gs nov-2-2010

8/7/2019 GS Nov-2-2010

http://slidepdf.com/reader/full/gs-nov-2-2010 1/27

8/7/2019 GS Nov-2-2010


8/7/2019 GS Nov-2-2010


GLOBAL SERVICES

An integrated media platform which connects thevarious constituents of the global technology andbusiness processing services industry ecosystem.

NEWSLETTER

A regular digest of key industry happenings.

DIGITAL MAGAZINE

The fortnightly digital magazine features researchreports, articles and experts’ views. Available on

www.globalservicesmedia.com

WEBINARS

Global Services’ web-based seminars aim toimpart useful information related to outsourcingindustry in the form of presentations and dis-cussions by industry specialists.

RESEARCH

We deliver indepth analysis and research reportson sourcing subjects.

MICROSITES

Online resource center designed to providefocused content on special subjects to the out-sourcing community.

EVENTS

From multi-day, high-level, resort conferences tointimate breakfast discussions we offer a numberof opportunities that connects the outsourcing

community.

CUSTOM PROGRAM

Customized services rendered through differentmedia platforms.

OSOURCE BOOK

A directory of global outsourcing serviceproviders.

www.osourcebook.com

DIRECTORY OF SERVICES

Pradeep Gupta

Chairman & Managing DirectorCyber Media (India) Ltd.

E. Abraham Mathew President

Ed NairEditor

[email protected]

Satish Gupta

Associate Vice [email protected]

Pratibha Verma

[email protected]

Sruthi [email protected]

Niketa Chauhan

[email protected]

Virendra Kumar

[email protected]

OFFICES

Global Services Media LLC.

806 Green Hollow Drive, Iselin, NJ 08830T: 678-665-6005

Global Services

Cyber Media (India) Ltd.CyberHouse, B- 35, Sector 32

Gurgaon-122001, IndiaTel: +911 24 4822222Fax: +911 24 2380694

Contact: [email protected]

Disclaimer

All rights reserved. No part of this publication may be reproducedby any means without prior written permission from the publisher.

3 GlobalServices www.globalservicesmedia.com November 2010

A CYBERMEDIA PUBLICATION

LETTERS TO THE EDITOR

Send letters to [email protected], or toany of our writers. We reserve the right toedit all letters. Postings submitted to ourblogs and letters to the editor may be pub-lished in our digital magazine or Website.

8/7/2019 GS Nov-2-2010



N o v e m b e r 2 0 1 0 V o l u m e 2 , I s s u e 2

FEATURES

ARE YOUBEING SERVED?

by Ed Nair The new watchwords forservices organizations:consolidate, standardize,

balance and manage

10

23

STRONG CONTRACTRESTRUCTURING LEADS WEAK Q3

by Sruthi Ramakrishnan

Restructuring of contracts heavily influenced the last three quar-ters, and will continue to influence Q4

25 ARE ON DEMAND CALL CENTERS INDEMAND?

by Vijay Venugopalan

More and more organizations are buying/exploring On-demand solu-tions, the economic situation has fuelled the desire to go on-demand

19

PROCUREMENTOUTSOURCING –CHINA'S MISSED

OPPORTUNITY by Pratibha VermaPO, which is still not mature in China, is growing at a slow pace.Due to this its capabilities are untapped by many companies

21THE IT OPPORTUNITY IN HEALTHCARELEGISLATION

by Sruthi RamakrishnanIT reforms are an important and integral part of the reformsplanned under the Patient Protection and Affordable Care Act

Extended Global

Enterprise

17THE SKY'S NOTFALLING ON THEINDIAN IT INDUSTY

by Sruthi RamakrishnanThere is more to the increase in MAT and expiry of STPI benefitsthan meets the eye and a deeper study shows that the situation isnot as dire as is being made out to be

8GLOBAL BANKS TO INVEST INCREATING FLEXIBLE PLATFORMS

by Ed Nair Even as the short-term business prospects are bleak, global banks

will focus their technology services investments towards managingrisk and compliance, creating platforms for growth, and improvingcustomer analytics.

8/7/2019 GS Nov-2-2010


Releasing November 16thTo advertise or to participate

contact: Satish Gupta at [email protected]

8/7/2019 GS Nov-2-2010



ED NAIR

Editor

EDITOR’S NOTE

[email protected]

Microtrends willbecome waves ofchange; systemic

shocks like therecession can reset the

economy and themarket.

hange is slow to be noticed. It is understood better, when things addup over time or when a large shift happens.

This issue of the digital magazine is all about change; how micro-trends will become waves of change or how systemic shocks like the reces-sion can reset the economy and the market.

For instance, the story on how the OPD market is recovering from therecession focuses on the impact of cloud computing on software product mod-els and the attractive mid-market opportunity. Mid-market software com-panies are treating their OPD vendors as extended R&D organizations, while

enterprise software vendors will use OPD vendors to handle entire familiesof products. Globalization of R&D is a far-reaching trend.

Similarly, the cover story on M&As spells out the need for companies tobuy their way into market share and the increasing willingness of small com-panies with service niches to sell out. These trends will endure for a few yearsto come. Reason: buying market share is the fastest way to accelerate growthand to get into new geographic market for services (India, China, Brazil, oth-ers).

Another interesting example of change is brought out by the story on RPOin Europe. Very strict data laws mandate that RPO work not be offshoredoutside the European Union. The laws are not aimed at curbing offshoring;they are aimed at strengthening data privacy. This is in stark contrast to theUS trying to enact laws that penalize offshoring with increased taxes, dis-criminating against Indian companies by hiking visa fees, or any other pro-tectionist measures.

Finally, the story about Cognizant drives home the point on how a com-pany can synthesize various signals that combine to form large forces of changeand make it a way of life both inside and outside the organization. The Cog-nizant way is a fantastic example of thought leadership. GS

C

Understanding the

Nature of Change

8/7/2019 GS Nov-2-2010


Releasing November 30thCase Studies are invited from service providers. For more details

contact: Satish Gupta at [email protected] or visit: www.globalservicesmedia.com/live

8/7/2019 GS Nov-2-2010



Industry Outlook

By Ed Nair

Even as the short-term business prospects are bleak, global banks will focus

their technology services investments towards managing risk and compliance,

creating platforms for growth, and improving customer analytics.

Global Banks to Invest in

Creating Flexible Platforms

IBM announced a deal with ABN AMRO (see Box) in

October. The deal has been hailed as a mega-deal in

terms of its value at nearly $1.8 B. At a time when

such megadeals are on the decline, this deal embodies

many of the trends in the large financial services industry

segment globally.

In terms of market environment, the short to medium

term outlook for the industry is difficult for banks in the US

and Western Europe. There is also quite a bit of social back-

lash because of the financial crisis; customers believe that the

banking industry created the financial crisis that led to therecession.

In terms of market regulation, the combination of in-

country regulations like Frank Dodds bill in US, similar oth-

ers in UK and Germany, as well as international regulations

like Basel III, and also the expectation that the IMF is going

to put together a fund to prevent systemic failures, are putting

new pressures on financial services companies. Both of these

present a real challenge to profitability.

Though the regulations have been watered down (Basel III

is much less draconian than what is was expected to be) and

the industry has been given a long time to create the capital

required for Basel III, the return on equity which used to be14 percent to 18 percent will fall below 10 percent in the next

couple of years. When you compare this to the cost of capital,

it looks very unattractive.

Profit squeeze is being exacerbated in banks where invest-

ment banking was really driving the profitability in the past.

Banks are being forced to shed hedge funds, proprietary trad-

ing activity and such other engines of growth. Profitability is

going to be considerably low in the coming few quarters. So

the short-term picture is challenging.

So, is it all gloom and doom? Hardly. In emerging markets

like China, India, Brazil, Middle East, the scale of opportuni-

ty is enormous. Even conservatively looking at the next five to

ten years, the global economy would grow at 5.8 percent to 6

percent annual compounded. Says Likhit Wagle, Global

Industry Leader: Banking & Financial Markets, IBM Global

Business Services, “That is significant amount of wealth being

created and this has to be disintermediated by the banking

industry.”

The emerging market opportunity is based on economic

8/7/2019 GS Nov-2-2010



Industry Outlook

ABN AMRO signed a contract to extend its services agreement with IBM. IBM will build and provide a new

computing environment while integrating the existing infrastructure of ABN AMRO and the former Fortis

Bank is an extension to the original contract. Next to that the infrastructure services for the former Fortis

Bank Nederland will come in. Both banks legally merged on July 1, 2010. Systems development will con-

tinue to be undertaken by a number of suppliers including Accenture, Infosys, and TCS.

On 1 September 2005 IBM announced that it signed a global contract with Dutch global bank ABN

AMRO to implement an on-demand IT infrastructure that will enable the bank to more rapidly roll out

additional services while significantly reducing IT costs. The contract, worth about EURO 1.5 billion over

5 years, supports ABN AMRO operations worldwide and represents the most extensive rollout of IBM's

data center automation technology, called Universal Management Infrastructure.

Further information from Nelson-Hall reveals:

I Data center management, with IBM managing the IT infrastructure on ABN AMRO premises in

Amsterdam. The existing data center infrastructure will be moved to a private cloud environment

I Desktop services. These services will retain a conventional desktop approach rather than moving to a

virtualized environment, with a major emphasis on improving collaboration through use of common

email infrastructure and community based collaboration utilizing web chat technology

I Service integration, with IBM taking overall responsibility for the roll-out of new systems on-time and

on-budget. A single set of KPIs are being shared by IBM and the applications development suppliers.

Andy Efstathiou and John Wilmott, analysts from Nelson Hall opine, “ABN AMRO is seeking to simplify

its operating model to achieve a reduced cost:income ratio while also improving its ability to comply with

the regulatory environment and improve its time-to-market. The service integration role being undertaken

by IBM is key to achieving these goals. The contract is also an early example of a major bank moving to aprivate cloud-based server infrastructure.”

IBM’s clients include Russia's largest bank, VTB, as well as Danske Bank in Denmark and Nordea in

Sweden – meanwhile a number of financial services companies in Europe are currently in negotiations with

IBM for Services contracts. Worldwide, IBM’s clients inlcude Citi, VietinBank, one of the largest banking

institutions in Vietnam, the Agricultural Bank of China, Discover Financial Services, and the National Bank

of Canada.

ABN AMRO extends Infrastructure Services Agreement with IBM

growth in these geos as well as the proportion of population

that is underserved— conservative estimates put it at 750 mil-

lion upwards and a third of which includes people with risingincomes. This translates to growth rates of 25 percent or more

per year. So, the medium term view is very bullish.

The IT services spend in the global financial services sec-

tor is largely marked towards three areas: a)getting the orga-

nization ready in the area of risk and compliance b)creating

platforms that are standardized and flexible and c) getting

customer analytics in place. Many of these new services are

being provided using new technologies like cloud. Says

Wagle, “The approach is to avoid either doing a wholesale

rip-and-replace or a band-aid kind of quick fix. The objective

is to simplify the operating model and the ABN-AMRO deal

is a good example.”

Organizations are sitting with expensive legacy systems

and want to take costs out, not incremental costs, but wholeareas of costs. This involves rationalizing systems, reengineer-

ing applications, and making the system more flexible. It

requires creating a platform that is standard and flexible. For

instance, in the ABN-AMRO deal, both ABN and Fortis will

migrate onto this platform that would in turn help them to

become more customer-centric.

From a strategic point of view, the traditional approach at

banks has been to free up more budget to run the bank as

opposed to changing the bank. However, the balance is now

changing when banks are investing in application develop-

ment, infrastructure refreshes, and process outsourcing. GS

8/7/2019 GS Nov-2-2010



Extended Global Enterprise Special Report

Extended GlobalEnterprise

8/7/2019 GS Nov-2-2010




I

Are You Being Served? 12I Q&A with Cliff Justice, KPMG 12

8/7/2019 GS Nov-2-2010


By Ed Nair

The new rules for the services organization: consolidate and standard-ize delivery; balance internal, external, and virtual capabilities; andmanage services like a portfolio.



Are You Being

Served?

If you are in global sourcing of ser-vices, talking with Cliff Justice is

great investment in time, espe-cially if the consultant’s clock is notticking. Cliff Justice is the NationalLeader, Shared Services andOutsourcing Advisory, KPMG. Hehas been advising companies on glob-alization, services delivery models,outsourcing, global sourcing andsuch for over 20 years. Cliff’s work with NeoIT, TPI, Equaterra- allreputed sourcing advisory compa-nies— where he either worked ormanaged partnerships, puts him as aleader in the sourcing advisory space.His insights are thorough and amaz-ing; his ideas are path-breaking andimpactful. Excerpts from a conversa-tion with Cliff Justice on the newrules and models of services delivery:

GS: We are just out of the recession. What are your clients asking you todo today? How’s it different from

yesterday?

CJ: In the last two years, clients havebeen demanding more from their

sourcing advisors in the area of valuecreation through optimization of sev-eral functions or their own internalservices organization and seekingmore value out of managing SG&A areas.

Whereas, ten years ago we werebrought in as advisors to help themcentralize shared services models oradvise them on the structuring of outsourcing contracts and helpingmake deals.

Today it is much more aroundenterprise services, enterprise trans-formation, and aligning that transfor-mation to drive competitive advan-tage to clients. More clients are ask-ing— how do I get competitiveadvantage through handling SG&A,through partners, through the way Imove services up the value chain,how do I access data and knowledgein a better way, how do I leverage the

maturity of the services organization

Cliff Justice,

National Leader, Shared

Services and Outsourcing

Advisory, KPMG

8/7/2019 GS Nov-2-2010




that has been in place to really drivebetter business value. In the last twoyears, these were the dominant con-versations.

The other important conversationcentered on managing risk. Back inthe day of pure outsourcing con-tracts, the risk question was a sidequestion. Now it is incorporated aspart of the value preservation discus-sion.

GS: Sourcing advisory as a businesshas been in turmoil. What is threat-ening a change there? How has itevolved?CJ: In the very early days, say from 1997 to 2003, it wasreally about identifying theright outsourcing vendors,scoping out the outsourcingcontract, structuring the deal,putting in the governancemechanisms, and managingthe deal. From 2003 to 2007,it was all about optimizingthose relationships. From

2008 onwards, we started hit-ting the rocky shores, it wasabout how do we really opti-mize and create value andcompetitive advantage out of the investments that we madeinto shared services and out-sourcing partnerships.

Some industries areapproaching this for the firsttime and wondering how toleapfrog. For example, thepharma industry was late into thegame, but they are now incorporatingthings like pharmacovigilance into acentralized shared services model,some enabled by external parties,some not. The line between them isgetting blurrier. We are structuringthem in a very similar way whether itis provisioned internally or externally, we are seeing lot more hybrids than what we ever had, and more mature

companies are moving up the value

chain helping quantify value cre-ation.

This requires going back to thebusiness and is a lot more challeng-

ing; it requires lot more insight intothe business— more than just doinga base case analysis and measuringsavings of a transactional service.They are table stakes that have to bedone.

GS: This is like more business con-sulting work.CJ: We have always been doing that.There’s always a component of busi-

ness strategy that has to be aligned tosourcing strategy. It was being doneeven ten years ago, but it is more vis-ible now. There were larger dollarsattached to sourcing deals and a lot of perceived external and internal valuein traditional sourcing advisory.

We have a developed a platformthat is comprehensive and holistic. Ithelps a client look at a long-termroadmap, not just a tower or two, on

how you provision the function.

Sourcing advisory has to include peo-ple and change; process transforma-tion in all functional areas likefinance, HR, IT, supply chain; and

enterprise risk management.Transactions services are fine; youhave to have those best-in-class. Butif clients really want the leverage, they have to think about service delivery more organizationally, integrate withbusiness partners, and drive valueback to businesses.

GS: You mentioned about SG&A. Isit time to rewrite Porter’s value

chain? Are support functionsgetting to the core?CJ: What we are seeing is thattraditional support-orientedfunctions contain lot of dataand knowledge. There’s lot of cost and expense to thosefunctions and there’s lot of value that comes out of thosefunctions. Organizations thatcan think in terms of virtual-ization, in terms of harnessing

the capabilities that reside within the company and har-ness those well, as well as har-nessing outsourcers and virtu-al platforms, SaaS, and cloudplatforms, can create a muchmore dynamic model that canaddress new questions to thebusiness, changes to the busi-ness faster than before. It is allsupport, but it is the newvalue that support can con-

tribute.The core is still the core, it is real-

ly about how your SG&A functionsare treated and addressed that they can become a competitive advan-tage.

These are not necessarily revenuegenerators; some industries may hivethem out and create a profit center. Itis probably still not their core busi-ness, but it enables their core business

to become more competitive.

“The economy has causedslowdown in major transfor-

mation investment, but that’schanging. Companies are look-

ing at creating sustainableservices organization asopposed to chasing labor

arbitrage,”

Cliff JusticeNational Leader, Shared

Services and OutsourcingAdvisory, KPMG

8/7/2019 GS Nov-2-2010


8/7/2019 GS Nov-2-2010



Tools & Technologies

GS: So what rules are you rewriting?CJ: The rewriting of the rule is— whether you can take these and man-

age them to the lowest cost and oper-ate them purely on efficiency; or doyou put enterprise-wise strategic ini-tiatives in place to drive innovationsinto those services. That’s what we aretalking about.

Drive the innovation, add a rea-sonable cost, create a flexible model.The cloud discussion is bigger thantech; it is really a way of thinkingabout flexibility in business.

Create an extended global enter-prise with internal, external and vir-tual capabilities, many of which canbe provisioned quickly, as and whennew businesses are introduced intothe environment.

One of the key things that wetalked about in the framework is howcompanies can take high value addservices that may be best in class within a business unit and create aservices organization that serves more

business units. These are centers of

excellence for that service. For exam-ple, research centers combine massiveknowledge and data or take shipping

companies that carry lot of data ontrends.

GS: Going back, you mentionedproper balance between internal andexternal capabilities. How does that

work?CJ: The desire for control over theservices, the ability to control risk,the specificity of the function, under-standing whether the service is some-thing that third party providers havethe maturity in providing— these arethe questions to be asked. It is notabout the price you are going to pay;lot of things can be moved out for alower price, but productivity couldget impacted. Hence, we are sayingthat companies should look at opti-mizing internal balance and externalbalance by managing services as aportfolio. Looking at internal provi-sioning and comparing and bench-

marking against the external market

is important. That’s what leadingcompanies do. More importantly, what we see is that services portfolio

organization across the enterpriseshould have a broad view across theorganization, cross the enterprise,helps the company realize the servicesstrategy. Drive and quantify the syn-ergies that are sometimes not obvious when you go to an end-to-endprocess. That’s for a lot of companiesseeing true value. It is true for an end-to-end process like say procure-to-pay.

This is hard to do because you arebreaking the traditional functionalstructure; it requires a lot of changein management. But there are somegood examples of companies outthere doing this.

GS: For many, shared services havebecome unwieldy. Why make when

you can buy? Are shared services onthe decline?CJ: No. Not at all. It’s just the oppo-

site. More companies are looking at

8/7/2019 GS Nov-2-2010




shared services, but the blend in pro-visioning is changing.

In the past, shared services and out-sourcing were two distinct servicedelivery models. That distinction isgoing away; they are becoming highly blended. A company provisions its ser-

vices in a very centralized way andenables more or less through thirdparty. Some companies don’t even callit outsourcing. That is, provisioning of services through partners within sharedservices unit is certainly on the rise.

You can see this growth at the ser-vice provider’s end. Even in a downmarket, they are growing, theirpipelines are full.

The economy has caused slow-down in major transformation invest-ment, but that’s changing.Companies are looking at creatingsustainable services organization asopposed to chasing labor arbitrage.

GS:What’s this Extended GlobalEnterprise model all about? Soundslike yet another consulting method-ology.CJ: Extended Global Enterprise isKPMG’s philosophy, framework,

methodology, point of view or what-

ever you call it; it’s a holistic view onservice delivery of enterprise ser-vices. It addresses companies that areboth very new to services as well asthose that are extremely mature inservices. It is a comprehensive set of principles that we as a firm use to

enable our partners, advisors,employees, to work with clients thatleverage the practices that we believe will drive value into their servicesorganization. It is a roadmap to cre-ating a long-term services strategy and the framework helps clientsdesign and implement a comprehen-sive services model that continues toevolve over time. It is agnostic toboth outsourcing and shared servicesin that it doesn’t recommend oneover the other.

GS: How do you compare this withthe other frameworks?CJ: I am not aware of any that is sim-ilar. There are frameworks on how tobuild a shared services organization,how to build an outsourcing deal,how to manage shared services, howto manage outsourcing contracts, andmany others. EGE helps companies

approach their services in the way

they want. It gives them the enter-prise capability that goes across func-tions and creates a common way toaccess services. There are differentdegrees to this like different levels ina maturity model. At the top is acompletely integrated end-to-end ser-

vices organization with complete ser-vice portfolio management (SPM).The SPM is a very simple interface torequest and manage services. Thegoal is to create an organizationalcapability that can interface betweena complex multi-tower service deliv-ery organization and the business andits customers. SPM helps the adop-tion of services without worryingabout different contracts, differentpricing, different SLAs— the SPMhandles all that and it constantly evolves and aligns all of the services tothe services strategy. GS

I It’s blind to the organizational structure and therefore immune to any limitation that such a struc-

ture might impose. Driven by customer need and not organizational structure:

I One-size-fits-all service offerings have been replaced with a balanced portfolio of retained, out-sourced and centralized service offerings with tiered, tailored and bundled services across func-tions.

I The “set and forget” approach or simple vendor management has been replaced by a more sophis-ticated Services Portfolio Management organization.

I Business transformation is all about business simplification. It’s really a reduction in complexity –consolidating and standardizing services delivery and then simplifying those service delivery stan-dards. Instead of a siloed and redundant approach with fragmented planning – one services deliv-ery strategy for IT, another for HR, and so on – you’ll have a single, common strategy within a com-

mon services delivery framework to achieve a common goal.

4 Principles of Extended Global Enterprise Model

8/7/2019 GS Nov-2-2010



IT Market Dynamics

T wo things which have been making newsrecently and are projected to have graveimplications for the Indian IT industry arethe proposed extension of MAT to the hith-erto tax- free Special Economic Zones

(SEZs), and the expiry of the Software Technology Parks of India (STPI) scheme in March 2011.

The concern about both is that they will increase the taxburden on the IT companies across the board, irrespective of size, location or turnover. The truth is that there is more tothese measures than meets the eye and a deeper study showsthat the situation is not as dire as is being made out to be.

Lets take the MAT increase under the DTC (Direct Tax

Code) regime first. It is not the increase in the tax itself, which actually comes to less than a percentage point, which is worrying. Most IT companies, including thoseoperating in Software Technology Parks, already pay thistax. The real cause of worry is that firstly, it it is plannedto be extended to the SEZs, and secondly, tax benefits willchange from being profit-linked to investment-linked.

"For SEZ, the tax benefit is for a period of 15 years,"says Raju Bhatnagar, VP, Government Relations and BPO,NASSCOM. "this is structured as a 100% tax benefitavailable only for the first five years, 50% tax benefit forthe next five years, and the last five years has a tax benefit

of 50%, provided the profits are invested in certain pre-

By Sruthi Ramakrishnan

There is more to the increase in MAT and expiry of STPI benefitsthan meets the eye and a deeper study shows that the situation isnot as dire as is being made out to be

The Sky’s Not Falling on

the Indian IT Industry

8/7/2019 GS Nov-2-2010



IT Market Dynamics

determined avenues. So after the tax holiday is there fromlets say 2006-10, you get 50% tax holiday, on the remain-ing 50% you have to pay full tax.

For an organisation that is halfway in the SEZ benefits,

they are paying normal tax. So the normal tax paid versusthe computed MAT, whichever is higher is what would beapplied." Thus the MAT increase may not impact toomuch after the first 5 years of tax benefit is availed.

So the real challenge seems to be the change from prof-it-linked to investment-linked approach to tax benefits, asthe latter approach would benefit sectors with large capitalinvestments. "If there is a tax benefit that is being allowed,let us say for the SEZ, and MAT is levied, upto two-thirdsof the tax benefit gets nullified," says Bhatnagar.

But this may not impact the big players like Infosys and

TCS significantly, who have multiple units in various stagesof operation in SEZs, besides subsidiaries operating outsideIndia. "There are several non-financial charges that they areable to take credit of which areallowed as per the Income Taxlaw," he says. "Besides, they have subsidiaries operating inforeign countries. So they pay tax in those countries for which they are eligible toclaim credit in India. So whenyou talk of the effective rate of

tax for a company which is aconglomerate, it is not simple, there are multiple aspectsthat come into play."

Where does that leave smaller companies? "So far asthose companies which are not in SEZs are concerned,they will have to in any case pay under normal income tax,and not get incentive deduction. So they will not be affect-ed by MAT," says Sunil Shah, a partner at Deloitte Haskins& Sells.

Thus the proposed extension of MAT to SEZs doesn'timply an uniform increase in taxes at one go, but a phasedincrease according to the age of each unit of a company.

Regarding the other major concern about the expiry of the STPI exemptions in March 2011, firstly, it is the ben-efit provided by Section 10A of the income-tax law (100per cent deduction for 10 years of export profits derived by units set up in any STPI, which is in accordance with thescheme notified by the Central Government) alone that iscoming to an end. "Under the STPI scheme there are mul-tiple benefits that are available, like the income tax benefit,bonded delivery center, duty free imports from withinIndia, etc. Of these benefits, one which is the income taxbenefit will expire. The rest remain open-ended, they don't

have a sunset date," says Bhatnagar.Besides, its end does not come as a surprise for the

industry. It was known from the inception of this schemethat this particular benefit has a ten-year horizon, which was later extended to 12.

Calling for extension of benefits is not wrong. But

believing that the Indian IT industry's USP is solely thetax sops and incentives offered by the government is.“Ourtax liability will go up to 25% next fiscal from around 21%in the present fiscal on account of this,” V Balakrishnan,CFO, Infosys told Financial Express regarding the end of the STPI tax benefit. But a company of Infosys' size andspread- across services, industry verticals and geographies-can surely absorb the increase in tax outflow. After all, it was none other than Infosys' Founder-Chairman NarayanMurthy who said that “Asking for tax exemption for 10sof years in my opinion is not the smartest thing” and

believes that IT and software sector should and are capableof paying taxes just like other industry sectors. Alternatively, they can shift operations to their delivery

centers outside India. That isone advantage the services sec-tor enjoys. "In services youcan, pretty much at the dropof a hat, pick up your servicedelivery center and shift it,"says Bhatnagar.

Admittedly, this can work both ways, and drive away for-

eign companies with Indiansubsidiaries to countries offering more tax benefits. But what needs to be kept in mind is that the Indian IT indus-try took the world by storm on the basis of its strong skillsets, talent pool and innovativeness and not solely lowcosts. The former, combined with India's rising status as anIT market, continue to propel India's IT story.

With the partial loss of their protective cocoon, com-panies will have to increase efficiency and become morecompetitive to retain customers. Smaller companies today already understand that going niche is the way forward.Companies which are good at what they are doing, espe-cially if its specialized services, will always be in demandeven if they chose to marginally increase their prices.

In short, the industry need not hassle itself over mea-sures which will, at best, cause a marginal increase intheir tax outflow. While they will, in the short term, hitthe "Infosys' and TCSs of the future which are still in theprocess of growing", as Bhatnagar puts it, expectingextension of exemptions endlessly is unrealistic. In anindustry where low cost is fast ceasing to be the dealclincher, all providers will eventually have to depend onthe efficiency and quality of their work to survive. The

sooner the Indian industry admits and adapts to this, thebetter. GS

Believing that the Indian IT

industry's USP is solely the taxsops and incentives offered by

the government is wrong

8/7/2019 GS Nov-2-2010



BPO Market Dynamics

By Vijay Venugopalan, CRM Capability Lead, APAC, BT Global Services

On 4th Sep 1882, the world’s first power sta-tion started its operation in New York City. 85 customers in lower Manhattanreceived enough power to light up 5000lamps and they paid US 5$ per Kilowatt-

hour in today’s dollar terms. Until then, people relied onexpensive battery powered ‘lighting bulb’. Power on-demand took over battery based power rapidly in its devel-opment cycle.

That’s the history of electricity. Let’s look at computing;Growth of computers was slow until IBM released

Mainframe systems in the mid-80s. Due to the size, com-plexity & cost of Mainframes, the ‘Digital Computing’ eraactually started as a hosted model - one centralized main-frame with ‘dumb’ terminals deployed across the enter-prise. Had we continued in this path, perhaps all of us would be paying monthly PC usage bills like our powerbills – well, I wouldn’t have had the opportunity to writethis article!

The point is many of what we use today such as tele-phone, power (even cars and real estate!) have changedfrom ‘buy’ to ‘share’.

The ‘Microprocessor’ generation which madePCs/servers possible, fundamentally changed the trajecto-ry of ‘Digital Computing’. Long story short - mainstreamIT solutions moved to outright purchase as it made perfectbusiness sense from a Cost/Benefit perspective.Organizations invested on technology infrastructure toempower their businesses. IT assets were depreciated over3 – 5 years. Happy days!

In my opinion this history sets the context for thefuture of IT services.

In the last 10 years, many global organizations haverealized that their IT assets are cumbersome and expensive

to manage. Some CFOs even claim that technology is one

of the single largest expenses and it makes their businessesless agile to change. What causes the shift in mindset?Unpredictable and escalating costs of IT operations, tech-nology obsolescence and changing customer demands!

In the ‘credit crunched’ economy, a corporate executive wants to improve efficiency, productivity and to maketheir business agile to ‘change’. Hence executives tend toinvest the scarce resource ‘dollars’ on core business func-tions such as R & D, product enhancements, emergingmarkets.

On the other hand, consumers want to have personal-

More and more organizations are buying/exploring On-demand solutions,

the economic situation has fuelled the desire to go on-demand

Are ‘On-Demand’ Contact

Centers in Demand?

Vijay Venugopalan,

CRM Capability Lead, APAC,

BT Global Services

8/7/2019 GS Nov-2-2010



BPO Market Dynamics

ized, timely service anytime anywhere via multi-channel.This trend has led to interesting survey results:

“80 per cent of businesses think they deliver a superiorexperience, yet only eight percent of customers agree”

[Source: Frost and Sullivan]This ‘paradigm shift’ in expectations has paved the way

for ‘On-demand’ services. An on-demand contact centre meets these criteria,

combining hosted IP telephony and automated, voice-acti-vated software-as-a-service to deliver a package that isdeeply scalable and can be purchased in new and flexible ways, such as per concurrent agent and by the hour. Thisnew level of cost granularity will allow chief operating offi-cers and heads of customer service to measure the efficien-cy and cost of operation, unlock service improvements and

additional cost savings in thefuture and its needless to say these fully managed services will remove worries about risk of technology obsolescence.

Some of the early networked IT services providers[SPs] like BT Global Serviceshave invested quality time andeffort (and dollars!) on marketresearch, designed mar-ket/industry relevant packaged

on-demand applications and created business models &return-on-investment tools around it and have acquiredcustomers.

The first agent logged into BT’s contact center On-demand platform back in 1999.

Many global MNCs have changed their operating mod-els to adapt to on-demand contact centers and have seenbenefits. More and more organizations are buy-ing/exploring On-demand solutions, the economic situa-tion has fuelled the desire to go on-demand.

Comments I hear in Asia are ‘Are these on-demand con-tact centers fit for purpose?’ or ‘On-demand contact cen-ters are only fit for short term deployments’. To get someclarity around this, let’s analyze the future of On-demandin 2 parts –Short & Long term.

Short term

In Asia, we are in the transition stage from outright pur-chase to On-demand services. While many organizationssee the benefits of On-demand contact centers, they haveconcerns around security, data privacy and some say – ‘Inthe long run hosted or cloud based contact center servicesare expensive’

Global networked IT service providers like BT have

been providing network based on-demand services for overa decade and have addressed these concerns already.Optimized on-demand contact center services are availableat a global scale – these services have the unique ability to

collect the contact (not just calls!) from anywhere in the world and deliver it to an agent with the right skills work-ing anywhere in the world – with secure platforms anddata privacy [It is mandatory for SPs who are registereddata controllers under the data protection act]

Wondering how? The contact center services are hostedon a very large voice and data network that spans across170+ countries.

Just deciding a best on-demand platform alone is notadequate. Organizations adapting to on-demand modelsshould be prepared for an internal transformation – to

make changes to their operat-ing model, process, gover-nance and people. Suchchanges will determine thesuccess factor of the on-demand deployment. If anorganization gets its internaltransformation right, on-demand platform will fit inlike a charm.

In 2010, finding the righttechnology partner to move

contact centres into the cloud, and the right commercialmodel to buy those services, will be vital.

Long term

If we take the long term view of the On-demand contactcenters, say 5- 10 years from now, many organizations would have procured contact center applications as ashared service. We are talking about hundreds of thou-sands of agents using on-demand service which will invari-ably bring down the cost per agent.

Business models will evolve to provide the service forfree as auxiliary revenue streams like network will make upfor it. After all, free is better than cheap if it results in a win-win deal for customers and partners.

What's more, on-demand call centers will also be ameans to gain points on ‘Corporate Social Responsibility’as arguably, On-demand services will reduce carbon emis-sion compared to on-premise rivals. Hence, organizations will evaluate which SP to choose rather than which tech-nology to choose and buy.

On a long term perspective, it’s obvious that on-demand contact center solutions are the way to go and it will be very difficult to justify an outright purchase busi-

ness case! GS

Organizations adapting to on-demand models should be pre-pared for an internal transfor-mation – to make changes to

their operating model, process,governance and people

8/7/2019 GS Nov-2-2010



IT Market Dynamics

T

he US healthcare reform bill, even before

being passed into law (the Patient Protectionand Affordable Care Act) in March 2010, was touted to bring a huge boom for 3rdparty service providers. But while the BPO

opportunity is quite visible- in the form of increased cus-tomer service, claims processing, etc- the IT aspect of it isless obvious. Nevertheless, it is an even more important andintegral part of the planned reforms.

"There is going to be a need to invest more in IT sys-tems to not only support alarger user base for goods andservices, but also to support

the administrative side of delivering these services adher-ing to the additional regula-tions coming on board. It isgoing to require more systems,greater automation and inte-gration of the existing systemsin order to be able to supportthese services on a practicalbasis, and also to achieve greater efficiency and effective-ness," Stan Lepeak, Managing Director of Research,EquaTerra had said in a March 2010 podcast (What Effect Will Healthcare Legislation Have on IT Services andOutsourcing?) organised by EquaTerra.

Service providers in the IT space are well aware of theopportunities that the legislation has brought. "From anapplication development perspective, we believe that theopportunity that lies for us is the requirement for newclaims administration application," says Pradeep Nair, VicePresident & Head – Global Life. Sciences Practice, HCL."From infrastructure, there is an increased storage require-ment."

He sees insurance as another segment with huge

potential for IT expansion. "There is the framework of

solutions on insurance exchange because we believe there

is a huge opportunity in trying to create an insuranceexchange. It constitutes essentially six buckets- productconfiguration; quoting engine; payment gateway; applica-tion processing; reporting certain tools which will inter-face with individuals and their families, employers, agents,payers, which will extend towards data migration; andautomated enrollment processes. That can be extended to,from an infrastructure perspective, to solutions in cloudcomputing."

The federal plan to launcha healthcare informationsuperhighway, the

Nationwide HealthInformation Network (NHIN) also requires expand-ing and uphauling the existingIT infrastructure. Mark Boxer,Senior Vice President andGroup President of ACSGovernment HealthcareSolutions, now part of ACS

Xerox, says," For the EMR (Electrnic Medical Record) tobe meaningful, it has to be aggregated and it has to beshared. We have got the data assets, the aggregation engineto aggregate EMRs into EHRs (Electronic Health records).EHR cuts across hospital systems, And then EHRs can beshared on a Health Information Exchange, which would befilled by states.

In addition to all the stuff that build the infrastructure, we also have critical rules engines that sit on top of thehealth exchanges that prospectively identify patients thatare at risk of getting diabetes, heart disease, etc. So this canhelp physicians take action before it becomes a critical issue.That is the promise of the healthcare reform."

So there is a lot of potential for growth for the service

providers. For healthcare providers and payers, there is a


IT reforms are an important and integral part of the reforms plannedunder the Patient Protection and Affordable Care Act

The IT Opportunity in

Healthcare Legislation

The federal plan to launch theNationwide Health Information

Network (NHIN) requires expand-

ing and overhauling the existingIT infrastructure

8/7/2019 GS Nov-2-2010



IT Market Dynamics

major incentive to increase outsourcing to them- cost ben-efit. "For firms, particularly the smaller to mid-size organi-zations, the equation has changed as to what is the fully loaded cost of an employee, and that's going to change theequation of whether it makes sense to add that next personor to invest in technology to automate that activity or rely on third parties," says Stan Lepeak.

Besides IT systems, another resource which will beequally in demand are the IT personnel skilled to manand maintain the systems, for whom there is already aglaring shortage. According to a College of HealthcareInformation Management Executives survey of 182healthcare CIOs, there is already a 71 percent shortage of clinical support implementation and support personnel.

There are 44 percent vacancies for infrastructure vacan-

cies, and 43 percent vacancies for business softwareimplementation and support personnel. These figures areonly set to grow as the country begins implementing theHealth IT Workforce Development Program, leadingmore agencies to look at outsourcing as a way out."While in some cases firms may make the investmentsthemselves and deploy management systems, in many cases they are going to look outside to the IT experts, sothat they can concentrate on their piece of healthcare andlet third parties manage the back office IT systems," saysLepeak.

Thus for the country's healthcare system to meet thehuge targets set by the Federal govt in the next few years, IT will have a big role to play, and in that third party providers

will have a dominant say.GS

Top Enterprise Healthcare IT Vendors

Cerner Corporation HealthlandCPSI Keane Healthcare Services

Eclipsys Corporation McKesson Provider Technologies

Epic Systems Corporation Medical Information Technology

GE Healthcare QuadraMed Corporation

Healthcare Management

Systems

Siemens Healthcare

Niche Vendors

Vendor Specialty Environment

ADP payroll services

Kronos time and attendance systemsLawson Software enterprise resource planning

Mediware pharmacy, blood bank

Oracle Corp./PeopleSoft enterprise resource planning

Philips Healthcare intensive care systems, cardiology information

systems, PACS systems for both radiology and

cardiology, and obstetrical systems

Picis/MSM operating room management, emergency

department, and intensive care unit (ICU)

applications

SCC Soft Computer laboratory, radiology, pharmacy

Sunquest Information Systems laboratory and radiology

Surgical Information Systems operating room management3M Health Information

Systems

encoding, dictation, transcription, and HIM

management applications

Unibased Systems Architecture enterprise scheduling

Key Vendors in US IT Hospital Market

Source: Executive summary of HIMSS Anaytics Report ‘Essentials of the U.S. Hospital IT Market’ 5th edition.

Top Consulting Firms for Hospitals

AccentureACS (acquired by Xerox)

Beacon Partners

BearingPoint

Cerner Corporation

Courtyard Group

CSC

Deloitte

Encore Health Resources

Hayes Management

IBM

McKesson Provider TechnologiesPerot Systems Corporation (acquired by Dell)

Siemens Healthcare

Top Firms Providing OutsourcingServices to Hospitals

ACS

CareTech Solutions, Inc.

Cerner Corporation

CSC

Eclipsys Corporation

IBM

McKesson Provider Technologies

Perot Systems Corporation (acquired by Dell)

Siemens Medical Solutions

8/7/2019 GS Nov-2-2010



Procurement Outsourcing

D

espite being strongest in the manufacturing sector,

China, which is also known for its outsourcing capa-

bilities, has failed to attract a considerable amount of

foreign direct investment in procurement outsourcing sector.The European Union has recently turned up the interna-

tional pressure on China to give foreign companies access to

its national procurement deals.

EU Trade Commissioner Karel De Gucht said, “China

needs to improve investment opportunities for foreign com-

panies, as European businesses are raising "serious questions"

about China's procurement policies.

Many companies have expressed concern

that recently drafted policies will discrimi-

nate against foreign companies in favour

of domestic suppliers with "indigenous

innovation," according to The Wall Street Journal.

De Gucht also expressed concern on

behalf of EU companies that are becoming

increasingly agitated about the lack of pro-

tection for intellectual property in China.

"There's so much discussion about

China's indigenous innovation policy,

because it forces European companies to

register as a Chinese company to get access

to private procurement markets”, he says.

Because of the huge manufacturing

base, China can be strong in direct spend but most of it is

done in-house.

Michael Rehkopf, Analyst TPI, says, “In procurement out-

sourcing, direct activities like buying raw material, are hugeand often it's done by and large in-house. When we look

around, we see a few number of firms doing one or two key

grand deals but nobody would do 20 or 50 in numbers.

Procurement outsourcing revenue in China is sort of going

slowly because spend control is slowly being shifted to

China.”

As organizations become more com-

fortable to see where they want to locate

their control for their spend, they move to

the region where they have got the manu-

facturing facilities.

Rehkopf says, “We have witnessed twotrends. The first one is the movement of

that activity from Europe and North

America to the region where things are

being procured and the second one is to

decide whether they should be done in-

house or need to be outsourced. We are

seeing both the things happening simulta-

neously.”

One of the biggest differentiators in

China is language. China is being per-

ceived as a very good destination only for

By Pratibha Verma

PO, which is still not mature in China, is growing at a slow pace. Due tothis its capabilities are untapped by many companies

Procurement

Outsourcing-China's MissedOpportunity

8/7/2019 GS Nov-2-2010



Procurement Outsourcing

people who deal in Chinese, Japanese or Korean.

In the past, MNCs in China were focusing on their

topline growth and their spend was relatively small. There has

been a rapid change in that area. For suppliers, PO base is

slowly becoming strong. Organizations are starting to shifttheir focus not only to increasing their spend but also to do

PO work more efficiently and effectively.

Rehkopf says, “Local companies in China believe that they

can do everything themselves and at a cheaper rate. But what

we see in the coming years is that they would no longer have

sufficient data and robust quality processes. Then they might

start depending on outsourcing not only for cost benefits but

also for overall benefits.”

Some suppliers have set up their centers in China and are

dealing with a number of clients but none of them have huge

clients. They are all getting themselves positioned for an

upcoming wave of procurement

outsourcing.

“A lot of MNCs have been

controling their spends from

other parts of the world. I antic-

ipate that there is significant

uptaking in this kind of out-

soursing in the next four-five

years. People have now started

thinking that outsourcing

makes sense.”

China is a complex place forforeign businesses. Regulations

are sometimes unclear, and

often not helpful. Contract

enforcement can be tricky. Its

business culture differs from that of India. And most impor-

tantly, language forms a critical barrier.

Nearly 10 to 15% of all PO deals signed in the last 3 years

have China as a delivery location. The key locations in China

from a PO perspective are Dalian, Guangzhou, Shenzen, and

Shanghai.

Everest classifies 20+ PO suppliers into emerging suppli-

ers, leaders and major contenders based on a comprehensiveassessment of capabilities and market success. Nearly a third

of all these PO suppliers have presence in China. However, it

is interesting to note that while all PO leaders have a China-

based presence, only 25% major contenders have delivery

capabilities in China and none of the emerging players is pre-

sent in China. So it is pretty evident that China is an impor-

tant cog in the overall delivery strategy for established PO

suppliers and is emerging as a differentiator.

Surabh Gupta, Analyst, Everest, says, “The biggest issue

with China is that there is a lack of service culture. Chinese

Government philosophy is based on producing cheapest and

world class goods unlike India whose philosophy is to provide

best services at low cost. The mindset is different. You get a lot

of benefit if you open a shop in India but you don't get them

in China. Lack of governement support and language also

deter companies from investing in PO.” When it comes Procure-to-Pay process, which is transac-

tional in nature, China is not an attractive destination to do

that. The value proposition comes in only when you deal with

the country for low cost country sourcing. Apart from that, it

is difficult to set up a center in China. People want to set up a

shop in China and buy from local Chinese manufacturers but

only some top service providers have delivery centers in China.

Over a period of time these western MNCs like

Accenture, IBM, Infosys, TCS, Wirpo, have gained confi-

dence in running their businesses in China. Companies like

Accenture have their centers in China.

Accenture started its pro-

curement delivery hub to serve

multi-national clients in 2002

in Dalian and established itself

as a strong procurement service

provider over a period of 8

years.

David Conte, Senior

Executive, Accenture

Procurement BPO Solutions,

says, “China not only provides

access to a large, highly skilledtalent base of procurement pro-

fessionals but, just as important-

ly, it provides access to local sup-

pliers and low cost services.”

He opines that China's cost competitiveness will remain a

key differentiator for multi-national clients.

Conte also says that with other markets, there will be new

opportunities for growth in China as the supply base contin-

ues to mature and expand into new segments. Additionally,

China will continue to be an important location for helping

clients manage and balance supplier risk. More generally, we

also expect to see continued demand from clients to helpthem add value and analytical insight from their BPO engage-

ments back into their business.

PO, which is still not mature in China, is growing at a

slow pace. Due to this its capabilities are untapped by many

companies.

Gupta says, “PO is growing in China but I haven't seen

too many suppliers from Chinese origin coming into play.

They are all global suppliers. There is this value proposition

that a country operates on low cost country model. That is

distinctive and unique about China and no other geography

can support this.”GS

“Local companies in Chinabelieve that they can do every-

thing themselves and at a cheap-er rate. But what we see in the

coming years is that they wouldno longer have sufficient data

and robust quality processes.”Michael Rehkopf, Analyst TPI

8/7/2019 GS Nov-2-2010



Market analysis

The TPI Q3 analysis shows that a pause in the market

recovery has dampened year-to-date momentum (see

Fig.1), but data and service provider feedback suggest

that a more active 4Q10 is underway.

Restructuring of contracts has heavily influenced how the

last quarter, and in fact the annual TCV (Total Contract

Value), have shaped up. “In the 1st quarter of this year there

was an unprecedented 42% of global TCV which were

restructuring related. At that

time we anticipated more

renewals were on the way. In

Q3 they make 48% of global

TCV,” said John Keppel,Partner & Managing

Director, TPI Research,

Analytics and Intelligence at

The TPI Index webinar.

“Restructuring TCV repre-

sents about 34% of the global

market, compared to the 20%

we’ve typically seen over the

past 3 years.”

The past quarter saw some

large restructurings- General

Motors, Bank of Ireland, ABN Amro, etc. In fact, six of

this year’s nine mega-deals

were restructurings.

One of the reasons for this extent of restructuring activity

is the change in the timing of renewals. “Some of the 7- 10

year contracts rewarded in the early part of the decade are up

for renewal. At the same time, some of the recent 3-5 year

contracts. As a result, there were more contracts being restruc-

tured simultaneously,” said Keppel.

Another reason is that larger economic difficulties still

cover outsourcing adoption. “In North America especially,CIOs and CFOs are returning to a restraining posture that

they initially took at the start of the recession. Projects involv-

ing new scope and budget approval are once again being

delayed. Restructuring which bring quicker and potentially

easier returns to bottom lines tend to move forward unim-

peded,” said Keppel.

In numbers, restructuring constituted 20% of the market

for both ITO and BPO and about 1/3rd of TCV. The relative

strengthening of BPO contract restructuring shows the

maturing of the BPO market

as some of the larger oppor-

tunities awarded in the mid-

dle of the decade come up for

renewal.On the other hand, new

scope activities were down,

not just in terms of global

market share but also by

absolute TCV numbers. New

scope TCV was down signifi-

cantly, by about 50% QoQ

and YoY. Clearly, new trans-

actions are not entering the

market as quickly as they

used to in previous years.

This is being attributed atleast partly to the recession

and delay in new projects.

Industry- wise

For ITO, which has seen consistent performance since 2006,

a huge Q1 followed by two weaker quarters has resulted in a

flat year. Most of the ITO mega-deals awarded have bundled

Infrastructure and ADM together. Much of the activity in this

space was restructuring related.

While BPO TCV is typically comprised mostly of new

scope, an increasing amount is restructurings. The traditionalBPO strengths- contact centers, FSO, HRO, F&A generally


Restructuring of contracts heavily influenced the last three quarters,and will continue to influence Q4

Strong Contract Restructuring

Leads Weak Q3

“Some of the 7- 10 year

contracts rewarded in the earlypart of the decade are up for

renewal. At the same time, some

of the recent 3-5 year contracts.As a result, there were more

contracts being restructuredsimultaneously,”

John Keppel, Partner & ManagingDirector, TPI Research

8/7/2019 GS Nov-2-2010



Market analysis

trended downwards and have been lower that their 2006 lev-

els, while there was some pickup in HRO and FSO. More

than half the activity in multi-process BPO was restructuring

related. The emerging R&D KPO activity is picking up in

volume and contracts.

Region-wise

The Americas experienced a decline in both the number and

TCV of contracts in the past quarter. This is important espe-

cially since the Americas, and the US IT market in particular

have been leading the market recovery which began in 3Q last

year. Despite this, TCV for this year is high because of extremely strong first half performance and this makes the

Americas the largest buyer of outsourcing services so far this

year. “The US, which is traditionally the dominant force in

the Americas region, has improved its share of the global mar-

ket from 36% to 44& YoY to date. The Americas is expected

to end this year on the upside,” said Duncan Aitchison,

Partner & President, TPI EMEA.

More contracts were granted in EMEA than Americas

this quarter, but this region is still lagging behind Americas

in both metrics. Within EMEA, there seems to be a lot of

activity in less mature markets. The Nordic region, the sec-

ond largest outsourcing market in the world in 2010, and

the Dutch market provided strength in Europe. The results

in both geographies have been heavily influenced by large

restructurings signed during the first nine months of this

year.

Geographically, APAC has shown the most fluctuation, at

49%, due to a few large deals.

Industry Segment- wise

The Financial Services sector has grown the most this year,

supported by large mega-deal restructurings. Driven mainly

by EMEA region, the growth in this sector has been support-ed by megadeal restructurings in the region, like that of ABN

Amro. Manufacturing has not improved on the same lines,

though the Americas saw activity in this space.

Retail, travel and transport, and hospitality sectors have

adopted outsourcing at an increasing pace over the last year.

Retailers, still experiencing top line pressure, are looking at

outsourcing to help reduce costs. Hospitality, travel and trans-

port have nearly doubled their contract values.

Looking at the number of deals coming up for renewal,

2011 again looks like it will be very active on the restructur-

ing front, though not as much as 2010.GS

3Q10 and YTD Headlines

Restructurings include renegotiations, renewals, extensions

Source: The TPI Index: An Informed View of the State of the Global Commercial Outsourcing MarketThird Quarter 2010

8/7/2019 GS Nov-2-2010


gs nov-2-2010

Documents