PricePoint: Q4 2012Points to Consider in the Pricing of Outsourcing ServicesPreview Deck ...
Our research offerings for global servicesSubscription information Market Vista The full report is included...
Introduction PricePoint is a quarterly compendium of key demand- and supply-side trends impacting pricing in the ITO ...
Table of contentsTopic Page no.Secti...
Guide to interpreting pricing dashboard for outsourced IT andbusiness process servicesArea Pricing implicat...
Pricing dynamics in outsourced IT servicesPricing dashboard – summary of pricing drivers in Q4 2012Overall trend in Q4 201...
Pricing dynamics in outsourced IT servicesSnapshotDemand-side factor (sample extract) ...
Featured researchSnapshotPhilippines versus India Pricing Differential ...
PricePoint research calendar Pub...
Appendix | Additional research recommendationsThe following documents are recommended for additional insight into the topi...
Everest GroupLeading clients from insight to actionEverest Group is an advisor to business leaders on the next generation ...
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PricePoint: Q4 2012 - Points to Consider in the Pricing of Outsourcing Services

This report analyzes the trends in the pricing of ITO and BPO services in Q4 2012, backed up by a comprehensive analysis of the factors that impact pricing. The report also includes a focused analysis on Philippines versus India pricing differential, forex-based price adjustment mechanism, and "pricing optics" strategies commonly deployed by service providers
Published on: Mar 4, 2016
Published in: Business      Economy & Finance      
Source: www.slideshare.net


Transcripts - PricePoint: Q4 2012 - Points to Consider in the Pricing of Outsourcing Services

  • 1. PricePoint: Q4 2012Points to Consider in the Pricing of Outsourcing ServicesPreview Deck Copyright © 2013, Everest Global, Inc. EGR-2013-9-PD-0859
  • 2. Our research offerings for global servicesSubscription information Market Vista The full report is included in Global services tracking across functions, sourcing models, locations, and the following subscription(s) service providers – industry tracking reports also available – PricePoint Banking, financial Healthcare Finance & accounting In addition to published services, insurance research, a subscription may include analyst inquiry, data Information cuts, and other services Procurement Cloud Vista technology If you want to learn whether your organization has a Human resources Recruitment process Global sourcing subscription agreement or request information on pricing and subscription Service provider Transaction PricePoint options, please contact us: Intelligence Intelligence – info@everestgrp.com – +1-214-451-3110 Custom research capabilities  Benchmarking | Pricing, delivery model, skill portfolio  Peer analysis | Scope, sourcing models, locations  Locations | Cost, skills, sustainability, portfolio  Tracking services | Service providers, locations, risk  Other | Market intelligence, service provider capabilities, technologies Copyright © 2013, Everest Global, Inc. 2 EGR-2013-9-PD-0859
  • 3. Introduction PricePoint is a quarterly compendium of key demand- and supply-side trends impacting pricing in the ITO (both ADM and Infrastructure) and BPO (both voice and non-voice) deals. It is published by Everest Group’s Pricing Assurance practice, which conducts pricing advisory engagements for large global buyers and providers of outsourcing services. PricePoint draws entirely from first-hand information and insights generated from: – “Live” advisory engagements – Analyst briefings and direct market conversations – Proprietary cost and transaction tracking tools PricePoint focuses on market developments in India and United States as the key offshore and onshore delivery locations for outsourced services. Other delivery locations are included as part of “featured research” whenever necessitated by market developmentsWhat objectives does PricePoint serve? Supports (re)negotiation efforts Assists internal decision-making or calibration per market dynamics Serves as a potential thought-starter on unexplored areas for pricing or spend efficiencyWhat objectives does PricePoint not serve? Comprehensive benchmarking of client-specific resources / units / service levels or delivery metrics Customized guidance on optimizing contracted fee Specific peer intelligence Copyright © 2013, Everest Global, Inc. 3 EGR-2013-9-PD-0859
  • 4. Table of contentsTopic Page no.Section 1: Pricing dynamics in outsourced IT services 6 Pricing dashboard 7 Demand-side analysis 8 Supply-side analysis 10 Key macro-economic factors 13 Trends and future outlook 15Section 2: Pricing dynamics in outsourced business process services 16 Pricing dashboard 17 Demand-side analysis 18 Supply-side analysis 20 Key macro-economic factors 22 Trends and future outlook 24Section 3: Featured research 25 Philippines versus India pricing differential 26 Trend of “pricing optics” strategy 32Appendix 36 Glossary of key terms 37 PricePoint research calendar 39 Additional research recommendations 40 Copyright © 2013, Everest Global, Inc. 4 EGR-2013-9-PD-0859
  • 5. Guide to interpreting pricing dashboard for outsourced IT andbusiness process servicesArea Pricing implication symbolsImpact ofprice driver Decrease price Sustain price Increase price These symbols represent impact of each price driver on overall pricing in isolationOverall price Significant Significanttrend/outlook decrease in price Stability in price increase in price Marginal decrease Marginal increase in price in price These symbols represent the cumulative impact of all price drivers on overall pricing Copyright © 2013, Everest Global, Inc. 5 EGR-2013-9-PD-0859
  • 6. Pricing dynamics in outsourced IT servicesPricing dashboard – summary of pricing drivers in Q4 2012Overall trend in Q4 2012  Deal activity in Q4 XX.  Pricing XX as evident from XX  Demand is expected to XX in 2013, with increased XX. As a result, pricing is Outlook for Q1 2013 expected to XX Impact ImpactDimension Price Driver Q3 2012 Q4 2012 ConclusionDemand-side Deal size  In the previous quarter (Q3 2012), we assessed a marginalfactors decline in overall demand but an unchanged value-mix Deal volume  In Q4, the overall deal activity increased along with shift in value-mix to high-value deals. This uptick was primarily Value mix driven by demand for long-term transformational deals. XX New deal - renewal mix (Refer to pages 8 and 9 for details)Supply-side Resource utilization  In the previous quarter, providers performed better on costfactors levers, however, margin declined Hiring mix  In Q4, despite margin pressure due to cost-side levers and INR appreciation against US$, providers were able to Overhead cost maintain/improve margin. XX Onshore-offshore mix (Refer to pages 10 to 12 for details) Financial performanceMacro-economic Inflation  Operating cost inflation, although low, was slightly higherfactors compared to the previous quarter Forex rates  Slight appreciation in INR against US$ also impacted service provider’s margin (Refer to pages 13 and 14 for details) Copyright © 2013, Everest Global, Inc. 6 EGR-2013-9-PD-0859
  • 7. Pricing dynamics in outsourced IT servicesSnapshotDemand-side factor (sample extract) Supply-side factors (sample extract)Cumulative size of ITO deals announced Total ITO deals announced Resource utilization Hiring-mixUS$ billion Number Utilization including trainees Utilization excluding trainees Lateral hires Freshers Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012  The cumulative size of announced ITO deals  The magnitude of XX in deal volume was  In Q4, we witnessed XX in the average  As resource utilization XX in Q4, service XX in Q4 2012 XX compared to that for cumulative deal resource utilization for IT service providers . providers hired more XX to replenish the  This was primarily due to XX size due to the following: This was primarily due to : reserve workforce, thereby, XX the share  We expect the demand for discretionary – XX – XX of freshers in hiring mix transformational project to XX in the long – XX – XX  XX term – XX – XX  XXMacro-economic factors (sample extract) Trends and future outlook (sample extract) Percentage 0.8% Trend in blended FTE price at offshore (India) for ADM Net impact  On the buy-side, delays in / change US$/hr/FTE on operating cancellation of some XX projects led to betweenContribution to operating cost cost XX Q3 12 - Q4 12 22 Management &  On the supply-side, revenue growth 20 XX but favorable forex led to XXadministration overhead 18  Most providers reported XX in pricing Real estate & facilities Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 Overall, offshore and onsite pricing XX 2012E  We expect the demand to XX in 2013. Wages  As highlighted earlier, demand outlook Impact on Impact on Trend in blended FTE price at onsite (U.S.) for ADM for XX initiatives is XX operating operating US$/hr/FTE  Providers’ operating cost inflation is Total cost Total cost in INR cost in US$ expected to XX 75  Forward looking pricing cues, shared  Wage cost increased by XX% in Q4 2012 due to XX. In the near term, wage inflation is XX 70 by most service providers, suggest XX  Real estate rentals XX in Q4 2012 due to XX. This led to XX% increase in the facilities costs 65  Overall, pricing is expected to XX  Overall, operating costs of service providers increased by XX% in local currency (i.e., INR) Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4  XX  However, INR XX against US$ in Q4 2012 2012E  XX  Accounting for these currency fluctuations, net US$ operating cost XX by XX% in Q4 2012 Copyright © 2013, Everest Global, Inc. 7 EGR-2013-9-PD-0859
  • 8. Featured researchSnapshotPhilippines versus India Pricing Differential Recommended approaches to adjust contracted rates for forex fluctuations:  Absorption band approach – In this approach, XX – XX  Cap & Collar approach – In this approach, XX – XXTrend of “Pricing Optics” Strategy Copyright © 2013, Everest Global, Inc. 8 EGR-2013-9-PD-0859
  • 9. PricePoint research calendar Published CurrentTopic Release datePricePoint Q1 2012 Update: Points to Consider in the Pricing of Outsourcing Services September-2012Webinar: ITO and BPO Pricing: What to Expect in 2012 September-2012PricePoint Q2 2012 Update: Points to Consider in the Pricing of Outsourcing Services November-2012PricePoint: Q3 2012 – Points to Consider in the Pricing of Outsourcing Services January-2013Webinar: 3 Pricing Questions Everyone Is Asking March-2013PricePoint: Q4 2012 – Points to Consider in the Pricing of Outsourcing Services April-2013PricePoint: Q1 2013 Q2-2013Webinar: Pricing trends Q3-2013PricePoint: Q2 2013 Q3-2013PricePoint: Q3 2013 Q4-2013Webinar: Pricing trends Q1-2014 Copyright © 2013, Everest Global, Inc. 9 EGR-2013-9-PD-0859
  • 10. Appendix | Additional research recommendationsThe following documents are recommended for additional insight into the topic covered in this research. Therecommended documents either provide additional details on the topic or provide complementary content that may beof interest:1. Benchmarking for Good (EGR-2011-9-R-0599); 2011. Though buyers of outsourcing services are increasingly adopting price benchmarking as a lever to optimize spend, we have observed that “quick-and-dirty” benchmarks often fail to provide the expected negotiating leverage. This viewpoint outlines some of the common challenges buyers need to be aware of in order to derive meaningful benchmarks2. Outsourced Portfolio Rationalization (EGR-2011-9-V-0585); 2011. Large outsourcing arrangements are frequently plagued with complexities that can significantly undermine the outsourcing benefits. This viewpoint highlights a real-life client situation to describe how Everest Group’s proprietary “Outsourced Portfolio Rationalization” methodology helped unlock sourcing efficiencies For more information on this and other researches published by Everest Group, please contact us: Sarthak Brahma, Vice President: sarthak.brahma@everestgrp.com Rahul Gehani, Practice Director: rahul.gehani@everestgrp.com Anuj Sukhlecha, Senior Analyst: anuj.sukhlecha@everestgrp.com Everest Group Two Galleria Tower 13455 Noel Road, Suite 2100 Phone: +1-214-451-3110 Dallas, TX 75240 Email: info@everestgrp.com Copyright © 2013, Everest Global, Inc. 10 EGR-2013-9-PD-0859
  • 11. Everest GroupLeading clients from insight to actionEverest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helpingGlobal 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With afact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use anddelivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practicalconsulting, original research, and industry resource services, Everest Group helps clients maximize value from deliverystrategies, talent and sourcing models, technologies, and management approaches. Established in 1991, Everest Group servesusers of global services, providers of services, country organizations, and private equity firms in six continents across all industrycategories. For more information, please visit www.everestgrp.com and research.everestgrp.com.Dallas (Corporate Headquarters) Toronto India / Middle Eastinfo@everestgrp.com canada@everestgrp.com india@everestgrp.com+1-214-451-3000 +1-416-865-2033 +91-124-496-1000New York Londoninfo@everestgrp.com unitedkingdom@everestgrp.com+1-646-805-4000 +44-207-129-1318Stay connectedWebsites Twitter Blogswww.everestgrp.com @EverestGroup www.sherpasinblueshirts.comresearch.everestgrp.com @Everest_Cloud www.gainingaltitudeinthecloud.com Copyright © 2013, Everest Global, Inc. 11 EGR-2013-9-PD-0859

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