While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from Everest Group’s latest study around emerging locations in the FAO delivery location landscape.
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Today’s Webinar is brought to you by Everest Group
Today’s WebinarToday’s WebinarEmerging Locations in the FAO Delivery Landscape – The New Frontiers Emerging Locations in the FAO Delivery Landscape – The New Frontiers
Synopsis: While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from Everest Group’s latest study around emerging locations in the FAO delivery location landscape
Synopsis: While India continues to be the location of choice for offshoring F&A services, the FAO delivery-location landscape now has a truly global footprint. This webinar will discuss key findings from Everest Group’s latest study around emerging locations in the FAO delivery location landscape
About Everest GroupAbout Everest GroupEverest 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 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 p p g y p p y p gmiddle-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
p p g y p p y p gmiddle-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 servessourcing 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.
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.
In today’s session, we will cover three key aspects of the expanding FAO delivery-location landscape
Global sourcing in FAO contracts Offshorability of F&A processes Direct cost benefits from offshoring
Global sourcing in FAO contracts Offshorability of F&A processes Direct cost benefits from offshoring Direct-cost benefits from offshoring Labor arbitrage across source and destination
geographies
Direct-cost benefits from offshoring Labor arbitrage across source and destination
geographies
New locations that emerged on the FAO delivery-location
New locations that emerged on the FAO delivery-location
Note: For more details refer to our recently published report titled ‘The New Frontiers: Emerging Locations in the FAO Landscape’ available at http://research.everestgrp.com/Product/11564
The multi-process FAO market witnessed strong performance in 2010
Higher number of new FAO contract signings in 2010 compared to 2009
Continued momentum in FAO contract extensions in 2010Number of contracts
Activity in current year
Cumulative activity to date xx% Annual growth
6387
compared to 2009Number of contracts
15%493
58018%
9469%142
23666%
Number of contracts
430 493
2009 2010
84142
58
2009 2010
3 615%
4.9
13%23.7
28.721%
~15% growth in active ACV was witnessed in 2010 compared to ~10% growth in 2009. The current FAO market size is US$3.6 billionActive ACV in US$ billion
20%+ growth in overall TCV in 2010TCV in US$ billion
Offshoring can provide significant savings on the direct cost of the entire F&A function
Impact on direct cost of F&A function due to offshoringIndexed to a total direct cost of 100 for onsite operations
ILLUSTRATIVE
Buyers of F&A services can achieve significant savings from offshore delivery due to labor arbitrage 30-40%
savings
100
Most-likely scenarioMost-likely scenario
and productivity improvements– Labor arbitrage: Labor arbitrage can range from
30 to 80 percent, depending on the delivery location mix (onshore versus nearshore versus offshore)
– Potential productivity improvements: Ongoing initiatives such as process improvements
savings
60-70
70-80% savings
initiatives such as process improvements, automation, and standardization etc. can contribute 20 to 30 percent to the cost savings
Percentage of services offshored is also impacts savings. In addition, situation-specific factors such as set-up costs, governance costs, and contract term
20-30
set up costs, governance costs, and contract term determine the actual savings achieved from offshoring
Note: The savings projections are for a steady-state offshore operation; the scenario is expected to be different in the first one to two years of the engagement
India continues to be the location of choice for offshoring F&A services
Inclusion of delivery locations in FAO contractsPercentage
Number of delivery centers1
Number of service providers1
India
Central and Eastern Europe
Central/+ ne
arsh
ore
Southeast Asia
South America
China
Offs
hore
+
North America
Western EuropeOns
hore
India is the preferred location for offshoring F&A services. Nearly 55 percent of the FAO offshored F&A services from IndiaIndia is the preferred location for offshoring F&A services. Nearly 55 percent of the FAO offshored F&A services from India
1 Based on the operational details of 20+ FAO service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini,Cognizant HP EXL Service Genpact HCL IBM iGate Infosys BPO Intelenet Steria Sutherland Global Services TCS VWA
Note: Based on information of 20+ service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, EXLService, Genpact, HCL, IBM, iGate, Infosys, Intelenet, OPI, RMS, Steria, Sutherland Global Services, TCS, Wipro, and WNS
Source: Everest Group (2011)
Poll Question: Do you leverage locations outside of India for F&A offshoring/service delivery?
Note: Based on information of 20+ service providers including Accenture, Aditya Birla Minacs, Xerox-ACS, Capgemini, Cognizant, HP, EXLService, Genpact, HCL, IBM, iGate, Infosys, Intelenet, OPI, RMS, Steria, Sutherland Global Services, TCS, Wipro, and WNS
Source: Everest Group (2011)
The study focuses on five from such locations
Jaipur is fast emerging as the next generation BPO destination in India– Low-cost labor, proximity to National Capital Region (NCR) region, unexploited real estate market, and
availability of good analytical skills make Jaipur a viable alternative– Key F&A processes delivered from Jaipur include accounts payable, accounts receivable, general
Jaipur
y p p p y , , gaccounting, and other transactional processes
Montevideo is a late entrant to the outsourcing map, but has attracted the attention of foreign investors due to a stable economic and political environment coupled with availability of an educated and low-cost workforce– Its strategic geographic location has also become a significant factor for selecting it as a regional center of
business operationsp– Key F&A processes delivered include accounts payable, accounts receivable, management reporting, and
tax & audit
Johannesburg, the smallest but wealthiest province of Africa already has a well established domestic outsourcing market– It is now increasingly becoming attractive as a Tier-II destination for global offshore outsourcing. This is
Montevideo
attributed to the increased awareness of potential cost savings – Key F&A processes delivered include accounting, and late stage collections
Guatemala City is an emerging location for bilingual English-Spanish talent as the wages are higher and labor supplies constrained in neighboring locations– A stable economy, strategic location and excellent telecom infrastructure lend this city the potential to
b th b t h l ti f A i li t
Johannesburg
become the best nearshore location for American clients – Key F&A processes delivered include accounts payable, accounts receivable, and management reporting
Rabat has three natural advantages that make it a highly competitive delivery location for serving Western Europe– Low cost and multilingual workforce
– Modern and liberalized telecom sector– Geographical and cultural proximity to Europe– Key F&A processes delivered include accounts payable, accounts receivable, and tax & audit
The research includes an in-depth profile of each location based on a variety of parameters
Risk assessment Evaluation of each location on parameters such as geopolitical stability, macro-economic
Risk assessment Evaluation of each location on parameters such as geopolitical stability, macro-economic
Service provider presenceService provider presence
g p y,environment, legal and regulatory framework, safety and security, infrastructure support, and labor sustainability etc.
g p y,environment, legal and regulatory framework, safety and security, infrastructure support, and labor sustainability etc.
Service provider presenceKey third-party providers and captives present at each location
Service provider presenceKey third-party providers and captives present at each location
F&A functional capability F&A functional capability Key F&A processes delivered from each locationKey F&A processes delivered from each location
Value proposition Unique advantages of each location in terms of Value proposition Unique advantages of each location in terms of
Geography covered and language competenciesGeography covered and language competencies
q goperating costs, availability of talent pool, geographic advantage, & infrastructure support
q goperating costs, availability of talent pool, geographic advantage, & infrastructure support
competenciesPrimary buyer geographies served from each location and language capability
competenciesPrimary buyer geographies served from each location and language capability
Key takeaways
More than 90 percent of the FAO contracts leverage global sourcing today
Given that FAO is a mature market most F&A processes have a high degree of offshorability especially Given that FAO is a mature market, most F&A processes have a high degree of offshorability, especially transaction-intensive processes. In contrast, judgment-intensive F&A processes are not offshored as much due to the complex nature of activities involved
Offshoring can provide significant savings on the direct cost of the entire F&A function, primarily due to labor arbitrage and productivity improvements achieved by service providers
India emerged as the global hub for FAO delivery, accounting for nearly 70 percent of the service providers’ offshore/nearshore FAO headcount. However, the FAO delivery-location landscape is now a truly global footprint In 2009-2010 expansion of the delivery footprint was a major investment themetruly global footprint. In 2009 2010, expansion of the delivery footprint was a major investment theme among service providers
There are four key drivers behind the FAO delivery location expansion:– Tapping into new source geographies
C ti t l l b l d li t k– Creating a truly global delivery network– Avoiding location concentration risk– Resource constraints as established locations near saturation
Over 15 new locations emerged on the FAO delivery-location landscape in 2009-2010
FAO annual report 2011 –FAO is Back!FAO annual report 2011 –FAO is Back!
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While India has traditionally been a prominent delivery location for BPO services, it is starting to emerge as a notable source geography as well. In this study, we focus on the General & Administrative Outsourcing (GAO) segments (FAO PO d HRO) f th d ti BPO k t d l k t th
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Topic Goals of the research
Published To-be published
Planned release
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Beyond the established locations that feature in most leading FAO service providers’ global delivery network, newer locations are making their presence felt on the FAO delivery map. This study evaluates top five from such locations and highlights the market state therein
Sep-2011
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While FAO is largely considered a horizontal BPO offering, in recent years, service providers have increasingly shifted their focus on specific industries, both in terms of service offerings and sales strategy, to drive greater
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