The year 2012 is not likely to start with a bang, but will it be the end of times? Definitely no. Worldwide economic and political uncertainly will attribute to a sluggish start for global sourcing in 2012. However, business confidence will likely be restored towards the end of the year, as buyers look to global management and consolidation initiatives to optimize existing sourcing channels. View the deck from a one-hour webinar featuring a panel of our analysts who will share its predictions and insights in the following areas: Banking, Financial Services and Insurance (BFSI) Outsourcing: Business Process Outsourcing (BPO), BFSI Outsourcing: Applications Outsourcing (AO), Information Technology Outsourcing (ITO), Finance & Accounting Outsourcing (FAO), Procurement Outsourcing (PO),Human Resources Outsourcing (HRO), Global Sourcing, and Service Provider Intelligence

1. 2012 Global Services Market Predictions:
Context, Growth, Disruption
January 2012

2. Key themes relevant for 2012:
Context, Growth, Disruption
Uncertain Next Generation IT
Macro-Economics and the
Continue Shaping Markets “Consumerization” of IT
2012
Service Provider
Global sourcing Landscape
complexity and diversity Remains
present new challenges Challenging
Proprietary & Confidential. © 2012, Everest Global, Inc. 2

3. Today’s Speakers and Focus Areas
 Service Provider Intelligence
 Global Sourcing
Katrina Menzigian Abhishek Singh
 IT Outsourcing (ITO) VP, Research Relations Senior Research Analyst
 Finance and Accounting
Outsourcing (FAO)
 Procurement Outsourcing (PO)
Rishabh Gupta Abhishek Menon
 Human Resource Outsourcing Senior Research Analyst Research Director
(HRO)
 Banking, Financial Services and
Insurance: Application
Outsourcing and BPO Rajat Juneja Anurag Srivastava
Research Director Senior Research Analyst
Proprietary & Confidential. © 2012, Everest Global, Inc. 3

4. Service Provider Intelligence Predictions for 2012
Macro Environment
 Pricing pressures will squeeze providers’ margins, especially for offshore resources, forcing investment in newer
customer-centric / industry-specific solutions, and deployment of innovative engagement models
 Buyers’ focus on business innovation is likely to drive a greater push on domain/micro-vertical expertise, which will in
turn drive investments in creation of new products and solution accelerators
 Buyer-driven portfolio consolidation will continue, especially by large BFSI organizations that are looking to further
rationalize their service providers portfolios
Growth
 Momentum in emerging areas such as social media, mobility, green IT, and cloud will continue to drive service
providers’ focus on innovation, and foster evolution of niche/ specialist service providers
 2012 will witness increased emergence of regional service providers on the global stage through focused efforts on
building an offshore play
Disruption
 Smaller/Tier-2 players have to need to demonstrate meaningful differentiation to protect market share – both in terms of
capabilities, as well as in engagement and pricing terms
 M&A in the provider marketplace is expected to continue, especially in select non-traditional segments (e.g., services
companies looking for products) will signal a change in the acquisition appetite of large offshore providers. Tier-2
specialist/niche service providers will be the primary acquisition targets.
Proprietary & Confidential. © 2012, Everest Global, Inc. 4

5. Global Sourcing (GS) Predictions for 2012
Growth and adoption
 Global macroeconomic and political uncertainty will result in sluggish outsourcing activity earlier in the year. Business
confidence is likely to return towards the end of the year
 Financial pressures on buyers will lead to increasing attention to global sourcing management and consolidation
initiatives; this will involve tighter discipline in demand planning and in capturing synergies across the organization
 The BFSI vertical will continue to be the dominant industry segment; other verticals such as healthcare and
Manufacturing Distribution and Retail (MDR) will continue to witness increasing traction. In terms of buyer geographies,
North America will continue to dominate. Asia Pacific is likely to grow faster than the industry average
Locations
 In addition to Central and Eastern Europe (CEE) and Latin America, emerging geographies such as Africa will continue
to attract interest
 Established markets (India and the Philippines) will see easing of labor market pressures in the first few months on the
back of softening demand. These pressures may gradually return toward the end of the year as the global economic
outlook improves
Sourcing models
 Companies will continue their balancing act between the captive and third-party models. There will be focused efforts to
improve the value delivered from captives by focusing on high-value processes
 Captives will continue to be an integral component of organizations’ global sourcing strategy. Captive investments will
continue, and the majority of setups/expansions will be in Asia Pacific and CEE
Proprietary & Confidential. © 2012, Everest Global, Inc. 5

6. Poll Question #1: The world we live in
How are global dynamics (i.e., the European debt crisis, political
upheaval in the Middle East, natural disasters in Japan) affecting your
company’s attitude towards global services?
We see global services as a strategy for managing
unpredictability and risk 53%
We continue to adopt global services, but we’re
more cautious and our appetite for risk is smaller 34%
We’re likely to put plans on hold and stick to the
status quo for now 13%
Source: Live polling conducted during the “2012 Global Service Market Predictions” webinar on January 19, 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 6

7. Information Technology Outsourcing (ITO)
Predictions for 2012
Macro Environment
 Buyers’ IT budgets may be suppressed: Fears of a second economic slowdown threatens the 2010 recovery
 Fewer and simpler: The buyers’ ITO spending focus will be on fewer deals with simpler pricing models; more buyers are
expected to stay away from the outsourcing market
 Margin pressures: Overall, margin pressures will continue to be a challenge for service providers
Growth
 ITO spending will be driven by larger buyers and will focus on outsourcing economics and service provider
consolidation
 Large service providers, both offshore and MNC, will benefit from this consolidation, leading to further growth disparity
between large and small service providers
 IO deals will increase driven by cloud and RIMO
 Strategic convergence between the large offshore and MNC service providers will continue
Disruption: Next Generation IT Adoption
 Cloud: In the past, technical and perception issues caused cloud adoption challenges. Investments in new and
sophisticated solutions, and the renewed focus on outsourcing economics, will make cloud adoption more mainstream
 Consumerization: Legacy hardware service providers and telecom firms (hosting providers) will create a strong push
toward consumerization of IT. Continuous pressure by end users for better consumer devices will also drive buyers
towards consumerization
 Social networking: Rapidly accelerating use of social networking in workplaces will drive more corporate spend in this
area
Proprietary & Confidential. © 2012, Everest Global, Inc. 7

8. Finance and Accounting Outsourcing (FAO)
Predictions for 2012
Macro Environment
 The FAO sales cycle will continue to be long as buyers are still cautious about the macroeconomic environment
 Buyers will continue to favour a phased, as opposed to a “big bang”, approach
 While cost arbitrage continues to be a key driver, the real buyer expectation from FAO now is to transform processes
toward best-in-class performance
Growth
 The FAO market will experience ~15% YoY growth to reach US$4.5-5 billion in ACV
 India-to-India domestic BPO, and the Middle East and APAC regions, will continue their upward growth
 The demand for analytics and other specialized F&A services (e.g., regulatory compliance, internal audit) will continue
to increase
Disruption
 Verticalization of FAO services and industry-specific FAO offerings will play a strong role in shaping the FAO value
proposition
 Mature themes such as outcome-based and transaction-based pricing will find increased instances in FAO contracts
 2012 will also see a stronger push for platform and BPaaS-based offerings (primarily catering to small and mid-market
buyers)
 The M&A activity witnessed in 2011 will continue to an extent in 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 8

9. Procurement Outsourcing (PO)
Predictions for 2012
Macro Environment
 Buyers will take an end-to-end approach, concentrating on Source-to-Contract (S2C) and Procure-to-Pay (P2P) rather
than discrete processes
 CFOs will increasingly drive PO conversations, leading to deals with FAO-PO bundling
Growth
 The PO market will grow at ~20% YoY to reach US$1.8 billion in ACV
 The government sector will see activity, especially in the UK market
 Central and South America will join Asia Pacific as the regions with the fastest growth, albeit on a low base
Disruption
 Acquisitions/partnerships between P2P-focused providers and S2C-focused providers are expected
 Adoption of SaaS-based technology solutions will increase
 The domain of PO deals will expand to cover other areas of supply chain
 More direct spend categories that are non-core, such as MRO (Maintenance, Repair, and Overhaul), will increasingly
become part of PO deals
Proprietary & Confidential. © 2012, Everest Global, Inc. 9

10. Human Resources Outsourcing (HRO)
Predictions for 2012
Macro Environment
 Buyers will increasingly approach HRO with a balanced set of outcomes, and adopt models that both address their
short term needs and create a foundation to realize their long term objectives
 Instead of auto-renewals, existing buyers will increasingly evaluate (but selectively adopt) alternate provider options
 Few traditional mid-market providers are likely to pursue large market opportunities
Growth
 The MPHRO market will continue to grow at a steady rate, and reach ~US$3.7 billion in terms of ACV
 We expect the high growth in standalone single process outsourcing, such as multi-country payroll, benefits, and
recruitment
 Adoption of HRO will gather further steam in emerging markets such as Brazil, Japan, India, and China
 While BPaaS will continue to be the dominant model in the mid-market, it will gain greater traction in the large market
Disruption
 We will also see at least one provider exit the Multi-process HRO (MPHRO) market, creating opportunities for other
providers to tap its existing clients
 There will be further merger and acquisition activity, particularly in Recruitment Process Outsourcing (RPO) and
Benefits Administration Outsourcing (BAO)
 Service providers will invest in building robust analytics capability, especially to harness the power of social media
Proprietary & Confidential. © 2012, Everest Global, Inc. 10

11. Poll Question #2: Are “cloudy” skies hanging around
your organization?
What’s the overall level of technology “disruption” your organization
anticipates experiencing in the next 12-18 months?
Got everything under control –
40%
moving ahead full steam
We’re in panic mode because we
10%
feel left behind
Yeah, we’re starting to deal with it 32%
What disruption? 18%
Source: Live polling conducted during the “2012 Global Service Market Predictions” webinar on January 19, 2012
Proprietary & Confidential. © 2012, Everest Global, Inc. 11

12. Banking, Financial Services, Insurance (BFSI):
Predictions for 2012
BFSI Macro Environment
 Buyers’ focus on managing costs, tighter regulatory controls, and need for centralized IT-BPO environments will be the
key drivers for outsourcing activity in the BFSI sector – overall market expected to grow at 10-15% globally
 Financial services buyers will look for balanced outcomes that focus on short-term objectives without compromising
long-term growth. This will drive provider portfolio consolidation as buyers opt for fewer and more strategic relationships
Growth
 While the U.S. and UK will continue to be the largest markets for BFSI outsourcing, emerging geographies in Asia
Pacific and Latin America will contribute significantly more to growth in the segment
 Within BFSI, banking will continue to account for the largest share of transactions, while capital markets will be the
fastest growing segment at ~15% YoY
Disruption
 Multiple factors such as risk diversification, operational flexibility, and regulatory and risk management requirements will
cause a higher number of acquisitions and partnerships among service providers
 The entire BFSI sector will have to realign its IT environment to face the impact of the wide-scale regulatory reform, and
minimize enterprise and credit risk exposure
 In an increasingly competitive environment, providers will have to protect market share by enhancing local/regional
expertise and capitalize on emerging growth opportunities (new markets, new business models)
 There will be an increase in adoption of technology-bundled BPO solutions (BPaaS) and a rise in transactional pricing
for BFSI BPO contracts
Proprietary & Confidential. © 2012, Everest Global, Inc. 12

13. Banking, Financial Services, Insurance (BFSI):
BPO and AO Predictions for 2012
BFSI-BPO BFSI-AO
 Within banking BPO, the rising cost of  Restoring growth, improving profitability,
Banking servicing each loan, is causing lenders to and reducing operational complexity will be
seek out solutions that can help them the primary imperatives for banks, leading
standardize loan origination and convert to investments in legacy modernization,
fixed to variable costs; this will drive and ERP initiatives. In addition, adapting to
greater adoption of technology-enabled changing customer demands will create
BPO solutions within the lending segment demand in areas such as mobility, social
media, and channel integration
 Beyond the back office, capital markets  Managing trade volatility will be a key front
Capital
BPO will see increasing adoption in the office priority in the capital markets domain;
markets
mid office (regulatory compliance and mid and back office priorities will be more
reporting/order management and focused on reference data/position
processing) and for some services in the management and modernization
front office (research, analytics)
 Within insurance BPO, the L&P segment  Deteriorating underwriting results across
Insurance will see greater activity than P&C. The geographies will place increasing pressure
growth in L&P will be driven by large Tier-1 on insurance companies to invest in
insurers, while in the P&C segment it will sophisticated underwriting solutions
be driven by Tier-2/Tier-3 insurers
Proprietary & Confidential. © 2012, Everest Global, Inc. 13

14. Implications of our predictions
For Global Services For Global Services
Buyers Providers
“Play the hand you’re dealt” Service provider reshuffling
likely to continue in 2012
Providers of global services Growth will be tied to how well
now better positioned than ever you engage clients around
to deliver business value their challenges
This disruption wave is driven The Next Generation IT market
by you, the “consumer of IT” is amorphous and open to
interpretation, so stay tuned…
Proprietary & Confidential. © 2012, Everest Global, Inc. 14

15. Q&A
To ask a question during the Q&A session
 Input your question in the Q&A panel on the right
 Be sure to keep the default set to ask “All Panelists”
 If your Q&A panel is not visible, click the Q&A tab on the upper right-hand corner to open it
 Attendees will receive an email with links to download today’s webinar presentation as well
as access a recorded audio version
 For more information on the webinar, please contact:
– Katrina Menzigian, katrina.menzigian@everestgrp.com, VP, Research Relations
– Rishabh Gupta, rishabh.gupta@everestgrp.com, Senior Research Analyst
– Rajat Juneja, rajat.juneja@everestgrp.com, Research Director
– Abhishek Menon, abhishek.menon@everestgrp.com, Research Director
– Abhishek Singh, abhishek.singh@everestgrp.com, Senior Research Analyst
– Anurag Srivastava, anurag.srivastava@everestgrp.com Senior Research Analyst
Proprietary & Confidential. © 2012, Everest Global, Inc. 15

16. Related Content
Complimentary Report: 2012 Market Predictions
Research
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2012 Market Vista Offshore Locations Survey
Participate in the 2012 survey to help us understand how organizations are
utilizing offshore locations for service delivery.
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