INTRODUCTION

The BFSI industry continues to be the largest adopter of the IT Application Outsourcing (AO) services. However, the industry dynamics changed significantly over the last 12-24 months. BFSI buyers are facing increasing pressure to drive top-line growth, manage complexity arising out of wide-scale regulatory reforms, and improve profitability by driving greater cost efficiencies. To achieve this, buyers are focusing on optimizing their portfolios of AO service providers

At the same time, service providers in the BFSI-AO space also ramped up their capabilities, built up scale, and invested in developing and acquiring IP/proprietary solutions. They also formed alliances, which allow them to undertake and deliver on large-sized, annuity AO engagements. The competitive intensity in the BFSI-AO services space is at an all-time high. As a result, it is becoming difficult to differentiate service providers purely based on delivery capability. It is, therefore, critical to have a comprehensive, well-rounded, and fact-based assessment of service providers’ BFSI-AO value proposition

In this research, we analyze the capabilities of 25 leading AO service providers, specific to the global banking sector. These providers were mapped on the Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to a provider’s capability and market success. In this report, we focus on:

• The landscape of service providers for banking AO
• Assessment of the service providers on a number of capability-related dimensions
• Characteristics of the Leaders, Major Contenders, and Emerging Players on the Everest Group banking AO PEAK Matrix
• 2012 “Star Performers,” that is, providers with a strongest forward movement over time – both in terms of market success and capability advancements
• Implications for banking buyers and service providers 

Scope

• Industry: Banking (retail banking, wholesale banking, credit cards, loans, and mortgages); excludes capital markets and insurance
• Services: Large (TCV >US$25 million), multi-year (>three years), annuity-based application outsourcing
• Geography: Global
• Service providers: 25 leading banking AO service providers 

CONTENTS

This report is structured across three key sections, each containing insights on the banking AO service provider landscape, focusing on large-sized contracts:

• Banking AO service provider landscape: Analysis of individual service provider capability and service provider groups across the following dimensions:
  • Scale
  • Scope
  • Domain investments
  • Delivery footprint
  • Market success
• Banking AO PEAK characteristics: Analysis of each of the categories on the Everest Group PEAK Matrix – Market Leaders, Major Contenders, and Emerging Players. Additionally, this year’s report focuses on identifying the 2012 “Star Performers” in banking AO. Key aspects covered include:
  • Commentary on the capabilities of each service provider
  • Delivery capability characteristics (scale, scope, domain investments, and delivery footprint)
  • 2012 “Star Performers” analysis
  • Market success characteristics (transaction activity)
• Implications for key stakeholders: Implications of trends on buyers and service providers

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

• The service provider landscape for banking AO services is segmented into four major categories of providers: global majors, offshore majors, regional players, and Tier-2 Indian providers
• Offshore majors surpassed the global majors group in terms of average banking AO revenue, and continued to lead in terms of banking AO headcount
• Global majors continued to have the most balanced profile across all banking lines of business (LoB), while offshore majors focused more on the traditional banking lines (cards and lending) in 2011
• PEAK clusters’ characteristics: Leaders’ dominance in the banking AO space increased in 2011, commanding about two-thirds of all contracts signed & TCV, and about three-fourths of industry revenues (ACV). Leaders and Major Contenders increased their “pure-AO” deal share slightly in 2011; Emerging Players significantly improved their share of multi-tower deals
• Banking buyers should focus on consolidation across operations and technology, i.e., provider consolidation; solutions and toolsets consolidation; and platform and channel consolidation
• Service providers need to support clients’ “change management” imperatives and help them create IP that has potential to generate additional revenue