Will increasingly focus on

standard, cloud-based platforms

Lift and Shift• Long-term, large deals• Focused on cost takeout• Rebadging of employees• Targeted F&A, HR

Offshore Process Optimization

• Offshore delivery• Streamline, automate

processes• Expanded beyond F&A, HR

Current Model

TBR


Business process transformation combines elements of legacy and emerging models, positioning vendors as client partners that leverage analytics tools and expertise to deliver business insight and value within the context of an outsourcing relationship.


Big data analytics is the foundational tool BPO vendors will utilize to craft holistic business process solutions aligned to industry-specific outcomes

• Operationally driven • Emphasizes low-cost offshore

delivery• Targets process optimization,

simplification, automation• Typically focused on functional

areas (F&A, HR)• FTE/transactional pricing model

• Leads with a business problem/outcome• Big data analytics tools are

utilized to uncover data, translate into business insight• Targets industry-specific needs• Focuses on standardized,

cloud-based platforms• Leverages a blended delivery

model

Legacy BPO Model Emerging BPO Model Business Process Transformation

Big Data analytics is the engine

that enables vendors to

deliver added

business value.

TBR


In the long term, leading BPO vendors such as IBM will aim to sell solutions rather than traditional or analytics-enhanced BPO services


IBM leads with a business outcome and crafts an integrated approach that uses analytics and other software assets with services capabilities to deliver a solution.

SOURCE: IBM

IBM GTM Approach

IBM engagements begin with an industry-aligned business

outcome, and bundled analytics solutions and

services capabilities (GTS) to develop an end-to-end

business solution.

Watson Engagement Advisor: A call center support tool that uses Watson’s cognitive natural language processing analytics capabilities to augment customer care interactions by functioning as a decision support mechanism for call center agents and/or a direct customer service tool for interacting with customers

Client Reference: Banorte, 10-year customer-centric transformational deal

TBR



New buyers continue to emerge as big data analytics shifts customer focus from cost takeout to business value. BPO vendors can win by shifting their approach from an outsourcing to partnership model that emphasizes bundled, analytics-enabled business process solutions that deliver long-term ROI benefits over traditional lift-and-shift BPO engagements.

BPO vendors that transcend stand-alone BPO deals and develop a business transformation partnership model will win in the long term

BPO OPPORTUNITY

Outsourcing Model Partnership Model

TBR








TBR


PSP Research Current Topics 2Q13 Report Key Themes• Vendor Reports:o Accenture o Atoso Capgeminio Cognizanto CSCo Dell Serviceso Fujitsuo HP Serviceso IBM Global

Serviceso Infosyso TCSo Wipro ITS

• Benchmarks: Management Consulting, HITS, Public Sector, Software Alliance

Which vendors are leading and lagging in developing energy and utilities industry solutions? How is the energy vertical performing relative to other markets? What investments are vendors making to craft industry-specific solutions?

How is cloud infrastructure management performing relative to other segments of the cloud services space? What vendors are leading and lagging? How is demand for cloud infrastructure management impacting traditional ITO businesses?

How are vendors’ approaches to big data and analytics evolving? What services areas are vendors targeting the most for analytics services (outsourcing, consulting, integration)? Who are the leaders and laggards?

Vertical Strategy:

Energy and Utilities

Cloud Infrastructure Management

Big Data Analytics

PSBQ 1Q13 Research Highlights and Outlook: 2Q13 Key Topics

TBR will continue to examine vendor business model shifts as investments in industry solutions, cloud and big data analytics accelerate in 2Q13

TBR


Questions?

PSBQ 1Q13 Research Highlights and 2013 Outlook

TBR


For further information, please contact:

Lindy Hanson James McIlroyDirector, Professional Services Practice Vice President, [email protected] [email protected]

Bryan BelangerAnalyst, Professional Services [email protected] @bbelangerTBR

Ramunas SvarcasSenior Analyst and Engagement Manager, Professional Services [email protected]@rjsTBR

Twitter: @TBRincSlideShare: www.slideshare.net/TBR_Market_InsightYouTube: www.youtube.com/user/TBRIChannel

PSBQ 1Q13 Research Highlights and Outlook: Webinar Presenters and Contacts





http://www.twitter.com/tbrinc

http://www.slideshare.net/TBR_Market_Insight

http://www.youtube.com/user/TBRIChannel

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

About TBR

Technology Business Research (TBR) is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, networking equipment, wireless, portal and professional services vendors.

Serving a global clientele, TBR provides timely and accurate market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996.

To learn how our analysts can address your unique business needs, please visit our website or contact us today.

Contact Us

[email protected] Merrill DriveHampton, NH 03842USA

This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.


http://www.tbri.com/

bpo becomes a business imperative. but why? insights from the tbr 1q13 psbq it services benchmark

Technology

1q13 bpo

bpo growth

bpo evolution

generation bpo

leading bpo performance

tbr quarterly webinar

tbr insights

fundamentals of bpo