finance & accounting as-a-service business process outsourcing ... · benefitsachievedthrough...
TRANSCRIPT
The Services Research Company
Finance & Accounting As-a-Service Business Process Outsourcing BlueprintExcerpt for GenpactApril 2016
BarbraSheridanMcGannExecutiveVicePresident,[email protected]
©2016 HfSResearch Confidential and Proprietary │Page2
Table of Contents
TOPIC PAGE
StateoftheMarket 3
Journey toFinanceAs-a-Service 14
Multi-ProcessF&A DealSizeandMarketTrends 32
GlobalF&ABPOMarketSizeandForecast 46
ResearchMethodology 57
ServiceProviderAnalysis 62
MarketDirectionandRecommendations 67
About theAuthors 75
Confidential and Proprietary │Page3
Executive Summary
Proprietary │Page4©2016 HfSResearch
Introduction to the 2016 HfS Blueprint Report: Finance & Accounting As-a-Service Blueprintn The Finance & Accounting (F&A) As-a-Service Blueprint for 2016 is an annually refreshed analysis of
the business process services and outsourcing market for F&A. This Blueprint builds on theProgressive F&A BPO report we published a year ago, reviewing in more detail the market andservice provider adoption of the Eight Ideals of the As-a-Service Economy for redefining the value ofsourcing engagements.
n This F&A As-a-Service Blueprint covers market size, trends, and direction, as well as analysis of 18service providers.
n Unlike other quadrants and matrices, the HfS Blueprint identifies relevant differentials betweenservice providers across a number of facets under two main categories: innovation and execution.
n For this 2016 report, HfS has increased the attention paid to innovation criteria in particular andadopted the new 2016 Blueprint Grid layout to assess service providers. This Grid nowrecognizes up-and-coming service providers (High Potentials) that are scoring higher oninnovation criteria than on execution criteria as the providers invest and collaborate with clientsand in services that move to a more business outcome-focused, flexible, and talent- andtechnology-enabled F&A service.
n The Grid includes a new grouping for established, high-execution service providers (ExecutionPowerhouses) that have maintained effective delivery operations but need to innovatecapabilities and offerings further. That is in addition to the existing rankings for highest overallperformance (Winner’s Circle) and a strong combination of innovation and executionperformance (High Performers).
Proprietary │Page5©2016 HfSResearch Ltd.
FinanceTransformation
• FinancialProcessConsulting
• SupportingInnovationRoadmap
• ChangeManagementandCommunicationsSupport
Record toReport
• FixedAssetAccounting
• IntercompanyManagement
• RiskManagement• TaxandTreasury
ProcuretoPay
• AccountsPayable• TravelandExpense• CreditManagement• PayrollServices
OrdertoCash
• CashApp/AccountsReceivable
• Billing/Invoicing• Collections• RevenueReporting
HfSValueChainDefinition:Valuechainreferstothebusinessunitsthatcarryoutvalue-creatingactivitiestodesign,produce,market,deliver,andsupportacompany’sproductorservice.Inthisusage,werefertotherangeofprimaryprocessesandsupportservicesthatprovidersoffertotheirclients.
ControllershipActivities
• Regulatory/StatutoryReporting
• ManagementReporting
• RiskManagement/Treasury
• InternalAuditing• BusinessIntelligence• FinancialPlanningandAnalysis
ENABLINGTECHNOLOGIES
Digitization&RoboticAutomation• Analytics• Mobility• SocialMedia• CognitiveComputing•ArtificialIntelligence
OPERATINGMODELS,METHODOLOGIES,ANDPLATFORMS
Outsourcing•SharedServices• GBS• COEs• BPaaS/SaaS/IaaS• DesignThinking
Inthisreport,welookathowserviceprovidersaresupportingtheF&AAs-a-Service:Finance & Accounting As-a-Service Value Chain
Analytics
• FinanceAnalytics • WorkingCapitalAnalytics • RiskandComplianceAnalytics
Proprietary │Page6©2016 HfSResearch
State of the F&A As-a-Service Marketn F&A service buyers fall into three categories:
• Legacy buyers looking for a third party to “lift and shift” their current operations and run them at alower cost over a long contract, usually with minimal process transformation.These buyers are becoming fewer and farther between.
• Progressive buyers realizing labor arbitrage benefits are finite and broader engagement valuedepends on a partner with higher quality process expertise, compliance, transparency in operations,an appetite to move to consumption-based pricing, using a combination of talent and technologythat keep pace with client needs on a sustained basis.The growing majority of services buyers are at this stage.
• As-a-Service buyers eager to work with a strategic partner to define and execute against achievablebusiness outcomes as part of a broad transformation and change management effort within theirown organization, tapping into talent and technology, both internally and externally.These are the future-oriented buyers that are in the minority today.
n For the most part, service buyers within enterprise customers are starting to look beyond the efficiencybenefits achieved through BPO, largely by standardizing F&A delivery, improved quality of delivery, processstandardization and consolidation, and cost savings. These were the critical levers in the last phase of BPO.
n In the emerging As-a-Service Economy, the onus in Finance shifts to serving the end user—executives,managers, and staff–and managing proactively the increased transparency and interaction that digitaltechnology is empowering. Service buyers seek greater flexibility in the way finance supports the businesswith increased productivity that drives business growth without operations growth.
n According to our recent research, Finance In The Digital Age, approximately three out of four buyersbelieve that service providers that fail to embed more digital capabilities within their F&A operations willsee their value proposition fade away.
©2016 HfSResearch Proprietary │Page7
Finance Professionals Buy Into Digital TransformationTowhatextentdoyouagree/disagreewiththefollowingstatements?
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
35%
32%
23%
25%
28%
49%
50%
53%
51%
46%
13%
16%
16%
19%
18%
7%
4%
6%
Enterprisesthat embrace digitaltransformationacrossbusinessfunctionswillgainmore groundthantheir
competitors inthenextcoupleofyears
Successful digitaltransformation impacts thewholeserviceexperience forendcustomersandinternalemployees, byintegratingthe front,middleandbackofficeprocesses
Thenewwaveofdigitaltechnologies isfundamentallychangingthewaythatthefinance functionoperates
Financeprofessionals who embrace digitaltechnologies willexperience faster careerprogression
Serviceprovidersthatfailtoembedmoredigitalcapabilitieswithintheirfinance andaccountingoperationswillsee their
valuepropositionfadeaway
Agree Strongly AgreeSomewhat Neutral DisagreeSomewhat DisgreeStrongly
©2016 HfSResearch Proprietary │Page8
Buyers’ Wish List—Be More Data-Driven & Efficient ProcessesThinkingabouttheadoptionofdigitaltechnologies,howimportantwouldyousaythefollowingbusinessdriversaretoyourfinanceorganization?
35%
39%
32%
31%
30%
23%
31%
19%
23%
57%
49%
51%
52%
52%
59%
49%
56%
47%
7%
10%
15%
16%
17%
17%
19%
23%
29%
Improveoperationalinsightstoincrease productivity
Gainoperationalefficiencytohelpstafffocusonhighervalueactivities
Breakfromlegacytechnologythatisholdingbackourorganization
Createamoreanalyticalcultureamongstaff
Enhanceourcollaborativecapabilitywithourcustomersandpartners
Promotemorecreativethinkingandcollaborationamongstaff
Expandmarketinsightstoimprovecompetitivenessandgrowthopportunities
Lessen theneedtokeephiringnewstafftosupportbusiness growth
Improvethemobilityexperienceofemployees
Hugeimportance Someimportance Minimalimportance Noimportanceatall
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
Proprietary │Page9©2016 HfSResearch
State of the F&A As-a-Service Market: Highlightsn Nature of Engagement to Encompass Change Management: During the study, HfS heard a number of
references to service providers clearly working to understand better the maturity and readiness of theclient environment for change, and the extent of change. There is an increasing focus on changemanagement in transition, and service providers being more active in defining and delivering on sharedservices and global business services business cases across client organizations. The service provider’sinterface to the client is becoming a more critical and strategic role.
n Productivity Gains in Contracts Increasing: There is an increasing focus on efficiency gains to ensurethere is no “standing still”—that steps will be taken continuously to improve the operations over thelength of the engagement. This approach is also driving take up automation because it’s a now aproven way to keep achieving these goals over time. “We have a committed outcome contract thatrequires productivity and it is in my interest that they can achieve it,” shared a finance executive,“because of my responsibility to internal stakeholders and the business case as well.” We also hear ofan increasing number of hybrid contracts that combine transaction or gain-sharing with FTE.
n New Age Clients Versus Legacy Relationships: Some service providers are taking a number of steps towork with legacy clients to map a path to the next level of value driven by “digitization”—the use ofautomation, cloud and mobile technology. A major part of original contracts are the use of client ERPsystems, and they are exploring how to better work with or outside of those systems, rather than use itas an excuse to not make changes as at all. The challenge for service providers is to take this approachconsistently across clients, which means hiring and training more change agents to be account leadersand and creating a culture of change in the delivery organization.
Proprietary │Page10©2016 HfSResearch
State of the F&A As-a-Service Market: Highlightsn Finding and Articulating Problems Could be Better in many instances: Even if a service provider received
high/stellar marks for delivery performance, when it comes to finding problems, articulating, and jointlyresolving them, clients express frustration. Service buyers want to know how the work is going, and whenthere are issues, trouble spots or ideas, to have insight into it. In some service providers, it meansaddressing the tendency to try to fix something “behind the scenes” so that everything “looks good.” In areal partnership there is dialogue around the realities of what is and is not working. Operationsdashboards are becoming more sophisticated, real-time tools to support these discussions.
n “Digital” Drives Discussion: Because “digital” is a term open for interpretation, it can serve as a “dooropener” for a discussion about what really needs to change not just in the Finance organization, but theimpact across an enterprise. Clients are more open to using service provider owned or managedtechnology when it is integrated in the process and connect with business results, and not for the sake oftechnology alone. As one executive said, “where tools are strong is where service provider has invested IPand where the tools are deeply embedded into the practice and method.”
n Early Stages of Robotic Process Automation Uptake: The use of automation is not new in F&A, as serviceproviders have been developing macros to automate routine tasks, and drive workflow, for example, forquite awhile now. Most of what we see today is in in collections, order processing, invoicing, andreporting. The increased use and potential impact of RPA is part of “every” discussion, according to manyof the service providers, who either bring it up proactively, or are responding to questions. But as oneservice provider put it, “we are thinking too small,” and the use of it could be more widespread and withgreater impact. What’s holding back the use of it this way is the lack of understanding among buyercompanies for what RPA is and how it is part of a broader business case for driving business outcomes. Themost effective use over time will be when it is part of the overall solution design between a service buyer(business and IT) and service provider to drive agreed upon business outcomes.
Proprietary │Page11©2016 HfSResearch
State of the F&A As-a-Service Market: Highlightsn The Need for “Intelligent Delivery”: In the push for “innovation” in service delivery, we hear mixed
reviews. While service delivery teams do need to be identifying and addressing trouble spots andraising ideas/suggestions for change, they also need to consider the context and the impact on theend-to-end process. Service providers need to find the right balance of encouraging change, and beingsure that delivery teams have the right context and environment for it, with checks and balances.
n Industry Verticalization Driving More Insightful Work: Buyers are mixed as to whether or not theyvalue industry-specific capability in their service provider engagement. Some just want standardfinance best practices and capabilities. However, for buyers and service providers looking to increasethe value of the engagement over time, functional and/or industry context helps increase therelevance of the work. And in some industries, industry knowledge is clearly useful for driving moreanalytics based work and extending coverage of the value chain, such as into spend analytics and riskand compliance.
n Mixed Maturity In Analytics: A handful of service providers have carved out areas in Finance &Accounting where they have developed expertise and momentum, such as IBM in receivables analytics,Accenture in financial planning & analysis and risk & compliance, WNS in working capital, and TCS infinance. Cognizant and Genpact also have developed a strong analytics analytics capability that roundsout the leaders in this area to date. The engagement needs to have a certain level of stability and trustfor analytics to be a part of of it. Some of the comments we heard from buyers included: “they bring usinteresting and insightful views of our business and we just have not been able to do something withit,” because the organization has other priorities; “we are looking to stabilize our operations before weget into analytics;” and “they are learning how to present to us well... what’s relevant to our companyand the level of detail versus executive summary…” Also, companies need to be willing to share dataand “allow” insights, e.g., “how come you are giving our data to a service provider”?
Proprietary │Page12©2016 HfSResearch
State of the F&A As-a-Service Market: Highlightsn Increasing Workforce Flexibility still a Core Benefit: In places where clients have felt the impact of
attrition, turnover, and inappropriate staffing (where the skills are not the right level to meet thedesired results), service providers have been quick to respond and adjust, whether at the account ordelivery level. The F&A sourcing market has mature recruiting and on-boarding in this area, driven byhigh levels of turnover for somany years. We also see increased attention to career path definition andtraining for use of automation and analytics based on employee interests and skills as well. However,there is still an untapped opportunity for service providers to create more dynamic environments foremployees (current, potential, and contractor) to opt in, self-select, or find and apply for engagementopenings and initiatives thatmatch their skills, interest and experience.
n F&A sourcing having Positive Impact on Career Development for in-house staff: We heard from anumber of service buyers that one of their drivers for sourcing was to create a more interesting careerpath for their finance employees. Either in larger enterprises or in mid-market where the finance teamis smaller, they recognize that service providers who specialize in finance across many organizationscan have the focus and resources to offer more advanced training and career options. In theincreasingly technological and analytical nature of the work, there are a number of options emergingfor careers in business process services—those that want to be business process efficiency experts andthose thatwant to take an analytical path, for example.
n Business Process Services: While experienced sourcing professionals are increasingly appreciating thevalue of service providers’ capability and exploring beyond a cost reduction and labor arbitrage valueproposition, broadly speaking, too many people still think of BPO as labor arbitrage and not as services.To drive increased value for a business over time, this perspective needs to change, particularly inprocurement organizations and legal teams.
Proprietary │Page13©2016 HfSResearch Ltd.
n As-a-ServiceWinnersareserviceprovidersthatareincollaborativeengagementswithclients,andmakingrecognizableinvestmentsinfuturecapabilitiesintalentandtechnologytocontinuetoincreasethevalueovertime.TheseprovidersarealsoleadinginincorporatinganalyticsasaserviceintoFinancecontracts.
• Accenture,Capgemini,Genpact,IBM,TCS,WNSn TheHighPerformers allexecutewell,areinvestingin
futurecapabilities,butneedtogainmoreconsistencyandtractionamongclientsindefininganddeliveringagainstbusinessoutcomes,andusinganalytics:
• Cognizant,HCL,HPE,Infosys,Wipron TheExecutionPowerhouses areallstronginoperational
excellenceandincreasinglycombiningtalentandtechnologyeffectively,butarestillinmoreofa“directive”andtransaction-orientedrelationshipwithclients:
• arvato,Sutherland,Xchanging
n OneSourceVirtualhasHighPotential,justenteringtheFinancemarketwithanativeAs-a-Serviceapproach.
n Aegisalsoparticipatedinourstudy,andweseethiscompanymakingtractioninexecutionandinnovation,justalittlefurtherbehindthanitspeers.
AS-A-SERVICEECONOMY
Useofoperatingmodels,enablingtechnologiesandtalenttodrivebusinessoutcomesthroughoutsourcing.Thefocusisonwhatmatterstotheendconsumer.
HfSusestheword“economy”todescribethenextphaseofoutsourcingasanewwayofengagingandmanagingresourcestodeliverservices.
The8IdealsoftheAs-a-ServiceEconomy:1. Write OffLegacy2. DesignThinking3. IntelligentEngagement4. BrokersofCapability5. IntelligentAutomation6. AccessibleandActionableData7. Holistic Security8. Plug-and-PlayDigitalServices
Source: Beware of theSmoke: Your Platform Is BurningbyHfS Research, 2015
State of the F&A As-a-Service Market: Service Providers
Confidential and Proprietary │Page14
Journey to Finance As-a-Service
©2016 HfSResearch Proprietary │Page15
There Is Room for Improvement in Finance Operations PerformanceServiceBuyers:HowsatisfiedareyouwiththeoperationalperformanceofyourF&Aprocessesasoftoday?(VerySatisfied)
13%
13%
10%
8%
8%
6%
6%
25%
19%
17%
15%
15%
13%
17%
Audit
FinancialPlanning&Analysis
OrdertoCash
Overall
ProcuretoPay
RecordtoReport
Treasury,Budgeting
>$5Bn
<$5Bn
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
©2016 HfSResearch Proprietary │Page16
Anticipated Impact from Digital Technologies Is a Driver for ChangeServiceBuyers:Towhatdegreedoyouthinktheadoptionofdigitaltechnologieswillimpactthefollowinginthenexttwoyears?
34%
28%
26%
26%
25%
21%
19%
53%
49%
65%
54%
62%
54%
53%
11%
20%
8%
17%
13%
21%
25%
Cycletimeoptimization
Agilityofthebusinesstodrivechangesinoperatingmodel
Costandproductivity
Userexperience infinanceprocesses
Leveragingfinancialandnon-financialdataforbetterdecisionmaking
Internalandexternal customerexperiencesoffinanceprocesses
Operationalriskmanagement
Hugeimpact Some impact Minimalimpact Noimpactatall
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
Budget Restrictions and Process Standardization Stand in the WayWhataretheprimaryobstaclestoyourfirmachievingmoreF&Abusinessimpactthroughdigital?
51%
48%
38%
33%
29%
22%
22%
20%
16%
13%
12%
Lackofbudget
Lackofprocessstandardization
Co-ordinationbetweenITandbusiness
Dealingwithlegacysystems
Middlemanagementincentives
Failuretoaligndigitaltobusinessoutcomes
Seniormanaementincentives
Seniormanagementdon'tseebenefit
Changemanagement
Lackofserviceprovidercapability
LackofITdepartmentcapability
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
Proprietary │Page18©2016 HfSResearch
Service Buyers Could Improve the Quality and Outcomes by Changing the Nature of their Outsourcing Engagement
28%
13%
9%
45%
4%
2%
Lettinggoandgivingupmorehigher-valueworktoourserviceprovider(s)
Threateningtoentertaincompetitivebid(s)toforceyourcurrentprovider(s)touptheirgame
Bringbackmoreworkin-houseandimproveitourselves
Rolloutanautomationstrategyintandemwithourprovider
Bringinaspecialistadvisortorecalibrateourrelationship(s)andgetusontherightcourseforAs-a-
Service
Notalot– wepaidfor“cheapandcheerful”andthat’swhatwe’restuckwith
Whichofthefollowingactions(selecttwo)wouldimprovethequalityandoutcomeofyourcurrentsourcinginitiative(s)?
Source: The HfS Working Summit for Service Buyers, December 2015Sample: 53 Enterprise Outsourcing Leads
Analytics, Creativity, Automation and End-to-end Process Capability Dominate Talent Requirements in Finance
45%
37%
35%
34%
32%
30%
25%
21%
43%
51%
51%
57%
51%
58%
54%
52%
11%
12%
13%
9%
17%
11%
21%
27%
Analyticalskillstoimproveoperations/productivity
Proactivelyidentifyingnewwaysofdoingthings
Understanding/usingautomation
Improvingend-to-endprocesses
Influencingseniorexecutives
Definingbusinessoutcomes
UnderstandingLeanprinciples
Applicationofdesignthinking
Increasingsignificantly Increasingsomewhat Nochange/decreasing
Towhatextentarethefollowingtalentrequirementsincreasinginimportancetogainmorevaluefromyourfinanceprofessionals?
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
©2016 HfSResearch Ltd.
TOOLS/INFRASTRUCTURE GOVERNANCE
Welcome to the As-a-Service EconomyHfSusestheword“economy”toemphasizethattheemergingnextphaseofoutsourcingisamoreflexible,outcomefocusedwayofengagingandmanagingresourcestodeliverservices.OperatingintheAs-a-ServiceEconomymeansarchitectinguseofincreasinglymatureoperatingmodels,enablingtechnologiesandtalenttodrivetargetedbusinessoutcomes.Thefocusisonvaluetotheconsumer.
I.THEOPTIMUMOPERATINGMODEL
Outsourcing|SharedServicesGBS|BPaaS/SaaS/IaaS|Crowdsourcing
II.EMPOWERINGTALENTTOMAKEITALL
POSSIBLECapabilitiesoverSkills|
DefiningOutcomes|Creativity|DataScience
IV.TECHNOLOGYTOAUGMENTKNOWLEDGELABOR
Digitization&RoboticAutomation|Analytics|Mobility|SocialMedia|CognitiveComputing
III.ABURNINGPLATFORMFORCHANGE
GlobalizationofLabor|High-growthEmergingMarkets|
DisruptiveBusinessModels|Consumerization
AS-A-SERVICEECONOMY
Agility|CollaborationOne-to-Many|OutcomeFocus
Plug-and-PlayServices
Proprietary │Page21©2016 HfSResearch
FixedAssetsLeveragedAssets
2DesignThinking
3BrokersofCapability
1WriteOffLegacy
4CollaborativeEngagement
7HolisticSecurity
5IntelligentAutomation
6Accessible&Actionable
Data
8Plug-and-PlayDigitalServices
SOLUTIONIdeals
LEGACYECONOMY
AS-A-SERVICEECONOMYCHANGEMGMT
Ideals
§ MovingintotheAs-a-ServiceEconomymeanschangingthenatureandfocusofengagementamongenterprisebuyers,serviceproviders,andadvisors
§ “As-a-Service”unleashespeopletalenttodrivenewvaluethroughsmartercombinationsoftalentandtechnologyfocusedonbusinessresultsbeyondcostreduction
Journey to the As-a-Service Economy
Proprietary │Page22©2016 HfSResearch
F&A Has Yet to Significantly Incorporate the Ideals of the As-a-Service Economy
IDEAL AS-A-SERVICEIDEALDEFINITION
NONEXISTENT
INITIAL EXPANSIVE EXTENSIVE ALLPERVASIVE
WriteOffLegacyUsingplatformbasedsolutions,DevOps,andAPIecosystemsformoreagile,lessexceptionorientedsystemsandprocesses 2016
DesignThinkingUnderstandingthebusinesscontexttoreimagineprocessesalignedwithmeetingclientneeds 2016
Brokers ofCapability
Orientinggovernance tosourceexpertisefromallavailablesources,bothinternallyandexternally,toaddresscapabilitygaps 2016
CollaborativeEngagement
Ensuring relationshipsarecontractedtodrivesustainedexpertiseanddefinedoutcomes 2016
IntelligentAutomation
Using ofautomationandcognitivecomputingtoblendanalytics,talent,andtechnology 2016
Accessible&ActionableData
Applyinganalyticsmodels,techniquesandinsightsfrombigdata,real-time 2016
HolisticSecurityProactivelymanagingdigitaldataacrossservicechainofpeople,systems&processes 2016
Plug andPlayDigitalBusinessServices
Plugginginto“readytogo”business-outcomefocused, people/process/technologysolutionswithsecuritymeasures 2016
Proprietary │Page23©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Writing Off Legacy
Legacytechnologyinvestments thatlimitagilityandcreate exceptionsaddressedby
addinginternalandexternalFTEs
Usingplatform-basedsolutions,DevOps,andAPIecosystemsformoreagile,less-exception-orientedsystems
§ In the Finance operations world, ERP systems have been king for many years. Significant investment have goneinto implementing and in many cases, customizing these systems. “Writing off Legacy” is not about abandoningthese systems, but in exploring and using, as the finance organizations look at corporate objectives andstrategy, platform-based solutions that integrate with the system of record, making the data more accessibleand extensible, and interfacing and integrating with other technologies. Service providers are developingpartner ecosystems with technology providers, wrapping around technology and business services, to be ableto both tap into existing systems (e.g., SAP and Oracle in many cases) and leverage newer proprietary and thirdparty options (e.g., Coupa, BlackLine, TradeShift), investing in platformsupport where they didn’t in the past.
Examples:§ With its LeanDigital approach, Genpact has evolved its traditional Lean Six Sigma process excellence focus.
LeanDigital provides a framework for working with clients to use design thinking for identifying, aligning andaddressing issues and opportunities. It’s a transformative approach to align digital technology and talent withdesired business outcomes fromF&A delivery.
§ An EXL client described how they are developing an integrated network of their own and EXL tools andresources. EXL works in their SAP system, uses an EXL tool for indexing in accounts payable and expenseauditing, and has incorporated a number of automation macros to address a variety of tasks. Now they areworking in partnership with an RPA third party provider to explore the use of RPA for general ledger processing.For each problem they are looking to address, they consider the tools, technologies, and capabilities of eachparty for the best combination to reach the objective.
Proprietary │Page24©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Design Thinking
Resolvingproblemsbylookingfirstattheprocessasthesourceofthesolution
Understandingthebusinesscontexttoreimagineprocessesalignedwithmeetingclientneeds
§ Design Thinking provides a new way to think and engage as partners. It helps shift the focus of work andengagement from “internal” to “external”—to the end consumer—for deals stuck in “holding pattern,”engagements that have reached levels of consistent “green” in SLAs, and are questioning the next level of value,for executives that realize that there should be more and better use of digital technology such as automation,analytics, and cloud-based solutions. We are seeing very little, “Nascent,” use of Design Thinking in F&A today,and we believe there is an opportunity to use it as a way to establish joint initiatives and change the nature ofengagement in F&A. However, both the service buyer and service provider have to be interested in engagingthis way.
Examples:§ IBM is one of the more mature users of Design Thinking, even having a designer with F&A expertise. They are
infusing it into early stages of engagement, as well as in more established relationships. In one example,working with a client that wanted more than a low cost solution for the business, and a partner willing to investin the success, IBM and the client started using Design Thinking in the proposal process and the orals sessions,and committed to fund innovation that would push the boundaries on analytics and cognitive, iterating onsolutions in set sessions over time. In another session, IBM and a client explored how to reduce the close cycle.
§ Over the past few months, Infosys been “infusing” design thinking into its organization through training andalso through top-down messaging on changing the culture to being more of a “learning environment.” Theyshared examples of using this approach to define and address trouble spots and bottlenecks in accountsreceivable and accounts payable, ultimately redesigning processes that have impacted cash flow.
Proprietary │Page25©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Brokers of Capability
Focusinggovernanceandoperationsstaffonmanagingtotheletterofthecontractandthedecimalpointsofservice levels
Orientinggovernancetosourceexpertisefromallavailablesources,bothinternallyandexternally,toaddresscapabilitygaps
§ Being a broker of capability is about articulating a business problem or opportunity, the desired outcomes, andthen coordinating and facilitating across internal and external entities to reach those results. In our research,we spoke to many finance, shared services, and global business services leaders who fill these roles in theircompanies and with their service providers. One finance executive described his career path as starting in acontroller role, moving into a project management lead for implementing shared finance services, then directorof BPO services, increasingly facilitating across internal business unit leaders and external third party serviceproviders to set and manage expectations for results. These professionals, in both clients and service providers,as the linchpins in the emerging As-a-Service Economy, and we see an increasingly “Expansive” network ofbrokers in F&A.
Examples:§ We have heard many stories from Capgemini and clients of brokers of capability in action, and alignment of
brokers between the two companies to advance the value of the operations and engagement. In clients, thesebrokers are typically in a shared services leadership role, or a global process owner, and have decision makingauthority, and manage the partnership to achieve outcomes, not just address contractual terms and conditions.
§ With the increasing number of alliances between service providers and technology vendors to deliver digitallybusiness process services, we see brokers of capability playing critical roles in companies like Cognizant (withBlackLine) and Xerox (with TradeShift) to coordinate between clients, their own organizations and third parties.One caution we heard here from a client is for the service provider to be sure to set appropriate expectationsand managewhich party is accountable forwhat activity and business outcome.
Proprietary │Page26©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Collaborative Engagement
§ At the core of the As-a-Service Economy—linking the solution ideals to the change management ideals thatmake a solution effective over the long term—is collaborative engagement. As such, the service providers thatare considered “partners” by service buyers are typically leaders in moving the industry toward Finance As-a-Service. Traditionally, business process outsourcing work has been directive from service buyers to serviceproviders and managed strictly by procurement organizations. As more business units and global sharedservices centers take responsibility for relationships, HfS is seeing a move over time to more collaborationwhere trust and experience are in place, often through shared outcomes and results. The adoption of practicesof collaborative engagement is “Expansive” in F&A today as there is still a mix in themarket on simple cost andefficiency play versus solving challenging business issues.
Examples:§ “Our relationship is a partnership,” said one client of the engagement with EXL. EXL takes initiative to explore
complicated scenarios and problems, and potential solutions that can use either client, EXL, or partnercapability, and shared investments. Central to this success is the time and effort clients believe EXL takes tounderstand their business.
§ Often asked what WNS stands for, the CEO’s current response is “we nurture specialists,” and from what wehear from clients, the service provider also nurtures “service buyers.” WNS is organized by industry businessunits, with close integration within the company, allowing them to be very flexible and responsive to clients,especially over the length of the engagement as trust builds.
Evaluatingrelationshipsonbaselinesofcost,effort,andlabor
Ensuringrelationshipsarecontractedtodrivesustainedexpertiseandoutcomes
Proprietary │Page27©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Intelligent Automation
Operatingfragmentedprocessesacrossmultipletechnologieswithsignificant
manualinterventions
Usingautomationandcognitivecomputingtoblendanalytics,talent,andtechnology
§ As a market, F&A is in the “Initial” stages in using what we call Intelligent Automation—using software andtechnology to do routine tasks, and enhancing it through machine learning and natural language processing,and moving up the curve with artificial intelligence. All service providers have been using macros and “mini-bots” on what they can manage without touching the client IT environment for years, and are increasinglyapplying it more aggressively across activities for standardized processes to increase predictability, speed, andquality. As they do so, staff are oftenbeing retrained or shifted to new engagements.
§ Clients also are increasingly using automation, and exploring RPA. What we are not hearing a lot of is on joint orcollaborative effort for a strategy or use of RPA. The hesitation to do so seems to vary as to whether it isbecause of limitations on the client side or disinterest in engaging in joint efforts that could cannibalize theircurrent work on the service provider side. At the HfS Summit in late 2015, 45% of the attending service buyerexecutives said they believe a joint automationeffort could drive a new level of value in their engagement.
§ We heard many references to pilots underway for RPA, and some discussion on how to collaborate with ITdepartments of clients, which will be necessary to get full benefit from autonomics in the future. We see RPAtoday primarily in accounts payable workflow, collections, reporting, and invoice processing. According to a USF&A executive, “When cognitive tools really kick in, that will change F&A. We'll be able to train software to do alot of the problem solving and error spotting that we domanually today that is so time consuming.”
Proprietary │Page28©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Intelligent Automation (continued)
Operatingfragmentedprocessesacrossmultipletechnologieswithsignificant
manualinterventions
Usingautomationandcognitivecomputingtoblendanalytics,talent,andtechnology
Examples:§ TCShasmadethemostproactiveprogressworkingwithRPAinawaythatclientsrecognizeanddiscuss.
Examplesincludeprocure-to-pay,reconciliationinT&E,andapplicationsincollectionsandinvoicing,aswellasreconciliationandmonth-endclosetospeedtheprocessandaccuracyinrecord-to-report.TCShasshownthegreatestappetiteto“cannibalize”itsrevenuestoprovetoclientsitcanhaveweaveRPAeffectivelyintotheirprocesses.
§ HPEhasbeenaugmentingthesuccessofitsAutoflow toolbyproactivelyworkingwithRPAvendorsandconsultants,suchasVirtualOperationsacrossitsmajorF&ABPOclients.HfSisimpressedwitheffectivewayHPEhasembeddedRPAintoitsF&Adeliverysoseamlessly.
§ Clientsspecifically referencedtheautomatedoperationalsupportandchangemanagementinplaceatXchanging,withautomationappliedtotrainingandsupportaswellasfortasksandactivities thatdrivebusinessresults.
§ Xerox,EXL,Capgemini,IBM,HCL,EXL,Cognizant,andWiproarepartneringwithF&A-specificRPAvendorsandSaaS platformstohelpwithautomation,forexample:Basware foraccountspayable,BlackLine forrecord-to-report,andCoupa forspendmanagement.
§ Wiprowasearlytothegameinapplyingautomationtoordermanagementinparticular,andisexploringtheuseofartificial intelligence viaHolmes,fordynamicscanningandOCR,andtodetectfraud.
§ Inadditiontowhatweareseeingasmore“standard”automation,Accenturehaspilotsunderwayinartificialintelligence suchasusingIPSoftAmeliaasavirtualassistantattheF&AHelpDesk.
Proprietary │Page29©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Accessible and Actionable Data
Performingad-hocanalysisofunstructureddatawithlittleintegrationor
businesscontext
Applyinganalyticsmodels,techniques,andinsightsfrombigdata in real-time
§ The most effective analytics – analysis of data for insight that leads then to plan and action – starts withaggregated, cleansed, and standardized processes and data. It typically builds on where a service hasestablished a level of trust, operational stability, and depth of industry or functional expertise. The greatest takeup of analytics in this way has in accounts receivable, financial reporting and compliance, and financial planningand analysis. Most analytics work today is building on the data presentation and reporting that’s pretty wellestablished in sourcing activity in F&A today, so we see the industry at “Expansive” stage of this Ideal. A numberof service providers are hiring data scientists, developing visualization tools with simulation capability, androlling out internal and external training programs and partnerships for talent development in specialty areas.
Examples:§ Accenture is embedding analytics into all of its F&A work, with a comprehensive suite of F&A “apps” for
analytics, including Intelligent Collections, Disputes Predictor, Period End Accelerator, and Call Flow Forecaster.It is also increasingly using its Operations Navigator as means for real-time monitoring, visualization, andanalysis. For example, analysts using Payable Optimizer can simulate payment adjustments to identifyopportunities and guide decisions onoptimizing working capital withoutharming vendorrelationships.
§ Starting with the area in which it has the deepest and broadest expertise, Sutherland has embedded predictiveanalytics into order-to-cash. For example, teams use statistical modeling, forecasting, and simulation incollections to calculate the likelihood of payment and to reduce costs by prioritizing debtors. By doing so, theservice provider can focus on high-balance, low-collectability customers while at the same time applying soft-touch treatments to high-collectible and low-balance.
Proprietary │Page30©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Holistic Security
Respondingreactivelywithpost-eventfixes; little focusonend-to-endprocess
valuechains
Proactivelymanagingdigitaldataacrossaservicechainofpeople,systems, andprocesses
§ Holistic Security is the proactive management across internal and external people, process, and technology.Often the focus is on the systems, but in business process services and in sourcing engagements, people andprocess become a significant factor in managing and securing data. There is a very deep and ingrainedprotection of data in finance. We consider this Ideal at the “Initial” stage of development for operating in theAs-a-Service Economy, not because there is a lack of attention to security but because the desire for absolutecontrol and this almost paranoiac state about keeping service providers “away” from data is keeping theindustry from more advanced RPA, analytics, insight, and collaboration. We see increasing levels of maturityaround education, training, and compliance management, which is more and and more critical to establishingtrust and enabling more interactive and analytical based engagements. However, clients and service providersneed to jointly strategize on how to create a shared culture for holistic security in order to continue the drive to“digital F&A.”
Examples:§ TCSemploysasimple,comprehensive,andstraightforwardmodelforwhattheserviceproviderterms
“customersafety”:humansecurity(pre,during,andpostemployment),physicalsecurity(e.g.,electronicandbiometriccontrols),andITsecurity.TCSdoesperiodicinfoevaluationwithvulnerabilityassessmentstoidentifypotentialforfraud,andtokeepdataintegrityandconfidentiality.
§ Xerox shared that client concerns are primarily around the cloud security and data compliance, and it has beena particular focusof this service provider that workswith a lot of public sector organizations in particular.
Proprietary │Page31©2016 HfSResearch
How As-a-Service Is Taking Shape in F&A: Plug-and-Play Business Services
Undertakingcomplexandoftenpainfultechnologytransitionstoreachasteady
state
Plugginginto“readytogo”businessoutcome–focused,people,process, andtechnologywithsecuritymeasures
§ While Finance is heavily dependent on ERP systems, plug and play business services can unlock value byinterfacing with these systems, and making them more extensible and valuable. Plug-and-play also is wellpositioned for smaller but growing companies, and in support of replacing systems for companies going throughmergers. It does require business executives to drive the business case and coordinatewith IT and procurementto be successful. As an industry, we need to make it easier to use “plug and play,” contractually. The F&Abusiness process services is in the “Initial” stages of using Plug & Play Business Services. Many service providersare shaping, partnering, developing, and offering options, and it is a matter of readiness and momentumamong clients.
Examples:§ OneSourceVirtualisenteringthemarketasaBPaaS providerwithWorkdayatthecore.OSVcombines
Workday’sAccountsPayablefunctionalitywithaproprietaryinvoicecapturetoolandaWorkdaybasedproprietaryrulesengine.“Sharedautomation”isthefoundationoftheoffering.
§ Capgemini hasexperienced takeupofits“as-a-stack”offeringforfinancialmanagementbyclientsinthemid-tier.Thisapproachbringstogetherinfrastructure,applications,andbusinessservices forF&A.ItsacquisitionofiGATEandITOPS(frameworkforIT+businessservices)enablesCapgemini toitsextendofferingsinthisarea.
§ XeroxAccountsReceivable isavailableasSaaS orBPaaS fororder-to-cash,addressingcustomerandriskmanagementtoimproveDSOandcashflow.The“package”Includesamixofautomationandmanualactivity;apaymentapplicationforallocationbasedoncustomerprofilesandalgorithms;deductionanddisputemanagementwithaudittrails;collectionsmanagementprioritizedwithworkflowandperformancemanagement.
Confidential and Proprietary │Page32
Multi-Process F&A BPOMarket Size and Deal Trends
Proprietary │Page33©2016 HfSResearch
The Gap Between Large Enterprises (>$5B) and Mid-market Buyers Narrowing as More and More Service Providers Adopt to As-a-Service MindsetClientOrganizations’Revenueas%ofDealsNumberofDealsfrom2005to2015
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
• LargeenterpriseshavingrevenueaboveUS$5billion(55%)arestillthebiggestuserbaseofoutsourcing.However,thenumberofdeals/yearwiththelargestcompanieshassteadiedandisnotgrowing.
• Moremid-market(enterpriseshavingrevenueslessthanUS$5billion)areengaginginoutsourcing,increasingthetotalnumberofnewcontractssignedduring2014and2015.
• Aspredictedinourlastyear’sresearch,“ProgressiveFinance&AccountingBusinessProcessOutsourcingServices,March2015,”moreserviceprovidersareofferingflexiblepricingandplatform-basedbusinessprocessAs-a-Service,whichisdrivingamorebalancedmixintermsofmid-marketandlargeoutsourcingbuyers.
• In2016andbeyond,weexpect toseemoremid-markettosmallmarketbuyersadoptingoutsourcing,especially throughBPaaS.
$20B+31%
$10- 20B7%
$5B+18%
$2.5- 5bn17%
$1- 2.5bn9%
<$1bn16%
NA2%
Enterprise Categories RangeofRevenueLargeEnterprises Revenueabove US$5billionMid-marketEnterprises RevenueFrom US$500milliontoUS$5billionSmallEnterprises Revenuebelow US$500million
Proprietary │Page34©2016 HfSResearch
17.8%
13.8%
11.2% 10.8%
8.6%7.3%
6.3% 5.8% 5.6% 4.9%
2.8% 2.5%1.7%
0.9%
Banking,
Insurance/
Financial…
Telecom,
Software&Hi-
Tech
Transportatio
n&
Logisitics
Manufacturin
g
Retail
PublicSector
Utilitie
s&
Energy
Healthcare
Others*
Med
ia/
Publish
ing
LifeSciences&
HealthCare
Consum
er
Packaged
Goo
ds
Chem
icals
Automotive
BFSI, Telecom & High-Tech, and Travel/Transport Have Had the Highest Amount of F&A BPO Activity to Date
BEHINDTHENUMBERS
• Outsideofthetop3active industries,weseesteadyincreaseofF&ABPOadoptionby:Manufacturing,Retail,Healthcare&LifeSciences, andUtilities&Energy.
• PublicSectorcontracting iscyclicalwithupsanddownsoverthepastdecade.
• Fairly smallnumberofcontacts,bycomparison,in:AutomotiveandConsumer PackagedGoods.
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
%ofDealsbyVerticalSegment– 2005to2015NumberofContractsto-date- 1499
*OthersincludeindustrysegmentssuchasRealEstate,ProfessionalServicessuchasManagementConsulting,Staffing&RecruitmentProvider,LegalServices,ResearchServicesandotherprofessionalservices
Proprietary │Page35©2016 HfSResearch
50.2%
17.4%
11.3%
6.5% 6.3%4.5%
1.6% 0.8% 0.7% 0.5%
NorthAmerica UK India LatinAmerica Japan
RegionContractSigned– 2005to2015NumberofContractsto-date– 1,491
While North America Continues Dominate the F&A BPO Market, Activity in Asia Pacific is Increasing
BEHINDTHENUMBERS
• AfterNorthAmerica, EuropecontinuestogeneratedemandforF&AOutsourcing—equatingtoroughly30%ofthemarket.
• DemandforF&ABPOinAPAC,EMEAandLatinAmericahassignificantlyincreasedsince2013,albeititfortransactional-basedactivitiesandservices.
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page36©2016 HfSResearch
11%
25%
32%
22%
8%
2%
<2Years 2- 3Years 4- 5Years 6- 7Years 8- 10Years >10Years
F&A BPO Deals Are Typically in the Range of 4 - 5 Years, and Getting Shorter
LengthofF&ABPOContractTerm– 2005to2015NumberofContractstill-date– 1,491
BEHINDTHENUMBERS
• Thenumberof2-3yeardealsbetweenisareontherise.Inourpreviousreport,” thistimeframeformed22%oftotaldeals.
• Lasttwoyears2014and2015didnotwitnessanylong-termdealsascomparedto2013.
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page37©2016 HfSResearch
Multi-process F&A BPO Engagements Center Heavily on Transactional Accounting Processes with Major Uptick in Reporting Activity
TRANSACTIONALACCOUNTING
REPORTING
FINANCIALPLANNINGANDTRANSFORMATION
BUSINESSINTELLIGENCE
56%
44%
29%
17%
19%
42%
31%
40%
28%
30%
36%
33%
30%
18%
23%
15%
18%
17%
20%
7%
9%
13%
13%
AccountsPayable
Travel&Expense
CreditManagement
PayrollServices
PayableAnalytics
CashApp/AccountsReceivable
Billing/Invoicing
Collections
RevenueReporting
ReceivablesAnalytics
FixedAssets
Inter-Company
ManagementAccounting
RiskManagement
TaxandTreasury
FP&A
ReportingAnalytics
FinancialProcessConsulting
F&ASystems/PlatformsDevelopment
ChangeManagement&CommunicationsSupport
FinanceAnalytics
WorkingCapitalAnalytics
Risk&ComplianceAnalytics
(Contracted aspartof deal)
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page38©2016 HfSResearch
Uptake in RPA Adoption Is Led by Proprietary Toolsets
BEHINDTHENUMBERS
• IBM,Capgemini,TCS,InfosysandXeroxleadinthenumber ofdeploymentofproprietaryRPAtools.
• Thethirdpartytoolsareincreasinglyusedasacomplementtoin-houseorproprietarysoftware.
• Although proprietarytoolstaketheleadinF&ABPO,off-the-shelfproducts suchasAutomationAnywhere,UiPath andBluePrismaregainingmomentum.
• SAP-Ariba,BaswareandCoupaareexamplesofthirdpartysoftwarepackagesspecifictoF&Aprocesses,aidingautomationintheprocure-to-payarea.However,HfSResearchdoesnotclassifytheseasstandaloneRPAtools.
In-HouseTools40%
AutomationAnywhere
20%
UiPath14%
BluePrism5%
OpenSpan4%
WinAutomation3%
BlueWorksLive3%
iLogic3%
Fusion2%
Simpro/Scribe1%
BPOInspect1%
RapidPaste1%
Automic1%
Others*2%
PercentageofRoboticsProcessesDeploymentbyRPAToolsNumberofContracts
*Others include toolssuch as Coupa, SAPAriba,Basware oranyothertools thatHfS does notclassify asRPA for thelackof Artificial Intelligence
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page39©2016 HfSResearch
OrdertoCash
RPA Deployment is High Across Repetitive and Standardized Activities in F&A BPO
ProcuretoPay
RecordtoReport
Analytics
PercentageofRoboticsProcessesDeploymentbyValueChainin2015NumberofContracts=225LiveContractsin2015
20%5%
1%
13%6%
5%4%
3%
16%3%3%3%
2%2%
1%
6%6%
1%
InvoiceProcessingTravel&Expenses
PaymentProcessing
CollectionsBilling/Invoicing
CashApp/AccountsReceivableRevenueReporting
ReceivablesAnalytics
ReportingAnalyticsFixedAssets
Inter-CompanyRiskManagement
ManagementAccountingTaxandTreasury
FP&A
FinanceAnalyticsWorkingCapitalAnalytics
Risk&ComplianceAnalytics13%
30%
30%
27%
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
©2016 HfSResearch Confidential and Proprietary │Page40
ServiceProvidersOverallRPAActivityinF&ABPOas%ofDealsNumberofContracts=225LiveContractsin2015
RPA Adoption is Led by IBM, Genpact and Capgemini
0.8%
0.9%
1.1%
1.4%
2.1%
2.4%
2.9%
3.2%
4.9%
5.0%
6.1%
7.6%
12.9%
16.1%
21.3%
HPE
arvato
Cognizant
Sutherland
Wipro
Xchanging
EXL
Infosys
Accenture
WNS
TCS
Xerox
Capgemini
Genpact
IBM
BEHINDTHENUMBERS
IBM,Genpact,Capgemini,Xerox,TCSandInfosys havebeeninvestingheavilyondevelopingtheirin-houseproprietarytools.
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page41©2016 HfSResearch
The Demand for Complex Analytics Activities Is on the Rise
BEHINDTHENUMBERS
• Since2013,thepercentageofdealswithananalyticscomponenthasincreased.
• The F&ABPOmarketisshowingahigherdemandforWorkingCapitalandRisk&Compliancetypeofanalyticswork.
• AsReceivablesAnalyticsworkisincreasinglystandardizedandautomated,itisbecominglessaccountedforasstand-aloneanalyticsandmoreas“businessasusual.”
• Theservice providerswiththehighestnumberofdealsinwhichanalyticsisspecificallycontracted:Accenture,Cognizant,Genpact,IBM,TCS,andWNS.
56%
14% 14%
6%8% 9%
40%
14%16%
7%9%
11%
30%
15%18%
9%13% 13%
ReceivablesAnalytics
FP&A ReportingAnalytics
FinanceAnalytics
WorkingCapitalAnalytics
Risk&ComplianceAnalytics
2013Survey
2014Survey
2015Survey
PercentageofFinanceAnalyticsScopeinMulti-processF&ABPODealsNumberofContracts
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page42©2016 HfSResearch
FTE41%
Transactional35%
Gain-sharing/Outcomebased
14%
Hybrid7%
Subscriptionbased3%
BEHINDTHENUMBERS
• ThepricinginF&ABPOcontinuesaspredominantlyFTE-based.However,buyersandserviceprovidersareincreasinglyexploringmodelsbeyondFTE-basedpricing,evenbeforerenewaldates.
• Mostofthetransaction-basedpricingmodelshaveoutcomesdefined,howeverpricingisnottiedtothebusinessoutcomes.
• Gain-share-basedpricingmodelhasbeengainingmomentumoverlasttwoyears.
• Ourdiscussionswithbuyersandserviceprovidersindicatethatserviceprovidersaremoreandmoreconfidentinrecommendinghybridorgain-share-basedpricingmodels.
• ThegrowinguseofplatformsandBPaaShasenabledmarginaluptakeinsubscription-basedpricing.
Current Pricing Models Deployed in F&A BPO
%F&ABPOContractsPricingConstruct– 2013to2015
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page43©2016 HfSResearch
51%
31%
16%12%
4%
FTEBased Transactional Hybrid Gain-sharing/Outcomebased
Subscriptionbased
FeeStructuresofAlltheF&ABPOContracts:2005to2015PercentageofContracts
Long-Term Contracts Keep FTE-Based Pricing Dominant, but Transaction- and Outcome-Based Are Increasingly Attractive Options for Buyers
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page44©2016 HfSResearch
FeeStructures(IncludingGainsharing)PercentageofContracts
54%45%
46%55%
2008 2015
%F&ABP
OCon
tracts
F&A BPO Is Shifting to Transaction and Business Outcome-Based Models from FTE-Based
Transactional/Hybrid/Gain-shareFTEExclusiveModel
BEHINDTHENUMBERS
• Weseeincreasedinterestinbreakingawayfromheadcount/FTE-basedmodelsinbusinessexecutivediscussions,however,procurementorgnazationsaretypicallystillfocusedonthismodelandlessopentoalternatives.
• Forarealstep-changehere,contractingwillneedtoberedefined—suchasownershipinthebusinessunitswithmoreofaframeworkapproachmanagedbyprocurementandlegalasstakeholdersversusdriversofcontracting.
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Proprietary │Page45©2016 HfSResearch
As Relationships Get More Collaborative and Aligned on Business Outcomes, We Are Seeing an Increase in the Number of Sole-Sourced Deals Versus Competitive BidsNewF&ABPODeals,PercentageSoleSourcedvs.CompetitiveBidPercentageofDeals
NewF&ABPODeals(2015),CompetitiveBids– PercentageUseofAdvisorsPercentageofDeals
NewF&ABPODeals(2015),SoleSourced– PercentageUseofAdvisorsPercentageofDeals
25% 30% 35% 33%39%
75% 70% 66% 67%61%
2011 2012 2013 2014 2015
% F
&A
BPO
Con
trac
ts
CompetitiveBidSoleSourced No Advisor Used32%
Advisor Used68%
No Advisor Used59%
Advisor Used41%
Source: HfS Research, 2015, N=1,491 liveMulti-process F&A BPO ContractsBased onliveF&ABPO contractswhich areover$1m inTCVand haveaminimum of twocore F&Aprocess bundled
Confidential and Proprietary │Page46
Global F&A BPO MarketSize and Forecast
Proprietary │Page47©2016 HfSResearch
n UpdatedMarch,2016
n MarketsizingbasedonserviceproviderfinancialstoQ42015
n Sizingmethodology• HfS’smarketsizingreliesonaconsistentprimarymethodologythatisusedforeachservicecategory.HfS’sprimarymethodisasupplysidemodelthatbuildsmarketdimensions byestimating revenuesfromthemostsignificantserviceprovidersineachcategory.Thisisaugmentedbyspendingmodelsandcontracttrackingforeachspecificmarket.
n Forecastingmethodology• HfS’sforecastingcombineshistoricrevenuegrowthprojections,contractrunrateprojections,demandsidesurveydata,supplysidesurveydata,andeconomicprojections.
n Sizeandforecastupdatedquarterly
IT Services and BPO Market Sizing 2015–2020Scope and Method
Proprietary │Page48©2016 HfSResearch
n HfS’smainforecastassumptions:• GDPgrowthfor2016willbearound2.5%,witheconomicprospectsevenacrossglobalregions,andwithmorerecoveryexpected inadvancedeconomiesthanindevelopingones.
• Overall,anapproximate95%renewalrateonexistingoutsourcingdeals–renewalwithexistingornewprovider(rateofinsourcesetat5%).
• Renewalratesatapproximateaverage85%oforiginalcontractvalue(variesbytype).
• Wecurrentlyhaveavolumepredictionof15%foroveralloutsourcingduring2016.
• Weanticipatethatplatform-basedBPO/BPaaSwillcontinuetodrivenewoutsourcinginsmallandmid-sizedorganizations.
• Weexpecttoseemoreinterest inanalyticsandtheimprovementofend-to-enddatamanagementwithorganizations.Weexpectthistodriveconsultingopportunitiesandlong-termcontractswithallbackofficeBPOareas,particularlyF&A.
Main Assumptions
Proprietary │Page49©2016 HfSResearch
n ITServicestogrow2.2%in2016,2.6%CAGRto2020• Continuestobeatwo-speedmarketwithdigital-relatedtechnologiesgrowingatdoubledigitswith
traditionalservicesflatordeclining.• Consultingandintegrationspendingcontinuetocreepupdrivenbyaforementioneddigital.• ITinfrastructuremanagementcontinueswithdeclines inlegacyoutsourcingslowingbutstillnotfully
offsetbyupticksincloudadoption.• ApplicationDevelopmentandMaintenance(ADM)volumescontinuetoincrease temperedbypricing
pressureandsomeinsourcingbutthemarketcontinuestogrowfasterthanothersegmentsinITServices.
n BPOtogrowat4.2%in2016,4.0%CAGRto2020• Automationandplatform-basedAs-a-Servicemodelseatintotraditionalmarkets.• “Mid-market”F&Adealsareincreasingasseveralserviceprovidersworkwithsmaller scaledeals(sub
50FTEs).• MostF&AdealsarestartingwiththetraditionalFTE-pricingmodel,butseveralmaturingdealsare
evolvingtobecomeorincludemorevolume-basedandoutcome-basedpricing.• Wide-spreadexperimentationnowunderwaywithRoboticProcessAutomationinF&ABPO,withslow
movementtowardsadoptionacrossclientsandserviceproviders.• IncreasedbundlingofF&AandIT,especially inretailandconsumergoodsectors,howevertheindustry
isstilldominatedbymanylegacyF&ABPOdealsinneedofbetterautomationandanalytics.• ServiceProvidersunwillingtoinnovatewilllikelyexperience increase incompetitivere-bidsoverthe
next3-4years.
IT Services and BPO Market 2016–2020 Highlights
Proprietary │Page50©2016 HfSResearch
Global F&A BPO Market 2016 (Expenditure $B)
Multi-process$6.4
O2C$16.5
P2P$1.5
R2R$0.8
S2P$2.1
Source: HfS Research, 2016
TotalMarketSize~US$27.3B
Proprietary │Page51©2016 HfSResearch
Global F&A BPO Market 2015–2020 (Expenditure $B and Growth %)
6.4 7.0 7.8 8.3 8.9 9.6
16.5 17.017.4
18.218.9
19.6
1.51.6
1.71.9
2.02.2
0.80.8
0.91.0
1.11.2
2.12.3
2.42.7
2.93.1
4.5% 4.6% 4.7%5.0% 4.8% 4.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
$0
$5
$10
$15
$20
$25
$30
$35
$40
2015 2016 2017 2018 2019 2020
Grow
th(%
)
ANNUA
LEXP
ENDITU
RE$B
Source: HfS Research, 2016
P2PR2RS2P
O2CMulti-processTotalF&AGrowth
Proprietary │Page52©2016 HfSResearch
Global F&A BPO Market Growth in 2016 and CAGR for 2015–2020
10.2%
2.8%
7.1%
10.4%
8.9%
8.6%
3.5%
7.5%
8.5%
8.3%
0% 2% 4% 6% 8% 10% 12%
Multi-process
O2C
P2P
R2R
S2P
Source: HfS Research, 2016
2016CAGR
Proprietary │Page53©2016 HfSResearch
F&A BPO Services Market 2015–2020 by Region(Annual Expenditure $B )
Source: HfS Research, 2016 Note: APexJ isAsia Pacific except Japan
2729
3032
3436
0
5
10
15
20
25
30
35
40
2015 2016 2017 2018 2019 2020
ANNUALEXPEN
DITURE
$B
NorthAmerica LatinAmerica APexJ Japan EMEA Global
Proprietary │Page54©2016 HfSResearch
F&A BPO Services Market 2015–2020 ($B) by Region (CAGR % over time period)
5.1%5.5% 5.7%
6.1% 6.1%
7.9%
EMEA Global NorthAmerica APexJ Japan LatinAmerica
Source: HfS Research, 2016 Note: APexJ isAsia Pacific except Japan
Proprietary │Page55©2016 HfSResearch
F&A BPO Services Market 2015–2020 by Industry Sector(Annual Expenditure $B)
4.1 4.2 4.4 4.5 4.7 4.8
4.2 4.3 4.4 4.6 4.8 4.91.4 1.6 1.7 1.8 2.0 2.14.6 4.8 5.1 5.3 5.6 5.81.1 1.2 1.3 1.3
1.4 1.5
1.3 1.3 1.4 1.51.5 1.6
1.3 1.31.4 1.5
1.5 1.63.1 3.3
3.53.7
4.04.25.2
5.76.2
6.77.3
7.9
0.90.9
1.01.1
1.11.2
$0
$5
$10
$15
$20
$25
$30
$35
$40
2015 2016 2017 2018 2019 2020
MarketExpen
diture$Billion
Transportation&Logistics
Telecom,Software&Hi-Tech
Retail&Hospitality
PublicSector
Pharma,LifeSciences&HealthCare
Other
Manufacturing
Entertainment,Media&Publishing
Energy&Utilities
Banking/Insurance
Source: HfS Research, 2016
Proprietary │Page56©2016 HfSResearch
F&A BPO Services Market 2015–2020 ($B) by Industry(% Growth over time period)
Source: HfS Research, 2016
8.5%8.1%
6.0% 5.8%
5.0%4.6% 4.4%
3.5% 3.5%
Telecom,Softw
are&
Hi-Tech
Entertainm
ent,Med
ia&
Publish
ing
Retail&
Hospitality
Transportatio
n&
Logistics
Pharma,LifeSciences&
HealthCare
Manufacturin
g
PublicSector
Banking/Insurance
Energy&Utilities
Research Methodology
Confidential and Proprietary │Page58©2016 HfSResearch
Research Methodology
n Data was collected in Q4 2015 and Q1 2016, coveringbuyers, providers and advisors/influencers of Finance &Accounting Business Process Outsourcing Services.
§ TalesfromtheTrenches:Interviewswithbuyerswhohaveevaluatedserviceprovidersandexperiencedtheirservices.Somecontactswereprovidedbyserviceproviders,andotherswereinterviewsconductedwithHfSExecutiveCouncilmembersandparticipantsinourextensivemarketresearch.
§ Sell-SideExecutiveBriefings:Structureddiscussionswithserviceprovidersregardingtheirvision,strategy,capability,andexamplesofinnovationandexecution.
§ PubliclyAvailableInformation:Thoughtleadership,investoranalystmaterials,websiteinformation,presentationsgivenbyseniorexecutives,industryevents,etc.
ThisReportisBasedOn:
ParticipatingServiceProviders
DataSummary
Proprietary │Page59©2016 HfSResearch
HfS Blueprint Scoring: Finance As-a-Service
EXECUTION 100%QualityofAccountManagement Team 15%IncorporateFeedback 15%Quality ofServiceDelivery 15%Embedding Automation 10%IndustryDepth/TailoredSolutions&Services 5%Analytics &GeneratingActionableData 15%Ability toAttract&RetainKeySkills 15%FlexiblePricingModelsandContracting 10%
INNOVATION 100%Strategy/MovetoIntelligentAutomationinF&A 10%InvestinginFutureTalentand Technology(staff,skills,tools) 15%Innovation 10%Usefulness&QualityofTechnologytoSupportBusinessProcesses 15%Vision fortheFutureofFinanceAs-a-Service 15%Intelligent/CollaborativeEngagement 15%Ability toFind&ArticulateProblems/UseofAnalytics 10%Strategy andCapabilityforPlug&PlayBusinessServices 10%
Proprietary │Page60©2016 HfSResearch
Execution Definitions
EXECUTION Howwelldoestheserviceproviderexecuteonitscontractualagreement,andhowwelldoestheprovidermanagetheclient/providerrelationship?
QualityofAccountManagement Team Howengagedis theexecutiveandmanagementteamindefiningandmanagingthedeliveryofbusinessservices?
IncorporateFeedback Howhas theserviceprovidertakenfeedbackandincorporateditintothesolutionanddelivery?
Quality ofServiceDelivery Whatisthe clients’overallimpressionofthequalityofservice?
GeneratingActionableData Istheserviceprovidergeneratingdatathrough clientworkthatisaccessibleandactionablebytheclientorbyitselfonbehalfoforinpartnershipwithclients?
EmbeddingAutomation Is theserviceproviderusingautomation?
Industry Depth/TailoredSolutionsandServices How welldoestheserviceprovidertapintoindustry(sameorcross)practicesandexpertise?Anyindustryspecificsolutionsorservices?
Ability toAttract&RetainKeySkillsDoservicebuyers haveaccesstotheskillsandcapabilityneededtodeliverrelevant,continuous,qualitywork?Theworkforcemanagementanddevelopmentcapabilityoftheserviceprovider.
FlexiblePricingModelsandContracting How competitiveandflexibleareserviceprovidersindeterminingcontractpricing?Aretheywillingtomakeinvestmentsinclientsforlong-termgrowth?
Proprietary │Page61©2016 HfSResearch
Innovation Definitions
INNOVATION Innovationisthecombinationofimprovingservicesandbusinessoutcomes.
Strategy/MovetoIntelligentAutomationInF&A
Is theserviceprovidermovingupthematuritycurveofautomationwithroboticprocessautomation,cognitivecomputing,artificialintelligence,etc.?
Investing inFutureTalentandTechnologyIstheservice providerinvestingindevelopingtalentwithaneyetowardcapabilitiesthatwillimpactvalueinthefuture?Istheserviceproviderinvestingintheuseofdigitaltechnologiesinsolutions?Andthetalenttouseit?
Innovation Hastheservice providersharedorrecommendedideasorinitiativesthathaveresultedinstepchange?
Usefulness &QualityofTechnologytoSupportBusinessProcesses
Howeffectivelydoestheservice providerusethedigitaltechnologiessocial,mobile,automation,andcloudtodeliversolutionsandresults?
VisionforFinanceAs-a-Service Doestheservice providerhave,share,andengageindialogueregardingthefutureofF&Ainsourcing(e.g.,FinanceAs-a-Service)?
Ability toFind&ArticulateProblems/UseofAnalytics
Howeffectivelydoestheserviceprovideridentifyandarticulateproblemsandissues,andprovidesuggestionsorpartnertoexploresolutions?Is theserviceproviderofferingorprovidinganalytics?
Collaborative/IntelligentEngagementDoestheservice providerworkasapartnerincollaborationandincreasethevalueoftheengagementovertime?OrdoesitmostlytakedirectionanddeliverbasedonKPIs?Isdesignthinkinginuse?
Strategy andCapabilityforPlugandPlayBusinessServices
WhatdigitalplatformsdoestheserviceproviderusetodeliverFinanceAs-a-Service?Aretheyintegraltotheserviceprovider ’soffering(s)oradd-ons?Howpervasiveistheuptakeofthesedigitalplatformsbyclientstoday?Whatistheserviceprovider ’sfuturedigitalplatformstrategy?Howeffectivelydoestheservice providerpartnerwiththirdpartiesorintegrateacquisitionsforimpact?
Confidential and Proprietary │Page62
Service Provider Analysis
Proprietary │Page63©2016 HfSResearch
Todistinguishserviceprovidersthatshowcompetitivedifferentiationinaparticularlineofdeliverywithprogressinrealizingthe“As-a-ServiceEconomy”ofbusinessoutcome–oriented,on-demandtalentandtechnologyservices,HfSawardstheseprovidersthe“As-a-ServiceWinner’sCircle”designation.
Guide to the Blueprint Grid
EXECUTION INNOVATION
As-a-ServiceWinner’s Circleshowexcellence recognizedbyclientsinthe8Idealsin executionandinnovation
Collaborative relationshipswithclients,servicesexecutedwithacombinationoftalentandtechnology asappropriate,andflexiblearrangements.
Articulatevisionanda“newwayofthinking,”haverecognizableinvestments infuturecapabilities,strongclientfeedback,and aredrivingnewinsights andmodels.
HighPerformersdemonstratestrongcapabilitiesbutlackaninnovativevisionormomentuminexecutionofthevision
Executesomeofthe followingareaswithexcellence:worthwhilerelationshipswithclients,servicesexecutedwith“greenlights,”andflexibilitywhenmeetingclients’needs.
Typically, describeavisionandplanstoinvestinfuturecapabilitiesandpartnerships forAs-a-Service,andillustratean abilitytoleveragedigitaltechnologiesand/ordevelop newinsightswithclients.
High Potentialsdemonstratevisionandstrategybuthaveyettogainmomentuminexecutionofit
Earlyresultsandproof points fromexamplesinnewserviceareasorinnovativeservicemodels,butlackscale,broad impact,andmomentuminthecapabilityunder review.
Well-plotted strategyandthoughtleadership,showcaseduseofnewertechnologiesand/orroadmap,andtalentdevelopmentplans.
ExecutionPowerhousesdemonstratesolid,reliableexecutionbuthaveyet toshowsignificantinnovation orvision
Evidence ofoperationalexcellence;however, stillmoreofadirectiveengagementbetweenaserviceprovideranditsclients.
Lack ofevidentvisionandinvestmentinfuture-oriented capability,suchasskillsdevelopment, “intelligentoperations,”ordigitaltechnologies.
Proprietary │Page64©2016 HfSResearch
HfS Blueprint Grid: Finance & Accounting As-a-ServiceINNOVA
TION
EXECUTION
ExcellentatInnovationandExecutionInvestinginInnovationtoChange
BuildingAllCapabilities ExecutionIsAheadofInnovation
AS-A-SERVICEWINNER’SCIRCLE
EXECUTIONPOWERHOUSES
HIGHPOTENTIALS
HIGHPERFORMERS
Accenture
arvato
Capgemini
Cognizant
EXL
Genpact
AegisHCL
HPEIBM
Infosys
OneSourceVirtual
WNS
TCS
WiproXchanging
Xerox
Sutherland
Proprietary │Page65©2016 HfSResearch
Major Service Provider Dynamics: HighlightsEXECUTION
• ActualDeliveryofServices:Withconsistent,qualitydeliveryandawayofaddressingfeedbackandcontinuousimprovementthatclientsappreciate,arvato,HCL,HPE,andSutherland standouthere.Xchanging clientsappreciatethediagnosticsandsteadycontinuousimprovementovertime.
• UsingAutomation:Everyserviceproviderisnowcommonlyautomatingroutineactivities,introducingitintoexistingandnewaccounts.IBM,Capgemini,Genpact,andXerox arethemostadvancedinincorporatingRPAintoworktheymanage.HPE hasastandoutstrategyformovingforwardhere.
• TalentDevelopment:Foramarketthatislookingtobetterleveragedigitaltechnologiesandisalwaysonthehuntforincreasedefficiencyandproductivity,thereisasurprisinglackofuniquefocusontalentdevelopment.Accenture standsoutherewithitstraininginautomationandindustryskills,asdoesWNS inIndia,andInfosys’specificefforttochangeitsculturewithdesignthinking.
• AccessibleandActionableDataandAnalytics:Weseemomentuminthemarketaroundembeddedandanalyticsasaservice,particularlywithAccenture,Cognizant,EXL,Genpact,IBM,TCS,andWNS.Thisapproachbuildsonalong-termvalueintheengagement.
• VerticalCapabilities:Forservicebuyerslookingforproviderswithindustrydepthandcontext,anumberofserviceproviderhave,andarecontinuingtobuildout,verticalcapability.Examples:WNSinTravel/Transport,Cognizant andSutherlandinHealthcare,andAegis inmanufacturing.
INNOVATION
• VisionforFinanceAs-a-Service:Accenture,EXL,Genpact,andIBM clearlyarticulateaforward-thinkingvisionforF&Athatbringstogetheranalyticaltalentandtechnology-basedsolutions.
• UsingTechnologytoSupportBusinessProcesses:TheuseoftechnologytosupportbusinessprocesseshascomealongwayinthepastfewyearsinF&A,bothproprietary(e.g.,Infosys)andincreasinglythroughpartnership(e.g.,CognizantEXL,andXerox).
• IntroducingIntelligentAutomationintoF&A:MovingbeyondmacrosandworkflowandintoRPAandcognitiveisstillrelativelynewinF&A.Accenture,IBM,andTCS aremostadvancedinboththeuseofRPAinFinanceandexperimentingwithcognitivecomputing.
• IntelligentandCollaborativeEngagement:Cornerstoneofincreasingvalueintheengagementovertimeiscollaboration.Cognizant,EXL,and IBMclientsallgaveexamplesofalignmentandsharedobjectivesandsolutions.
• PlugandPlayBusinessServices:TheseservicesfocusontheoutsetonaddressingaspecificactivityandoutcomeinFinance,andAegis inprocure-to-payutilitymodel,CapgeminiwithAs-a-Stack,HCLwithitsFinanceEnterprise-As-a-Service,XeroxwithitsAccountsReceivableofferingareallexamplesofearlytraction.Wiprohasmadeacquisitionsforindustryspecificcapabilityinthisarea,inhealthcareandcapitalmarkets.Andnow,OneSourceVirtualisenteringthemarketwithitsWorkday-centricBPaaS solution,basedonitsownexperience.
Confidential and Proprietary │Page66©2016 HfSResearch
Strengths Challenges
• Industry-Led Solutions: With 18years intheF&Amarket,Genpact hasmovedup thevalue chain byautomating within over100processes and developingdeep industry expertise thatclients appreciate, particularly inmanufacturing,pharma, and consumer products. Genpact’s “CFO andTransformation Services”approach, forexample, addresses keyneeds of CFOs in pharma and financialservices,which iscriticalin newrelationships.
• ExtremelyCompetent Sales Capability: Genpact hasbeen onamajor upswing,winning asuccession of recent deals inEurope and the USbynurturingconsultative sales executives.
• Focus onGlobal Business Services: Genpact’s iGBS, now adopted by severalclients, isfocused on embedding analytics, process integration and innovationinto GBSoperations toprovide ongoing support inan “As-a-Service” model.
• “Feel Good” Culture: HfS heard from clients thattheyfeel astrongculturalalignment withGenpact. Theyappreciate theinteraction withleaders anddeliveryteams, and canworkwith Genpact for thelong term. This hasbuilt alotof “forgiveness” factor from clients thatoften struggled intheearlydays ofF&A,where client expectations wereoften misaligned withoverly-aggressivepromises (an issue not unique toGenpact).
• LeanDigital: Genpact has evolved its traditional Lean SixSigma focus withDesign Thinking asamethod for identifying, aligning and addressing issues andopportunities. HfSsees LeanDigital as atransformative approach toaligndigitaltechnology and talentwithdesired business outcomes from F&Adelivery.Earlyfeedback from clients isencouraging.
• Challenge Legacy Clients and LegacyMindsets: While Genpact hasmade serious strides inacquiring newclients withatransformation-led approach, itneeds toalso besure toinfusefresh thinking and challenge thestatus quo inmany aging long-termclient engagements, whichwereconstructed during thelegacyera of labor-arbitrage deals atlowprice-points. Being abletoshift themodel and share theproductivity savingswith clients,while being apublic company, requires realfinesse and smartinvestments.
• TooMany Solution Offerings Confuse Clients: Genpact hasatendency toover-engineer itsservice offerings withrecentlaunches (for example) of “SmartEnterprise Processes,” “IntelligentOperations” and now“LeanDigltal.” Theservice provider needs tosimplify itsofferings andmarketmessages and stayconsistent.
• Break FromThe Culture of“Yes”: The valueof collaborativeengagements in theindustry isincreasing, and some of Genpact’sdeliveryteams, in thehabit ofworkingtofix problems and do“what isasked,” need tofindwaystoput requests andissues intocontext, separating outwhattheycan fix versuswhatshould beaddressed withthe client.
• Internal Communications: Some clients feel itcan takealongtimetogetananswer from Genpact, thattheorganization has toomanytowers thatneed toimprove interaction, such asbetween accountmanagement and delivery.
Genpact
Acquisitions /Partnerships Client Profile Service DeliveryOperations ProprietaryTechnologies
Acquisitions:• StrategicSourcing Excellence (2016)• Servicedelivery inBratislava, Slovakia
(2015)• Endeavour Software Technologies (2014)• HitachiManagement Partners (2014)Partnerships:• Arria NLG• Decisyon, Inc.• Top Image Systems• ATungsten Network• Automation Anywhere• RAGE Frameworks• OneNetwork Enterprises
Clientswithrevenue ranging from $1Bn–$100+ Billion
140+ F&ABPO clients, including: AircraftManufacturing Company, Leading BreweryCompany, Leading Energy Company, LeadingRetail Drugstores, Food& Beverage Company,Global Pharmaceutical Company
TargetIndustries:
CPG/ Retail, IndustrialManufacturingServices, HighTech, Healthcare ,LifeSciences, Banking, Financial Services,Insurance, CapitalMarkets
Headcount: ~25,000
Delivery Centers (47):• USA– 5%• UK• Latin America – 4%(Guatemala, Mexico, Brazil)
• Continental Europe – 11%(Czech Republic, Poland,Romania, Slovakia)
• India – 71%• China – 6%• Philippines – 2%• Others – 1%(Kenya, Japan)
• dSEP: DigitalSmartEnterprise Processes• ProcIndex: performs diagnostics• GenTrac: manages transition programs• SmartModeler: generates standard operating procedures• Financial Controllership Suite(FCS): for record-to-report• Accounts Receivable Management Suite(ARMS): forcollections
• Enterprise SupplierManagement (ESM): for accounts payable• Lifecycle Manager (PLM): casemanagement inGBS• Rapid Automation and Genpact’s Robotic Process Automation(RPA) Solutions
• Intelligent Process Insights Engine (IPIE)• Akritiv EnterprisePerformance Analytics (EPA)
BlueprintLeadingHighlights
• Collaborative Engagement• Incorporating Feedback• Delivering Industry-Specific
Solutions• Investing inFuture Talent&
Technology• Use of Technology toSupport
Business Processes
MakingstrategicinvestmentsthatclientsappreciatebybringingtogetherLean,Digital,andAnalyticsthandrivebusinessresultsintargetedindustriesWinner’s Circle
ValueChainCoverage:
ProcuretoPay
OrdertoCash
RecordtoReport
Finance Transformation
Analytics
• Automic• OmPrompt• BlackLine• Rosslyn Analytics• Deloitte• SAP• Oracle
Confidential and Proprietary │Page67
Market Direction and Recommendations
Proprietary │Page68©2016 HfSResearch
Where to Next for F&A As-a-Service
n Increasing Interest in Making A “Cultural Match”: Companies will always be subject to changes inleadership, and as service providers are an increasingly integral part of a company’s operations, it’scritical to have alignment over time on the context, direction, and alignment between the servicebuyer and the service provider. As one executive put it, “we will have change in our leadership andthe challenge is to have new leaders on both sides continue to build on what we have started…thatwe don’t have to start over.”
n Investments in Talent and Technology: Effective use of technology to drive new business results andimpact is in the appropriate combination with talent. We see an increasing number of serviceproviders offering education and training opportunities to increase analytical, industry, andautomation capability of BPO professionals. This investment will pay off in driving new levels ofvalue with clients, and also in better engaging and retaining staff who tend to turnover quite quicklyin this industry.
n Analytics Embedded and As-a-Service: Where service buyers and service providers have partneredto stabilize and standardize processes, with the increasing use of automation to integrate datasources and drive predictable and higher quality data, and noting the increase in sophistication invisualization and reporting tools, we see an increasing number of both service provider-driven andcollaborative efforts to embed and better drive analytical insights and action plans in F&Aengagements.
WeseethefollowingasthemajortrendsthatwillfosterthefutureevolutiontoFinanceAs-a-Serviceoverthenext2–3years:
Proprietary │Page69©2016 HfSResearch
Where to Next for F&A As-a-Service (continued)
n Continued Centralization and Standardization: Over the next few years, more F&A work will getcentralized and include hybrid delivery. A number of service providers have been working withshared services centers for years (e.g., Accenture, Capgemini), and others have recently gainedmomentum and experience (e.g., Wipro). Across the board, we see service providers investing andpartnering for transformation capbility and tools and technology for dealing with disparatemanagement information systems, better visualization tools and partnerships, and more automationand real-time reporting capability.
n BPaaS Rising: The mid-market and smaller companies are already starting to transition to true“finance in the cloud” solutions, such as Workday or Salesforce FinancialForce. Process standards,security controls, workflows, and automation are native to these solutions, and enable companies tobe up and running with finance platforms quickly, and with much less of a capital outlay. As theindusty gets more experience and comfort in defining shared business outcomes, these SaaSofferings are forming the basis for the rise of “business process as a service” (BPaaS): solutions thatare designed and contracted to deliver specific business outcomes by a provider that defines andmanages the processes, supporting technology, and the talent executing the work. These solutionscan be attractive options to established enterprises looking for a new standard because of M&A orfaster access to a ready service for regional expansion, for example.
WeseethefollowingasthemajortrendsthatwillfosterthefutureevolutiontoFinanceAs-a-Serviceoverthenext2–3years:
Proprietary │Page70©2016 HfSResearch
Service Providers Need to “Reimagine” Finance and Be Willing to Take Risks to Move into Finance As-a-ServiceServiceProviders:Howaggressivelyisyourcompanytakingthefollowingmeasurestogeneratemoredigitally-alignedengagementswithyourclients?
Source: “Finance In The Digital Age,” HfS Research, 2016Sample: Enterprise Buyers = 160
Proprietary │Page71©2016 HfSResearch
Focus On How to Better Use Digital To Impact Business Outcomes Will Drive Take Up of Finance As-a-Service
IDEAL AS-A-SERVICEIDEALDEFINITION
NONEXISTENT
INITIAL EXPANSIVE EXTENSIVE ALLPERVASIVE
WriteOffLegacyUsingplatformbasedsolutions,DevOps,andAPIecosystemsformoreagile,lessexceptionorientedsystemsandprocesses 2016 2019
DesignThinkingUnderstandingthebusinesscontexttoreimagineprocessesalignedwithmeetingclientneeds 2016 2019
Brokers ofCapability
Orientinggovernance tosourceexpertisefromallavailablesources,bothinternallyandexternally,toaddresscapabilitygaps 2016 2019
CollaborativeEngagement
Ensuring relationshipsarecontractedtodrivesustainedexpertiseanddefinedoutcomes 2016 2019
IntelligentAutomation
Using ofautomationandcognitivecomputingtoblendanalytics,talent,andtechnology 2016 2019
Accessible&ActionableData
Applyinganalyticsmodels,techniquesandinsightsfrombigdata,real-time 2016 2019
HolisticSecurityProactivelymanagingdigitaldataacrossservicechainofpeople,systems&processes 2016 2019
Plug andPlayDigitalBusinessServices
Plugginginto“readytogo”business-outcomefocused, people/process/technologysolutionswithsecuritymeasures 2016 2019
Proprietary │Page72©2016 HfSResearch
2016-17 Recommendations: Enterprise Buyers
n MoveFasterandDeepertoAs-a-ServiceOfferingsfromServiceProviders:Asanenterprisebuyerkeeppushingyourserviceprovider(s)tomovetoanAs-a-Servicemodelthatgoesbeyondlaborarbitragetoincludeandofferyouabroadersetofchoicesforwhatsolutionsyouadoptandhowtheyinteractwithyourownretainedorganization.Don’tsettleforalong-termfixedmodelofsolutiondeliveryforfinanceservices,butpushyourserviceprovider(s)tobeflexibleandagilesothatfutureservicesofferingsbetteraligntoyourownpotentialfutureneeds.
n AdoptDesignThinking:Don’tdismissdesignthinkingassomethingthatisafadwithlittlebenefitforyourownoperations.Theopportunitiestositdownwithyourserviceprovider(s)tobetterunderstandthebusinesscontextinwhichyourcurrentprocessesoperateandwhatcanbedonetorealignorreimaginetheseprocessestoachievedifferentand/orbetterresultsisalwaysanexerciseworthundertaking.
n IncreasetheTrust:Pushyourserviceprovider(s)tobemorecollaborative,morevisionary,moreinclusiveandsharewithyou.Inturn,providethatsameapproachtotheserviceprovider(s).Extendthissamenewmindsettohowyouthinkofdataandphysicalsecuritytomakesurethatyourpoliciesonsecurityaren’tkeepingyoufromincreasingthevalueofyoursourcingengagements.Realizethatachievingtheresultingbusinessoutcomesiseasierinaclosepartnershipthaninaclosed-offzero-summindsetrelationship.So,workwithyourserviceprovider(s)inamannerthatfacilitateslong-termsuccessaswellandaskforitinreturn.
Proprietary │Page73©2016 HfSResearch
2016-17 Recommendations: Service Providers
n Be Proactive With As-a-Service Offering Design and Execution: At HfS,we are strong believers in the rapid move of BPO away from legacy “liftand shift” models toward an As-a-Service solution design and deliveryworld. As shown in our recent study, Finance In The Digital Age Financeexecutives are challenged to better manage regulatory compliance andfinancial reporting, better use financial and non-financial data, make theclose cycle more efficient, and have paperless audit trails. Work withthem to broker better combinations of talent and technology to drivebusiness results.
n Take A Chance With Design Thinking:While we have seen very little takeup of Design Thinking in Finance, it is a way to bring together servicebuyers and service providers to refresh or reimagine an existing/legacyengagement. It also is a way to set the scene with a new client. As weexplored in an HfS webinar panel discussion, you don’t need to be adesigner to do design thinking. You do need to be willing to take a risk.
n Implement Robotic Process Automation in Finance: Robotic processautomation (RPA) is certainly the topic of the moment in process deliverycircles, but other than invoicing and order management, the applicationof RPA inside end-to-end processes remains limited in finance andaccounting. HfS believes that RPA is a means to an end for financedelivery by decoupling labor and growth, especially in transactionalsupport, and service providers that adopt these technologies extensivelywill gain traction in the next few years.
AsaFinanceexecutiverationalized,“Whileinfinancewecancreatethemostcompellingbusiness casesfordigital,theorganizationismorelikelytochannelinvestmentintothingsthatmoredirectlytranslatetorevenuegrowth.”
Thiscreatesmoreofanimperativeforserviceproviderstohelpdefineanddrivethebusiness case,andalsoshowvaluebybeingwillingtoputthefirstfootforwardandinvestinupgradingtheirowndigital-drivenF&Acapabilitiestoshowimpact.
Formoreinsightonchallengesservicebuyersarefacing,refertotheHfSstudy,FinanceInTheDigitalAge, April2016.
©2016 HfSResearch Proprietary │Page74
Additional Materials: F&A Blogs, Webinars, and Research
Note:Morethan75%ofourpublishedresearchisaccessible forfreeandrequiresjustafewcheckboxesinoursimpleregistrationtodownload.ViewallofourF&Aresearchhere.
BLOGS
ShortReadOnline:
• Rescuing BPOFromIt’sTroughofBPOBoredom• It’sTimeWeStartedBeingAs-a-Service• WhyIt’sTimeForRoboticBPOToBreakTheMoldofLegacy
BPOEngagements• ConfusionAs-a-Service:TheMassiveDisconnectBetween
VisionandReality• AreServiceProvidersandAdvisorsDoingEnoughtoGetDigital
IntoF&A?
POVs(POINTS OFVIEW)
DownloadWithFreeRegisteredAccess:
• The Current Impact Of RPA in F&A BPO Engagements• F&A BPO ServiceMetric Analysis• The Role of Analytics for The CFO: A #CFOEXCHANGE SessionThe Road Less Traveled:Getting on the Path toAs-a-Service
• TheRiseofDesignThinking• InsightsFromEarlyBPOAdoptersofRoboticProcessAutomation
RESEARCHPAPERS
DownloadWithFreeRegisteredAccess:
• FinanceInTheDigitalAge• BewareoftheSmoke:YourPlatformisBurning
TheEvolutiontotheAs-a-ServiceEconomyPosesMajorOpportunitiesandThreatstoEnterprises
• TheBPOProfessionin2015:Today’sAccidentalCareerPath,Tomorrow’sCapabilityBroker
• HfSBlueprint2015:ProgressiveFinance&AccountingBusinessProcess
WEBINARREPLAY
• EvolvingtoaBalancedFinanceAsAServiceModel
• WhereistheActionTodayinIntelligentAutomation?
• WhyDesignThinkingCanSavetheServiceIndustryFromObsolescence
Confidential and Proprietary │Page75
About the Authors
©2016 HfSResearch Proprietary │Page76
Phil Fersht
FounderandCEO,HfSResearch– Cambridge,MA
Overview§ PhilFershtisFounder andChief ExecutiveOfficerofleadingglobalanalystauthorityfortheservicesindustry, HfS
Research.Heisanacclaimedauthor, analystandvisionaryinGlobalBusinessServicesandOutsourcing, theDigitalTransformation ofenterprise operations andtalentstrategies.Fershtcoined theterm"TheAs-a-ServiceEconomy"whichisHfSResearch'svisionforthefutureoftheglobalservicesandoutsourcing industryandhasbecomewidelyadoptedbytheglobalservicesindustry.
§ Fershtfounded HfSResearchin2010andhasmasterminded thedevelopmentoftheHfSorganization asaleadinganalystforthefirm,inaddition tosteeringthebusinessoperations. Heisalsoauthor andcreator ofthemostwidely-readandacclaimedblogintheglobalservicesindustry, entitled “HorsesforSources”andnowenteringitsninth year,attractingoveramillion visitsperyearacrosstheglobe.AtHfS,hedirects thefirm’sresearch, advisoryandglobalknowledgecommunity, whichtodaytotalsover100,000 professionals andisservedbyarespected globalanalystteam.
§ Under Fersht'sstewardship, HfSResearch hasbecometheleadingindustry analystfirmforgrowinginfluence andvalue,basedontheresults of1093industryparticipants inthe2014AnalystValueSurvey.Hewasnamed"AnalystoftheYear2011”bytheInstituteofIndustryAnalystRelations(IIAR),winning thepremieranalystawardforasecondsuccessiveyear- themostcovetedglobalawardforindustry analystsintechnology andservicesindustry.In2012,theInternationalInstituteofAnalystRelations (IIAR)awardedHfSresearch asMostInnovativeAnalystFirm.
§ Fershtcontributes regularlytomediasuchasWallStJournal, BusinessWeek,Economist, TheTimesofIndiaandCIOMagazineandisaregularkeynotespeakeratmajorindustryevents,suchasNASSCOM,SourcingInterestsGroup andtheHfSBlueprint Sessions.
PreviousExperience§ Overthepast20years,FershthaslivedandworkedinEurope, North AmericaandAsia,wherehehasadvisedon
hundreds ofoperations strategy,outsourcing, andglobalbusinessservicesengagements.Duringhiscareer,PhilFershthasworkedatGartnerInc.(AMRResearch), directing thefirm’sBPOandITServicespractices andservedasmarketleaderforDeloitte Consulting’s BPOAdvisoryServices,wherehelednumerous outsourcing andoffshoring advisoryengagementswith Fortune500enterprises.HebeganhiscareerwithITanalystIDC.
Education• HereceivedaBachelor ofScience,withHonors, inEuropean Business&TechnologyfromCoventryUniversity, United
KingdomandaDiplôme Universitaire deTechnologie inBusiness &TechnologyfromtheUniversityofGrenoble, France.Healsohasadiploma fromtheMarketResearch SocietyintheUnitedKingdom.
©2016 HfSResearch Confidential and Proprietary │Page77
OverviewBarbraSheridanMcGannisExecutiveVicePresident,BusinessOperationsResearch,atHfSResearch.Barbra’sscopeofworkcoversthebusinessprocessoutsourcingandemerging“As-a-ServiceEconomy,”aswelldivingintothemessuchastalentanddesignthinking,andindustryandfunctionalareasofHealthcare,LifeSciences,andPublicSector.
Barbra’sexperienceinthisindustryincludes:
§ Researching,analyzingandadvisingonmarketandcompetitivemovesandmeaning
§ Developingorganicandinorganicstrategiestodrivegrowthofnewandmatureofferingswithbusinessprocessservices
§ Buildingpartnershipsandstrategiesforjointsuccess
Herworkhistoryincludes20yearsatAccenture;andprioryearsinmarketingandnot-for-profitmanagement.
EducationBarbraearnedaBachelorofArtsdegreeinEnglishwithHonors,andwasrecognizedforoutstandingleadershipinVolunteerismwiththeChetPagniServiceAward,fromtheUniversityofSanDiego.She’salsocompletedpost-graduateexecutiveleadershipworkatNorthwesternUniversityandSmithCollege.
Barbra Sheridan McGannExecutiveVicePresident,HfSResearch– Chicago,IL
©2016 HfSResearch Proprietary │Page78
Overview
§ HemaSantoshisaPrincipalAnalystatHfSsupportingresearchinfinanceandaccountingandrelatedbusinessservices,andglobalin-housedeliverycenters.Shehasheldseniorresearchpositionsfororganizationssuchas,InformationServicesGroup,Accenture,WiproandITFinity Solutions.Herjourneyasaresearchprofessionalhasevolvedover14yearsbyworkingacrossfacetsofMIS,businessplanning,marketforecast,marketanalysis,competitiveintelligenceandlargestrategicinitiatives.
§ HemaunderstandsthenuancesanddynamicsoftheBPOandTechnologyindustry.Herexperiencerangesfromcustomresearch,quantitativestudiestoqualitativesecondaryresearchconductedamongfinancialservices,governmentandmedia&telecommunicationindustries.
Education§ SheholdsaBachelor ’sdegreeinCommercefromtheUniversityofMumbai,anMBA
specializinginMarketingfromManipal Universityandacertificateinfulltime‘ManagementProgramforWomenEntrepreneurs’fromtheIndianInstituteofManagement(IIM),Bangalore.
Hema SantoshPrincipal Analyst,HfSResearch– Bangalore,India
Proprietary │Page79©2016 HfSResearch
About HfS ResearchHfSResearch isTheServicesResearchCompany™—theleadinganalystauthorityandglobalcommunityforbusinessoperationsandITservices.Thefirmhelpsenterprisesvalidatetheirglobaloperatingmodelswithworld-classresearchandpeernetworking.
HfSResearchcoinedthetermTheAs-a-ServiceEconomy toillustratethechallengesandopportunitiesfacingenterprisesneedingtore-architecttheiroperationstothriveinanageofdigitaldisruption,whilegrapplingwithanincreasinglycomplexglobalbusinessenvironment.HfScreatedtheEightIdealsofBeingAs-a-Service asaguidingframeworktohelpservicebuyersandprovidersaddressthesechallengesandseizetheinitiative.
Withspecificfocusonthedigitizationofbusinessprocesses,intelligentautomationandoutsourcing,HfShasdeepindustryexpertise inhealthcare,lifesciences,retail,manufacturing,energy, utilities, telecommunications andfinancialservices. HfSusesitsgroundbreakingBlueprintMethodology™toevaluatetheabilityofserviceandtechnologyproviderstoinnovateandexecutetheEightIdeals.
HfSfacilitatesathrivinganddynamicglobalcommunityofmorethan100,000activesubscribers,whichaddsrichnesstoitsresearch.Inaddition,HfSholdsseveralServiceLeadersSummits everyyear,bringingtogetherseniorservicebuyers,providersandtechnologysuppliersinanintimateforumtodevelopcollective recommendationsfortheindustryandadddepthtothefirm’sresearchpublicationsandanalystofferings.
Nowinits tenthyearofpublication,HfSResearch’sacclaimedblogHorsesforSources isthemostwidelyreadandtrusteddestinationforunfetteredcollective insight,researchandopendebateaboutsourcingindustryissuesanddevelopments.HorsesforSourcesandtheHfSnetworkofsitesreceivemorethanamillionwebvisitsayear.
HfSwasnamedAnalystFirmoftheYearfor2016,alongsideGartnerandForrester,byleadinganalystobserverInfluencerRelations.