Unlocking Additional Value From Your Offshored Research & Analytics

Proprietary & Confidential. © 2010, Everest Global, Inc.1

Today’s Webinar is brought to you by Everest Group

Today’s WebinarUnlocking Additional Value From Your Offshored Research & Analytics

Synopsis:Everest experts, Jimit Arora and Ankur Garg, will outline how large financial services customers can push the envelope in offshore R&A and help you understand how to emulate the best-in-class financial institutions, along with customers in other industries learning from financial services best practices.

Upcoming WebinarKey Q2-2010 Global Sourcing MarketDevelopments: Everest Research InstituteMarket Vista Report Briefing

Tuesday, August 17, 20109:00 AM CDT/10:00 AM EDT

Speakers:Eric Simonson – Managing Partner -Research, Everest GroupAnand Ramesh – Research Director, Everest Group

About Everest GroupEverest Group is a leading consulting and research firm that comprehensively serves the Global Services landscape encompassing offshoring, outsourcing and shared services. An industry leader since creating the sourcing consultancy practice in 1991, Everest has earned a worldwide reputation for on-going innovation by helping clients capture optimum value through sourcing strategies and implementation. Committed to thought leadership, Everest is noted for its fact-based analyses and insights that are crucial to making the right decisions in today’s environment. For more information, contact Mark Williamson at [email protected].

mailto:[email protected]


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Introductions

Ankur GargSenior Research AnalystEverest [email protected]

Jimit AroraResearch DirectorEverest [email protected]



Unlocking Additional Value From Offshored Research & Analytics

July 20, 2010


Agenda

Overview of offshore Research and Analytics

Value proposition of offshore R&A in Financial Services

Evolution of demand and service maturity

Supplier landscape

Summary and implications

Q&A


“Knowledge services” includes a varied set of complex and judgment-intensive services

Spectrum of knowledge services

Knowledge Services

Financialresearch

Equity researchCredit researchFixed-income researchCorporate financeIndex researchQuantitative research

Businessresearch

Company profiling and benchmarkingIndustry studies and trackingMarket entry studies

Marketresearch

Survey designAdministrationData compilationInsight generation

Data analytics

Marketing analyticsRisk analyticsFund sales analyticsClaims analytics

Legal and IP

Patent researchLegal services

Other

Regulation & compliance supportEditorial supportLibrary & KM services

‘Research and Analytics’ (R&A)Largest segment of knowledge services

NOT EXHAUSTIVE

Source: Everest Research Institute


The decade old knowledge services industry is at an inflexion point and preparing for the next generation of growth and maturityGlobal sourcing industry maturity curve

Emerging rapid growth

Remote infrastructure services

Pioneers Reaching maturity

Mar

ket v

alue

cre

atio

n

Human Resources

Knowledge services

Contact center

IT applications services

Finance & Accounting

Financial services is the largest contributor to offshore knowledge services marketPost the economic crisis, financial institutions seek to further push the envelope in offshore R&A, and will play a lead role in the growth and evolution of the industry



35-45%

15-20%

40-45%

2006 2009

The existing US$1.0-1.2 billion offshore R&A industry represents less than 10 percent of the addressable market potentialOffshore R&A market sizeUS$ million

600-700

1,000-1,200

Financial Services

Pharma & Life sciences

Others

100% = US$1.0-1.2 billion

Offshore R&A industry distributionPercentage


Financial and business research are the dominant service offerings for financial institutionsWhile capital markets players lead adoption for financial and business research, retail banks and insurance firms drive majority of the data analytics demandNorth America and U.K. contribute more than 75% to the total market activity; recent years have witnessed activity from other geographies such as Switzerland, Benelux, and Nordics in Europe, and Japan, Hong Kong, and Singapore in Asia


Agenda




Supplier landscape


Q&A


Labor arbitrage driven direct cost-savings remains the primary driver in the adoption and growth of offshore R&A

15-25

50-70

25-40

100-200

Offshore

Onshore

Billing rates for research and analyticsUS$ per hour

Market research and data management

Financial/business research and data analytics

Offshore locations such as India provide financial institutions with access to large pools of qualified talent with advanced degrees in management, finance, or engineering at significantly lower costs

In outsourced delivery, onshore billing rates are typically 2-4x the offshore billing rates

Sources: Supplier inputs; Everest Research Institute


However, other offshoring drivers have gained notable importance from buyers

Outsourcing R&A enables financial institutions to mitigate challenges of managing variations in capacity as volumes fluctuate. The flexibility allows financial institutions to scale up or down per demand fluctuations depending on the economic activity (e.g., year-end peak loads)

Flexibility of scale

Access to a ready pool of trained resources in offshore locations allows financial institutions to reduce time to market and quickly expand coverage to newer areas and geographies

Reduced time to market

Offshoring allows financial institutions to deploy similar amount of capital to hire a greater number of resources to increase throughputFurther, exploiting time-zones advantage through global delivery, financial institutions are able to get the analysis of previous day’s market activity before the start of the next trading day

Greater throughput



Agenda




Supplier landscape


Q&A


We analyze the evolution and maturity of the industry along three key aspects

Locations maturity

FS R&A maturity

and evolution


The increased confidence in offshore R&A is resulting in a more sophisticated demand profile

Experienced buyers of offshore R&A services are recognizing the growing maturity of third-party suppliers and increasingly leveraging them for core and complex work traditionally reserved for captives

Sourcing models

Encouraged by the successful experience of larger financial institutions, mid-tier players are also increasingly embracing the offshoring in R&AAdoption

Contracting approaches are evolving from project-based engagements to large, multi-year engagementsContracting

behavior

Buyers are expanding offshoring adoption to newer and complex areas, e.g., regulatory and compliance support, advanced modellingScope

As global sourcing maturity of buyers increases, portfolio issues such as location concentration risk are also impacting offshore R&A, and mature adopters are seeking delivery locations outside India

Risk mitigation

Sources: Buyer discussions; supplier inputs; Everest Research Institute

Locations maturity


Financial research is the most mature area for offshore R&A delivery

Functional areas maturity for FS knowledge services

Financial research

Equity research

Credit research

Fixed-income research

Business research

Company profiling & benchmarking

Industry studies and tracking

Market entry studies

Corporate finance

Index research

Data analytics

Marketing analytics

Risk analytics

Fund sales analytics

Claims analytics

Quantitative research

Market research

Survey design

Administration

Data compilation

Insight generation

Mature Credible Emerging

Emerging segments with high growth potential:Wealth management including fund lists and recommendations, fund manager screening and performance tracking, research and analytics activities for portfolio managers and large wealth management firmsTrading and sales support including high-volume middle-office support activities such as contract reviews, trade reviews, tear-sheet preparation and other corporate functionsBuy-side research for hedge funds and mutual funds (currently sell-side research dominates)


Locations maturity


While India remains the most mature delivery location for offshore R&A, a number of other countries have emerged

India

Sri Lanka

China

PolandRomania

ChileArgentina

Costa RicaPhilippines

South Africa

Locations maturity for FS knowledge services


Mature Credible Emerging

Locations maturity


Case Study | Amba Research

Client overviewA global asset manager with more than US$200 billion of assets under managementOver 250 investment professional across seven countries

Offshoring objectivesStructure cost-effective solutions to reduce time to market for new services and products and improve profitabilityThe client required a structured, cost-effective solution that would supplement its internal team with skilled offshore resources

Engagement overviewStarting with a short pilot with Amba, the client expanded the scope of work across multiple areas including equity, fixed income, quantitative research, and sales and marketing

The client now uses Amba for 80 percent of its research support including background research, regulatory back-up, etc. It retains in house the remaining 20 percent that is considered more strategic

Rationale for selecting AmbaFinancial services expertiseSynergies from having equity, fixed income and quantitative research support from one supplier

Key benefits and resultsIncreased focus and time spent by portfolio manager/analyst on networking, idea generation, and stock pickingIncreased client coverage by ideating on new themes and providing research on themes where sell-side coverage was limitedImproved depth of evaluation Accelerated pace of converting broad themes into actionable ideas Enabled compliance with the regulatory requirementsHelped service new products

Equity Fixed income Quant Sales and marketingThematic, industry research reports

SEC 2A-7 filings Portfolio simulation and optimization

RFP/RFI support

Idea filtering Municipal bond checklists

Performance analysis Databasemaintenance

Data collection and presentation

Performance attribution

Coverage support Back-testingEvents and news monitoring

Statistical support


Case Study | Irevna

Client overviewOne of the top-10 banks in the world, with over US$500 million of assets under management

Offshoring objectivesResearch support for senior analysts and front office tradersFlexibility of large people-intensive projectsExpand coverage into new and emerging areas

Engagement overviewScope spans multiple research verticals – equity, fixed income, derivatives, quantitative research, and commoditiesKey services provided by Irevna include:

Building valuation modelsWriting research reportsPerforming periodic and event-driven updatesInitiating coverageWriting thematic reportsGenerating research and trade ideas Participating in investor and management calls

Multi-lingual delivery – English, Japanese, German, Spanish, and Mandarin – from three global locations – India, Poland, and ArgentinaThe relationship has evolved into an intellectual partnership with Irevna supporting strategic initiatives, generating trade ideas, expanding coverage, and designing new products

Rationale for selecting IrevnaQuality of talentDemonstrated domain expertiseOutput qualityTransparent engagement model

Key benefits and resultsRevenue enhancement though new trading and product ideas and tools to monetize researchExpansion of coverageImprovement in analyst rankings and increased broker votesFlexibility of scale allowing to manage and implement large organization-wide initiativesSignificantly reduced time to market Improvement of client’s systems and evaluation of new methods of delivering research work through “thought-partnership” with Irevna


Agenda




Supplier landscape


Q&A


The supplier landscape has evolved significantly to include suppliers from multiple categories

Supplier landscape NOT EXHAUSTIVE

Diversified IT/BPO Specialist R&A


Specialist research and analytics suppliers pioneered the market in early 2000sIT and BPO suppliers also expanded their play in this space and have scaled significantly. Acquisitions have been a key component of the growth strategy of these large IT and BPO suppliersIn some cases, the financial services practices of the specialist R&A players are meaningfully larger than those of the diversified IT and BPO players, justifying their positioning as R&A leaders for the FS sector

http://www.google.com/imgres?imgurl=http://trak.in/wp-content/uploads/2007/09/marketrx-logo.png&imgrefurl=http://trak.in/tags/business/2007/09/01/infosys-wipro-marketrx-deal/&usg=__bKoatidnxaXB6NWsvWel1C2QKIY=&h=196&w=640&sz=83&hl=en&start=1&sig2=fza_-hq_g_SE39yvD-3lkQ&itbs=1&tbnid=YEcnesegQIjBFM:&tbnh=42&tbnw=137&prev=/images?q=marketrx&hl=en&gbv=2&tbs=isch:1&ei=TwEaTLi3G42X_QavjrGVCQ

http://www.google.com/imgres?imgurl=http://www.pipalresearch.com/images/pipalLogo.jpg&imgrefurl=http://www.pipalresearch.com/&usg=__QFgX0k-S1tZpJ0sQuU7Y5VqdVqU=&h=62&w=155&sz=22&hl=en&start=1&sig2=qJWDZsKjY41R7sFzAYY-eg&itbs=1&tbnid=YRV58J4oATaG-M:&tbnh=39&tbnw=97&prev=/images?q=pipal+research&hl=en&gbv=2&tbs=isch:1&ei=7wMaTODVLJae_gb5oJySCQ

http://coreadvisor.com/globalwise/wp-content/uploads/2010/02/symphony-logo.gif

http://www.ibm.com/us/


Supplier profile | Amba Research (page 1 of 2)

Sources: Company inputs; Everest Research Institute

35%

3%

20%40%

Insurance (2%)Data/index providers

Investment banking

Brokerage

Asset management

Industry segments for FS R&APercentage

11%

7%8%

74%

Sales and marketing support

Business research

Analytics

Financial research

Functional areas for FS R&APercentage

Company overview

Established: 2003Delivery locations:

Bangalore, IndiaColombo, Sri LankaSan Jose, Costa Rica

Client profile:Over 70 clients6 of the top 15 investment banks6 of the top 15 asset managers

`Number of FS R&A FTEs

340 360440

2007 2008 2009


Supplier profile | Amba Research (page 2 of 2)

Key growth themes and investment areas

Amba is witnessing an uptick in demand for emerging markets research coverage, primarily driven by the outperformance of emerging markets compared to U.S. and European capital markets and the reduced headcount in research firms post the downturnAmba expects further push to come from domestic demand expansion and rising consumer spending in emerging markets

Emerging markets


Talent transformation and maintaining differentiation with the best capital markets talent is a key focus area at AmbaOver the last several years, Amba invested in building a top-notch training team, which now has over 55 man-years of experience and comprises several CFA charter-holdersThe firm recently created a proprietary Skill Competency Framework that identifies real technical and behavioral skills of the employees, accordingly assigns them to roles suited to their skills, and also plans career moves and rotations around their capabilities

Talent

Since the credit crisis Amba has seen a high demand for high-yield and distressed debt analysisAlso, with the recent rise in the issuance of high-yield bonds, there is greater demand for monitoring these freshly issued securities, not only in the U.S. and Europe but also in emerging markets where corporate disclosures, corporate governance, and bankruptcy laws are not as sophisticated

High yield and distressed debt analysis


Supplier profile | Evalueserve (page 1 of 2)

13%

6%4%

9%

62%


17%

6%

12%

61%


Company overview


Gurgaon, IndiaShanghai, ChinaValparaiso, ChileCluj, Romania

Client profile:7 of the top 12 investment banks5 of the top 10 UK and U.S. retail banks2 of the top 10 asset managers2 of the top 10 insurance firms

`Number of FS R&A FTEs

579

760 820

2007 2008 2009

Investment banking

Brokerage (2%)

Data/index providers

Retail banking

FS consultants

Credit cardsAsset management (2%) Insurance (2%) Market research (3%)

Editorial, library, KM services

Business research Financial research

Analytics

Regulation/ compliance support (1%)



Supplier profile | Evalueserve (page 2 of 2)



This largely untapped area involves providing R&A services to firms with a large network of brokers or financial advisorsThe key support activities are manager research, portfolio construction and monitoring, operational support, and compliance supportAnother upcoming area is analytics, which involves activities such as data retrieval, data analysis, internal reporting, campaign management, and predictive modeling

Wealth management

Clients are various research teams (equity, derivatives, fixed income, commodities, etc.) and sales and trading functions within investment banks. The activities include:

Sales support including tear sheets, pitch books, market commentaryStructuring including back-testing of new trading strategies, creation and maintenance of databases of historical prices, implied volatilities, correlationsTrading support including preparing daily economic statistics, market sentiment, tracking weekly/monthly performance of bespoke client portfolios and middle-office support

Quantitative support

This involves use of advanced statistical tools like SAS and SPSS to analyze a large amount of internal customer data to gain insights into customer behavior and internal operational data to enable better decision making. Key client segments are marketing and business managersAnother area of significant interest is risk analytics relating to BASEL II and Solvency II (actuarial support)

Advanced analytics


Supplier profile | Irvena (page 1 of 2)

Company overview


Chennai & Mumbai, IndiaBuenos Aires, ArgentinaWroclaw, Poland

Client profile:Multiple Fortune 500 financial services companies

`Number of FS R&A FTEs (estimated)

1,0001,200 1,300

2007 2008 2009

16%

29%

55%


10%

16%

74%


Others

Analytics

Financial researchAsset management

Investment banking

Others



Supplier profile | Irevna (page 2 of 2)



Given the growth potential in the offshore R&A market, Irevna is focusing on making inroads into this untapped market, both within and outside the financial services sectorThe firm plans to continue focusing on enhancing the range of its services as well as its delivery model. It considers leveraging technology as central to this initiative

Expansion of coverage and offerings

Expanding the footprint across geographies will continue to be an area of focus for Irevna. This is intended to enable Irevna to diversify its talent base and have access to a much wider range of skill sets. Irevna plans to simultaneously continue to expand its business development presence to get closer to its clientsIrevna expects that these initiatives will enable it to enhance its client value proposition in terms of local relationship managers, nearshore support, access to unique skill sets, multiple language support, real-time support, and business continuity

Expansion of geographic footprint


Agenda




Supplier landscape


Q&A


Key implications for buyers

Larger financial institutions that are already offshoring knowledge services can benefit by doing more – either through expanded volumes within existing scope (e.g., more coverage, newer markets) or by adding newer and more complex process areas

Potential to unlock value by doing more

Knowledge services are different from transactional BPO services and they need to be sourced and managed differently. The people model, the operating model, and the value creation themes tend to be different across BPO and R&A:

Nuances related to the quality and background of the labor force, compensation levels, approaches to people development, career management, and retention need to be understood and managed differently in R&AThe operating models require a high degree of client-specific customization and interaction, and differ from the industrialized and SLA-driven BPO service deliveryFinally, value created through offshored R&A extends beyond direct cost savings and needs to be adequately weighed by business impact

Need to differentiate between R&A and BPO

Newer adopters, especially the mid-sized financial services players, can draw confidence from the experiences of their larger counterparts and begin with relatively larger engagements, especially in the more mature process areas

First-time adopters can start big

Unlike a few years ago where financial institutions favored their internal captives for judgment-intensive knowledge services, the growth in scale, delivery capability, and experience of the suppliers creates a credible set of options for FS firmsFirst-time adopters of offshore R&A delivery can more quickly establish offshore operations through the use of these specialist third-party players

Improved supplier credibility


Agenda




Supplier landscape


Q&A


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, [email protected]

For advice or research on research and analytics in financial services, please contact :Jimit Arora, [email protected] Garg, [email protected]

For background information on Everest, please visit:www.everestgrp.comwww.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




http://www.everestgrp.com/

http://www.everstresearchinstitute.com/

Unlocking Additional Value From Your Offshored Research & Analytics

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