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Esteemed Panelists Provide a Reality-based Look at Wage Inflation and the Sustainability of Cost Arbitrage

Speculation of fading cost competitiveness have long surrounded Global In-house Centers (GICs), or captives. To arm decision makers with real data rather than speculation, Everest Group and NASSCOM conducted research to understand the extent of cost savings achieved, levers for driving cost savings, and the future sustainability of these savings.

Join us for a one-hour webinar to review the findings of this important study and hear first-hand from Wells Fargo and MetLife executives about their real-life lessons with GICs.

Webinar discussion will focus on addressing the following questions:

• How much savings do GICs deliver from a total cost of ownership perspective?
• Is inflation a serious concern?
• How sustainable is the cost competitiveness of GICs?

About the Study

Everest Group and NASSCOM conducted the joint research Cost Competitiveness of Global In-house Centers (GICs) based on input and perspectives from multiple leading GICs and Everest Group’s proprietary knowledge base.

Special thanks to our steering committee: Deena Harapanahalli, Invesco; Aveek Mukherjee, Wells Fargo; Nitin Seth, Fidelity Worldwide Investment; and Sriram Dhanyamraju, Dell

Presenters:

• Charles Roberson, Head of Enterprise Expense Management and Offshoring, Corporate Finance Group, Wells Fargo
• Kush Kamra, Senior Vice President, Global Operations, and Chairman & Managing Director, Global Operations Support Center, MetLife
• H. Karthik, Vice President, Everest Group

Moderator:

• Eric Simonson, Managing Partner, Research, Everest Group

Related Content: 

• Cost Competitiveness of Global In-house Centers (GICs) Complimentary
• Market Vista: Q1 2012
• Achieving Next Generation Excellence in the Captive Model
• Global Offshore Captive Landscape and Trends: Focus Geography – The Philippines
• Global Offshore Captive Landscape and Trends: Focus Geography – China
• Captives are Staying Alive

Several positives…

With its sizeable graduate pool, low-cost of operations, and English language advantage, the Philippines offers an attractive proposition for organizations looking for destinations to offshore services. The Philippines IT-BPO industry registered US$11 billion in 2011 on the back of successful expansion in services and increased geographic diversity. The sector is generating 640,000 direct jobs and another 1.5 million indirect jobs. Given the robust growth, the Philippines is likely to achieve its target of US$25 billion in revenues and generate 1.3 million direct by 2016 as per the IT-BPO Road Map 2016 developed by Everest Group.

The country is also seeing an increase in the share of non-voice work (including IT/ESO) which now contributes about 30% to the industry and there is evidence of credible activity in complex processes, e.g., legal, analytics, although their scale remains small. This is largely because buyers are now looking to diversify their delivery operations beyond established markets and are witnessing satisfactory experience from country’s non-voice services. Geographic diversification beyond the United States is also gaining traction and focus on multi-lingual services is increasing.

One of the key reasons behind this success is government’s commitment to the sector which is working to position the country as an attractive destination for diversified services with the target to double share of revenue from other service lines. Continuing in this direction, the government and BPAP are initiating steps to enhance country’s value proposition at segment level (e.g., ESO, animation), with a significant attention on non-voice services.

…however, some concerns remain

Activity in Next Wave Cities^TM is evolving at slow pace. Analysis of the delivery location pattern of top 20 service providers and Forbes 2000 companies reveals that of the 35 centers set-up in the Philippines in last three years, only three were located outside Metro Manila and Cebu. Clearly, Philippines has its task cut out in order to position these cities as alternative locations beyond Metro Manila and Cebu and widen the talent base to ease the supply of talent and address high attrition.

Moreover, ITO and Engineering Services are still not prevalent. The country also needs to continue to increase its alignment towards the United Kingdom and Europe, which are the biggest growth markets after United States. In addition, the country has a high risk of natural disasters. The most recent example is the typhoon activity in 2011, which led to power cuts and disruption of daily activity in Manila. Companies are, therefore, mindful of business continuity plans when they evaluate the Philippines for expansion of their delivery network.

While the government and industry associations are striving to enhance the attractiveness of Philippines IT-BPO sector, it remains to be seen how much the country can get players to think of itself for considerations beyond the arbitrage in voice-based services and more as a broad-based global sourcing destination.

For more details on the Philippines global sourcing market, refer to the recently released reports by Everest Group:

• Global Locations Compass – The Philippines
• Global Offshore Captive Landscape and Trends; Focus Geography – The Philippines

DALLAS, May 10, 2012 ─ The global outsourcing and offshoring market saw this year’s first quarter transaction volumes hold steady as the sluggish market witnessed  441 outsourcing deals compared to 433 transactions in fourth quarter of 2011, according to Everest Group, an advisory and research firm on global services. Captive activity decreased slightly in the first quarter with 18 new set-ups compared to 23 in the previous quarter, and there were no divestments. A one-hour webinar will be held May 16, 9 a.m. CDT, to present study findings and insights.

Everest Group’s Market Vista: Q1 2012, a quarterly report on global outsourcing and offshoring activity, reports first quarter global transaction volumes reached about US$3 billion in annual contract value (ACV), an increase of 11 percent over the previous quarter. Compared to Q4 2011, the market saw a 9 percent increase in Business Process Outsourcing (BPO) transactions while IT Outsourcing (ITO) transaction volumes remained the same. New transactions accounted for 83 percent of all deals signed during the quarter. Two mega deals, each valued at over US$1 billion in total contract value (TCV), were signed during the quarter. 

“Until the world economy gains more stability, we foresee the global services market will hold a steady course in terms of transaction volumes, captive set-ups and other activity,” said Eric Simonson, managing partner of Research. “If you set aside mega deals and look at annual contract and total contract volumes, the numbers are lower than we used to see in a more vibrant market, which is indicative of cautious buyer behavior and more adoption of phased-in approaches.”

Other first quarter 2012 findings include:

• Compared to Q4 2011, the BFSI (banking, financial services and insurance) sector led the market in transaction volumes with an increase of 12 percent while the MDR (manufacturing, distribution and retail) vertical saw a 9 percent increase. Transaction increases also were recorded for public sector, energy and utilities, and telecom verticals, but the healthcare vertical saw a large drop in deals signed during the quarter.
• Transaction volumes decreased in North America, held steady in the United Kingdom and increased significantly in Rest of Europe.
• India and Rest of Asia each saw six captive set-ups followed by four in Europe and two in Latin America.
• Offshore activity saw 30 delivery centers established across captives and service providers in the first quarter compared to 29 in the previous quarter. Significant activity occurred in Asia, Latin America and Eastern Europe.
• Service providers’ consolidated revenues and margins increased in Q4 2011 compared to the previous quarter. (Financials lag other service provider activity by one quarter.)

Everest Group’s quarterly Market Vista reports provide data and analysis of deal trends in the outsourcing and offshoring market, captive landscape, current and emerging locations and key service provider intelligence insights. Everest Group’s industry trends research complements the Market Vista reports through quarterly updates focused on industry-specific global sourcing data, developments and insights across the BFSI, MDR (manufacturing, distribution and retail), healthcare, energy and utilities, technology, and telecom sectors.

The report also includes these focus sections:

• Eastern Europe: analysis of labor arbitrage sustainability, operating costs, operating cost inflation, arbitrage sustainability and currency trends. Cities profiled include Prague and Brno, Czech Republic; Budapest, Hungary; Sofia, Bulgaria; Bratislava, Slovakia; and the cities of Warsaw, Krakow and Poznan in Poland.
• Location optimization insights include a focus on domestic sourcing from tier-3/4 cities in the United States; emergence of Jordan as an alternative sourcing location in the Middle East; increased interest in business districts located in the periphery of tier-1 Indian cities; implications of recent changes in Indian government policies and regulations on offshore services industry; and rising prominence of Central American locations for voice and non­-voice BPO.

Quarterly Market Vista reports comprise key developments among 20 leading global service providers. Traditional service provider profiles include Accenture, Xerox, AON,  Atos, Capgemini, Convergys, CSC, HP, IBM, Dell Services and Unisys. Offshore-centric service provider profiles include Cognizant, EXL, Genpact, HCL, Infosys, Mahindra Satyam, Tata Consultancy Services, Wipro and WNS.

The webinar will be held May 16, 9 a.m. CDT; 2 p.m. GMT Standard Time. To register, please visit: research.everestgrp.com/Events/Webinars.

Market Vista is a subscription service with four reports published per year, including location datasets, Breaking Viewpoint briefings, Market Vista Primer and Global Locations Insights newsletter. For information about the Market Vista: Q1 2012 report or other research services, please visit research.everestgrp.com, e-mail info@everestgrp.com or call +1-214-451-3110.

Register for the event

Join your peers for an exclusive panel discussion where you’ll hear several visionary enterprise leaders share their secrets and perspectives on  how IT infrastructure solutions and the cloud have been a winning strategy in  meeting their businesses’ goals.  Savvis leaders will also share their objective views on game-changing technologies and trends. There will be no PowerPoint presentations—just a free flowing exchange of ideas and experience. Come and network with your peers and enjoy cold beverages and delicious food.

Panel Speakers:

• Scott Bils, Partner, Everest Group
• Mike Reiman, CTO , KingsIsle Entertainment
• Scott Kressner, VP and CIO, Rush Enterprises
• Bryan Doerr, CTO, Savvis
• Chuck Smith, VP WW, Blades & Cloud Industry Standard Servers & Software, Hewlett-Packard Corp.