SBICaps_Outsourcing Market Overview
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SBICaps_Outsourcing Market Overview
SBICaps_Outsourcing Market Overview
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April 2014 Infrastructure Outsourcing: Key Analysis and Trends Outsourcing Market Update
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Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
IT Services Overview & Global Spend
Overview: Global Technology Spend 1 Spends across verticals have recovered post-slowdown, however there are numerous regulatory pressures under action which impact outsourcing in the short/long term resulting in lower TCV and contract counts YoY 2 Large contracts in Insurance, Manufacturing, Energy & Utilities, Retail, Telecom along with Public Sector contracts in 2012 have ensured strong growth in the next 2-3 years 3 Infrastructure Outsourcing contracts remain the largest contributor to services spend, specially because of the infrastructure development in emerging economies of APAC, LatAm and MENA NOTE: Vertical spends include software, services and hardware, Source: NASSCOM
YoY Outsourcing Contract Movement Large outsourcing contracts which expire in 2013-2014 have led to new contract re-negotiations and has improved both the TCV and # of contract predictions. Contracts expected to rise
Sector wise Year on Year Contract Movement 2014 is expected to witness increased contract numbers but not necessarily large contracts, trend of multisourcing will further reduce average TCV for vertical industries Upbeat for 2014
Outsourcing market : Paradigm shift in sourcing drivers As businesses struggle in the current economic environment, the global outsourcing industry is witnessing a paradigm change; paradigm shift in the sourcing drivers • Key Emerging Macro Trends • Sluggish global economy continues to be a key influencer in the cautious stance being adopted • The Global IT-BPO Market growth expected to Grow at a 4.9% CAGR until 2015; • North America ; 4.8% and EMEA – 4.4% respectively • Expected Drivers of spending: • Restructuring activity on the rise on large deals • Incumbency no longer a significant advantage on large contracts; clients looking for greater value and performance orientated contracts to improve efficiency • Capex to Opex : Cloud component in large deals on the rise; Source: Avasant Research, all figures in US$ billion
Clients expected to invest further on initiatives around Cloud, Mobility, Analytics and Big data • Avasant forecasts ITO –BPO market to grow at around 5% CAGR till 2020 • Offshoring is expected to increase as buyer organizations stabilize and strategize for growth • BPO expected to grow at a higher rate than ITO • Key Trends: • Cloud component on outsourcing transactions gradually on the rise • Service providers investing in subscription/pay as you go service models in order to move up the value chain • Mobility, Cloud, Big data and Analytics emerging to be a key priority for both Clients and Service providers Source: Avasant Research, all figures in US$ billion
Future outlook improving with significant uptick in restructuring activity • Demand for third-party business and IT services, improved in the last quarter of 2012, though demand for traditional back-office shows signs of tapering as compared to historical figures. • Contract value in 2013 witnessed flat growth compared to 2012 due to the cautious approach of buyers. 2014 is however expected to revive growth due to large contracts due for re-negotiation • The number of deals and TCV have seen significant decline , implying smaller and fewer deals as compared to 2009 • Broader market ACV declined on account of lesser large deal activity • Multi-sourcing accounts for much of the decline in ACV and term. • Restructuring of deals on the rise - Large clients splitting deals across multiple service providers towards risk diversification ; promoting higher competition and driving pricing efficiencies Source: Avasant Research, all figures in US$ billion
Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
Offshoring Market IT Services: India
India: Strong Performance and Future “Outsourcing to India” provides sufficient evidence with strong history/growth but also a sustainable business value for organizations globally; IT services remains the largest and most robust segment for India Scalable and Sustainable Source: NASSCOM 2014 India IT/BPM Revenue FY2014E USD billion
Segmentation of Revenue Europe has increasingly become a large market for outsourcing from India; revenue from emerging verticals like retail, healthcare and utilities is expected to grow at over 14% and drive Indian revenue in the next 3-5 years Source: NASSCOM 2014 New Segments: Europe and Emerging Verticals
Key Growth Segments NASSCOM estimates infrastructure outsourcing to grow in terms of revenue for India by 18.5% in 2014, this is a significant opportunity for Indian Service Providers this year Source: NASSCOM 2014 Infrastructure Outsourcing to grow at 18.5% • IT outsourcing is expected to provide the greatest opportunity with over 18% expected growth in 2014 • New technology like social media, mobility, analytics and cloud computing (SMAC) is expected to be discussed widely for all contracts being negotiated in 2014-15 • Increased penetration of outsourcing has also led to higher degree of vertical specific services and transformation contracts; segment is expected to grow in excess of 14% in 2014
Renegotiation: Changing Landscape in 14 Large number of sizable contracts are open for renegotiation during the 2013-14 timeframe, new technology and sourcing models are expected to significantly impact new contract signings Source: Avasant Research 2014 Large outsourcing transactions nearing end of their contract duration in 2014
Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
IT and Infrastructure Management The management of a firm’s Information Technology infrastructure has been one of the earliest outsourced elements in IT Services industry Enterprise IT Environment Server (Midrange & Mainframes) Corporate User Business Processes Network Datacenter Applications DC and Hosting ADM BPO Infrastructure Management
Market Segments and Sizes Infrastructure Services and Remote Infrastructure Management (RIM) Potential for RIM is high as 60-70% of the IM activities can be done remotely Source: NASSCOM; Servers and Mainframes are typically clubbed together and account for $73B; relative market shares is estimated
Infrastructure Management Services Services across all the towers have historically had client-site as well as non-client-site elements with service providers taking over and managing assets
IT Service Provider Landscape Differences between service providers continue to be influenced by their heritage – especially where asset takeover is concerned Major Service Providers Category Characteristics • Global reach and experience • Often offer other BPO, ITO & ADM services • Multiple global centers & offer regional centers • Focus on larger contract opportunities Tier 1 Western Heritage Tier 2 • Leverage low cost country service delivery strategies • Unlikely to offer regional centers • Willing to seek smaller contracts Tier 1 India Heritage • Smaller players that may have single tower or segment focus • One - two global service delivery centers; offer regional centers • Greater regional focus (e.g, NA) • Willing to seek smaller contracts Tier 2 * Networking Services Focused SPs
Delivery Center Map by Country Most prominent countries for globalized operations appear in regional clusters Russia UK Canada Ireland Poland Czech Rep. Ukraine Slovakia Romania Turkey United States China Israel Morocco Pakistan India Mexico Vietnam Egypt UAE Philippines Nigeria Thailand Costa Rica Ghana Colombia Malaysia Sri Lanka Kenya Singapore Indonesia Peru Brazil Uruguay Chile South Africa Argentina New Zealand New Destinations Emerging Countries Established Countries
Top Outsourcing Cities 2014 Selection of new delivery location or expansion has become complex due, however segmentation of requirement and careful matching of capabilities assists in a sustainable and scalable operation. Capabilities / Value Proposition Good Average Poor Bangalore Manila Mumbai Chennai Pune Dublin Kraków Shanghai San José Quality of Life Technology Based Process Based Knowledge Based Sustainability Savings Proven Expertise Secure Dalian Scalability Infrastructure
Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
RFP Process Steps for Sourcing Best Practices Sourcing Infrastructure Services Process Details
Strategic Sourcing Avasant Sourcing Methodology DEVELOP SERVICE STRATEGY ROADMAP COLLECT DATA & CONDUCT ASSESSMENT DEVELOP FINANCIAL MODEL AND MARKET PRICE ANALYSIS CONDUCT SOURCING SCENARIO ANALYSIS CONDUCT PROVIDER MARKET SCAN FACILITATE RISK ASSESSMENT PHASE 1: SOURCING STRATEGY SERVICE MANAGEMENT & OPERATIONAL ALIGNMENT COMMUNICATIONS & CHANGE MANAGEMENT Sourcing Management& Governance CONTRACT APPROVALGATE RFP RELEASEGATE PROVIDE CONTRACT NEGOTIATION SUPPORT CONFIRM STRATEGY & COLLECT BASELINE REQS PREPARE SOWs/ CONTRACT TERMS & KEY SCHEDULES PREPARE RFP & CONTRACT PACKAGE MANAGE PROVIDER EVALUATION PROCESS FACILITATE DUE DILIGENCE & FINALIST SELECTION PHASE 2: SOURCING TRANSACTION EXECUTION RETAINED ORGANIZATION TRANSFORMATION MANAGEMENT www.itgi.org VENDOR MANAGEMENT AvaSenseTM MGT CHKPT MGT CHKPT PHASE 3: SOURCING MANAGEMENT & GOVERNANCE
Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
Sourcing Infrastructure Services Success Factors & Risk Analysis
How to Offshore Successfully Avasant leverages strategic and operating lessons it has learned as offshoring has progressed from early adoption to maturity. Best Practices • Establish strong governance and program management practices • Adopt a robust approach to project selection • Prepare detailed transition plans for each project Adopt robust offshoring framework & program governance structure • Develop the metrics to track program benefits and vendor performance • Layout audit procedures to ensure process adherence • Establish documentation and coding standards upfront • Leverage the vendor’s quality management skills Institute strong quality management through metrics • Emphasize joint upfront planning and design • Develop appropriate team structure • Institute effective review mechanisms and issue escalation procedures Use best-in-breed project management approaches • Leverage certified partners (Six Sigma, CMM and ISO) to improve internal process • Insist on appropriate domain and technology talent • Develop joint processes to mitigate attrition Fully leverage vendors’ skills and techniques • Resilient communications network • World class physical and network security • World class development centers compatible with customer requirements Ensure world class physical and network infrastructure
General Offshore Risks Sample Mitigation Considerations Illustrative Only Sourcing Management Supplier(s) Selection Education / Change Service Level Model Portfolio Selection Operating Model Global Strategy Management Management Program Contract P P P 1. Cultural fit P P P P P 2. Client acceptance P P P P P P P 3. Service quality P P P P P 4. Corporate Culture buy-in P P P P 5. Employee turnover P P P P 6. Data security P P P 7. Weakening morale P P P P P P P 8. Loss of control P P 9. Disaster recovery P P P P P 10. IP Loss P P P P P P 11. Operational efficiency P 12. Political backlash P 13. Political instability P P P P P P 14. Infrastructure instability
Critical Success Factors of the Process Go to market with: Complete data Common understanding of requirements from the Key team Highly ordered and clear – no ambiguity Commitment Key controls ALL aspects of the process Sell the transaction Scope Plan and timetable Communications Empower the team, drive the suppliers Manage the economics
Critical Success Factors of the Process, Cont. Start with the End Goal in mind Defined deal (“detailed analysis” vs. “conceptual conclusions”) Test compliance and commitment (“will” vs. “can”) Support iterative solution development – built with Suppliers during the process Understand trade-offs – (essentials vs. nice to haves) Know what outcome you are seeking Precision of the Agreement Accuracy of data Evaluation of economics Effectiveness of Due Diligence Accuracy of wording Service Levels that meet Key’s requirements Clear understanding of risks and minimal assumptions
Sourcing Advisory Services Business Process Readiness Assessment Avasant’s Business Process Readiness solution identifies operations which may be optimized through Sourcing, Shared Services or Transformation • Solution Approach • Optimization Opportunities PHASE 1: STRATEGY GATHER INFORMATION &STRATEGY DRIVERS • Functional Towers • Finance & Accounting • Human Resources • Customer Management • IT Operations • Supply Chain & Logistics • Procurement • Legal Services • Research & Analytics CONFIRM TARGET SCENARIOS AND OPPORTUNITIES Benefits DEVELOP COMPARATIVE FINANCIAL MODEL Sample HR Deliverable ANALYZE OPERATIONS, MANAGEMENT & TECHNOLOGY ASSESS MARKET MATURITY & SERVICES FIT COMPARE TARGET SCENARIOS & ANALYZE RISKS • Quickly identify opportunities for sourcing, shared services, consolidation or transformation • Align opportunities against internal and market service maturity • Compares tangible cost savings targets of alternate solutions • Identifies key execution risks of target alternatives • Develop Action Plan & Roadmap overview for initiative execution FINALIZE SERVICE DELIVERY STRATEGY DEVELOP SERVICE STRATEGY ROADMAP
Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
Service Provider – Capabilities at a Glance Full Capability No Capability
Agenda • IT Services: Overview • IT Services: Global Spend • Offshoring Market (IT Services): India • Infrastructure Outsourcing: Services & Evolution • Sourcing Infrastructure Services • Key Success Factors & Risk • Service Provider Landscape • Q&A session • Appendix
President & Managing Partner Pradeep Mukherji pk.mukherji@avasant.com +91 22 26313599 +91 98210-80841
Appendix Avasant Team
Presenters Dr. Pradeep Mukherjee, President and Managing Partner Dr. Mukherjee heads Avasant’s Asia & Africa operations. He brings to Avasant, a unique blend of understanding of outsourcing from both the buy side and sell side perspective. Pradeep brings to Avasant over 20 years of rich experience and expertise in Consultancy and Management of Technology Businesses. Knowledge to client in the areas of Country Analysis, Operating Structures, Governance Model, Finance Model, Risk Assessment and Mitigation, Vendor Evaluation and Contract Assessment as well as successful implementation and management of the off-shore centers for Fortune-1000. Dr. Mukherjee holds a Master’s degree in Industrial Engineering and Operations Research from Indian Institute of Technology (IIT) and a Doctoral degree in Management and Expert Systems. He has been active in the education field and has been a visiting faculty at leading Management Institutes in India & USA. Nishant Verma, Sr Manager Mr. Verma is an acknowledged sourcing SME in the IT Infrastructure and Applications outsourcing space. He has over 11 years of sourcing and consulting experience in Retail, Education, Healthcare, and Business Services verticals in addition to other industries such as Financial Services, Infrastructure, Banking, Oil & Gas, Media & Entertainment and Telecom. Mr. Verma has undertaken Program Management of offshore IT operations, IT development, F&A and HR, services delivery for US based clients. His consulting experience spans Applications, IT Infrastructure and Business process outsourcing. He has Sourcing and Consulting experience across geographies: US, Europe, India & SE Asia. Prior to joining Avasant, Mr. Verma held positions at various outsourcing advisory firms - ISG (erstwhile TPI), Tholons and neoIT. Mr. Verma is a graduate of the Indian Institute of Technology Kanpur, India, and holds an MBA degree from the Indian Institute of Management, Ahmedabad.
Consulting Practice Overview Corporate Capabilities
About Avasant Based in Los Angeles, California, Avasant experts have performed over 1,000 engagements since 2001 across 40+ countries within three primary disciplines: Technology Optimization, Sourcing Advisory and Globalization Advisory services Enterprise Optimization Services • Business & IT Transformation Services – Avasant assists organizations with managing critical internal IT and Operations initiatives to drive efficiency and effectiveness of service delivery, capabilities acquisition and optimal cost savings • Sourcing Advisory – Avasant assists public and private sector clients with navigating the complex transaction lifecycle of securing critical IT , Operations and Analytics managed services from global Tier 1 – 3 service providers by leveraging best practice contracts, service level frameworks and financial analysis Sourcing Advisory Services Globalization Advisory Services • Globalization Advisory – Avasant assists the governments and the supporting provider ecosystem of emerging markets with targeted economic development solutions designed to foster job growth, education, policy optimization, infrastructure development and global market awareness
About Avasant Corporate Facts industry • Industry Experience • Avasant consultants have conducted more than 1000 sourcing and globalization engagements in more than 40 countries • Avasant has negotiated over 10 billion dollars in service provider contracts for clients Experience • Industry Recognition • Avasant has been recognized with a "World's Best Outsourcing Advisors" designation by the International Association of Outsourcing Professionals (IAOP) for 4 straight years • Avasant hosts and sponsors over 50 ITO events and conferences annually. • Avasant is an independent management consulting firm without any financial ties with IT service provider and/or vendor companies. As such, we are able to provide unbiased advice to our clients. industry Recognition transaction • Transactional Expertise • Avasant maintains a complete library of best practices for outsourcing transactions • Avasant maintains a multi-disciplinary team of lawyers, IT experts, and management consultants • Avasant’s negotiations experience includes managed services agreements (IT, BPO outsourcing and development agreements, and Telecom Services) Expertise provider • Service Provider Coverage • Avasant maintains relationships with over 1000 Tier-I, II and III IT/BPO/KPO service providers • Avasant maintains a detailed database of over 500 service providers with specifications on capabilities, pricing and services Coverage
About Avasant Recent Industry Recognitions Avasant Avasant Ranks as Top Sourcing Advisor IAOP World’s Best Avasant ranked among the Top 3 “World’s Best Advisors”by the International Association of Outsourcing Professionals (IAOP) in 2013 and also in 2009, 2010, 2011, and 2012.
Avasant Overview Industry & Domain Expertise Vertical Vertical Public Sector & Utilities Energy Healthcare & Life Sciences Banking, Financial Services & Insurance Hi-Tech & Telecom Travel & Transportation Retail, Manufacturing & Distribution Media & Entertainment Countries & Non-Profit Business & IT Transformation Services Globalization Services Horizontal Strategic Sourcing Services IT Operations & Business Processes Research & Analytics IT Customer Management Supply Chain & Logistics Finance & Accounting Procurement HR Knowledge Processing Legal Processing • IT Help Desk • Desktop Support • Data Center Operations • Server & Storage Management • Network Ops • Voice Services • Application Development • Application Maintenance • ERP Systems • Co-Location • Customer Service • Customer Relations • Customer Acquisition • Operations Support • CRM Support • Outbound Telemarketing • Specialty Help Desk • eCommerce • Forecasting • Sales & Operations Planning • Capacity & Demand Planning • Sequencing & Scheduling • Distribution Planning • Logistics & Transport • Procure to Pay • Order to Cash • Record to Report • AP/AR • Collections • Fixed Assets • Treasury • Cash Mgt. • Financial Planning • Analytics • Tax & Compliance • Expense Mgt. • Source to Pay • Sourcing Support • Supplier Research • Supplier Training • Contract Mgt. • Market Intelligence • Procurement Analytics • Spend Analysis • Performance Reporting • Recruitment • Compensation • Performance Evaluation Management • Workforce Management • Benefits Administration • Training • Payroll • Employee Data Management • Travel Management • Data Management • Business Intelligence • Market Research • Insurance • Financial Services • Industry Analytics • Consumer Goods Analytics • Marketing Support • Law Firm Back Office • Corporate Legal • Document Review • Intellectual Property • Contract Management • Compliance & Regulatory Management Strategy Development Risk Management Transaction Management Change Management Transition & Transformation Management End-to-End Solution Lifecycle Management
Appendix Service Provider Landscape
Accenture Accentureis a Public Company Headquarters Dublin, Ireland Founded 1989 NYSE ACN S&PLong-term Credit Rating NA Moody’s Long-term Credit Rating A1 Company Overview The world's largest consulting firm, Accenture offers management consulting, information technology and systems integration, and business process outsourcing (BPO) services to customers around the globe. The company divides its practices into five main operating groups -- Communications and High Technology, Financial Services, Public Service, Products, and Resources -- that encompass more than 15 industries and operates from more than 200 locations in about 55 countries. Service Initiation: NA Services Available ITO: Infrastructure outsourcing; Enterprise architecture; Information management; Infrastructure consulting; Intellectual property; Research and development BPO:Customer relationship management; Finance and performance management; Human performance; Strategy; Supply chain management; Customer contact; Finance and accounting; Human resources; Learning; Procurement
Capgemini Headquarters Paris, France Founded 1967 EuroNext CAP S&PLong-term Credit Rating BBB- Moody’s Long-term Credit Rating N/A Company Description Cap Gemini SA is a France-based company engaged in the provision of consulting, outsourcing, technology and local professional services. The Company's consulting services focus on such areas as marketing, sales and services, finance transformation, human resources consulting, supply chain management and technology transformation. Its outsourcing services comprise applications, infrastructure and business process outsourcing, service management and global service desk. The technology services include the design, development and implementation of a range of technology projects that cover systems integration. Its local professional services, offered via the subsidiary, Sogeti SAS, include application, infrastructure, high technology engineering and testing services. Cap Gemini SA operates in over 30 countries through its numerous subsidiaries. Service Initiation: NA
Cognizant Technology Solutions Cognizant Technology Solutions is a public companyHeadquarters Teaneck, NJ, United States Founded 1994 NYSE CTSH S&PLong-term Credit Rating NA Moody’s Long-term Credit Rating NA Company Overview Cognizant Technology Solutions Limited (Cognizant Technology Solutions) is a global information technology (IT), services company. Cognizant Technology Solutions provides a range of IT services, software solutions and research and development services in the areas of hardware and software design to companies worldwide. It also provides business process outsourcing (BPO) services. The company operates in three segments: IT Services business segment, IT Products business segment and Consumer Care and Lighting business segment. Cognizant Technology Solutions BPO’s procurement and supply team chain supports clients in more than 20 different languages and is located across the globe. Service Initiation: 2003 Services Available ITO: Application Services, IT Infrastructure Services, Cloud, Enterprise Information Management, Mobility, Program Management, Testing Services BPO: Customer Care and Call Center Services; Finance & Accounting; Human Resources; Supply Chain Management services; Procurement Services KPO:Engineering & Manufacturing Solutions, Enterprise Analytics
CSC CSCis a Public Company Headquarters Falls Church, VA, USA Founded 1959 NYSE CSC S&PLong-term Credit Rating BBB Moody’s Long-term Credit Rating Baa2 Company Overview Computer Sciences Corporation (CSC) was founded in Los Angeles in 1959 by Fletcher Jones and Roy Nutt to write software for manufacturers such as Honeywell. CSC is one of the world's leading providers of systems integration and other information technology services, supporting 2,500 enterprise clients in 70 countries on six continents. A major government and defense contractor, CSC generates more than one-third of its revenues from US federal agencies through its public sector division. Service Initiation: 2003 Services Available ITO: Application development, Data center management; Networking development; IT systems management BPO: Billing and Payment processing, Customer Relationship Management (CRM), Human resources; Business Consulting; Communications
Dell Headquarters Round Rock, Texas, USAFounded 1959NASDAQ DELLS&PLong-term Credit Rating A- Company Overview Dell Inc. (Dell) is a global information technology company that designs, develops, manufactures, markets, sells, and supports a range of products, solutions, and services. The company's services unit provides asset recovery, financing, infrastructure consulting, support, systems integration, and training, as well as hosted IT services. Dell generates more than half of its revenue outside of the US. The company operates in four segments: Large Enterprise, Public, Small and Medium Business, and Consumer. The company’s Large Enterprise customers include global and national corporate businesses. Its Public customers, which include educational institutions, government, health care, and law enforcement agencies, operate in their own communities. Its SMB segment is focused on helping small and medium-sized businesses by offering products, services, and solutions. Its Consumer segment is focused on delivering technology experience of entertainment, mobility, gaming, and design. Service Initiation: 1988