po service provider landscape – investing in building ... · this report examines the dynamics of...

Procurement Outsourcing (PO) Report: July 2012 – Preview Deck

Topic: PO Service Provider Landscape – Investing in Building Expertise

Copyright © 2012, Everest Global, Inc. EGR-2012-1-PD-0705


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Background and methodology of the research

Background of the research The PO market witnessed back-to-back strong growth in 2010 and 2011, with annual growth of 14%. The rapidly growing PO market attracted new entrants and also led to increased M&A activity. With the rise in maturity, service providers are focusing on previously nascent themes such as direct spend procurement, mid-market buyers, and global contract scope In this research, we analyze the global PO service provider landscape in 2011. We focus on Relative position of 15+ service providers on Everest Group PEAK Matrix for PO The 2012 PO Star Performers Service provider delivery capability assessment Emerging trends in 2011 The scope and methodology of this report includes Third-party PO deals; it does not include shared services or captives Over 320 multi-process PO deals signed as of 2011, with a minimum of three procurement processes over

US$1 million in ACV and a minimum contract term of three years. Typically, managed spend is greater than US$50 million

Coverage across 15+ PO service providers with multi-process capability, including Accenture, Capgemini, Corbus, DSSI, Genpact, GEP, HCMWorks, HCL, HP, IBM, Infosys, Optimum Procurement, Procurian, Proxima, TCS, Wipro, WNS, Xchanging, and Xerox


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Table of contents (page 1 of 2)

Background and methodology 5 Summary of key messages 9 Section I: Everest Group PEAK Matrix for PO 13 Summary 14 PEAK Matrix for PO 15 Market share 19 Section II: 2012 PO Star Performers 20 Summary 21 2012 PO Star Performers 22 Market success in 2011 24 Other notable 2011 performers 26 Section III: Service provider delivery capability assessment 27 Summary 28 Dimensions for capability assessment 30

– Scale 31 – Scope 32 – Technology capability 37 – Delivery footprint 39

Topic Page no.


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Table of contents (page 2 of 2)

Section IV: Emerging service provider trends 40 Summary 41 Emerging trends 42

– Mergers & Acquisitions (M&A) 43 – New market entrants 44 – Focus on direct spend 45 – SMB and mid-market focus 48 – Building end-to-end S2P capability 49 – Integrated FAO-PO offering 50

Section V: Implications for key stakeholders 51 Implication of PO trends for buyers 52 Implication of PO trends for service providers 53 Section VI: Appendix 54 Service provider capability assessment 55 Glossary of key terms 59 PO research agenda 63 References 67

Topic Page no.


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Overview and abbreviated summary of key messages (page 1 of 2)

Everest Group PEAK Matrix for PO

Everest Group classifies 15+ PO service providers on the Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix into the three categories of Leaders, Major Contenders, and Emerging Players. The PEAK Matrix is a framework to assess the relative market success and overall capability of service providers

The Leaders dominate the global multi-process PO market in terms of ACV, however competition is strong among the numerous Major Contenders and Emerging Players

This report examines the dynamics of the global PO service provider landscape and its impact on the PO market. The report focuses on the relative positioning of 15+ service providers on Everest Group PEAK Matrix for PO, the 2012 PO Star Performers, service provider delivery capability assessment, and emerging trends in the PO market.

Some of the findings in this report, among others, are:

2012 PO Star Performers

Based on the relative YoY movement of each service provider, Everest Group identified five service providers as the “2012 PO Star Performers”

Beyond the 2012 PO Star Performers, several service providers noticeably enhanced their positioning on the PO PEAK Matrix


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Delivery capability assessment

Everest Group assessed the overall PO delivery capability by evaluating each service provider along four dimensions – scale, scope, technology, and delivery footprint. While the Leaders continue to dominate, Major Contenders have narrowed the gap on most dimensions

Some Major Contenders now have comparable or higher FTE scale compared to Leaders

In 2011, service providers across the board made significant investments in building their technology capability

Emerging service provider trends

M&A activity increased significantly in 2010-2011, focused on building new capabilities and technology advancement

The rapidly growing PO market attracted new entrants Service providers, including the Leaders have increased focus on the SMB and mid-

market with significant market activity in 2011

Overview and abbreviated summary of key messages (page 2 of 2)


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Procurement pyramid (non-core spend)

S2P strategy

5. Day-to-day purchasing

7. Accounts payable

6. Performance management

8. Procurement systems

1. Spend data mgmt. 2. Strategic sourcing

3. Vendor management

4. Demand management

Strategy (done in-house): Mission/corporate strategy Business strategy Geographic strategy Technology strategy

Strategy

Judgment-intensive

Transaction-intensive

Strategic sourcing: Sourcing strategy Vendor selection Contracting Sourcing implementation Category management

Spend data management: Baseline analysis Data “cube” construct Opportunities definition

Day-to-day purchasing: Approval workflow Material requisition Purchase order Expediting/

troubleshooting Material/invoice receipt Invoice payment

1

2

5

Vendor management: Vendor relationship

management Contract administration Service level/standards

monitoring

3

Demand management: Specifications/standards Transformation/change

management Process and systems

implementation

4

Procurement systems: E-auctions Catalog management Solution hosting

8 Performance management: Financial performance Compliance management Policies and procedures Performance and results

reporting

Accounts payable: Master data maintenance Process payment request T&E claims processing EDI/P-card administration Month-end closing Vendor inquiries Reporting

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Source: Everest Group (2012)

The Source-to-Pay (S2P) process spans the entire procurement function


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Direct spend

Indirect spend

Core spend

Non-core direct spend

Non-core spend

Goods and services that are key ingredients to manufacture/deliver the final product/service

They are proprietary or specific to the organization

For example: Iron-ore for a steel manufacturer and rubber for a tyre manufacturer

Source-to-Contract (S2C)

Procure-to-Pay (P2P)

Source-to-Pay (S2P) cycle

Goods and services that are commonly required to manufacture/deliver the final product/service

They are commodities in that industry For example: Lubricants, packaging, and MRO

Non-production goods and services that are not required to manufacture/deliver the final product/service but are required to operate the organization

For example: Spend categories such as facilities, office supplies, travel & logistics, marketing/sales-related spend, and IT/telecom

Prevalence of third-party outsourcing

Low prevalence of third-party outsourcing

Beyond the process dimension, PO contracts also have “procurement-spend category” dimension


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U.S. Rest of Americas UK Rest of Europe Asia-Pacific

This study offers three distinct chapters providing a deep dive into key aspects of the PO market; below are four charts to illustrate the depth of the report

Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix for PO

2012 PO Star Performers

Distribution of SMB and mid-market contracts signed by service providers in 2011 Number of contracts

PO market share by signing region of contracts ACV in US$ million

Source: Everest Group (2012)

100% =

Service provider 1

<100 ~800 ~200 ~350 ~150

Service provider 2

Service provider 3

Service provider 4 Service provider 5

Service provider 6

Service provider 1

100% = 30

Service provider 2


Service provider 5

Service provider 6

Service provider 7


Mar

ket s

ucce

ss

25th

per

cent

ile

High

Low

PO delivery capability

(Scale, scope, technology, and delivery footprint)

25th percentile

75th percentile

Low High

Major Contenders

Emerging Players

75th

per

cent

ile

Leaders SS RR

LL PP NN GG EE OO

MM

FF

CC

JJ

QQ

KK

II HH

DD BB

AA

Leaders Major Contenders Emerging Players Star Performers

Service provider 7

Year 1

Year 0

Service provider

Mar

ket s

ucce

ss

Capability

Market success XXXX XXXX XXXX XXXX XXXX XXXX XXXX

Capability XXXX XXXX XXXX XXXX XXXX

2012 PO Star Performer Service provider 1 Service provider 2 Service provider 3 Service provider 4 Service provider 5


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PO research agenda (page 1 of 4)

Topic Goals of the research Release date

January-2012 PO contracts with Maintenance, Repair, and Overhaul category in scope show a phenomenal growth of nearly 35% CAGR over the last five years. This report discusses the process and category scope of MRO, benefits of outsourcing MRO, different MRO outsourcing options and their pros and cons, and the challenges and the associated best practices illustrated with a case study

Succeed with Maintenance, Repair, and Overhaul (MRO) Outsourcing

January-2012 A panel of Everest Group Analysts will discuss market predictions for the following areas: Service Provider Intelligence, Global Sourcing, Information Technology Outsourcing, Finance and Accounting Outsourcing, Procurement Outsourcing, Human Resources Outsourcing, and Banking, Financial Services, Insurance Outsourcing. Key themes across all areas that will be discussed are context, growth, and disruption

Webinar Deck: 2012 Global Services Market Predictions: Context, Growth, Disruption

February-2012 The objective of this research article is to describe the market dynamics around gainsharing in PO and share perspectives on key considerations to make it work. It discusses the role of pricing strategy in PO, prevalence and adoption of pricing structures in PO, pros and cons of gain sharing, making gainsharing work – supported by a case study, and best practices and lessons learned

Gainsharing in PO – Can it Really Work?

February-2012 As Business Process Outsourcing matures, companies and service providers must look for the next source of value – labor arbitrage is important, but not sufficient. In particular, the industry is seeking to create value propositions that achieve cost savings while also delivering other sources of value. The results show a vivid difference in the approach and mind-set of best-in-class

Achieving Best-in-Class BPO – Secrets Unveiled

Published Upcoming Current

http://research.everestgrp.com/Product/11627





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May-2012 With increasing maturity of PO, the boundaries between direct and indirect categories are blurring and PO is playing an important role in direct categories. This report covers the adoption of PO in direct categories, the benefits and challenges, and the best practices to increase the scope of PO to direct categories, and the service provider landscape

March-2012 After witnessing a vacillating adoption for over a decade, the Procurement Outsourcing (PO) market is finally coming of age with steadily increasing adoption in the last few years. Years 2010-2011 were the best ever years for PO with 50 or more new contract signings in each year. Unlike other BPO segments, PO engagements impact the procurement spend, not just the operational costs. This large cost base makes the PO value proposition attractive, but it makes the realization of value, complex. The objective of this research is to describe the top ten best practices in PO that will help current and prospective PO buyers realize value from their PO engagements

Top 10 Best Practices in Procurement Outsourcing (PO)

May-2012 Overview of the overall PO market in 2011 with size and growth of the market, contract characteristics, value proposition, service provider rating, and market outlook for 2012

Procurement Outsourcing (PO) Annual Report 2012: The PO Market – Steadily Marching Forward

April-2012 This research aims to compare Total Cost of Ownership (TCO) of Business Process as a Service (BPaaS) solutions with traditional BPO using a comprehensive financial model and create a comprehensive framework to evaluate BPaaS sourcing

Making the Right Choice – How to Evaluate BPaaS Solutions?



Role of PO in Managing Direct Spend – Not so Indirect Any More






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Q3-2012 Profile 15+ established PO service providers across various dimensions including FTEs strength, key delivery locations, PO service suite, market positioning, overall PO delivery capability assessment, and Everest Group Research perspective on service providers

PO Service Provider Profile Compendium

July-2012 In this research study, we analyze the fast-changing global PO service provider landscape and its impact on the PO market. We focus on providing a comprehensive analysis of the PO service provider landscape along multiple dimensions and assess service providers to position them on the Everest Group PEAK Matrix

PO Service Provider Landscape – Investing in Building Expertise

Q3-2012 This study explores the S2C outsourcing market, focusing on S2C market trends, value proposition and challenges, S2C solution components and characteristics, and the service provider landscape

Source-to-Contract (S2C) a High Value Driver in PO

Q4-2012 With increasing importance and significant spend on contingent workforce, this study identifies different sourcing models and deep dives into the growing Managed Service Provider (MSP) models and its variations

Sourcing Contingent Workforce – Rise of MSP Model

Q3-2012 This report explores the adjacencies of procurement with other supply chain areas such as supply chain planning, asset management, fulfilment and logistics, after-market services, and trend of PO service providers extending service to these areas

Expansion of PO Into Broader Supply Chain




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Q4-2012 The BPO market is now in a mature state with a well-established value proposition and demonstrated service provider capabilities. As the value proposition expands beyond cost arbitrage to improving business outcomes, buyers are considering an end-to-end approach as opposed to a functional piecemeal approach. In this study, we investigate the business value and the market state of an end-to-end Procure-to-Pay (P2P) process

Unlocking Value from End-to-End Outsourcing: Focus on Procure-to-pay (P2P)




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Additional PO research references

The following documents are recommended for additional insight into the topic covered in this research report. The recommended documents either provide additional details on the topic or complementary content that may be of interest 1. PO Annual Report 2012 (EGR-2012-1-R-0683a); 2012. This report providers an overview of the overall PO market in 2011, including

the size and growth of market, adoption trends, contract characteristics, value proposition, service provider landscape, and market outlook for 2012

2. Role of PO in Managing Direct Spend – Not so Indirect Any More (EGR-2012-1-R-0684); 2012. This study analyzes the role of PO in managing direct spend categories including, market size, adoption trends, and service provider investments related to direct spend outsourcing, models for leveraging PO to optimize direct spend, drivers, challenges, and best practices

3. Top 10 Best Practices in PO (EGR-2012-1-R-0677); 2012. The objective of this research is to describe the top 10 best practices in PO that will help current and prospective PO buyers realize value from their PO engagements

4. Succeed with Maintenance, Repair, and Overhaul (MRO) Outsourcing (EGR-2012-1-R-0633); 2012. This report discusses the trend in adoption of MRO outsourcing, benefits, challenges, and best practices. It also includes a case study on a successful MRO outsourcing engagement

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For more information on this and other research published by the Everest Group, please contact us: Saurabh Gupta, Vice President: [email protected] Katrina Menzigian, Vice President: [email protected] Abhishek Menon, Practice Director: [email protected] Arpita Bansal, Senior Analyst: [email protected] PO Team: [email protected]





































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About Everest Group

Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research, and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies, and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations, and private equity firms in six continents across all industry categories. For more information, please visit www.everestgrp.com and research.everestgrp.com.

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