Nearly US$20 billion worth of business process outsourcing (BPO) contracts across HR, finance & accounting, and procurement are up for renewal in the next three years. In a maturing BPO market, organic growth has been the major contributor to different segments of the BPO market in the last two to three years. In fact, contract extensions and renewals accounted for more than 65 percent of finance & accounting outsourcing (FAO) and more than 50 percent of procurement outsourcing (PO) market growth in 2012. This is the presentation deck used during our one-hour webinar that provided insights on how BPO clients can drive further value in their next generation of BPO relationships.

1. Next Generation of BPO Relationships
June 26, 2013

2. Proprietary & Confidential. © 2013, Everest Global, Inc. 2
Introductions
Abhishek Menon
Practice Director
abhishek.menon@everestgrp.com
Rajesh Ranjan
Vice President
rajesh.ranjan@everestgrp.com

3. Proprietary & Confidential. © 2013, Everest Global, Inc. 3
Scope of today’s discussion
Strategic Processes
Judgmental Processes
Transactional Processes
Human
resources Procurement
Finance &
accounting
 Analyses in this presentation include multi-process contracts with a minimum of three processes, over US$1 million in
Annualized Contract Value (ACV) or buyer employee size is more than 3,000
 Includes all multi-process contracts signed as of 2012
HR
strategy
F&A
strategy
S2P
strategy
Recruitment & selection
Training & development
Comp & benefits
Payroll
Fixed assets
Accounts receivable
Accounts payable
T&E processing
Day-to-day purchasing
Customer service
Procurement systems
Performance management
Information
mgmt.
Performance mgmt.
Regulatory & compliance
Budget/forecast
General accounting
Mgmt. reporting & analysis
Treasury & risk mgmt.
Spend data
mgmt.
Strategic sourcing
Demand management
Vendor management

4. Proprietary & Confidential. © 2013, Everest Global, Inc. 4
Discussion points for today
Capturing additional
value leveraging
Strategic Engagement
Review (SER)
End-of-term activity in
BPO
Emerging next
generation BPO
solutions

5. Proprietary & Confidential. © 2013, Everest Global, Inc. 5
When is your
BPO contract
up for renewal?
33%
3%
17%
10%
37%
Not in a BPO contract
2013
2014
2015
2016 or later
Source: Live polling conducted during the “The Next Generation of BPO Relationships” webinar on June 26, 2013

6. Proprietary & Confidential. © 2013, Everest Global, Inc. 6
In 2012, nearly 70% of the market growth across FAO,
PO, and HRO was attributed to extensions/renewals
Extensions/
renewals
7.3
~0.2
1.5
0.7
9.3
1.4 ~0.2
Components of BPO ACV growth in 2012
US$ billion
2011 ACV Terminations New contracts 2012 ACV
8.7
Organic
growth
contributed
67% to the
ACV growth
in 2012
Inorganic
growth
contributed
33% to the
ACV growth
in 2012
Contracts that
completed
term in 2012
Mid-term
terminations
End-of-term
terminations
Sample size: 1,690 multi-process contracts (across FAO, HRO, and PO) signed up to 2012
Note: Only FAO, HRO, and PO contracts are considered
7%
YoY growth

7. Proprietary & Confidential. © 2013, Everest Global, Inc. 7
37% 16%
11%
10%
8%
18%
100%
Up to 2012 2013 2014 2015 2016 On or after
2017
Total
End-of-term activity in BPO will significantly influence
market growth in the next 3 years
Contracts worth US$22 billion
(in terms of TCV) will be up for
renewals in the next 3 years
Share of BPO relationships up for extension/renewal
Percentage of contracts
Sample size: 1,690 multi-process contracts (across FAO, HRO, and PO ) signed up to 2012
Note: Only FAO, HRO, and PO contracts are considered

8. Proprietary & Confidential. © 2013, Everest Global, Inc. 8
This significant end-of-term activity is spread across
different BPO and buyer segments
Relationships up for renewal by
Number of contracts
51%48%46%
31%
20%
FAO
HRO
Large-size1Mid-size1
PO
35%
15%10%
8%
4%
28%
53%
30%
15%
North
America
APAC
Manufacturing
Energy and utilities
EMEA
Latin America (2%)
Financial servicesHi-tech and telecom
Retail
Others2
1 Mid-size companies have revenue less than US$5 billion, large-size companies have revenue greater than US$5 billion
2 Others include Healthcare, hospitality, logistics, and media
Sample size: 948 multi-process contracts (across FAO, HRO, and PO) ending term during the period 2013-2015
Note: Only FAO, HRO, and PO contracts are considered
BPO segment Buyer size
Signing region Buyer industry

9. Proprietary & Confidential. © 2013, Everest Global, Inc. 9
Buyers increasingly look to align their next generation
BPO relationship to some of their key imperatives
How do I capture value
beyond cost from my BPO
relationship?
How can I simplify my BPO
partnership and what are the
potential obstacles?
How do I better align my
service provider’s interest
to my business needs?
How can I take my BPO
relationship to a strategic level?
To what extent my BPO
relationship is aligned to
market best practice?

10. Proprietary & Confidential. © 2013, Everest Global, Inc. 10
Discussion points for today
Capturing additional
value leveraging
Strategic Engagement
Review (SER)
End-of-term activity in
BPO
Emerging next
generation BPO
solutions

11. Proprietary & Confidential. © 2013, Everest Global, Inc. 11
Majority of the contracts approaching end-of-term were
signed more than three years ago
Share of BPO relationships up for extension/renewal by signing year
Percentage of contracts
Sample size: 948 multi-process contracts (across FAO, HRO, and PO) ending term during the period 2013-2015
Note: Only FAO, HRO, and PO contracts are considered
58%
28%
19%
Signed more than
three years back
Signed two years back
Signed in 2012
Nearly 550 contracts
(up for renewal in
the next 3 years)
were signed in or
before 2010

12. Proprietary & Confidential. © 2013, Everest Global, Inc. 12
The BPO market has evolved significantly since the original
contracts were signed. End-of-term event provides an
opportunity to align with emerging best practices
In the past Emerging
Delivery
Technology
Performance
Value creation
Scope
 Arbitrage
 Continuous improvement
 World-class-lift-shift-and fix
 Analytics and business insight
 Functional and piecemeal
 Regional/local
geographic coverage
 End-to-end process-driven
 Global Business Services (GBS)
 Offshore-centric model
 Balanced delivery
(offshore-nearshore-onshore)
model
 Tie-and-run
 Augmentation (add-on tools)
 Platform-based BPO
 BPaaS / Cloud-enabled solutions
 Efficiency
 Productivity
 Effectiveness
 Business outcomes

13. Proprietary & Confidential. © 2013, Everest Global, Inc. 13
World-class lift-shift-and-fix
BPO value creation is expanding beyond labor arbitrage and
continuous improvement
Stages of evolution of the BPO value proposition
The past The current state The emerging trend
Stage 3: World-class lift-shift-and-fix
Service provider focuses on improving
business outcomes vis-à-vis best-in-class
benchmarks and not just existing/past
performance
Pre-
outsourcing
Post-
outsourcing
Process
performance
Process
performance
Costof
function
Costof
function
Process
improvement
Target
world-class
performance
Cost
arbitrage
Pre-
outsourcing
Post-
outsourcing
Process
performance
Process
performance
Costof
function
Costof
function
Similar process
performance
Cost
arbitrage
Pre-
outsourcing
Post-
outsourcing
Process
performance
Process
performance
Costof
function
Costof
function
Process
improvement
Cost
arbitrage
Stage 1: Lift-and-shift
Service provider essentially performs at
buyer’s existing process level but at a
lower cost
Stage 2: Lift-shift-and-fix
Service provider focuses on improving
efficiency and/or effectiveness vis-à-vis
existing performance, thus adding value
beyond just cost-arbitrage
Value creation

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End-to-end process definition
A process approach versus a functional approach is emerging
Judgment-intensive
Transaction-intensive
Develop
(Learning)
Retain
(Performance
Management;
Compensation &
Incentive planning)
Manage
(Workforce administration;
Employee data management;
Global mobility, payroll)
Retire
(Pension benefits)
End-to-end process driven definition of Hire-to-Retire (H2R)
End-to-end process driven definition of Source-to-Pay (S2P)
Day-to-day
purchasing
Accounts
payable and
T&E
Performance
management
Sourcing
support & catalog
management
Vendor
management
Strategic
sourcing
Demand
management
Spend data
management
Billing
Dispute &
deduction
management
Aging and
collections
Accounts
receivable
End-to-end process driven definition of Order-to-cash (O2C)
End-to-end process driven definition of Record-to-Report (R2R)
Treasury and risk
management
Management
reporting &
analysis
Fixed assets
Budgeting and
forecasting
Regulatory
compliance &
taxation
General
accounting &
reconciliation
Scope
Order management
Hire
(Recruitment)

15. Proprietary & Confidential. © 2013, Everest Global, Inc. 15
The BPO delivery-location landscape now has a truly
global footprint
North America
(Onshore)
Latin America
(Nearshore)
Delivery locations servicing F&A processes ILLUSTRATIVE
Delivery
Africa & Middle East
(Offshore)
China & S.E. Asia
(Offshore)
East Europe
(Nearshore)
West Europe
(Onshore)
Morocco
South Africa
Kenya
USA
Canada
Mexico
Argentina
Guatemala
Chile Uruguay
Costa Rica
Brazil
Ecuador
India
Philippines
China
Thailand
Romania
UK Slovakia
Norway
Hungary
Bulgaria
Netherlands
Spain
France
Germany
Italy
Ireland
Czech Republic
Poland
India

16. Proprietary & Confidential. © 2013, Everest Global, Inc. 16
1 Limited role of technology where service provider plugs into the buyer’s existing system to deliver services
2 Service provider tools that serve as “add-ons” around the periphery of the existing systems to address specific gaps
3 Pre-integrated applications and pre-built processes, owned by service provider (pricing built into the FAO contract)
Sample size: 642 multi-process new FAO contracts signed as of December 2012
Source: Everest Group (2013)
Invasive role of technology in BPO
Tie-and-run solutions are giving way to augmentation and platform-play
Adoption of technology models in FAO contracts
Number of contracts
49% 45%
31%
39% 41%
54%
12% 14% 15%
Up to 2008 2009-2011 2012
364 219100% =
Tie-and-run1
Technology
augmentation2
Platform-based3
59
FAO EXAMPLE
Technology

17. Proprietary & Confidential. © 2013, Everest Global, Inc. 17
High
Low
Impactdelivered
Cost/efficiency
impact
Business/effectiveness
impact
Strategic/broad
impact
Time
 Cost reduction
 Process efficiency
 Scalability
 Basic reporting
 Improved quality and
effectiveness of services
 End-to-end process
harmonization
 Improved compliance
 Predictive analytics
 Faster time-to-market
 Increased employee
productivity
 Prescriptive analytics
Table stakes Increasingly
important
Aspirational
today
Illustrative
target
outcomes
Effectiveness based performance metrics
With the inclusion of judgment intensive processes into BPO contracts, more
emphasis is being given to effectiveness Performance

18. Proprietary & Confidential. © 2013, Everest Global, Inc. 18
Is value beyond cost
being captured from
your BPO
relationship?
32%
21%
47%
Yes
No
Maybe
Source: Live polling conducted during the “The Next Generation of BPO Relationships” webinar on June 26, 2013

19. Proprietary & Confidential. © 2013, Everest Global, Inc. 19
Discussion points for today
Capturing additional
value leveraging
Strategic Engagement
Review (SER)
End-of-term activity in
BPO
Emerging next
generation BPO
solutions

20. Proprietary & Confidential. © 2013, Everest Global, Inc. 20
A comprehensive evaluation of the existing relationship is
essential to align and capture next generation imperatives
Everest Group’s Strategic Engagement Review (SER) framework
Operations metrics and
insights directly impacting
win-win commercial and
efficiency discussions:
 Staffing mix
 Utilization
 Productivity
 Attrition etc.
Differentiated approach that
yields benchmarks:
 Normalized to client
nomenclature
 Provides buy and supply
side context to metrics
 Includes analysis of
benchmark drivers
Identify improvement
opportunities in contract versus
market norms:
 Pricing structure and
implications
 Service levels and
performance metrics
 Review of common T&Cs
Understand solution vis-à-vis
industry best practices
across:
 Scope assessment
 Technology leverage
 Global sourcing leverage
 Governance structure
4. Delivery
metrics
assessment
3. Cost and
price
benchmarking
5. Overall
implications for
relationship
2. Contract
assessment
1. Solution
review

21. Proprietary & Confidential. © 2013, Everest Global, Inc. 21
Here’s how a BPO buyer benefited from SER
SER of a leading healthcare equipment manufacturer’s supply chain engagement highlighted the
opportunity to realize further cost savings while moving towards a clearer value setting agenda
Client situation Issues identified and analyzed by Everest Group
 The client wanted to optimize its
outsourcing spend and align provider
services to business needs
 Outsourced supply chain services portfolio
consisted of more than 150 FTEs mapped
across supply chain functions
 10% reduction in overall pricing agreed
 Red flag on productivity gain sharing; to arrive at best-in-class gain share and invoicing
 5% re-allocation of additional costs such as BCP agreed
 “Pay for Performance” inclusion being drafted within the contract for all “value-creation” work
 The relationship extended for another 2.5 years, with an agreed roadmap for evolution from
cost-reduction to business benefits
Everest Group’s assessment of client
situation revealed the following inefficiencies:
 Fragmented/minimal technology leverage
 Inconsistent and sub-optimal pricing model
 Skewed gain sharing clause
 Inflated pricing
 Sub-optimal COLA clause
Benefits to the client

22. Proprietary & Confidential. © 2013, Everest Global, Inc. 22
In summary
 Significant end-of-term activity in the next three years will influence and shape the
BPO market
 The BPO market has evolved significantly since the original contracts were signed
 The end-of-term situation offers a good opportunity for both buyers and service
providers to align their relationship to the next generation considerations
leveraging current and emerging best practices
 However, end-of-term need not be the only trigger to reshape the relationship
 Compared to a traditional benchmarking approach, a comprehensive Strategic
Engagement Review helps create and sustain a win-win buyer-provider
relationship

23. Proprietary & Confidential. © 2013, Everest Global, Inc. 23
To ask a question during the Q&A session
 Click the question mark (Q&A) button located on right side of your screen. This opens Q&A
 Be sure to keep the default set to “send to All Panelists”
 Type your question in the box at the bottom of the Q&A box and click the send button
 Attendees will receive an email with instructions for downloading today’s presentation
 For advice or research, please contact:
– Rajesh Ranjan, rajesh.ranjan@everestgrp.com
– Abhishek Menon, abhishek.menon@everestgrp.com
Q&A
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Related content
 Finance and Accounting Outsourcing (FAO) – Annual Report 2013: Increasing Market
Maturity Driving Cost+ Value Proposition
 Multi-Process Human Resources Outsourcing (MPHRO) – Annual Report 2013: The Sun is
Rising in the East
 Procurement Outsourcing (PO) – Annual Report 2013: Expertise and Technology Driving
Growth

26. Proprietary & Confidential. © 2013, Everest Global, Inc. 26
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