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HfS Blueprint Report Finance & Accounting BPO Excerpt for Genpact March 2013

Phil Fersht Founder & CEO phil.fersht@hfsresearch.com

Brian Dubiel Principal Analyst brian.dubiel@hfsresearch.com

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Table of Contents

Topic Page

Executive Summary 3

Research Methodology 6

Service Provider Capabilities 13

Service Provider Profile 16

About the Authors 18

Executive Summary

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Introduction to the HfS Blueprint Report:

The F&A BPO HfS Blueprint Report is the first of its kind in the global services industry. Unlike other quadrants and matrices, the HfS Blueprint identifies relevant differentials between service providers across a number of facets under two main categories: innovation and execution.

HfS Blueprint Report ratings are dependent on a broad range of stakeholders with specific weightings based on 1,355 crowdsourced responses. Stakeholders include:

F&A BPO Enterprise Buyers F&A BPO Service Providers F&A BPO Industry Influencers (sourcing advisors) HfS Analysts

Finance and Accounting BPO Services

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Key Highlights: Finance & Accounting BPO in 2013

Deal activity rebounds. F&A BPO market has shown growth of 13% increase in deals 2012 after several years of downturn. Contract size for multi-scope engagements has stabilized at $25M (ACV).

The “F&A Big Four” dominate the Winners Circle. Accenture consolidates its command of market share. IBM, Genpact, and Capgemini round out the “Winner’s Circle” members.

Intense competition among the High Performers. Wipro, WNS, EXL, Xerox and Infosys pushing aggressively for their share of new deals.

Execution trumps Innovation. The service providers are attempting to become more innovative in the F&A BPO space, but the market still remains more focused on execution and delivery, assigning 70% of the importance weighting to execution, 30% to innovation.

Market size grows. Total F&A BPO is expected to surpass $25B in 2013, at a growth rate of 8%, with multi-process F&A BPO expected to reach $5B. 4 out of 10 enterprises ($5B+) intend to expand their F&A BPO operations this year.

Industries experiencing secular shifts show highest growth. These include Telecom, Software/High Tech, Media/Publishing and Retail/Hospitality.

“Early adopter” industries show slowed growth. Banking, Financial Services and Insurance and Manufacturing still dominate a third of the market, but growth has slowed.

Market still nascent. All F&A functions are still predominately managed in-house by enterprises.

Research Methodology

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Data Summary 58 data points were collected from 745 live multi-

process F&A Business BPO engagements. Each contract had a minimum of two core F&A processes bundled and a minimum on $1M in TCV.

Data was collected in Q4 of 2012, covering 1355 buyers, providers and advisors/influencers of outsourcing services. Included in this sample were 127 buyers of F&A BPO services.

This Report is Based On: Tales from the Trenches: Interviews with F&A BPO

buyers who have evaluated service providers and experienced their services. Some references are supplied by service providers, but many are interviewed in meetings conducted with HfS Sourcing Executive Council members and participants in our extensive qualitative researching process.

Sell-side Executive Briefings: Structured discussions with service providers based on collected data necessary to evaluate their innovation and execution capabilities, market share and deal counts.

HfS “State of Outsourcing” Survey: The industry’s largest quantitative survey on outsourcing, conducted with the support of KPMG, covering the views, intentions and dynamics of 1355 buyers, providers and influencers of F&A and business services.

Publically-available information: Financial data, website information and presentations given by senior executives, and other marketing materials.

Participating Service Providers

Research Methodology

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Evaluation Criteria

Two major factors that impact service delivery:

• Execution represents service providers’ ability to deliver services. It includes:

– Real world delivery of solutions – Quality of Customer Relationships – Market Share

• Innovation represents service providers’ ability to improve services. It includes:

– Vision for End-to-End Process Lifecycle

– Integration of BPO and IT – Vision, Plans and Investments to Tailor

Solutions for Specific Industries – Leveraging External Drivers

Criteria Weighting

Criteria are weighed by crowdsourcing weightings from the four groups that matter most:

• Enterprise Buyers (40%) • Service Providers (30%) • HfS Research Analysts Team (20%) • Advisors, Consultants, and Industry

Stakeholders (10%)

Weightings from this report come from HfS’ 2013 “State of Outsourcing Study”, conducted with the support of KPMG.

Key Factors Driving the HfS Blueprint

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Provider G Provider J

Provider B Provider G

Provider A Provider B

vs.

vs.

vs.

…

After providers respond to HfS’ Blueprint RFI, and upon completion of client references and fact-checking, HfS analysts conduct a paired-comparisons survey of service providers in each category of evaluation. This involved more than 700 unique provider comparisons.

Using ExpertChoice, an advanced statistical analytics package, the data/rankings are compiled and compared across all provider comparisons to identify inconsistencies within the scores.

After a further data-refinement, the criteria weightings are used to give each service providers a score in each of the evaluation criteria components.

Once aggregation and scoring is complete, the service providers’ scores are plotted, producing the HfS Blueprint.

How the HfS Blueprint Scores are Compiled

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EXECUTION 71.77% Quality of Customer Relationships 23.74%

Quality of Account Management Team 10.49% How Service Providers Engage Customers and Develop Communities 5.62% How Service Providers Incorporate Customer Feedback 7.63%

Real World Delivery Solutions 20.94% Actual Delivery of Services for Each Sub-process 9.63%

O2C 4.23% R2R 1.71% P2P 2.83% Other 0.85%

Geographic Footprint and Scale 3.60% Usefulness of Services to Specific Client Needs of All Sizes 7.71%

Flexibility to Delivery Both End-to-End Solutions and Point Solutions 3.48% Experience Delivering Industry-Specific Solutions 4.23%

Market Share 10.80% Flexible Pricing Models to Meet Customer Needs 16.28%

INNOVATION 28.23% Vision for End-to-End Process Lifecycle 11.41%

Concrete Plans to Deliver Value Beyond Cost and Investment Into Future Capabilities 4.63% Integration of Technology Into Business Process 3.31% Continuous Improvement Methodology and Capability 3.47%

Vision for Industry-Specific Solutions 9.46% Ability to Leverage External Value Drivers 7.35%

Leverage New Technology, Security, Social Media, Mobility and Cloud Capabilities 3.55% Incorporate Regulatory Requirements Quickly and Proactively 3.80%

TOTAL 100.00%

HfS Blueprint Scoring: Percentage Breakdown of Importance Weightings

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Stra

tegi

c Im

port

ance

• Accounts Payable • Travel and Expense • Billing/Invoicing • Cash and Accounts Receivable • Credit

• Collections • Revenue Accounting • Fixed Asset Accounting • Tax Filing • Payroll

• Inter Company Accounting • Regulatory/Statutory

Reporting • Management Reporting • Risk Management/Treasury

• Internal Auditing • Financial Planning and

Analysis • Business Intelligence • Other

• Financial Process Consulting • Change Management and Communications Support • Supporting Innovation Roadmap

Transactional Accounts

Controllership Activities

Transformational Responsibility

Low level and process based activities in the F&A sphere.

Higher level and more analytical focused F&A activities and process.

Consultancy like products and services. Identifying the long term strategy of F&A.

Activities include and/or not limited to:

HfS Bases its Research on an Assessment Framework of Services that F&A BPO Service Providers Offer the Market

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Procure to Pay

• Accounts Payable • Travel & Expense • Credit

Order to Cash

• Cash App/Accounts Receivable

• Billing/Invoicing • Collections • Revenue Reporting

Record to Report

• Fixed Asset Accounting

• Tax Filing • Payroll

Controllership Activities

• Inter-Company Accounting

• Regulatory/Statutory Reporting

• Management Reporting

• Risk Management/ Treasury

• Internal Auditing • Business Intelligence • Financial Planning &

Analysis

Transformational

• Financial Process Consulting

• Supporting Innovation Roadmap

• Change Management & Communications Support

HfS Value Chain Definition: Value chain refers to the series of departments which carry out value-creating activities to design, produce, market, deliver, and support a company’s product or service. In this usage, we refer to the range of primary processes and support services that providers offer to their clients. In the case of the F&A BPO Services assessed in this Blueprint, only those engagements which involve a minimum of two of these core F&A process bundled and a TCV more than $1M.

Definition of Finance and Accounting Business Process Outsourcing Services Finance and Accounting Value Chain

Service Provider Capabilities

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INN

OVA

TIO

N

EXECUTION

High Performers

Winner’s Circle

Accenture

IBM Genpact

Capgemini

EXL

Wipro

WNS Infosys

Xerox

HP

TCS

Serco Sutherland

Cognizant Steria

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Vertical Focus driving F&A value. Clients have repeatedly referenced the industry-focused vertical scope of F&A services as being of prime importance. HfS expects this trend to accelerate in the future, where service providers will become F&A experts within given industries, with the capability to offer insights and analytics. Notable industries where clients prefer providers with specific vertical capability include Pharma, CPG, Retail and Insurance.

Blur between Procurement and F&A. The line between procurement and the finance back office is starting to blur as companies look to reduce overhead and find synergies between the lines of corporate groups. It will be imperative for service providers to keep abreast of the changing landscape and address Finance and Procurement needs together.

Creating Relationships that Foster Innovation. As it gets harder to differentiate between the main body providers in “table stakes” areas of price flexibility and global operational delivery, those providers that are able to provide clear and measurable innovative improvements for clients will dominate market share. The key is providers being able to demonstrate how they created environments with their clients to work together to define business goals and outcomes. It’s not going to be about “selling innovation”, but more about creating environments to foster innovations.

Development of Client Communities. The need for more interaction between a provider’s client base is abundantly clear. Clients have called for more cross collaboration, to gain a better understanding of how other companies are leveraging their F&A BPO, and where best practices can be identified. HfS anticipates smart providers to increase their involvement of driving more focus groups within their F&A BPO client portfolios.

Future of the Finance and Accounting Outsourcing Market

Service Provider Profile

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Genpact

Client Industry Verticals Key Clients Global Operations Centers Business Platforms Offered

• Financial Services • Insurance, • Retail and CPG • Pharma • Manufacturing • Services Industry • Travel

• GE • Kimberly-Clark • Walgreens • AstraZeneca • UCB • Hyatt • GlaxoSmithKline • United Biscuits • Telefonica O2 • Cigna • Penske • Ashland

• Headcount: 16,000+ FTEs

• India: (12,300+) • China (600+) • Philippines • Brazil, Columbia, Mexico, Guatemala • Czech Republic, Hungary, Poland, Romania • Kenya, South Africa, Morocco • Netherlands • U.S.

• Akritiv • E-Invoicing • ProFlow • NICE • CMS • Duplicate Payment Audit Tool • E-Billing platform • Callisto • Manual Journal Entry • Close Tracker • Questor • Smartstream • SmartView

Strengths Challenges

• Distinctive client culture. Genpact’s clients talk more fondly about their provider than many of its competitors. This is due to the notable humility of Genpact’s delivery staff and a bloody-minded determination to succeed. Genpact has worked hard to get its clients on the right track and enjoys many long-term established relationships as a result..

• Ability to be flexible in offering services to customers in a customized, tailor-made approach or providing the best-fit solution. Genpact offers both a plug and play solution as part of service offerings and an end-to-end solution for a multitude of services.

• Proven performer in both the high--end and mid--market client base. Genpact has does an excellent job in servicing a wide range of clientele. Account management teams have generally risen above most other competitors in terms of quality.

• The Smart Enterprise Processes (SEPSM) methodology is a game-changer in the BPO market; a scientific methodology enabling a comprehensive analysis of business activity across the entire enterprise.

• Ability and openness to support both existing customer based technology solutions or propose own business tools in order to address the unmet functionalities of the systems and processes.

• IT development and IT innovation remains a weak focal point. IT business still remains quite small in comparison to other service providers in the market. As customers look towards all inclusive deals and solutions, this could ultimately hinder its ability to attract new deals. Clients have cited the lack of new applications developed to boost innovation, however, recent acquisitions of Headstrong and JAWOOD have significantly enhanced Genpact’s capabilities in capital markets and healthcare insurance, which should improve F&A capabilities in these industries.

• Over-reliance of F&A headcount in India. A more globally-diversified staff spread would be more attractive for more regional buyers looking for a greater degree of local support and business continuity planning in the F&A space.

• Apparent lack of depth and vision in some industry verticals. Although strong in pharma and CPG, and showing potential with recent acquisitions in others, the lack of a top tier IT business that could lead to new industry focused relationships could hold the firm back.

Industry Leading: Innovation

• Vision for End-to-End Process

• Continuous Improvement Methodology and Capability

Industry Leading: Execution

• Developing Customer Communities

• Flexibility to Deliver End-to-End and Point Solutions

Market Share: 10.2%

“Winner’s Circle”

About the Authors

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Founder and CEO, HfS Research

phil.fersht@hfsresearch.com

Overview • Over 17 years’ business experience in the global outsourcing and shared

services industry across US, Europe and Asia • An acknowledged industry advisor, strategist, author, speaker, practitioner

and blogger • Advised on 100s of global IT & BPO engagements

Previous Experience • Practice Head for IT Services & BPO Practice, AMR Research (Gartner Inc.) • BPO Marketplace Leader at Deloitte Consulting • Vice President for Everest Group, leading research and consulting teams

based in the US and India.

Prior Career • Regional Director, IDC Asia/Pacific • Program Manager, European IT Markets Services, IDC Europe

Education • BS with Honors in European Business & Technology from Coventry

University, United Kingdom • Diplôme Universitaire de Technologie in Business & Technology from the

University of Grenoble, France

Phil Fersht

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Principal Analyst, HfS Research

brian.dubiel@hfsresearch.com

Overview • Covers the Finance and Accounting and Procurement Outsourcing

industries for HfS Research • An acknowledged industry expert in BPO operations, having worked on

multiple sourcing engagements including in areas such as KPO, FAO, PO and LPO domains

Previous Experience • Served as the outsourcing category manager for State Street Corporation,

acting as an internal advisor for both procurement operations and corporate outsourcing projects

• Initiated and developed State Street’s Outsourcing Center of Excellence, creating corporate outsourcing tools and methodology, and standardizing knowledge for internal business lines to better govern their outsourcing providers and sourcing events

Education • Dual BA in Economics and Philosophy from Trinity College • MBA with an Operations and Supply Chain concentration from

Northeastern University

Brian Dubiel

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HfS Research (www.HfSResearch.com) is a leading independent global analyst authority and knowledge community for the business and IT services industry.

HfS is unique in the fact that it serves the research and strategy needs of business operations leaders across finance, supply chain, human resources, marketing, customer management, IT and core industry functions. In addition to researching business operations strategies, HfS educates and facilitates discussion among the world's largest knowledge community of enterprise services professionals, currently comprising 120,000 subscribers. HfS Research also facilitates the HfS Sourcing Executive Council, the acclaimed elite group of sourcing practitioners from leading organizations, which meets on a bi-annual basis to share the future direction of the global services industry and discuss the future enterprise operations framework.

Led by recognized industry expert Phil Fersht, HfS Research differentiates itself with its global team of expert services analysts with real industry experience, provocative and opinionated research, unrivalled market analytics, and a view of technology as an enabler for business process improvement. Its on-demand expertise relationship model helps clients leverage HfS knowledge and strategic insight in a rapid, responsive and engaging manner.

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