INTRODUCTION

The BFSI industry continues to be the largest adopter of the IT Application Outsourcing services. However, the industry dynamics changed significantly over the last 12 to 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. In order to achieve this, buyers are focusing on optimizing their portfolio of AO service providers

At the same time, service providers in the BFSI-AO space are also ramping up their capabilities, building up scale, and investing in developing and acquiring IP/proprietary solutions. Further, they are also forming alliances that 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 based purely on delivery capability. It is, therefore, critical to have a comprehensive, well-rounded, and a fact-based assessment of each service providers’ BFSI-AO value proposition

In this research, we analyze the capabilities of 20 leading AO service providers specific to the global capital markets sector. These providers were mapped on Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to each provider’s capability and market success. In this report, we focus on:

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

The scope of the analysis includes:

• Industry: Capital markets (investment banking, asset management, custody, fund administration, and brokerage); excludes banking and insurance
• Services: Large (TCV >US$25 million), multi-year (>three years), annuity-based application outsourcing
• Geography:  Global
• Service providers: Twenty leading capital markets AO service providers

CONTENTS

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

• Capital markets 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
• Analysis of each of the categories on Everest Group’s PEAK Matrix – Market Leaders, Major Contenders, and Emerging Players. Additionally, this year’s report focuses on identifying the 2012 “Star Performers” in capital markets 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 are:

• Given an upsurge in capital markets AO demand, owing to regulatory reform and profitability pressures, most provider categories expanded their capital markets AO scale for in 2011, both in terms of revenue and FTEs
• Offshore majors and regional players witnessed the highest growth in the scale. While the average number of clients increased for most provider categories, average duration of contracts increased only for global majors
• Regional players and tier-2 providers saw increased activity across multiple LoBs. Offshore majors also witnessed improved performance with custodian banks
• PEAK clusters’ characteristics: Leaders increased their share of total TCV and number of deals, while major contenders expanded their share in terms of revenue / active ACV from large capital markets AO contracts. While leaders continue to dominate significantly, in terms of average revenue and headcount, major contenders are also beginning to build credible scale in capital markets AO
• Capital market buyers need to push service providers to provide better visibility and control across IT engagements; and standardize and streamline their back- and middle-office operations
• Leading service providers should capture market momentum by leveraging broader scale, diverse skill sets, and superior market knowledge. Emerging Players should continue to capture niche market segments by designing targeted value propositions