Introduction

The Banking, Financial Services, and Insurance (BFSI) industry is one of the largest adopters of IT application outsourcing (AO) services. To cater to this large market segment, a number and variety of service providers have developed capabilities to deliver AO services to BFSI companies.

Market growth objectives post the economic recession, advent of new technology paradigms, and the desire to create a globally integrated multi-channel environment, are placing demands on financial institutions to ensure that their applications portfolio is aligned to industry best-practices. As financial institutions strive to maintain and modernize their applications portfolio, they are consolidating their IT service provider base and are looking to identify strategic partners that can sustain the pace of technological advancement in this rapidly evolving industry. As a result of this consolidation exercise, financial institutions are signing larger and more strategic AO deals with a fewer number of service providers, a phenomenon that is expected to meaningfully alter the AO services landscape in the BFSI segment.

In this research, we analyze the current trends and the future outlook for large, multi-year application outsourcing relationships for the global insurance sector. We focus on:

• Trends in AO in the BFSI segment
• Market trends and activity for large AO relationships in insurance
• Drivers for change and future outlook for AO in insurance
• Implications for insurance buyers and service providers

Scope of the analysis

• Industry: Insurance (life, annuities and pensions; property and casualty insurance); excludes banking, capital markets, and healthcare payers
• Services: Large (TCV >US$25 million), multi-year (> three years), annuity-based application outsourcing
• Geography: Global
• Sourcing model: Third-party AO transactions; excludes shared services or captives

Content

This report is structured across three key sections, each containing insights on application outsourcing in BFSI and insurance sector, with a specific focus on large-sized contracts:

• BFSI ITO market overview: Analysis of the overall BFSI IT Outsourcing (ITO) market and transaction trends:
  • Market size and growth
  • Adoption drivers
  • Transaction characteristics (e.g., transaction volumes, value, frequency, scope)
  • Market activity and adoption trends (e.g., by geography, sub-verticals, functions)
• Insurance AO market overview: Analysis specific to the insurance AO market with a focus on large transactions:
  • Transactions activity and growth trends
  • Demand characteristics for insurance AO services by:
    • Geography
    • Line of business: life, annuities and pensions; and Property and Casualty (P&C)
    • AO sub-functions
    • Buyer size
  • Offshore leverage
  • Global delivery locations
  • Renewal activity
• Emerging themes and implications: Analysis of emerging trends and their influence on the future of insurance AO:
  • Factors altering the demand profile for insurance AO services
  • Major technology investment themes in the insurance sector
  • Implications for key stakeholders – buyers and service providers

Some of the findings in this report, among others, are:

• The US$72-80 billion BFSI ITO sector led the growth for overall ITO industry in 2010, with a sharp spike in transactions volume and value in the second half of the year
• Within BFSI-ITO, banking vertical accounts for the majority of transactions; while the insurance vertical has larger and longer duration transactions
• Large transactions (TCV >US$25 million) form a significant portion of BFSI-ITO market
• Emerging business trends across the insurance industry value chain are changing the IT/application priorities for the insurance sector, with most companies focusing on developing innovative offerings, redesigning channel strategy, improving underwriting performance and increasing operational efficiency