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Proprietary & Confidential. © 2011, Everest Global, Inc.1
Today’s Webinar is brought to you by Everest Group
Today’s WebinarIT Application Outsourcing in Banking: Market trends, evolving service provider landscape, and future outlook
Synopsis:Everest Group will highlight the findings of its reports on the banking AO market covering the following aspects: Key Market Trends: Analyze the current trends for large, multi-year application outsourcing relationships for
the global banking sector Evolving Service Provider Landscape, and Results of Everest Group’s banking AO PEAK 2011:
Highlight the capabilities of over 20 leading AO service providers specific to the global banking sector. These providers have been mapped on the Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to a provider’s capability and market success.
Key Implications and Future Outlook: Highlight themes that are likely to influence the service provider landscape for large banking AO relationships in the future, and discuss implications for banking buyers and service providers
About Everest Group
Everest Group is an advisor to business leaders on next generation 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 www.everestresearchinstitute.com.For more information, contact Mark Williamson at mark.williamson@everestgrp.com
Proprietary & Confidential. © 2011, Everest Global, Inc.2
Q&A
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Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel
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IT Application Outsourcing (AO) in Banking: PEAK into the Evolving Service Provider Landscape
Webinar
June 29, 2011
Proprietary & Confidential. © 2011, Everest Global, Inc.4
Introductions
Amneet SinghVice PresidentEverest Groupamneet.singh@everestgrp.com
Rajat JunejaSenior Research AnalystEverest Grouprajat.juneja@everestgrp.com
Jimit AroraResearch DirectorEverest Groupjimit.arora@everestgrp.com
Proprietary & Confidential. © 2011, Everest Global, Inc.5
Agenda
Background and context
IT AO in Banking – Emerging market trends
Banking AO service provider landscape – Everest Group’s PEAK results
Key implications and future outlook
Q&A
Proprietary & Confidential. © 2011, Everest Global, Inc.6
Retail financial services (B2C1) Retail banking Lending Cards
Commercial banking (B2B2)
Banking
Investment banking Asset management Custody Fund administration
Capital markets
Life and pensions Property and casualty
Insurance
1 Business-to-consumer relationships2 Business-to-business relationships
Traditional IO Remote Infrastructure
Management (RIM) Infrastructure Management
Services (IMS) Cloud
IT Infrastructure Outsourcing (IO)
Application development Applications maintenance Independent testing Package implementation ERP services Business intelligence /
Data warehousing
IT Applications Outsourcing (AO)
BFSI-specific BPO HRO FAO PO Contact center Knowledge services
Business Process Outsourcing (BPO)
IT strategy/operations consulting
Business consulting Infrastructure consulting Infrastructure roll-outs
Consulting
Everest Group’s research analyzes IT applications outsourcing market in the Banking sub-vertical with a focus on large (TCV >US$25 million), annuity-based, multi-year (>3 years) relationships; and capabilities of service providers in winning and executing such transactions
NOT EXHAUSTIVEFocus of webinar
Services industry
BFSI
This Webinar presents results of Everest Group’s recently released reports on the banking Applications Outsourcing (AO) market
Proprietary & Confidential. © 2011, Everest Global, Inc.7
These reports are a part of Everest Group’s series of nine reports focused on applications outsourcing in BFSI in 2011
Banking
Capital markets
Insurance
Banking
Capital markets
Insurance
Banking
Capital markets
Insurance
Service Providers’ Profiles Compendium: IT Application Outsourcing services
Capability profiles of service providers capturing their AO services experience in specific sub-verticals. Each service provider profile includes: Service provider overview: Details of AO services capabilities, key
investments, proprietary solutions, technological expertise Functional/LoB focus Transactions overview for application services offerings Delivery footprint
Service Provider Landscape: IT Application Outsourcing Services
Each report provides: Mapping of service providers on Everest Group’s capability matrix
i.e., Performance | Experience | Ability | Knowledge (PEAK) Matrix for the specific sub-vertical
Assessment of service providers based on delivery capability and market success in establishing large AO contracts with financial institutions
Market Trends and Future Outlook in IT Applications Outsourcing Services
Each report provides an overview of the application outsourcing market for the specific banking / capital markets / insurance sub-vertical
The report analyzes key trends in market size and growth, demand drivers, adoption and scope trends, emerging themes, key areas of investment, and implications for key stakeholders
Proprietary & Confidential. © 2011, Everest Global, Inc.8
Everest Group’s BFSI research is based on two key sources of proprietary information
Proprietary Everest Group database of ~345 large, multi-year AO contracts within BFSI (updated annually)
The database tracks the following elements of each large AO relationship: Buyer details including industry, size, and signing region Contract details including TCV, ACV, term, start date,
service provider FTEs, and pricing structure Activity broken down separately for banking, capital markets,
and insurance, and by Lines of Business (e.g., retail banking, credit cards, loans and mortgages)
Scope includes coverage of buyer geography as well as functional activities
Global sourcing, including delivery locations and level of offshoring
1
Proprietary Everest Group database of operational capability of 20+ BFSI AO service providers (updated annually)
The database tracks the following capability elements for each service provider: Key leaders Major BFSI AO clients and recent wins Overall revenues, total employees, and BFSI employees Recent BFSI-related developments BFSI AO delivery locations BFSI AO service suite Domain capabilities, proprietary solutions, and intellectual
property investments
2
Note: We continuously monitor market developments and track additional service providers beyond those included in the analysisConfidentiality: The Everest Research Institute takes our confidentiality pledge very seriously. Any information we collect, that is contract
specific, will be presented back to the industry only in an aggregated fashion
Service providers covered in the analysis
Proprietary & Confidential. © 2011, Everest Global, Inc.9
Everest Group has collated information on large-sized BFSI AO transactions and has used this robust data-set to analyze various aspects of the BFSI AO market
Everest Group’s Transaction Intelligence Database
~18,000 transactions listed Over 95% transactions post-
2000 ~4,300 BFSI transactions
Everest Group’s RFIs to BFSI AO service providers
Participation by over 20 leading service providers
1 Transactions with TCV >US$25 million, which are active as of Dec 2010Source: Everest Research Institute (2011)
~350 active large-sized BFSI AO transactions1
Banking (170+ large-sized transactions)
Insurance
Capital Markets
Focus of this webinar
Industry: Banking (retail banking, wholesale banking, credit cards, loans and mortgages); excludes capital markets and insurance
Services: Large (TCV >US$25 million), multi-year (>3 years), annuity-based applications outsourcing Geography: Global Sourcing model: Third-party AO transactions; excludes shared services or captive Service providers: 22 leading banking AO service providers
Research scope
Proprietary & Confidential. © 2011, Everest Global, Inc.10
Agenda
Background and context
IT AO in Banking – Emerging market trends
Banking AO service provider landscape – Everest Group’s PEAK results
Key implications and future outlook
Q&A
Proprietary & Confidential. © 2011, Everest Global, Inc.11
The global ITO market returned to growth in 2010; BFSI sector is a leading ITO adopter
With a market size of US$72-80 billion, BFSI is the leading industry in ITO adoption The BFSI vertical was instrumental in the revival of the ITO industry post the economic downturn Pent-up demand, post-merger integration, channel integration, and regulatory/compliance drove
market activity
9996100
2008 2009 2010
Global IT outsourcing market growth (indexed)Base year (2008) indexed to 100
Global IT outsourcing market split by buyer industry2010; US$ billion
16%
12%
7%4%3%
18%
3%
8% 13%
16%
Manufacturing
Retail
Others
100% = 450-500
Healthcare
BFSI
Telecom and media
Government
Services
Utilities and construction
Transport
Source: Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.12
Applications Outsourcing is included in scope in over 60% of all BFSI ITO transactions
Scope distribution of BFSI ITO transactions1
2008-2010; Number of transactions
50% 50% 56%
11% 15% 9%
39% 33% 31%
2%4%
2008 2009 2010
Pure AO
Non-AO3
Bundled AO2
Scope not known
230 202189
1 Based on number of publicly announced transactions tracked through Everest Group’s Transaction Intelligence Database2 Bundling of AO with IO and/or BPO3 Pure IO, and IO bundled with BPO
Source: Everest Research Institute (2011)
The proportion of pure AO contracts among the BFSI ITO transactions increased each year from 2008 to 2010 Large transactions (TCV >US$25 million) form a significant portion (over 50% in number, and even higher in terms of
TCV) of BFSI AO transactions
59%
41%Large transactions (TCV >US$25 million)
Small transactions
(TCV <US$25 million)
Distribution of active BFSI AO contracts by size1
Percentage of all transactions
100% =
Proprietary & Confidential. © 2011, Everest Global, Inc.13
6 6
16
9 911
H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010
In line with the broader ITO trend, large banking AO transactions have revived after the slowdown phase of H2 2009-H1 2010
The revival of large-sized banking AO transactions in 2010 is more evident in terms of the value of contracts The healthy transaction activity in H1 2009 despite the onset of recession is attributed to the typical lead time in signing outsourcing contracts
Number of large, active banking AO contracts1
Number of transactions
Total TCV of large, active banking AO contracts1
US$ billion
Slowdown phase
1 New transactions with TCV >US$25 million, which started in the given period and which are active as of Dec 2010Note: TCV excludes volume expansion for accounts that were signed prior to 2008
Source: Everest Research Institute (2011)
65% 35%
100% = 164
Contracts signed during 2008-2010
Contracts signed before
2008
100% = 27.3
TCV signed during 2008-2010
TCV signed before 2008 74% 26% 0.3
1.19
1.97
0.95 0.84
1.75
H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010
Proprietary & Confidential. © 2011, Everest Global, Inc.14
Custom application development, enhancements and maintenance is at the core of most large AO relationships
1 Transactions with TCV >US$25 million and which are active as of Dec 20102 Percentage of large banking AO transactions (with known scope details) in which the given sub-function is in scope
Source: Everest Research Institute (2011)
Sub-functions in large banking AO transactions1
Frequency of inclusion2
97%
83%
54%
34%
57%
Includes other AO sub-functions such as systems integration, and application related consulting
Most large-sized banking AO transactions are structured around application development and ongoing enhancements and maintenance
Application testing is also a key outsourced AO sub-function, which is most commonly bundled in ADM contracts. Stand-alone, independent testing services are also witnessing increased market traction
Project-based, core banking implementations are relatively less common, given the contract scale cut-offs imposed on the sample-set (i.e., TCV >US$25 million)
ADM
Testing
Package implementation
ERP services
Others
Proprietary & Confidential. © 2011, Everest Global, Inc.15
67%
83%
50%56%
72%82%
H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010
72%69%69%67%73% 70%
H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010
Proportion of large banking AO contracts with offshore delivery has increased steadily since H1 2009
Percentage of large banking AO transactions with offshore delivery1
2008-2010
The decline in offshoring during 2008-09 was primarily due to regulatory restrictions and the political sentiment of governments against moving work outside their countries
Percentage of FTEs present in offshore locations for banking AO transactions with offshore delivery component1
2008-2010
1 Transactions with TCV >US$25 million and which are active as of Dec 2010Source: Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.16
Chile
MexicoIndia
China
Poland
Romania
Brazil
Argentina
AO services capabilities placement in key offshore locations
Czech Republic
Philippines
NOT EXHAUSTIVE
1 ‘Maturity’ defined based on ~20 leading service providers’ aggregate delivery workforce present in the countries for AO workSource: Everest Research Institute (2011)
While India continues to be the nerve-center for banking AO delivery, service providers are building other locations for specific markets and skills
Maturity1 level: High Medium Low
Russia
Ukraine
Israel
Vietnam
Hungary
Mauritius
Proprietary & Confidential. © 2011, Everest Global, Inc.17
Agenda
Background and context
IT AO in Banking – Emerging market trends
Banking AO service provider landscape – Everest Group’s PEAK results
Key implications and future outlook
Q&A
Proprietary & Confidential. © 2011, Everest Global, Inc.18
From a landscape of 50+ service providers, Everest Group assessed 22 service providers for their capabilities in Banking applications outsourcing
Service providers assessedService provider outreach (partial list)
1 Assessment for Accenture, Capgemini, HPES, and IBM GS is based on Everest Group’s proprietary Transaction Intelligence (TI) database, service provider disclosures, and Everest Group’s interactions with banking buyers
Source: Everest Research Institute (2011)
Assessment based on: RFIs submitted by service providers1
Everest Group Transactions Intelligence database
Service provider disclosures and interviews Everest Group’s interaction with banking buyers
1 1 1
1
Criteria for inclusion in the assessment:
Success in large banking AO relationships, i.e., >US$25 million
TCV >3 years
relationship duration
Active on Dec 31, 2010
Everest Group experience and RFI response
Proprietary & Confidential. © 2011, Everest Global, Inc.19
1 Contracts that have a TCV of more than US$25 million and are active as of Dec 2010Source: Everest Research Institute (2011)
Global majors Offshore majors Regional players Tier-2 Indian providers
The current service provider landscape for banking AO services has four major provider categories
~90~150
~650~660
Globalmajors
Offshoremajors
Regionalplayers
Tier-2 Indianproviders
Average banking AO revenues2010; US$ million
Banking AO operations scale across four service provider categories
On an average, global and offshore majors derive upwards of half a billion dollars in banking AO revenues
Despite the difference in total revenues, offshore majors’ banking AO revenues are comparable to that of global majors
While regional players have a smaller employee base in comparison to Tier-2 companies, they realize significantly higher revenues given their larger base of onshore employees
Proprietary & Confidential. © 2011, Everest Global, Inc.20
These service providers have been assessed on multiple dimensions pertaining to their capability and market success to determine their positioning on the banking AO PEAK Matrix
Number of contracts
Contract values (TCV, ACV)
Success with large-sized buyers
New clients acquired
Revenue growth
Scale
Revenues
FTEs
Number of delivery centers
Number of clients
Length of contracts
Scope
Lines of Business served
AO sub-functions
Contract size range
Domain investments
Proprietary solutions
Certifications
Delivery footprint
Delivery countries
Offshore leverage
Geographies served
M&A and alliances
Mar
ket s
ucce
ss
Delivery capability
Everest Group PEAK Matrix
Emerging Players
Leaders
Major Contenders
Proprietary & Confidential. © 2011, Everest Global, Inc.21
Everest Group PEAK Matrix for the large banking AO relationships
1 PEAK specific to large (>US$25 million TCV) multi-year (>3 years) applications outsourcing relationships specific to the banking sector (i.e., retail banking, credit cards, mortgage & loans, and commercial banking segments). EXCLUDES capital markets and insurance
Source: Everest Research Institute (2011)
Major Contender Emerging PlayerLeader
Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix for large banking AO relationships
High
Low
25th
perc
entil
e
75th
perc
entil
e
75th percentile
Low HighDelivery capability(Scale, scope, domain investments, delivery footprint)
Emerging Players
Leaders
Major Contenders
Mar
ket s
ucce
ss(T
rans
actio
n ac
tivity
)
25th percentile
WiproHPES
Capgemini
CGIHCL
CSC
Atos Origin Polaris
Dell ServicesSyntel
Infosys
Accenture
IBM GS
Cognizant
LuxoftSofttekNess
ITC Infotech
L&T Infotech
MindTree
Leaders are characterized by their breadth of capability in banking AO services, established set of proprietary products/platforms, highly scaled operations, as well as their ability to win and execute large annuity contracts with major banking buyers
Major Contenders have been successful in establishing their stronghold in select regional pockets, functional areas, or sub-verticals through targeted investments in specialized solutions or micro vertical focused solution accelerators, and product partnerships
Emerging Players that bank on select privileged relationships in the banking AO space, and are seeking to aggressively grow their operations through investments in dedicated CoEs, and expertise in custom application development, and analytics/testing services
Hexaware
TCS
Proprietary & Confidential. © 2011, Everest Global, Inc.22
Leaders account for 70% of active ACV of large banking AO contracts
Market share of providers in large banking AO contracts1
Active ACV and TCV in US$ billion, Number of contracts
70% 63% 59%
28% 34%32%
9%3%2%
Active ACV TCV Number of contracts
1 Contracts for a representative set of 22 providers; contract TCV >US$25 million and status active as of Dec 2010Source: Everest Research Institute (2011)
The banking AO market represented by the 22 service providers assessed by Everest Group scaled up to over US$5 billion in revenues and ~100,000 FTEs spread across ~20 delivery countries
5.5 22.8 175+
Leaders
Major Contenders
Emerging Players
100% =
Proprietary & Confidential. © 2011, Everest Global, Inc.23
Service provider capability assessment dashboard
Everest Group’s banking AO service provider landscape report analyzes specific attributes of each provider category / PEAK cluster
Banking AO scale by provider segment
Source: Everest Research Institute (2011)
Scope of AO functions covered in large banking contracts
Banking AO revenuesUS$ million
xxxxxx
xxx
xxx
xx
xxx
xxx
xxx
Emerging Players
Major Contenders
Leaders
xxxxxx
xxx
xxx
xx
xxx
xxx
xxx
Emerging Players
Major Contenders
Leaders
Banking AO FTEsNumber of FTEs
Service provider Scale Scope
Domain investments
Delivery footprint
Service provider category 1
Provider 1
Provider 2
Provider 3
Provider 4
Service provider category 2
Provider 1
Provider 2
Provider 3
Provider 4
Scope distribution of large banking AO contracts
High Medium Low
Proprietary & Confidential. © 2011, Everest Global, Inc.24
The report also provides specific details on each service provider’s distinctive characteristics, and capabilities, in the banking AO services space
Actionable insights on banking AO
scale, breadth of offerings, domain
investments and market success for each service provider on the PEAK
Provider 1
Provider 2
Provider 3
Provider 4
Provider 5
Provider 6
Provider 7
Provider 8
Provider 9
Provider 10
Proprietary & Confidential. © 2011, Everest Global, Inc.25
Agenda
Background and context
IT AO in Banking – Emerging market trends
Banking AO service provider landscape – Everest Group’s PEAK results
Key implications and future outlook
Q&A
Proprietary & Confidential. © 2011, Everest Global, Inc.26
Four primary priorities of banks are driving growth in large-scale applications outsourcing
Restoring growth
As the banking sector emerges from recession, return of discretionary spend and increased business volumes are expected to drive outsourcing activity
Entry into new markets (e.g., MEA, APAC) and customer base expansion are creating significant technology demands of banks
Given pressures brought on by the financial crisis, banks are focusing disproportionate attention towards removing redundancies in operations to: Improve business efficiency Achieve cost savings especially in the
middle-and back-office activities
Improving profitability
Banks are investing in customer experience management and evolving towards a ‘bank of the future’ by blending technology (mobility, social media) into banking to attract and retain a new “generation” of clients
Adapting to changing customer preferences
Managing complexity
Extensive regulatory demands & increasing compliance complexity
Need to create “single view of customer” to mitigate risk and to sell better
Application rationalization and consolidation, cloud adoption to reduce IT complexity
Emergence of large, integrated, banking enterprises focusing on better governance
Factors driving banking AO
demand
Sources: Buyer and service provider interviews; Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.27
Implications for banking buyersEstablish a robust IT foundation to navigate the intensifying business complexities such as restoring growth, expanding operations, and improving profitability
The banking industry has traditionally been one of the most mature adopters of technology. However, it is facing pressure with regards to its IT systems and processes as it emerges from recession: Banks’ profits dipped drastically during the slowdown phase of 2008-2009, driving them to focus on
reducing their cost of operations. This can be achieved through: Carefully evaluating various outsourcing and offshoring options to minimize costs and maximize value
derived from providers Designing a well integrated, efficient application framework to ensure optimal utilization of IT resources
Banks also need to augment their IT systems to support their entry into new markets and to reach out to a wider customer base. Business expansion across geographies creates the challenge of integration of acquired assets and customers. It is therefore critical for banking buyers to create a global delivery footprint that helps meet their growth objectives, and also reduces location concentration risks
Total assets Pre-tax profits
Assets of largest 1,000 banksUS$ trillion
0
30
60
90
120
2005-06 2006-07 2007-08 2008-09 2009-100
200
400
600
800
Pre-tax profits of largest 1,000 banksUS$ billion
Sources: The Banker; Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.28
Implications for banking buyers Design an optimized portfolio of service providers to simplify sourcing environment and achieve cost savingsLandscape of applications outsourcing service provider portfolio GLOBAL FINANCIAL MAJOR EXAMPLE
Retail banking Commercial banking Credit cards Enterprise-wide
Service provider 2Service provider 3
Service provider 1
Service provider 1
Service provider 1
Service provider 1
Service provider 1
Service provider 4
Service provider 6
Service provider 3
Service provider 1
Service provider 1
Service provider 1
Service provider 4Service provider 2
Service provider 2
Service provider 1Fron
t of
fice
F&A
HR
Service provider 1 has a large position Service provider 3 is used by multiple businesses, but split across front and
mid-back office Service provider 4 is also used by multiple businesses, but split across mid-
back office and HR This variety in use reflects relationship preferences, not differing capabilities
Source: Everest Research Institute (2011)
Service provider 1
Most banks currently use a complex portfolio of service providers for their applications portfolio. Global expansion, and large-scale M&A have introduced further complexity to the portfolios. Rationalizing the portfolio helps in Creating a less complex sourcing environment Enabling strategic partnerships with service providers Deriving meaningful financial benefit: Utilizing fewer service providers can yield as much as 22-28% financial savings
on an annualized basis Buyers therefore need to re-evaluate their service provider relationships to create an optimized service delivery portfolio that balances trade-offs between concentration risks, redundancy levels, and competitive tension (may be optimally enabled through a “champion challenger“ model)
Mid
-ba
ck
offic
e
Service provider 3
Proprietary & Confidential. © 2011, Everest Global, Inc.29
Managing increased regulatory/compliance demands
Invest in customer-centric initiatives
Banks are increasingly required to manage huge volumes of data originating from several fronts to better comply with a stricter regulatory environment and manage risks
Examples of regulatory changes impacting the banking sector include: Basel III which will be phased in from 2013 to 2019 globally, making it critical for
banks to upgrade their IT backbone during 2011-12 Stricter regulatory requirements which are surfacing across different regions. For
example:— The 2010 Dodd-Frank Act in the U.S. represents a significant change in the
U.S. financial regulatory environment and is expected to affect almost every aspect of the country’s financial services industry
— The recent call for reverse stress-testing by the Committee of European Banking Supervisors to toughen the scenarios used in examining banks’ financial stability
In a post recessionary environment banks need to invest in staying connected with their clientele, and enhancing customer experience. This would require greater investments in areas such as social media, multi-channel integration, enterprise-wide data management, and CRM & marketing tools
Implications for banking buyersManage stringent compliance requirements being outlined by regulators in the post-recessionary scenario; and adapt to changing customer preferences through investments in technology that enhances customer experience
Source: Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.30
Implications for service providersBuild deep vertical domain expertise to differentiate and effectively combat the “Matthew Effect”
In the crowded banking AO provider landscape, buyers are placing disproportionate emphasis on domain expertise as a key selection criteria for service providers. Buyers are looking for technology that can reduce time-to-market for their products, and developing customer- focused solutions, and innovative products.
To deliver these benefits, providers need to invest in domain capabilities (build IP/solution accelerators) and develop expertise in individual LoBs within banking (e.g., mortgage, credit cared specialization). This micro-vertical approach to differentiation will be key to the future success of service providers
Build micro-vertical expertise to achieve/sustain differentiation
As buyer-driven portfolio consolidation drives M&A among service providers, the landscape is exhibiting signs of the “Matthew effect” (rich get richer and poor get poorer) or in this case the “big get bigger”. This phenomenon could further widen the gap between the Leaders, Major Contenders and Emerging Players. As these relatively “smaller” service providers seek to achieve growth and remain competitive in this environment, M&A and alliances will play a significant role to achieve quantum jumps in capability and performance:
Major Contenders looking to more effectively compete with the Leaders need to expand their coverage and scope of offerings, enhance domain expertise, increase onshore presence, broaden global delivery footprint, strengthen sales and marketing capabilities to win new business, and build robust account management practices that can help drive growth in existing accounts
Emerging Players need to identify market niches to go after. As these providers rely on a select set of clients it remains critical for them to demonstrate superior value consistently to protect these accounts from any portfolio consolidation initiatives
Major Contenders and Emerging Players to prepare for “The Matthew effect”
Source: Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.31
Implications for service providersPrepare for a new competitive landscape as buyer-driven portfolio consolidation accelerates M&A activity
3
10
1
Leaders MajorContenders
EmergingPlayers
M&A transactions in 2010 that enhance BFSI capabilitiesNumber
Post-recession, M&A activity in the outsourcing and offshoring industry gathered momentum
M&A activity in the Major Contenders category is significantly higher than that for the Leaders or Emerging Players
These M&A events are likely to alter the landscape in coming years and create a new set of Leaders and Major Contenders
Source: Everest Research Institute (2011)
Proprietary & Confidential. © 2011, Everest Global, Inc.32
Agenda
Background and context
IT AO in Banking – Emerging market trends
Banking AO service provider landscape – Everest Group’s PEAK results
Key implications and future outlook
Q&A
Proprietary & Confidential. © 2011, Everest Global, Inc.33
Q&A
Attendees will receive an email enabling them to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Mark Williamson, mark.williamson@everestgrp.com
For advice or research on the BFSI outsourcing and offshoring market, please contact: Amneet Singh, amneet.singh@everestgrp.com Jimit Arora, jimit.arora@everestgrp.com Rajat Juneja, rajat.juneja@everestgrp.com
For background information on Everest Group, please visit: www.everestgrp.com www.everstresearchinstitute.com
Thank you for attending today
To ask a question during the Q&A session
Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel
Be sure to keep the default set to “send to a Panelist”
Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit
Proprietary & Confidential. © 2011, Everest Global, Inc.34
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