ElixIRR Trends in Outsourcing in The Financial Services Industry 2009 - 2013

Trends in Outsourcing in the Financial
Services Industry 2009 2013:

What is next for the financial services support model?
Elix-IRR: Trends in Outsourcing in the Financial Services Industry 2013

Copyright 2013 Elix-IRR Partners LLP
2 | Page
Global financial services overview

Global outsourcing market overview
Financial services outsourcing market overview
Emerging market: BRIC economic update and impact on outsourcing
BPO Trends Analysis
BPO performance in financial services: market trends

BPO performance in financial services: by domain
BPO performance in financial services: by geography
19
ITO Trends Analysis
ITO performance in financial services: market trends

ITO performance in financial services: by domain
ITO performance in financial services: by geography
28
Features Review
Regulation
Outsourcing in the future retail bank
Moving up the value chain
Challenging times for the life and pensions industry
New destinations for outsourcing
Afterword
Elix-IRRs services
Appendix top deals 2012
38
Introduction
Market Context
Market Context
BPO Trends
Foreword
Executive summary
ITO Trends
Features
Introduction
64
3 | Page
Conclusion
Conclusion

4 | Page
Foreword
Stephen
Newton
Founder and
Managing Partner
of Elix-IRR
I am very excited to announce the

publication of this years Trends in
Outsourcing in the Financial Services
Industry report, following the success
of previous reports.
There is an unprecedented level of
regulatory and investor pressure on
financial service institutions and this
year we focus on how the industry is
responding to it.
It remains to be seen if the post
financial crisis era has started as we
see RoE performance begin to
rebound.
We provide a brief review of the

current performance of the financial
services industry, before focusing on
key trends in the outsourcing space
and then continue with a number of
special features around the future of
the outsourcing industry.
I know that our clients, and the
industry more broadly, value the
independent analysis that we bring in
these reports and I hope this year will
be no exception.
This years report contains analysis of

outsourcing market data provided by
NelsonHall, a market leading
outsourcing research house.
5 | Page
Despite the return to growth in the financial services

industry in the year since we published our last report,
the new regulatory reality has led banks to recognise
that even as the economy recovers and performance
improves, financial services institutions will need to
work much harder to achieve the same returns they
enjoyed before the crisis. The increase in required
regulatory capital, and the subsequent need to
implement more robust processes and transparent
governance is driving institutions towards cost
reduction strategies that are both innovative and
sustainable.
In addition, financial services institutions have been put
under increased pressure by the growing expectations
of customers. Customers increasingly expect
unprecedented quality and availability of service and
transparency from financial institutions, a trend already
observed in other industries.
From a demand perspective this is driving changes in

the way financial services are looking at outsourcing as
part of the toolset to address these market changes:
In their search for value, financial services

institutions are increasingly looking for services
which span the value chain whilst taking a multisourcing approach as their maturity in managing
outsourced services grows
Financial services institutions continue to see

outsourcing as a means of cutting costs, however
they are also looking for increased value aligned
with their long-term business strategies including
new capabilities, reduced capital investments in
infrastructure and improved services
The increasing demands on financial services

institutions from global regulators means third party
service providers will be expected to support their
customers by implementing greater transparency
and more robust control frameworks
Executive Summary
Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

6 | Page
Against this backdrop, the global outsourcing sector

in financial services overall has continued to grow
modestly over the last four years and this growth is
forecast to accelerate. Behind these headline figures,
the major changes in the financial services sector are
starting to change the nature of outsourced services.
Our analysis reveals a fundamental blurring of
traditional definitions of outsourcing is making typical
industry classifications less and less relevant:
Outsourcers are diversifying their approach and

seeking to build more innovative solutions that
align with their customers cost and value
agendas, including broadening services to
previously core areas of financial services
activity such as mortgage and securities
processing
These trends have had a noticeable impact on the

sourcing behaviours of financial institutions. As a
result, new service providers are emerging, whilst
existing providers are adapting their service offerings
to respond to these trends.
Features in this years report

In addition to our market trend analysis, we have also
sought to provide a perspective on the challenges
the industry faces. In our Features section we
examine some of the key themes from our report in
greater depth:
1.
What is the impact of changing regulation on

financial services sourcing models?
In this context the provider landscape is

changing; bank-to-bank outsourcing agreements
on transaction processing which previously would
not have been considered as outsourcing, make
up some of the largest transactions in the
marketplace
2.
What will the impact of increased customer

expectations be on the sourcing behaviour of
retail banks?
3.
How can transaction banks move up the value

chain and offer innovative outsourcing solutions
to help their clients cut costs?
The traditional boundaries between BPO and ITO

are becoming blurred as service providers look to
provide integrated, end-to-end solutions for
clients not just leverage wage arbitrage
4.
How is the insurance industry using

outsourcing?
5.
What alternative outsourcing destinations are

challenging traditional offshore locations?
As financial institutions become more accepting

of new technologies such as cloud-based
infrastructure and software services, the need for
large, monolithic outsourcing solutions in this
space is diminishing
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8 | Page
Introduction
Conclusion
Features
ITO Trends
BPO Trends
Market Context
Market Context
9 | Page
Figure 1. H1 2013 profit increase vs. H1 2012
RBS
Standard Chartered
HSBC
ICBC
Bank of China
Barclays
Lloyds Banking Group
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
Figure 2. 2013 Q1 RoE performance by selected global banks
JP Morgan
Goldman Sachs
Citigroup
BNP Paribas
HSBC
RBS
Lloyds Banking Group
Barclays
0%
2%
4%
6%
8%
10%
12%
14%
Source: Published 2013 Interim Results and 2012 Annual Results, Elix-IRR analysis

10 | Page
Global financial services

A fragile recovery
Back to black
Regulation
Whilst 2012 saw many global banks continue to

struggle against a backdrop of falling revenues
and stagnant RoE, results for the first half of 2013
suggest that a recovery, albeit a slow one, is
underway. Average RoE for the major US banks
has risen to over 14% in Q2 of 2013, while the top
four UK banks have seen average RoE lift to 9%
and pre-tax profits jump nearly 30% in H1 2013,
compared to the same period last year. However,
these numbers are still well below the pre-financial
crisis highs of more than 20% RoE.
Regulation remains the key driver behind

business and operating model changes across the
industry, as new regulatory requirements increase
the cost of doing business and decrease the
profitability of previously lucrative activities.
Concurrently, the penalties for non-compliance
have increased: the top ten global banks recorded
operational risk losses of more than $25bn in
2012, practically all of which was recorded by five
banks (JP Morgan, Citi, Bank of America, HSBC
and Wells Fargo).
Growth has been prompted, in part, by the

extensive financial stimulus programmes
instigated by major governments that pumped
billions into their respective economies. These
stimuli have contributed to the gradual emergence
of the UK and US from recession. Combined with
a period of relative stability in the Eurozone which
has allowed banks to focus on rebuilding their
balance sheets. Geography seems to be the key
determining factor in whether banks have been
able to achieve this, with European banks
criticised for being undercapitalised compared to
their US counterparts.
The regulatory environment continues to evolve.

The imminent implementation of AIFMD is
concerning the buy-side; MiFID II is occupying
sell-side participants; Solvency II, despite
continued delays in its implementation, will still
impact the insurance industry. Substantially
increased capital requirements are also enduring,
which continues to impact revenues and RoE
through a reduction in leverage across the
industry. This is driving the long-term need across
the industry to reduce fixed costs. Financial
services institutions that recognise the new rules
of the game will continue to focus on what they
can control, namely cost. (for more detail see our
Features section)
The insurance industry has also experienced

similar challenges, particularly the need to cut
costs and increase capital buffers. Whilst mature
markets have stabilised, consumer and business
spending remains sluggish. As a result insurers
continue to seek to trim costs, whilst chasing
opportunities in emerging markets.
Same game, new rules

A paradigm shift within financial services has
occurred. Governments and central banks will
continue to set the agenda for financial services
institutions as they seek to remould the industry.
The focus on increasing regulatory capital will
result in a long-term focus on finding sustainable
ways to reduce fixed costs. This presents an
opportunity to service providers who can
effectively align their offerings behind this
objective.
The performance of financial

services institutions is starting to
rebound, but capital challenges
remain and support services
continue to be under cost pressure
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Figure 3. Overall outsourcing market performance 2009-2012
ITO
BPO
Overall outsourcing market ($bn)
600
500
400
185
189
182
181
299
311
328
347
2009
2010
2011
2012
300
200
100
-
Figure 4. Overall outsourcing market 2012

ii. Region
i. BPO / ITO
ITO
$189bn
35%
BPO
$347bn
65%
Asia Pacific
$80bn
15%
EMEA
$178bn
33%
Americas
$277bn
52%
Sources: NelsonHall data, Elix-IRR analysis

Notes: - Please note the change in data source from the 2012 report to Nelson Hall
- Outsourcing contract data is from publicly available information

12 | Page
Global outsourcing market

Trends and performance
Global outsourcing market
The overall global outsourcing market continues to
enjoy steady growth. The year-on-year gains in
the overall market observed in recent years are
set to continue in 2013. This is a good indicator
that confidence in the strength of the outsourcing
value proposition has been maintained throughout
the global economic crisis and ongoing recovery.
Key structural changes are driving this growth and
we have identified four key trends in the global
outsourcing market:
1. The labour arbitrage model is no longer the

only key driver
Every year, above-average inflation and resultant
increasing wages in established offshore
outsourcing destinations are driving costs
upwards and reducing potential cost savings.
Despite this, outsourcing continues to grow yearon-year, demonstrating that cost is no longer
necessarily the primary driver. Organisations are
looking for:
3. The rapidly evolving digital world is forcing

businesses to make a series of fundamental
changes to their operating models
Innovation and technology are disrupting the way
outsourcers provide and sell their services:
Online is becoming the norm: this requires

companies to maintain multi-channel
solutions as customers move away from faceto-face interactions (i.e. online banking)
Greater demand for big data analytics to drive

revenue growth, cost reduction, and running
robust Customer Relationship Management
(CRM) systems
Cloud applications and services are allowing

companies to buy based on usage and
eliminate large up front costs
4. Rise in stronger value propositions
Flexibility and scalability of resources
Guaranteed price, even if this is not

necessarily a lower price
Higher levels of service and expertise
Many of the quick wins or easy cost saving

opportunities have been exploited, especially in
mature markets where outsourcing is an
established solution. In response to various
challenges, the outsourcing industry is shifting
from a cost-focused industry to one that is defined
by higher value, better service and more
expertise. Responses include:
Lower capital investment
Low cost providers operating on thin margins

can struggle to make the required
transformational changes. Working with
strategic partners is becoming more common
Vertical integration in outsourcing can enable

greater value through deeper expertise in one
business unit. For example, many financial
services institutions struggling with the DoddFrank Act are looking to outsource vertically
some of the required documentation and data
gathering
The clear cut boundaries between BPO and

ITO are blurring as outsourcers provide
solutions that cover the entire end-to-end
value chain
2. New outsourcing destinations: rise in

nearshore and alternative lower cost
destinations
As the business model for offshoring has been
eroded by increasing wages and real estate costs
in mature locations such as India, outsourcers
have responded in two ways:
Exploring alternative offshore destinations

that can deliver continued cost savings, for
example Sri Lanka or Colombia, instead of
traditional outsourcing destinations such as
India or the Philippines (see our Features
section for more analysis)
Increasing automation is reducing the need
for large numbers of low skilled workers,
leading to nearshoring of outsourced services
to gain access to more highly skilled
workforces and better customer service
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Figure 5. 2009-2012 total outsourcing market, by industry

Financial
services
spend
$182bn
34%
35%
65%
35%
34%
65%
2009
Other
industry
spend
$354bn
66%
66%
2010
2012
2011
Figure 6. Financial services outsourcing market performance 2009-2012, and forecast 2013-2016
Overall outsourcing market

($bn)
250
200
150
170
170
176
182
2009
2010
2011
2012
190
2013
217
207
198
100
50
0
2014
2015
2016
Figure 7. Financial services outsourcing performance 2009-2012 and forecast 2013-2016 by BPO / ITO
CAGR
2009-12 / 2012-16
200
BPO
$143bn
78%
Outsourcing market ($bn)
180
ITO
$39bn
22%
3.2% / 5.2%
160
140
120
100
80
60
40
-0.2% / 1.5%
20
2012
0
2009
2010
2011
2012
2013
2014
2015
2016
Figure 8. Financial services outsourcing performance by region 2009-2012
CAGR
2009-12
100
Asia
Pacific
$29bn
16%
Americas
$89bn
49%
EMEA
$64bn
35%
Outsourcing market ($bn)
90
1.6%
80
70
3.3%
60
50
40
30
3.5%
20
10
2012
0
2009
2010
2011
2012

14 | Page
Financial services outsourcing market

Trends and performance
Financial services outsourcing market
2. Pure ITO is falling out of favour
Financial services outsourcing spend makes up

approximately 34% of the total outsourcing
market, and this proportion has remained
relatively consistent between 2009 and 2012 (see
figure 5). Whilst the non-financial services markets
have shown a small gain, the financial services
share of the global outsourcing market has
diminished slightly since 2009.
Across the financial services industry pure ITO is

in real term decline, for both value and number of
deals signed. The ITO market is increasingly
saturated, and many companies are looking to
manage their existing deals more effectively rather
than commit to new arrangements. Furthermore,
CIOs are looking to refocus their use of ITO
service providers, having been ultimately
disappointed with the success of large scale
transformational outsourcing deals, and the
market is seeing an increase in the appetite for
cloud-based solutions.
The financial services outsourcing market has

grown at 2% CAGR since 2009 (see figure 6),
driven by a need to cut costs and improve service
levels. This growth continues in response to
increased cost of regulatory compliance and
capital and increasing customer demands which
require further investment. Outsourcing continues
to offer a way to deal with the issue of cost, and at
the same time providers are getting creative with
the types of services they are offering their clients,
as we will explore further in this report.
As shown in figure 7, BPO accounts for 78% of
outsourcing in financial services and has shown
stronger growth than the ITO market between
2009 and 2012. BPO grew 3.2% over the last four
years (CAGR), whereas ITO was stagnant (0.2%
decline over four years), showing a real term
decline in sales. This trend is expected to continue
next year and forward to 2016. We see three key
trends driving the trends in financial services
outsourcing:
1. A key driver for outsourcing remains cost

reduction
As revenue pressures resulting from regulation
increase, there is a continued focus on
outsourcing to reduce costs to protect margins.
However, financial service providers are looking
for more strategic relationships to deliver
enhanced value through any outsourcing, given
that potential labour arbitrage using offshore
resources has fallen away in recent years.
As an alternative to large transformational deals,

buyers are looking to use more bespoke
providers, combine services into industry verticals
with BPO elements, or move ITO spending
towards outcome-based pricing (enabled by cloud
computing and managed service solutions). The
knock-on effect is the reduced number of megadeals and the impact on the total market size.
Additionally, though there is very little data on the
subject, we believe that there has been a
concurrent increase in cloud-enabled BPO.
This fall out of favour of pure ITO in financial
services is evidenced by its share of the market
compared to BPO. In the overall outsourcing
market, ITO accounts for 65% of the market size
(see figure 4i). However, in financial services, the
ITO market share is significantly smaller, at 22%
(see figure 7).
3. The outsourcing industry is diversifying

Financial service providers are outsourcing a
wider range of services, including specific
business areas such as HR and procurement (see
BPO Trends Analysis for further discussion). This
trend is being driven by a desire for more strategic
arrangements (including the integrated use of IT
and BPO services), and the search for further
value in areas not traditionally outsourced. Service
providers are responding to this by seeking to
develop broader end-to-end services, whilst niche
entrants with specific expertise are also gaining
ground. We expect outsourcing to play a
continuing, and growing role, in financial services,
and for outsourcers to work more widely across
the value chain and in an increasingly holistic
manner.
15 | Page
Emerging markets
Economic update and impact on outsourcing
BRICs, no mortar?
Emerging markets outsourcing overview
The BRIC countries have experienced fluctuations

in fortunes over recent years. Following a decade
of sustained high growth, high inflation and
improving living standards, events over the past
year have led to a more negative outlook for BRIC
countries (see figure 10). This began with a rapid,
but controlled, slowdown in the Chinese economy,
and a marked decline in Brazilian, Indian and
Russian growth.
Most of the emerging economies still provide

comparative advantage in wage arbitrage,
however this is only diminishing over time as
markets mature. Competitors able to offer greater
wage arbitrage over established players have
entered the market. Nonetheless, whilst economic
needs are maturing, the BRIC countries are still
supplying outsourced services rather than
demanding them. Mature countries are moving up
the value chain and are able to compete on quality
of service and proposition, rather than just cost.
However, it is worth noting that financial services
institutions are still located more predominately in
high-cost locations compared to their service
provider counterparts (see figure 9). There is
therefore still opportunities for savings from labour
arbitrage.
In China this has been driven by a number of

factors, notably, overcapacity and saturation in the
export market, an unsustainable credit fuelled
construction bubble and rising wages as Chinas
demographic dividend peters out. The slowdown
in Chinese growth has led to a significant knockon impact on the commodities driven economies
of Russia and Brazil, who have also suffered from
domestic political discontent.
This trend has been further accelerated by the
prospect of an end to quantitative easing in the
US. This has led investors to reassess, in the
short term, their investments in emerging markets
and subsequently withdraw capital. This is largely
due to the short term challenges in these
economies, such as political instability, high
inflation, corruption and the need for structural
reforms.
India in particular has suffered over the past year
as investors have woken up to the realisation that
inflation has outstripped growth by 4-5 percentage
points, whilst the economy remains unreformed,
leading to, amongst other things, aging
infrastructure, sclerotic job market, a weak
banking sector and a high current account deficit.
Overview of key offshore destinations

India: India remains the largest hub of offshored
financial services BPO centres in the world and
continues to grow, supported by local and
international service providers. Large Indian
service providers are also attempting to expand
into Europe to provide nearshore services in
countries like Poland and Bulgaria, with some
success. However, in the past few years several
alternative offshore destinations have shown
strong growth in the market, highlighting that
Indias position is far from assured.
Whilst these factors will have an impact on the

growth trajectory of these countries, it is also
impacting their outsourcing industries.
Political stability has increased

the attractiveness for outsourcing
in several countries amid rising
costs in more traditional markets

16 | Page
China: China has a well-educated workforce and

is providing a growing range of services to the
global banking community, from a complete IT
outsource service from Deutsche Bank to an
IBM/Siemens joint venture, to the creation of
several shared service centres in regional hubs
like Shanghai and Shenzhen. This is only likely to
increase as the financial services sector continues
to mature and looks for the kind of productive
capacity and scale that China can offer.
Philippines: Although it can not compete with
India in terms of population size, the Philippines is
a popular outsourcing destination. The Economist
estimates that BPO revenues totalled $11bn in
2012; around 5% of the countrys GDP. This
revenue is created predominately by contact
centres, with the English language skills and
neutral accent making the labour force an
attractive proposition. Representative of this is the
decision by many Indian providers, such as
Infosys and Wipro to open operations there.
Alternative outsourcing and offshoring

locations
Whilst the BRIC nations find themselves further
along the outsourcing maturity curve, there are
several other emerging candidates for the location
of offshored hubs and the provision of outsourced
services. These new destinations may provide the
catalyst for outsourcing provider growth over the
next few years, rather than the established BRIC
economies amongst emerging markets.
Discussion of two alternative destinations; Sri
Lanka and Colombia, can be found in the
Features section.
.
12
FS support
functions
10
% GDP growth
TCS
IBM
Infosys
Capgemini
Wipro
2
Accenture
0
0%
20%
40%
Low Cost
60%
80%
100%
High Cost
Figure 9. Use of low cost versus high cost locations by

financial services institutions and service providers
Source: Elix-IRR survey results 2013
Brazil
Russia
% GDP growth 2010
India
China
OECD
% GDP growth 2013
Figure 10. GDP growth in the BRIC economies
Source: The Economist
17 | Page

18 | Page
Introduction
Market Context
Conclusion
Features
ITO Trends
BPO Trends
BPO Trends Analysis
19 | Page
Figure 11. Global financial services BPO market size 2009-2012, forecast 2013-2016, by domain
200
180
17
160
16
15
Market size ($bn)
140
120
100
14
13
12
32
34
36
12
12
25
25
123
102
107
117
93
98
112
93
2009
2010
2011
2012
2013
2014
2015
2016
30
28
27
80
60
Insurance
40
Support services
20
Banking
operations
Figure 12. Financial services BPO average contract value and number of deals signed 2009-2012
120
100
60
80
40
60
51
56
57
20
47
40
20
Number of deals signed
Number
of deals
signed
Average contract value ($m)
80
2009
2010
2011
2012

20 | Page
BPO performance in financial services

Market trends
Financial services BPO market
The global financial services BPO market has
continued to recover from the effects of the 2008
financial crisis and European sovereign debt
crisis. Growth from 2011 to 2012 was at a four
year high at 4.5% (see figure 11).
The 2012 average contract value was the lowest
for four years, but the number of deals signed
increased (see figure 12), suggesting a preference
for smaller, more focused deals or more flexible
shorter term arrangements than previously.
Opinion is split as to whether this reflects risk
aversion post-crisis or the greater maturity of
financial services companies outsourcing
capabilities, leading to more multi-sourcing or
best-sourcing approaches.
There are three key factors driving continued BPO
growth.
1.Return to growth in financial services, but a

continued desire to cut costs
The return to growth is driving the demand for
banking back office processes such as payments
or securities processing. These highly scalable
processes continue to be required by all
institutions and demand is directly linked to an
increase in transaction volume in the financial
services market, with certainty of pricing a
secondary driver.
Despite the economic recovery and the return to
growth, banks are continuing to look to BPO as a
tool to reduce cost. As a result BPO is forecast to
grow at the accelerated pace of 5% CAGR 20122016 / 23% total growth (see figure 11).
2. BPO providers must be compliant with new

regulations
The increasing complexity of global regulation
shows no signs of abating. This is compounded by
the on-going public discontent at the financial
services industry, driving politicians to ensure
criminal sanctions are imposed as a penalty for
the failure to meet accountability obligations. As a
result financial services institutions will demand
more from their vendors. BPO service providers
will have to prove they can comply to increasingly
complex regulations in order to win and maintain
business.
Although accountability will remain with financial
institutions, in the medium-term we will continue to
see direct interest from regulators in service
providers themselves. As traditional organisational
boundaries give way to operating models enabled
by a number of diverse providers, regulators will
deeply probe each and every aspect of the
industry value chain.
3. BPO growth continues to be driven by

widening scope of activities
Financial services institutions are increasing the
scope of activities that they can outsource to
enable them to focus on their core customer
propositions. There has been strong growth in
non-traditional areas of outsourcing such as
procurement and risk, and in addition traditional
ITO services are being bundled into BPO deals
using cloud technologies. However, as BPO
providers expand their service offerings into nontraditional services, they will increasingly fall under
the regulatory spotlight.
Financial services institutions are

increasing the scope of activities that they
can outsource to enable them to focus on
their core customer propositions.
21 | Page
Figure 13. Financial services BPO market by domain 2012
Insurance
BPO
$13bn
9%
Support
services BPO
$28bn
20%
Banking BPO
$102bn
71%
Total: $143bn
Figure 14. Banking BPO market 2009-2012, forecast 2013-2016

Total CAGR
2009-2012
3.1%
70
$6bn
$13bn
Payment processing
$49bn
$34bn
Mortgage processing
Market Size ($bn)
Securities processing
60
50
40
30
20
10
2012
Core banking*
Total CAGR
2012-2016
4.7%
0
2009
2010
2011
2012
2013
2014
2015
2016
2015
2016
Figure 15. Insurance BPO market 2009-2012, forecast 2013-2016

Total CAGR
2009-2012
2.5%
12
Total CAGR
2012-2016
7.2%
Property & Casualty BPO
$4bn
$9bn
Life BPO
Market Size ($bn)
10
8
6
4
2
2012
0
2009
2010
2011
2012
2013
2014
Figure 16. Support services BPO 2009-2012, forecast 2013-2016

Total CAGR
2009-2012
4.2%
14
$1bn
$3bn
HR outsourcing
$7bn
$10bn
F&A outsourcing
KPO
Procurement
12
$0.1bn
$8bn
2012
Market Size ($bn)
Customer Management
Services
Document management
Total CAGR
2012-2016
6.3%
10
8
6
4
2
0
2009
2010
2011
2012
2013
2014
2015
2016

* Note: Core Banking BPO is defined as the outsourcing of core account administration in support of deposit services, client data services (CIF), general
ledger services, loan services, and reporting services. However, outsourcing of account administration services in support of mortgage processing,
payments processing, securities processing, and channel management services are excluded

22 | Page

By domain
Banking
Financial services BPO spend remains dominated
by domain-specific processing services (see figure
13).
Securities processing forms the largest proportion
of the key services we analysed (47% in 2012),
followed closely by payments processing (34% in
2012, see figure 14). Securities processors are
seeing an uplift now that markets are recovering
and trade volumes are increasing. Services have
become increasingly commoditised and providers
are working harder to improve their processes and
reduce their own costs. Consequently securities
processing is seeing significant consolidation, and
the business case for outsourcing has improved.
However, this sector is still dominated by the
transaction banks, not by traditional outsourcers.
As such large transaction banks are now amongst
the top BPO providers (this year Citi, BNY Mellon
and State Street ranked 3rd, 5th and 7th by value of
deals signed respectively, see BPO contract 2012
snapshot for further details).
The payments space is seeing significant
innovation and change, with electronic payment
methods (contactless, mobile and online) gaining
momentum. The demand for activities servicing
credit and debit card customers will continue to
increase, driving the case for outsourcing. For
example, three of the top ten global banking BPO
deals, with a combined value of $245m, were
signed with TSYS (by Bank of America, RBS, and
BancorpSouth respectively) for services for credit
and debit card processing, which also included
statement processing, card production, and
settlement (see BPO contract 2012 snapshot for
further details).
Mortgage processing is showing signs of real-term
growth again as the global housing market begins
to pick up, led by a recovery in prices in the US
(figure 14). The post-mortem following the
bursting of the US housing bubble has had a
major impact on mortgage processing, focusing
significant regulatory attention on this area as
governments seek to prevent irresponsible future
lending practices.
A swathe of new regulation in this area affects the

third parties who are accountable to the
institutions that they service (particularly appraisal
management companies and title underwriters).
Dodd Frank, for example, has instituted
unprecedented laws regarding consumer
protection which affect not only the relationships
between third party providers and their clients, but
also the internal processes and controls that they
need to implement.
Insurance
The insurance BPO market returned to growth in
2012, having declined by 3% in 2011 (see figure
11). Growth was driven in part by mega-deals in
life and pensions, the top five deals accounting for
24% of the total value of all insurance BPO deals
in 2012 (see Appendix for further details). These
deals are being driven largely by a desire to
minimise the cost of regulatory compliance and
capital increases.
Outsourcing in Property and Casualty (P&C)
processing suffered in 2011 but returned to 4%
growth in 2012, and the market is forecast to pick
up from 2013 to CAGR 5% between 2013-2016
(see figure 15).
Life insurance BPO has performed well since
2009, growing with 6.0% CAGR over the 4 years,
and is also forecasting strong growth at 9.8%
CAGR through 2013-16 (see figure 15). Across
the market we are seeing insurers increasingly
look to service providers to remove complexity
from their businesses, allowing them to focus on
their core business and prospects for growth in
emerging markets.
Life and pensions firms are waking up to the
costly burden of policy administration, particularly
of closed books. This is a key driver behind
outsourcing, as the largest deal this year shows.
Diligenta, a subsidiary of TCS, will administer 3.2
million Friends Life policies in the UK using the
TYSCS BaNCS system. The contract is worth
1.37bn ($2.2bn) over 15 years.
23 | Page
Regulation will continue to be a key driver for

outsourcing as demands for increased capital,
greater risk management, control systems and
governance drive up costs and reduce margins.
As a result insurers will continue to look to
outsource non-critical and costly support services,
though regulators are also turning their attention
to the risk borne by outsourcing arrangements
may constrain future growth. For example in Hong
Kong, the Office of the Commissioner of
Insurance (OCI), has recently introduced
requirements for insurers to obtain prior approval
from the OCI before entering into any outsourcing
contract.
Notably, within insurance we continue to see the
traditional boundaries of BPO being blurred as
insurers outsource further up the value chain; with
firms such as Scottish Widows outsourcing large
parts of their asset management functions,
handing over their assets to third party managers.
Currently 6.6% of assets are managed externally
but this is forecast to increase to 8.9% by 2017.
This highlights how the boundaries of BPO are
increasingly being stretched.
Support services
The mainstay of BPO in many industries, support
services BPO remains a small fraction of the
market in financial services but continues to grow
at a significantly higher rate: 5% last year, and
with a CAGR of 4.2% between 2009-2012 (see
figure 11).
Growth is being driven largely by an increase in
three key areas: Customer Management Services
(CMS), document management and HR
outsourcing which collectively comprise 86% of
support services BPO. These are forecast to
continue to drive growth up to 2016.
CMS outsourcing is being driven by two key

factors. The first is increasing pressure on nonbranch customer interaction points, as customer
services move away from the branch. This has
been driven in the UK in part by a growth in
complaints regarding PPI mis-selling, which is
driving banks to increase capacity. The second
factor is an increasing desire to enhance and
maximise customer interaction by offering multichannel support. As a result contracts are
broadening in scope as well as size, and CMS is
expected to grow by 7% CAGR over the next four
years (see figure 16).
HR BPO is now seen as able to deliver reliable
savings as well as enhancing existing capabilities
to enable better talent management. For example,
technology innovation around workforce
management will continue to drive growth and
increase this sectors attractiveness. As a result
this sector continues to mature and deal sizes are
increasing. Growth is expected to continue to
remain strong at CAGR 7% over the next four
years (see figure 16) and larger deals, such as the
$150m deal between Unicredit and HP last year
will become more common.
Procurement currently only accounts for a small
proportion of support services outsourcing spend.
However, it grew rapidly at a CAGR of 13%
between 2009-2012 (see figure 16). This is a new
area of focus in the post-crisis era, as
Procurement Service Providers (PSPs) have
matured and overcome some of the early issues
seen in the area. Additionally, large financial
services clients are looking to procurement
outsourcers to provide increased visibility of
spending, improved and standardised compliance
and reporting standards. For example, in 2013
Zurich signed a contract with Procurian, worth an
estimated $150m, to help the insurance group
manage and optimise its global procurement. This
demonstrates the trend of outsourcing decisions
being driven by the expertise and value provided
by a bespoke provider, rather than the search for
absolute cost savings from an offshore, low-cost
provider.

24 | Page
BPO contract 2012 snapshot

Who is selling? BPO vendor snapshot 2012: Top vendors by deal value*
Cognizant
Regional / other
3%
Serco
12%
Citibank
30%
10%
Multitower
global
36%
TSYS
BNY Mellon
10%
Industry
specific
61%
Quindell
6%
10%
State Street Corporation
7%
7%
8%
HP
Others
Who is buying? BPO major deals snapshot 2012

Top 5 Banking deals
Rank
Buyer
Vendor
Value
Duration (years)
Description
Citigroup
HCL
Technologies
$220m
5 years
(new contract)
Back office processing,

customer service management
UniCredit
HP
$150m
15 years
(new contract)
Payroll, application hosting and

management, systems
integration
Bank of
America
T-Systems
$120m
6 years
(new contract)
Payment processing
Bank of
Queensland
HP
$108m
2 years
(extension)
Fulfilment, customer
management, front-office BPO
SunTrust
First Data
$90m
3 years
(renewal)
Merchant processing
Top 5 Insurance deals

Rank
Buyer
Vendor
Value
Duration (years)
Description
Friends Life
Diligenta
$2.2bn
15 years
(new contract)
Life policy services
ING
Cognizant
$330m
7 years
(renewal)
Insurance BPO
Aegon
Serco
$263m
10 years
(new contract)
Life policy services, customer

relationship management
Large UK
Insurance
Intermediary
Quindell
$190m
3 years
(new contract)
Property and casualty (P&C),

claims processing
Lincoln
Financial Group
Capita
$168m
15 years
(extension)

*Note: Publicly available contracts
25 | Page
Figure 17. Financial services BPO market size 2009-2012, forecast 2013-2016, by region
200
CAGR
2009-12 / 2012-16
180
25
Total Market Value ($bn)
160
140
120
6% / 7%
23
22
16
100
20
19
18
17
54
51
49
57
60
64
45
47
73
76
79
87
68
70
83
69
2009
2010
2011
2012
2013
2014
2015
2016
5% / 6%
80
60
Asia Pacific
40
EMEA
2% / 4%
20
Americas
0
i. Americas
120
60
100
50
80
40
60
30
40
20
20
74
43
35
10
21
2012
60
100
50
80
40
60
40
30
97
88
20
79
46
20
10
2010
2011
2012
120
60
100
50
80
40
60
30
40
20
20
-
32
13
2009
10
21
20
2011
2012
Number
of deals
signed
2011
120
2009
iii. Asia Pacific
2010
Number
of deals
signed
2009
ii. EMEA
Number
of deals
signed
Figure 18. Financial services BPO average contract value and number of deals signed 2009-2012, by region
0
2010

26 | Page

Regional analysis
Global BPO Contract Activity
The total market continued to grow, with the Americas the source of more than 50% of global BPO
revenues and EMEA contributing 33% of the market. Asia Pacific BPO was the smallest region at 10%, but
continues to see strongest growth of 6% over the last four years. EMEA had the largest average deal
value, at around $97m per deal in 2012. While Asia Pacific deals have remained consistently relatively
small (average contract value $20m in 2012), we have seen a marked decline in contract value in the
Americas from highs of $74m average in 2010 to $21m in 2012. The overall trend indicates a move
towards smaller, more flexible arrangements as part of diverse outsourcing portfolios. All data is potentially
affected by extremely large, long-term deals that can skew the average value in any one year.
Americas BPO Activity
Market
size
Average
contract
size
CAGR
2009-2012
EMEA BPO Activity
Asia Pacific BPO Activity
$72.9bn
$51.1bn
$19.2bn
$21m
$97m
$20m
2%
5%
6%
The market for BPO in the

Americas showed growth of 6%
in 2012. The market shows
continued growth, with the
forecast showing relatively
strong growth of 7% CAGR
between 2012-2016.
The Americas saw a large leap
in the number of deals signed in
2012, but average contract
values continued to fall,
indicating that a preference for
smaller deals is driving growth
(see figure 18i).
The market returned to good

growth last year (7%), an
indication that banks are finally
recovering from the financial
crisis.
In contrast to other geographies
EMEA average contract values
were at a four-year high in 2012,
but the number of deals signed
continued to fall from a high in
2010 (see figure 18ii). Many of
the largest insurance an appetite
from the insurance sector to
extend the reach of outsourced
operating models in their
organisations. See our special
feature for more in depth
analysis.
Despite being impacted by the

global recession the BPO market
in Asia Pacific has outperformed
other geographies, with 6%
growth (CAGR) over the last four
years.
The number of new deals being
signed is recovering following a
four year low in 2011. Average
contract values have remained
stable between 2011 and 2012.
There were several large deals
signed in Australia in 2012. For
example, EDS has won a twoyear contract extension by Bank
of Queensland to provide
fulfilment for both consumer and
business banking.
27 | Page

28 | Page
Introduction
Market Context
BPO Trends
Conclusion
Features
ITO Trends
ITO Trends Analysis
29 | Page
Figure 19. Global financial services ITO market size 2009-2012, forecast 2013-2016, by domain
50
45
40
Market Size ($bn)
35
7.2
31.6
31.3
31.6
32.0
32.3
32.8
33.4
34.1
2009
2010
2011
2012
2013
2014
2015
2016
30
25
20
15
Application
management
7.5
7.3
7.4
7.6
7.2
7.6
7.9
10
Infrastructure
outsourcing
5
0
Figure 20. Financial services ITO average contract value and number of deals signed 2009-2012
140
120
100
80
147
60
40
94
110
99
20
0
2009
2010
2011
100
90
80
70
60
50
40
30
20
10
0
Number
of deals
signed
160
2012

30 | Page
ITO performance in financial services

Market trends
The ITO market: an increasingly blurred
definition
service which does not require large capital

investment to access state of the art technology.
The ITO market has been in decline in real terms

across all domains, with 1% growth on 2011 total
ITO performance and a four year CAGR of -0.2%
(see figure 19). In part this is due to a move
towards integrated BPO and ITO deals, together
with a fast growing cloud services sector, which is
blurring traditional definitions of ITO.
Traditional ITO vendors are now investing in cloud

computing to try and capture some of this growing
market. This is exemplified by IBM acquiring
SoftLayer; a cloud computing firm for $2bn.
Whether these established ITO players can
successfully transition their existing customers to
a cloud solution, or if they will look for a solution
elsewhere, is yet to be seen.
The traditional ITO market appears increasingly

mature, with most potential cost savings realised
and prices extremely competitive. The majority of
the major financial services institutions have
largely outsourced core IT infrastructure, so future
business will take the form of renewals and retenders rather than net market growth.
The future for ITO mega-deals is uncertain, with
many companies unsatisfied with the level of
service they receive. As with BPO, many
businesses are increasingly opting to use smaller,
more agile providers to meet their strategic needs.
This is starting to be evidenced in retail banking,
where institutions are leveraging small, focused
providers to deliver online services which are
becoming the main channel of customer
interaction. As Barclays partnership with Tech
Hub in Manchester shows, banks are starting to
turn to start-ups, rather than their traditional
providers, to help them solve their strategic
challenges.
Cloud services are blurring the definitions of

traditional ITO
Cloud computing is allowing providers to offer
cutting edge platforms (both software and
hardware) without the large upfront capital cost,
but in a scalable and usage based form. Gartner
has estimated the public cloud services market is
worth $131bn in 2013, up 18.5% from last year.
Amazon Web Services (AWS) alone, according to
Macquarie Capital, earned $3.8bn in 2012.
Many of these cloud deals are not captured as
traditional ITO and this is lowering the apparent
size and number of contracts signed. MetroBank
set a precedent in 2010 when it outsourced its
entire IT to NIU Solutions on a pay as you grow
model, highlighting the value of software as a
Pure ITO will continue to be side-lined by

broader outsourcing propositions
A key factor contributing to the apparent absence
of growth in the market is the shift towards vertical
integration of numerous types of ITO services
under a BPO wrapper. As companies look for new
ways to drive additional value from outsourcing,
they are turning away from pure ITO and entering
into innovative solutions, or strategic partnerships
that integrate technology with BPO to provide
joined-up solutions that span the value chain.
By outsourcing the technology as well as the
process, the entire processing cost base can be
rationalised. This can also enable companies to
avoid large investments in systems development
which is important in the current capitalconstrained financial services environment where
operations and IT have to compete for capital
funding with the rest of the business.
Therefore, core enabling services that typically fell
into the remit of ITO are increasingly being offered
as part of a cohesive end-to-end solution, but
under the BPO banner. For example, in 2012
TSYS was awarded a $120m credit card
processing contract by Bank of America.
Processing was previously carried out in-house on
a proprietary system, now however a TSYS
platform (TS2) will be used.
We expect to see more BPO contracts that have
embedded IT elements over the coming years,
with technical elements enabling and automating
the business processes.
Source: Gartner, Forecast Overview: Public Cloud Services, Worldwide, 2001-2016, 4Q12 Update
31 | Page
Figure 21. Financial services ITO market 2009-2012, forecast 2013-2016

40
35
Infrastructure
outsourcing
Market Size ($bn)
30
$7bn
19%
$32bn
81%
Application
management
25
20
15
10
Total: $39bn
5
0
2009
2010
2011
2012
2013
2014
2015
2016
Figure 22. Financial services ITO average contract value and number of deals signed by domain 2009-2012
Number
of deals
signed
400
60
350
50
300
40
250
200
20
208
100
50
129
2010
2011
2012
60
10
40
35
50
30
40
25
30
20
52
20
15
10
10
20
22
22
2009
2010
2011
Number
of deals
signed
101
2009
ii. Application
management
30
366
150
i. Infrastructure
outsourcing
2012

32 | Page

By domain
Infrastructure outsourcing
Application management and development
Infrastructure outsourcing continues to dominate

the ITO market in financial services, making up
81% of total spend in 2012 (see figure 21). Growth
has remained low over the four previous years at
0.3% CAGR, but is forecast to pick up slightly
from 2013, to CAGR 1.6% 2012-2016 (see figure
21), however this still remains below the projected
inflation rate.
Market performance was poor with a 2% decrease

from last year, continuing a year-on-year decline
in application management outsourcing spend
(see figure 21). The number of contracts signed
last year also fell, albeit slightly and in line with the
broadly static trend of previous years (see figure
22ii). Average contract value rose, as a result of
several large contracts in 2012, such as the
$350m application management deal CGI signed
with National Bank of Canada (see ITO contract
2012 snapshot for further details).
The average value of infrastructure outsourcing

deals fell sharply in 2012 (see figure 22i), as a
result of fewer mega-deals being signed in the
market place, although the total number of deals
recovered slightly from previous years. However,
on average, infrastructure outsourcing deals had
larger average contract values than application
management outsourcing, and six out of the top
ten deals in both banking and insurance this year
were for infrastructure outsourcing services (see
ITO contract 2012 snapshot for further details).
The long-term nature of most infrastructure
outsourcing arrangements has contributed to the
relatively flat performance of the domain.
Additionally, institutions appear to be
consolidating infrastructure (reducing overall
spend) and are increasingly wary of large, longterm investments.
In contrast to the relatively flat performance of
traditional ITO infrastructure deals, we are seeing
an increase in cloud solutions being employed in
this space. Gartner forecasts that the
Infrastructure as a Service (IaaS) market showed
growth of 42.4% in 2012. The laaS pay as you go
model can help institutions manage variable
usage; particularly at peak demand, however
migration costs can be high. The value of big
data and the insights it can provide for marketing,
risk assessment and sales could also prove to be
a driving force for IaaS. The popularity of this
reflects financial services institutions desire to cut
their fixed costs in a strategic manner.
The rise of cloud computing and the importance of

developing agile digital strategies is reducing the
relevance of traditional application development
solutions. For example, Platform as a Service
(PaaS) is forecasted by Gartner to grow to $1.5bn
worldwide in 2013. PaaS could enable financial
services firms to increase the speed of application
development, enabling them to react more quickly
to opportunities at a lower cost.
Despite this trend, service providers will continue
to generate revenues in this area due to the
importance of quality maintenance for current
systems. This was brought into sharp focus after
the well-publicised issues with front line systems
at RBS in the summer of 2012, which left
customers unable to withdraw cash from ATMs or
process transactions, and were ultimately blamed
on outsourcing application development and
management.
Application development is not effectively
captured as part of the market analysis as it is
often purchased as part of wider project services
or spend is with software houses rather than
traditional outsourcers. However, the use of third
party vendors for application development
continues to be a key element of sourcing strategy
for financial services firms.
Sources: Gartner, Forecast Overview: Public Cloud Services, Worldwide, 2001-2016, 4Q12 Update
Everest Group, Everest Cloud Connect Enterprise Cloud Adoption Survey 2012-2016
33 | Page
Figure 23 . Global financial services ITO market size 2009-2012, by region
CAGR
2009-12 / 2012-16
45
40
Total Market Value ($bn)
35
Asia Pacific
-0.5%
10
10
10
14
13
13
13
-1%
16
16
16
16
1%
2009
2010
2011
2012
30
25
20
15
10
EMEA
5
Americas
0
i. Americas
200
180
160
140
120
100
80
60
40
20
0
60
50
40
30
158
52

2012
40
35
30
25
194
150
20
149
15
67
10
5
0
2010
2011
2012
60
50
40
30
145
168
20
95
10
41
Number
of deals
signed
200
180
160
140
120
100
80
60
40
20
0
2011
45
2009
iii. Asia Pacific
2010
Number
of deals
signed
200
180
160
140
120
100
80
60
40
20
0
10
38
0
2009
ii. EMEA
69
20
Number
of deals
signed
Figure 24. Financial services ITO average contract value and number of deals signed by region 2009-2012
0
2009
2010
2011
2012

34 | Page

Regional analysis
Global ITO Contract Activity
The number of new deals signed in 2012 continues to show signs of decline from the 2009 level (see
figure 24). Average contract values have returned to 2009-2010 levels after a noticeable rise in 2011,
driven by a number of large transformational deals in EMEA.
Americas ITO Activity
EMEA ITO Activity
Asia Pacific ITO Activity
Market
size
$16bn
$13bn
$10bn
Average
contract
size
$158m
$67m
$95m
1%
-1%
-0.5%
The Americas followed the

global trend of falling ITO deal
numbers, with less deals signed
in 2012 than previous years.
However, the average contract
value rose again this year,
boosted by several very large
insurance deals signed.
The absence of any sizeable

deals has severely impacted
average contract values in 2012.
This is in stark contrast with a
four year-high in 2011.
Furthermore, the number of
contracts signed in 2012
continues the downwards trend.
The largest ITO deal in 2012

was in Latin America, with Caixa
bank signing a 10-year contract
with CPM Braxis Capgemini in
Brazil. Capgemini will become
Caixa's strategic IT services
provider helping them to
modernise current IT systems
(see Appendix for further
details.)
Many European financial service

providers are recovering slowly,
with many banks supported
solely by state bail-outs, and are
unwilling to embark on
expensive infrastructure projects.
The Asia Pacific ITO market

remains mainly limited to
Australia. Other countries in the
region do not have sufficiently
mature banking sectors, and
would struggle to gain favourable
labour arbitrage due to the low
cost locations they already
operate in. Newerbanks in
emerging markets do not have
the same legacy IT system
problems as EMEA and the
Americas, nor the same cost
pressures that are driving
outsourcing elsewhere.
CAGR
2009-2012
The volume of Asia Pacific deals

remains small in comparison but
has not declined further from
2011, however, average contract
value fell by nearly half,
reflecting the reduction in the
number of large deals signed.
35 | Page
ITO contract 2012 snapshot

Who is selling? ITO vendor snapshot 2012: Top vendors by deal value*
Capgemini
7%
Regional /
Other
9%
Industry
Specific
2%
CSC
3%
3%
23%
4%
CGI
4%
T-Systems
5%
IBM
HCL Technologies
6%
Multitower
Global
89%
Atos
21%
HP
EVRY
10%
Steria
14%
The rest
Others
Who is buying? ITO major deals snapshot 2012

Top 5 Banking deals
Rank
Buyer
Vendor
Value
Duration
Description
Caixa
CPM Braxis
Capgemini
$1.3bn
10 years
(new contract)
Multi-scope IT outsourcing
Large German
Bank
Atos
$450m
5 years
(renewal)
Multi-scope infrastructure
management
National Bank
of Canada
CGI
$350m
5 years
(renewal)
Application outsourcing &

management
Postbank
Atos
$260m
7 years
(new contract)
management
UBS
HCL
Technologies
$250m
5 years
(new contract)
Application outsourcing
Top 5 Insurance deals

Rank
Buyer
Vendor
Value
Duration
Description
Allianz
HP
$490m
5 years
(new contract)
Infrastructure management
Old Mutual
T-Systems
$350m
7 years
(extension)
Blue Cross
Blue Shield of
North Carolina
Fujitsu
$250m
5 years
(new contract)
management
Blue Shield of
California
HP
$220m
5 years
(renewal)
John Hancock
CGI
$142m
7 years
(renewal)
Infrastructure outsourcing

*Note: Publicly available contracts

36 | Page
37 | Page

38 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Conclusion
Features
Features Review
39 | Page
The features in this years report focus on

analysing the impact of external trends in financial
services and understanding the knock-on impact
these will have in financial services outsourcing.
As with previous years, regulation continues to be
a key change driver across the financial services
industry, both in terms of the operational
limitations it imposes and the cost of compliance.
This year we also explore in part the impact
increasing customer demands are having on
the industry.
1. Regulation
Our first feature examines the structural impact of forthcoming
regulation on outsourced support arrangements
2. Outsourcing in the future retail bank

Our second feature looks at how digital disruption in retail banking
is changing the way banks think about sourcing and support
models
3. Moving up the Value Chain

Our third feature examines how transaction banks are well placed
to meet the demands of investment banks for more holistic and
transformative solutions
4. Challenging times for the Life and Pensions industry

Our fourth feature focuses on how margin pressures in the
insurance industry driven by aging infrastructure and regulatory
capital demands are behind a new wave of outsourcing
5. New destinations for outsourcing

Our final feature explores offshore destinations that could deliver
furthercost savings, focusing on Sri Lanka and Colombia as
possible alternatives to traditional outsourcing destinations such as
India and Brazil

40 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Features Review
Conclusion
Features
1. Regulation
41 | Page
The changing face of regulation

Oversight of outsourced services is increasing
Increasing pressure from politicians
The various components of an outsourcing
regulatory framework make it clear that the
ultimate accountability for the business process
lies with the client organisation rather than the
service provider. As accountability cannot be
abdicated to a third party, putting in place
appropriate governance procedures is key in order
to retain control over outsourced functions.
Whilst the spectre of individual criminal liability is
looming over financial services, it is a well
established principle in outsourced services
across other industries. Whilst BP is inextricably
linked with the Deepwater Horizon incident, they
did not own or operate the rig. Despite this, their
lack of control over the two outsourced service
providers ensured their fines were roughly double
those of the organisations that actually operated
the rig. Litigation is likely to persist over the next
twenty years and damages may reach $20bn; this
exacerbates the exceptional reputational damage
that has already been done to BP.
Recent banking failures and the

introduction of more stringent
regulation have emphasised the
importance of clear oversight and
control over outsourced
processes
New referee new rules
The financial services industry in the United
Kingdom is dual-regulated by the Financial
Conduct Authority (FCA) and the Prudential
Regulation Authority (PRA) after the dissolution of
the FSA in April 2013. Importantly, this system of
dual regulation extends to outsourcing
arrangements.
Specific FCA and PRA rules on outsourcing are
found in the Senior Management Arrangements,
Systems and Controls (SYSC) handbook. There
are specific requirements in relation to the
outsourcing of critical or important functions; a
function is deemed to be critical or important if a
failure in this area would affect the firms financial
performance and ability to comply with regulatory
obligations.
SYSC rules impose requirements on, amongst

other things:
The due diligence to be undertaken in relation

to a proposed supplier
The outsourcing contractual terms
The basis on which the regulated firm should

supervise the outsourced functions and
manage the risk of the outsourcing
Whilst there have been regulatory requirements

for outsourcing for the past six years, it is
particularly relevant in light of recent political
developments. The publication of Changing
Banking for Good, the Final Report released by
the Parliamentary Committee on Banking
Standards and the FCA Risk Outlook for 2013,
have brought the issue of individual and criminal
liability into sharp focus.
The importance of control

Regulators continue to challenge institutions to
drive ever-greater levels of compliance, whilst
institutions strive to return to levels of commercial
performance that existed pre-financial crisis.
HSBCs $1.9bn fines for Anti-Money Laundering
weaknesses in Mexico at the end of 2012 also
highlight the severe potential consequences of
weak or ineffective control over local entities.
The current regulatory environment continues to
evolve. The imminent implementation of AIFMD is
concerning the buy-side; MiFID II is occupying
sell-side participants; Solvency II, despite
continued delays in its implementation, is still
affecting the insurance industry. Substantially
increased capital requirements are also enduring.
As new regulations are introduced, the increased
costs borne by the financial services industry,
together with persistently difficult market
conditions, make outsourcing of non-critical
functions an attractive proposition.
However, this regulatory process, together with
the drive towards criminal sanctions against
organisations or individuals that breach
regulations, highlights the need for financial
services institutions to professionalise and
standardise control frameworks around third-party
arrangements, in the same way as it has been
done with their own operations.

42 | Page
Regulatory impact on support models

Because of the global reach of regulation, it is more helpful to look at key themes and their impacts on
outsourcing or support services arrangements, rather than scrutinising individual regulations on a case-bycase basis.
Theme
Although any given regulatory compliance is

still rooted in the local jurisdiction of the
principal booking entity, some of the largest
banks are responding to complex global entity
structures by raising internal compliance
targets to the highest standard, in many cases
above the level of stringency of local
requirements, in order to avoid any
unintended consequences of executing
business plans
New deals, renewals and

extensions to existing outsourcing
deals will come under a greater
level of scrutiny for alignment with
internal policies and procedures as
institutions survey their global
supplier landscape
When the key priorities of institutions are

assessed, regulations which mandate the
need for an enhanced understanding of their
customers are amongst the most important
Key measures include: know your customer,
anti-money laundering, anti-bribery &
corruption
All of these measures share the same feature,
which is a significant increase in operational
overhead and reporting requirements in the
interests of understanding institutions
customers fully and sustainably to prevent
against criminal and terrorist financial activity
Transactional legal services

providers are well placed to be able
to offer a differentiated proposition
in this area
Institutions could possibly pool
resources to create industry utilities,
retaining cost and expertise within
the financial services industry
RoE continues to rebound, albeit slowly

Some commentators have predicted that the
trilateral regulatory strengthening at global,
US and EU levels would eventually drive
fracturing and regionalisation
JP Morgan and Oliver Wyman have taken the
stance that regulation is at its most
aggressive in the EU and as a result it is likely
that fragmentation will accelerate
Institutions will be seen turning to

service providers to support
improved financial management of
their businesses. For example,
enhancing the effectiveness and
decreasing the cost of intra-day
liquidity management buffer
charges
Sell side institutions are required to maintain

enough liquid assets, net of any liabilities, to
ensure the settlement of all scheduled
liabilities in the event of their own failure and
liquidation
Institutions will reflect on the

requirement to preserve core
business and release non-value
adding services which to date have
not been seen as candidates for
outsourcing e.g. derivatives post
trade processing
Global
regulation
provides
leading
players with a
singular focus
Strengthening
client
validation
measures
Capital
adequacy and
liquidity
Credit
mitigation
Implication for outsourcing and

support models
Detail
Clearly the greater regulatory burden on financial services institutions is driving firms to find innovative
ways of cutting costs whilst increasing or preserving service quality. While outsourcing is clearly continuing
to drive efficiencies for financial services institutions, the increasing scope and depth of regulation is also
compelling buyers to implement improved governance and control frameworks around outsourcing
arrangements.
43 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Features Review
Conclusion
Features
2. Outsourcing in the future retail bank

44 | Page
Outsourcing in retail banking

Evolution and revolution
Evolution: Commoditised back office
processing and support functions will remain
the mainstay of outsourcing in retail banking
Revolution: Digital transformation is driving

key changes to the retail banking customer
engagement model
Following the core messages of our report, it is

clear that outsourced service provision remains a
key part of banks sourcing models. Our outlook
for many elements of outsourcing in retail banking
are not expected to change in the immediate
future, in particular:
The retail banking industry is undergoing rapid

change, with customer interaction shifting from
physical channels to digital channels, and
alternative payment methods (online, mobile and
contactless) changing the way that customers
transact. The core customer facing elements of
the business are required to evolve rapidly to fill a
widening gap between customer expectations and
the service they are able to provide. Furthermore
some elements of the bank are increasing in
importance as customer preferences evolve (such
as online or contact centre), while other areas are
seeing reduced usage (branch network). As such
banks are rethinking their support model to ensure
that the best service is being delivered to their
customers through new multichannel environment.
Services such as IT and digital technology may be
retained in house due to their new importance but,
equally, strategic use of third parties can provide
equal or better service and expertise. Some banks
are rethinking their support model entirely to
enable them to focus on core differentiators and
customer service elements only, and allowing far
more transactional elements to be handled by
other providers.
Highly repeatable, commoditised back office

processes, for example core banking systems
and payment processing (making up the
largest group of retail banking BPO
outsourcing contracts signed this year, and
forecast to grow with 5% CAGR over the next
four years, see figure 14). This also includes
other discrete services, for example cash
handling, card production and cheque handling
amongst others.
Non-core, and non-specific functions, such as

IT desktop support, printing, document
storage, and security, will remain potential
areas of outsourcing where there is a strong
cost saving potential. Higher value services
are seeing more pronounced growth as retail
banks seek greater value for money across the
business, for example procurement and HR
outsourced solutions (see figure 16).
Technological innovation, as well as increased

regulation and reduced margins, are putting
pressure on transactional services in banks. But
changes are likely to be gradual and evolutionary,
and will remain commoditised and cost driven.
Service is still likely to be provided by
outsourcing, through offshoring to a lower cost
location, or as part of a shared service
environment.
Over the following pages we will explore how

digital innovation is changing how customers
engage with their banks, and the impact on
sourcing and outsourcing models.
Some of the key sourcing changes we are seeing

include a growing market for innovative IT
outsourcing, including mobile and digital.
Providing the back office capabilities to process
these new forms of transactions and new products
will require some changes to current outsourcing
provision, and banks are looking at current ITO
deals and expecting greater flexibility to support
this going forward. In part the move towards
greater flexibility is being driven by greater
appetite in the industry around cloud solutions.
A new customer engagement model in retail banking

Other industries have already experienced the
drive towards digital and this has led to
increased retail banking customer expectation
Over the last decade, industries such as retail,
media, advertising and travel, along with many
others, have felt the impact of digitalisation.
Customer expectations in retail banking are being
set by the increasingly positive experiences with in
these industries.
Retail banking is rapidly changing, driven by

digital transformation and customer demand
We see three fundamental shifts taking place in
the retail banking sector, driven by customer
demand and digital challenger brands:
The way in which customers interact with

their banks is shifting from physical
channels to digital channels: In the not-toodistant future, one can envisage that the
majority of bank customers in developed
economies will carry out their banking needs
almost exclusively via their mobile phones, or
other personal device. Gartner concur with this
observation and predict that 50% of all bank
customers will use mobile banking as their
primary channel by 2016. Juniper Research
similarly forecast that over 1 billion mobile
phone users will use mobile banking by 2017,
compared to just over 590 million users in
2013. Banks need to develop coherent
banking applications and services across all
their channels, while at the same time
optimising the existing branch network to
reduce the number of under-utilised branches.
Better service is being demanded across all
channels: Typically retail customers are not
looking for complex banking products they
are looking for simple solutions that support
their desired banking objectives. This offers an
opportunity for disruptive organisations, who
are able to provide more focused solutions to
customer needs (for example PayPal, Square,
Google Wallet and m-pesa in Africa). The onus
is now on banks to simplify their portfolio of
products and services, not only to ensure they
are understandable, but also to ensure that
they meet customers specific needs. Banks
need to integrate their services to support
improved, multi-channel customer
experiences, across all channels including
branches, contact centres, online, mobile and

ATMs. Additionally, it is also clear that in the
future multi-channel in itself is only a stepping
stone towards omni-channel, where customer
interactions are truly integrated across
channels and an interaction started on an
application has the potential to be completed
online or on through a contact centre
Better analytics and use of big data to drive

more customer-centric service: Customer
analytics functions are being established to
seek actionable insights from big data. In the
future real-time analytics will be used to
understand and respond to specific customer
objectives, allowing banks to innovate around
lifestyle events, such as shopping, travel and
entertainment, as well as customer lifetime
events, such as university enrolment, new
employment, buying a house and retirement. It
is through these experiences that customers
can truly derive value from their banking
provider, and this advice should be offered via
any and all available channels including
contact centres, mobile, ATMs, social media
and potentially branches. In fact, within the
next decade, banking advisory may be entirely
replaced by algorithms; a digital platform, with
access to customer data, market data and
financial algorithms, could be able to provide
financial advice to customers.
Emerging disruption in financial services

In recent years, the industry has seen the
emergence of disruptive business models at the
fringes of Financial Services. Companies such as
Wonga, who provide instant, short-term loans over
the internet, and Kickstarter, who provide a crowdfunding platform, are redefining traditional
approaches to financial services.
Additionally, we have seen new entrants to the
banking industry such as Metro Bank, Britains
first new bank in over 100 years, who operate a
small number of branches but differentiate with
their internet and telephone banking services.
Metro makes heavy use of outsourcing providers
to allow them to focus on customer experience,
and not on supporting a core banking platform.

46 | Page
The changing face of customer interaction

Present
Future
Quality of Service
Past
Customer
Expectation
Expectation gap
Bank channel
service levels
For many years, customer

expectations of channels
were largely met. The
branch network handled
many of the most important
customer engagement
points.
Customer channels were a
commodity that could be
provided through lowest
cost providers, including
outsourcers (e.g. contact
centres)
Time
The effect of digital

innovation has caused a
surge in customer
expectation in terms of the
level and type of services
they receive from their bank
There is now a gap between

customer expectation and
bank performance. Banks
need to bridge the gap to
avoid losing customers.
Customer channels are a
source of differentiation so
banks need to use
providers that provide
value-add (and potentially
insource).
Change in customer expectation
Sourcing and business models
The digitalisation of retail banking has a profound

effect on customer management. For many years,
customer expectations of channels, particularly
the indirect banking channels, were largely met.
Due to customers experiences in other industries,
a step-change in expectations has placed banks
in a position whereby their quality of service
provision does not currently meet customer
expectations.
Increasingly, new channels are becoming more

strategically important, and with new channels,
different areas and services within the business
are moving into customer-facing roles. Some of
these areas of the bank would have previously
been considered part of the back office. So
whatever sourcing decision is taken, banks are
looking for best-in-class solutions, whether that
means outsourcing, specialist suppliers, or
retaining (or moving) in-house.
Customers demand more innovative and

convenient methods of banking, with expectations
being driven by other industries. Customers
expect to be able to access their bank anytime,
anywhere, through a multitude of channels, and
are moving away from some channels such as
branch.
This sector-wide gap between what customers
expect and what the sector can offer, is why there
is such a competitive focus on digital; closing this
gap, before competitors do so, is a strategic
imperative. The question is, what role does
outsourcing play?
In all, we expect new, innovative banking business

and operating models to emerge over the next two
to five years. Progressive retail banks, as well as
disruptive entrants, will seek differentiation and
growth via digital means. As a consequence of
such competition, we are likely to witness
profound structural changes in the retail banking
sector.
This will mean radical change to banks
operating models and sourcing strategies.
47 | Page
Changing retail banking outsourcing models

Outsourcing services in the two sides of a bank,
customer-facing and transactional, are being
affected by the changes in the retail banking
landscape in very different ways. Throughout this
report we have laid out how traditional BPO and
ITO providers are moving into higher value service
provision in order to provide specific skills,
flexibility and expertise, while also continuing to
deliver reduced costs as banks feel the pressure
of reduced margins and increasing stringent
regulation. In retail banking we are seeing this
trend continue. The transactional segments of the
retail bank will continue to seek low cost solutions
to its back office processes. The customer facing
elements of retail banks are struggling to match
service expectations, so are experiencing some
unique sourcing challenges. We see several key
possible solutions and trends emerging:
1.
2.
Improve customer service through

regaining control of customer service
channels: In the short-term, with rising
customer expectations of direct channels,
banks are recognising the value of traditional
retail banking channel capabilities, such as
contact centre services. As such, the lowest
cost option (potentially outsourced or
offshore) may not be delivering acceptable
customer service. For example, Santander
moved its UK call centre back from India in
2011 in an attempt to boost customer service.
Across channels, including some previously
not regarded as customer facing, we will see
a trend towards insourcing of functions, or
use of strategic outsourcing to high-quality,
specialist firms who will likely shirk antiquated
metrics (such as average handing time in call
centres) in favour of superior customer
experience.
Outsource more, or the whole of, the
transactional elements of the bank to
focus on customer service: Being a
custodian of customers is critical for
competition, and hence should be the banks
core focus. Many banks are divesting control
of the operational elements of the bank in
order to focus on the customer facing
elements. Metro Bank in the UK has
outsourced the majority of its back office
activities/operations to a selected few
outsourcing providers.
3.
Alternatively, if customer management is

not a core strength of a bank, use
outsourced providers to deliver
personalised customer service: In the
extreme, outsourcing of customer
relationships may appear like a radical
departure from banks historical strategies.
However, for many banks, burdened with
legacy technologies and constraining
organisational silos, retaining relevance in the
digital economy may require exactly such a
radical decision. Should a retail bank seek an
outsourcing partner for a customer facing
role, the nature of the outsourcing deal would
need to be heavily value-oriented and
focused on closing the customer experience
gap. We expect that there will be an increase
in such partnerships and outsourcing
arrangements in the future, and we have
already begun to see examples such as
simple.com, an American startup bank who
have formed an innovative partnership with
Bancorp. To Bancorp, the impact of this is to
remain a custodian of transactions, and
allow simple.com to focus on the customer
management, an area that plays more readily
to their strengths.
4.
Use outsourcers to fast-track innovative

solutions and technologies that retail
banks may not have the capability or
resources to deliver: Some providers are
increasingly opting to use smaller, more agile
providers to meet their digital needs. This is
particularly the case in retail banking where
online services are becoming the main
channel of customer interactions. As
Barclays partnership with Tech Hub in
Manchester shows, banks are turning to startups to help them solve strategic challenges.
However, careful management of suppliers is
required for banks seeking to achieve a
consistent omni-channel customer
experience, as using a larger number of small
suppliers can cause unwanted integration
requirements.

48 | Page
Future of outsourcing in retail banking

Retail banks moving forward
From vendor to partner
The digitisation of retail banking presents

profound opportunities, but also challenges, to
banks. A new set of technology tools and a
changed customer mindset are potential sources
of business inspiration. However, to monetise any
inspiration, banks need to:
It is within this transformational context that future

outsourcing opportunities will be shaped. As
banks, and disruptive start-ups, form new
business models that deploy the power of digital
technology, they will look to outsourcing providers
and partner organisations to enable increased
focus. These dynamics will create a raft of new
opportunities, beyond the more traditional areas of
retail banking outsourcing. In turn, to keep step
with the digitalisation of retail banking, outsourcing
providers will also have to innovate within their
own capabilities and business models.
Define a common vision of how digital will

change the bank
Innovate around customer objectives, not

banking products
Transform the operating model to instil new

capabilities and customer objectives at the
heart of the organisation
Focus on certain crucial capabilities and

initiatives Custodian of customers?
Custodian of transactions?
Source appropriately to ensure that the best

suppliers are working with you. In particular
banks will need robust sourcing and vendor
management processes to ensure that they
can choose the best suppliers and get the
most value from their selection, given that
ranking suppliers by lowest cost will not
necessarily be the best approach to access the
new skills and capabilities required.
49 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Features Review
Conclusion
Features
3. Moving Up the Value Chain

50 | Page
Moving up the value chain

The leveraging of transaction banks
As with other areas of financial services,
outsourcing in corporate and investment banking
has historically focused on the low hanging fruit
of cost and headcount reduction. The industry is
now moving beyond labour arbitrage opportunities
to the creation and leveraging of utilities for
processes and technology. This is driven by the
changing appetite of investment banks who are
increasingly looking for holistic solutions to their
challenges from within the industry rather than
piecemeal product-based approaches to
remedying their cost issues. There is a substantial
need in the industry to variablise cost. Pressure
on margins is leading firms to reassess the need
for large fixed cost infrastructure, particularly in an
environment with the potential for highly volatile
volumes.
2.
There are recent examples of investment banks

looking to outsource their entire operations
function, extending far beyond the third party
clearing and custody that many already outsource
to transaction banks. This presents a strategic
opportunity for transaction banks to broaden their
remit beyond the traditional custody and clearing
market, and to increase their client stickiness
and resultant wallet share.
Providing outsourced services

to other financial services
institutions can deliver further
revenue streams to those who
capitalise on the trend
The benefits of this are threefold:

1.
Outsourcing revenue is less volatile than

traditional revenue streams. This is the
case particularly for new entrants in the
market who are more accustomed to making
money across capital markets. Analysts place
greater value on sustainable, repeatable
sources of long-term revenue, with the
associated positive impact on market value.
Assessment of forecasts of the growth in
securities processing (see figure 25), a
mainstay of bank on bank outsourcing
underlines this position.
Market size ($bn)
60
50
46
44
47
2009
2010
2011
49
51
2012
2013
53
56
59
40
30
20
10
There is an increasing acknowledgement

that, with EMIR and AIFMD regulations
approaching, transaction banks
traditional strengths in custody,
administration and processing creates
additional opportunities to service both
the buy-side and sell-side. The changing
market in derivatives, driven by increased
transparency and regulation, is pushing
market participants towards outsourcing their
emerging trade processing requirements.
Increased regulation on the buy-side is also
drawing new participants into the collateral
management process, creating a potential
market squeeze for eligible collateral.
Transaction banks with large amounts of
custody assets have an easily accessible
pool of high quality collateral, leaving them
well placed to benefit from the current
regulatory environment and the increased
pressure on high quality collateral that greater
central clearing is likely to cause.
3.
Outsourcing is still an extremely profitable

enterprise. Whilst the classic BPO model can
provide profit margins of around 10%-20%,
the incremental clearing, custody and
settlement fees that transaction banks may
be willing to provide to anyone with the
wherewithal to package a single solution,
makes this even more lucrative.
Banks with the capability to provide outsourced

services to other banks even their own
competitors, who may wish to focus on other core
areas of the trading and settlement value chain
can profit from the trend toward transformational
solutions. However, if these banks do not
capitalise on this trend, organisations that have
not traditionally operated in this space may do.
0
2014
2015
2016
Figure 25. Actual and forecast securities processing

outsourcing performance 2009-2016
51 | Page
The market for service providers is changing

Transaction banks are increasingly looking to
exploit their existing custody and clearing client
relationships when creating a holistic solution that
extends beyond these traditionally outsourced
processes. This is increasing competitive
pressures on the transaction banking community,
as those who are able to package a complete
processing solution are likely to pick up the
incremental clearing and custody business.
Exacerbating these pressures, several third party
service providers and technology solutions
organisations are looking into the opportunity of
providing these services and some have been
successful in completing large, potentially industry
changing deals. In response to the threat of
competitors capturing market share, transaction
banks need to determine which part of the
spectrum of outsourced services they want to
focus on.
Securities services outsourcing of post-trade
processes is a well established market with a
myriad of different service offerings from simple
settlement and custody solutions through to
traditional Model B clearing (see figure 27).
Securities Processing accounted for nearly half
(47%) of the Banking BPO market in 2012.
An interesting twist on some of the more standard

offerings in this space is demonstrated by the
development of account operating models by
various transaction banks in Asia. Here, a banks
clients remain direct members of the central
securities depository in their jurisdiction; however,
the bank operates on their behalf rather than
taking on the trade themselves.
Figure 26. Accenture post-trade processing deal
Accenture and Broadridge have created Accenture

Post-Trade Processing, a Joint Venture exploiting
Accentures traditional strength in BPO and
Broadridges post-trade technology expertise.
They have signed up Societe Generales Corporate
and Investment Bank as their first client and will
insource their Back Office securities function,
covering 50 markets. The financial terms of the
agreement have not been disclosed.
However, the market is being shaken up by nonbanks who, through technological innovation
partnerships, find themselves able to provide the
kind of services that the market is demanding.
In response to service providers like Accenture
and Broadridge moving into securities processing
(see figure 26), large transaction banks are also
developing their offerings. The dynamics of the
market for securities processing will shift with the
entry of these new competitors, and transaction
banks will be forced to act more like professional
services firms. As a result this will increasingly
lead to transaction banks focusing on efficiency,
standardisation and technology rather than their
historic emphasis on product-specific expertise
and relationships.

52 | Page
Figure 27. Examples of securities services outsourcing models
Self Clearing
BPO exc.
technology
IB / TB
Operations
consolidation
Account Operator
Services
Securities Post-Trade
Outsourcing Spectrum
In-house
Traditional
Settlement &
Custody
BPO incl.
technology
Whilst there is innovation on the securities side,

the increased financial and regulatory burden of
operating in the derivatives sector should push
more sell-side organisations into outsourcing posttrade processes to third party service providers.
Indeed, the fundamental operating model of an
investment bank may well only encompass
execution and advisory in future, with their back
office functions outsourced to whomever
represents best value for money. For example,
two major Swiss banks have released Request for
Proposals (RFPs) for organisations to take on
their global securities processing architecture.
BP2S 3rd party

Clearing (Asia)
Fully
outsourced
Model A/B
Clearing
Despite the positive picture painted by the

development of new industry utilities and service
offerings, there are some questions. It remains to
be seen whether the sell-side is truly prepared to
give up such a substantial portion of control over
their back office processing, given the increased
accountability but diminished control created by
recent regulation over outsourced services.
Similarly, it is open to debate how ready
transaction banks are to actually service these
needs in the short to medium-term.
The increasing industry appetite for

back office outsourcing is leading to
a growing convergence of service
providers with new service models
53 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Conclusion
4. Challenging times for the Life and Pensions

industry
Features
Features Review

54 | Page
Challenging times
In the Life and Pensions industry
A challenging environment
External forces
In an increasingly challenging market, we believe

that now is a critical time for life and pensions
firms. In order to protect and grow their bottom
line they need to innovate and meet both internal
and external forces head-on. Recent news of Old
Mutual-Skandias commitment to a new 20 year
(BPO) deal with IFDS (the State Street-DST
Systems joint venture) indicates substantial
confidence in the long-term ability of outsourced
solutions to support their business and drive
substantial cost efficiencies. On top of last years
$2.2bn mega-deal between FriendsLife and
Diligenta, this may be a sign that the life insurance
and pensions market is set to see increased
outsourcing activity.
1. Regulation
Although many life and pensions firms were less

impacted by the 2008 recession than other
financial services companies, a number of internal
and external forces have resulted in a challenging
environment within which the industry needs to
operate (see figure 28).
Figure 28. Drivers for a new approach

External
Internal
Tightening
regulation
Inappropriate
operating models
More demanding
customers
Information
breakthrough
Pending regulation, such as Solvency II in the

UK, has forced insurance organisations to
invest heavily in new IT and operating
processes to provide the necessary controls
and transparency.
2. More demanding customers
As in other industries, the introduction of new
technologies, such as internet self-service,
price comparison and social networking has
raised demands of customer service.
Customers are empowered by the wealth of
information available, and are increasingly
using their knowledge of the market to drive
negotiations in the sales process.
Internal forces
1. Inappropriate operating models
Life and pensions firms are largely constrained
by inefficient operating models and legacy
systems, required to support their closed
books long into the future. These portfolios are
commonly outsourced to allow the firm to
focus on core business requirements.
2. Information breakthrough
High-quality data is being supplemented with
large quantities of unstructured profiling data
from sources such as social media. Insurers
will increasingly need to use advanced
analytics and IT systems to know their
customer, to better serve and to sell.
Decreasing margins
Decreasing margins
As the factors described combine, the industry as
a whole finds itself squeezed at both ends. With
capital requirements being further challenged by
regulators and an increasingly tough market, both
in terms of customer demands and industry
competition, large firms in the industry are
beginning to look again to outsourcing. A key
driver is the desire to remove the costly
administration burden of aging closed book
policies in addition to unlocking capital. On the
following page we begin to describe how these
factors manifest themselves in the context of
historical trends in the life and pensions BPO
industry.
55 | Page
A changing approach to outsourcing

Early BPO in Life and Pensions
During the early 2000s we saw the first phase of
early outsourcing deals in the life and pensions
sector focusing around the offloading and
aggregation of so called zombie funds to BPO
providers. It was in this arena that firms such as
Phoenix Life, Capita and Resolution found
success. Policies transferred to providers were
mature policies: premiums were being collected
and very little real client interaction was required.
Outsourcers, unencumbered by the large and
expensive parachute of processing and support
services, therefore had tremendous ability to strip
away administration costs and build strong
business cases for taking on these policies.
The new shape of deals

We believe that we are beginning to see a new
phase of outsourcing in the sector. In the wake of
the financial crisis, life and pensions firms are
regrouping and waking up to the complex and
costly burden of policy administration costs that
they carry, both for their legacy books as well as
their new business. In order to focus on
management of their assets, where the largest
potential for profit in the industry lies, firms like
BNP Paribas Cardif are leading the way to get
these functions off their hands. In parallel,
regulation in the industry is creating increasingly
large pressure on capital requirements, leading
firms to explore alternative ways to unlock capital
from their businesses.
Most interestingly; in continental Europe, where
regulators are more averse to outsourcing than in
the UK, we foresee increasing industry and
regulatory discussion around regulator reluctance

to outsourcing. As capital requirements tighten,
business desire to release capital and improve
their P&Ls through offloading costly administration
functions will only increase. Where the regulators
will strike the balance, and the subsequent
consequences on the outsourcing market, are yet
to be seen.
Examples of some large outsourcing deals in

the sector are described below:
$2.2bn
New contract
Diligenta were last year awarded a contract with

FriendsLife to provide administration for 3.2m
policies. Policies include much of both the
closed book protection business and the
corporate benefits business.
Undisclosed
20 years
New contract
Skandia and IFDS agreed a 20 year deal in Q3

2013 to outsource a number of its policy
administration functions, starting in 2016.

15 years
56 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Features Review
Conclusion
Features
5. New destinations for outsourcing
57 | Page
In focus: Sri Lanka
India
Sri Lanka
132
81
182
112
105 days
103 days
18.2%
16.9%
Enforcing contracts
(rank of ease)
184
133
Recovery rate after Insolvency (% returned)
44%
26%
62.8%
91.2%
20,740,000
232,300
10%
6.5 %
Ease of doing Business

(rank)
Construction Permits
(rank of ease)
Getting Electricity
(average time for connection)
Labour Tax
(%)
Literacy
University Education
(people currently in tertiary education)
Junior BPO resource salary as % of US salary
Source: Doing Business Rankings, UNESCO, CIA Factbook, SourcingLine Top Outsourcing Destinations

58 | Page
Sri Lanka is becoming a favoured outsourcing

location, rising up to rank 21st in the 2011 AT
Kearney Global Services Location Index. With
the ending of the civil war comes the
opportunity to become a leading destination.
Opportunities
Sri Lanka offers significant labour savings
compared to India and ranks well for ease of
doing business. The island also has strengths in a
number of more specialised services that
outsourcing providers are well placed to deliver.
For example, there is a wide finance and
accounting outsourcing capability due to a readily
available supply of chartered accountants trained
on the same accounting standards used in the
UK, in addition to strong analytics capabilities.
The government of Sri Lanka appears to have
recognised that they do not offer the scale
advantage of countries such as India and the
Philippines, and as such is targeting key areas for
growth in outsourcing, mainly centered around
capabilities in IT including software development,
training and IT enabled services. They also have a
young but emerging KPO industry, driven by firms
such as HSBC and WNS who have established a
local presence. The government is currently
offering significant tax and duty incentives,
including tax holidays of 4-12 years, which are
likely to contribute further to the growth of
outsourcing providers on the island.
Challenges
Infrastructure in Sri Lanka is often expensive and
of low quality. Although property prices can be
lower than in India, telephone charges are
significantly higher and electricity tariffs charged to
businesses are inflated to subsidise the general
population. High speed broadband internet access
also remains limited.
Additionally, the smaller population means large
companies will be unable to achieve savings from
scale. This is exacerbated by continued low rates
of tertiary education (~10%-12%) and the lack of
English speakers (~10%), particularly outside
Colombo.
Examples
Several multi-nationals already have centres in Sri
Lanka, including HSBC, who expanded their
network of group service centres into Colombo in
2004, and WNS who use Sri Lanka as a base
from which to deliver voice and multilingual voice
support. There are also several established local
providers such as BPO firm Hellocorp.

59 | Page
In focus: Colombia
Brazil
Colombia
Ease of doing Business

(rank)
130
45
Construction Permits
(rank of ease)
131
27
165 days
57 days
40.8%
18.2%
Enforcing contracts
(rank of ease)
116
154
Recovery rate after Insolvency (% returned)
16%
76%
90.4%
93.6%
6,929,000
1,849,000
Getting Electricity
(average time for connection)
Labour Tax
(%)
Literacy %
University Education (currently in tertiary
education)
Source: Doing Business Rankings, UNESCO, CIA Factbook, SourcingLine Top Outsourcing Destinations

60 | Page
Colombia is beginning to follow more

established players such as Mexico and Chile
to become a rising star of the outsourcing
industry in South America. With North America
the largest buyer of outsourcing services the
Colombian government can see the potential
economic opportunity and are strongly
supporting the outsourcing and offshoring
industry with various government schemes.
Opportunities
Despite its reputation for drug-fuelled conflict,
Colombia has made significant steps to stability in
recent years. The capital Bogot has reduced its
homicide rate by nearly 80% in the last ten years
to become one of the safest urban areas in Latin
America. Resuming in November 2012, peace
talks between FARC rebels and the government
promise to allow Colombia to fulfil its economic
potential. However, the government will have to
proactively challenge the worlds perception of
Colombia and further encourage foreign
investment.
The stabilisation of the political landscape is
improving business in Colombia, ranking 45th
worldwide in the World Banks Doing Business
rankings in 2013. Colombia has a well-enforced
regulatory environment, particularly in financial
services and also scored particularly highly for
protecting investors, placing 1st in Latin America
and 6th worldwide. For example, legal stability
contracts are in place to protect investors. The
government also offers generous tax incentives to
encourage foreign investment, such as free trade
zones.
Challenges
A challenge faced by Colombia in developing its
reputation in outsourcing is the low percentage of
English speakers. The government has
implemented initiatives aiming to address this,
such as the National Programme for Bilingualism
2004-2019, however the success of these
programmes has been questioned. Nonetheless,
there is a strong opportunity for Colombia to
provide contact centre services for Spanish
speakers from the US, Europe and the rest of
Latin America.
Compared to other South American markets
Colombia is less well developed, with fewer highly
skilled workers. The Colombian outsourcing and
offshoring market, as yet, has failed to attract the
same high value BPO or ITO activities that Brazil
or other South American countries provide, and
the majority of current operators are providing call
centre services.
Examples
There are a number of companies that operate in
Colombia, for example CitiGroup, Siemens, Tata,
Hewlett Packard (who run a BPO centre in
Medellin which handles group back office) and
Kimberly Clark (who operate their Global
Innovation Centre from the country).
Colombia has secured loans from the InterAmerican Development Bank to develop their
outsourcing and offshoring sector. The
government has also set up free trade zones for
BPO facilities to further incentivise the industry.
61 | Page

62 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Features
Conclusion
Conclusion
63 | Page
Afterword
At the beginning of our report we asked What
next for the financial services support model? The
answer is both complex and uncertain.
It is clear that service providers continue to drive
substantial cost efficiencies in both ITO and BPO
for the financial services industry, and as such we
can expect to see a continued stream of highvalue deals being agreed between the largest
financial services institutions and multi-tower
outsourcing firms. We believe that as the market
matures we will see a new wave of deals coming
through, as firms regroup following the financial
crisis and can focus on tackling the cost burden of
legacy systems and support processes. As a
result we expect to see outsourcing moving
deeper into core banking processes.
While the full impact of regulation is yet to be
articulated across the board, it is certain to
continue to place pressure on capital
requirements across the sector. This will
contribute further to the already existent pressure
on margins and drive firms to approach
outsourcing, both as a means to improve their
balance sheets and to release capital.
Finally, in the long-term it is clear that the financial

services sector is changing. Firms are increasingly
aware of the pressure that disruption places on
their business models, and are waking up to the
fact that the digital economy and a world of
connected consumers have been built around
them. Driven by what they are capable of doing
through self-service channels in other industries,
these consumers are demanding more of their
financial services providers, and firms will need to
innovate to catch up.
It is uncertain what shape outsourcing will take in
this context. As previously back-office functions
such as IT become core business competencies,
we may see businesses looking to take greater
control of the service and either bring it back
in-house, or outsource to truly specialist providers
who bring competitive advantage rather than
lowest cost commodity service. Conversely, those
processing activities once deemed core to
financial institutions are increasingly seen as
commodities.
In summary, traditional definitions of outsourcing
(ITO, BPO etc.) are becoming outdated and miss
the diversification of offerings and providers,
making generic market trend analysis increasingly
difficult. What does seem certain is that as
financial services institutions work through the
long-term disruption to traditional business models
as a legacy of the financial crisis, outsourcing
services will continue to grow, evolve and play a
strategic role in supporting the industry
transformation.
Elix-IRR Trends in Outsourcing Financial

in the Financial
Services
Services
Industry
Industry
2013 2013
64 | Page
Elix-IRR
Elix-IRR is a strategic advisory firm specialising in
all forms of strategy, transformation, change, and
execution. We have grown to become a multi
award-winning company, working with
multinational clients around the world to help them
to successfully achieve their business plans and
deliver upon their market commitments. The mix
of experience, people and skills we offer is truly
unrivalled.
We have been internationally recognised in the

outsourcing and financial services domains, and
are proud to be ranked 5th in the IAOP Worlds
Best Outsourcing Advisors list. We have also won
awards from both the Management Consultancy
Association and National Outsourcing Association,
amongst others, recognising our capability to
consistently provide Inspiring, Relevant and Real
advice to our clients.
Contact Us
For further information regarding Elix-IRR and this
research report, please contact the following people:
Stephen Newton
Managing Partner
Email: stephen.newton@elix-irr.com
Barry Lewis
Partner
Email: barry.lewis@elix-irr.com
Graham Busby
Partner
Email: graham.busby@elix-irr.com
Anthony Potter
Partner
Email: anthony.potter@elix-irr.com
Elix-IRR Trends in Outsourcing Financial

in the Financial
Services
Services
Industry
Industry
2013 2013
65 | Page

66 | Page
Introduction
Market Context
BPO Trends
ITO Trends
Features
Conclusion
Appendix
67 | Page
Top ten banking BPO deals 2012
1
$220m
2
5 years
New
contract
Back office processing,

customer service
management
HCL will provide back-end processes for loans,

financial products and customer service for Citi
HCL will employ approximately 800 personnel
for the contract
$150m
UniCredit Business
Integrated Solutions SCpA
15 years
New
contract
Payroll, application
hosting and mgmt,
systems integration
HP has been awarded a 15-year payroll and IT

outsourcing contract by UniCredit
Services provided include payroll services and
application transformation to support migration
to SAP
The contract will delivered via a jointly owned
company called ES Shared Service Center SpA
3
$120m
6 years
New
contract
The banking BPO market

continues to be dominated
by a small number of very
large deals
Payment processing
TSYS has been awarded a credit card

processing contract by Bank of America
The retail portfolio will now be processed on
TSYS' platform, TS2
Processing was previously in-house on Bank of
America's proprietary system
TSYS also processes the commercial credit card
portfolio
4
$108m
5
2 years
Fulfilment, customer
Extension management services,
front-office BPO
EDS has been awarded a 2-year contract

extension by Bank of Queensland
They will provide fulfilment for both consumer
and business banking
IT infrastructure management and application
management services will also be provided
$90m
Renewal
Merchant processing
The contract is operated under a joint venture

between the two entities
The contract services 67,000 merchant locations
and processes $29bn in card volume each year
Services to be provided by First Data include
payment processing, risk management and
merchant sales activities

3 years
68 | Page
6
$75m
5 years
Renewal
Payments processing
The contract covers RBS' UK, Irish and US

consumer credit and commercial card
businesses
Services provided include: statement
processing, card embossing, accounting and
settlement, fraud prevention, member service,
collection operating systems, correspondence
and risk mitigation
$60m
3 years
Renewal
State Street has been awarded a custody

contract by QSuper, a retirement fund in
Australia with $32bn in assets
Services provided include: custody, unit pricing,
compliance monitoring, alternative asset
reporting, tax and accounting services
8
$50m
10 years
New
contract
BNY Mellon has been awarded a 10-year fund

accounting contract by Thomas Miller
Investment, an investment manager with $4bn
in assets under management
Services to be provided include: custody, fund
accounting, fund administration and transfer
agency
9
$50m
The business case for

outsourcing back office
processing remains strong,
particularly in payments and
securities processing
10
5 years
New
contract
Payments processing
Degussa will migrate to TSYS' TS2 processing

platform in early 2012
Services to be provided include: credit & debit
card processing, platform implementation,
payment processing, statement processing,
accounting and settlement, fraud prevention,
collection operating systems and risk mitigation
$40m
8 years
Renewal Multi-process HR
& Expansion outsourcing
Services provided include: payroll, workforce

administration, recruitment services and
compensation administration
69 | Page
Top ten insurance BPO deals 2012
1
$2.2bn
2
15 years
New
contract
Diligenta has been awarded a contract with

Friends Life to provide administration for 3.2m
policies. Policies include much of both the
closed book protection business and the
corporate benefits business.
Approximately 1,900 Friends Life employees will
transfer to Diligenta
$330m
7 years
Renewal
Insurance business
process services
Cognizant is to extend its services to include

insurance BPO
Cognizant previously provided specific
technology systems management to ING U.S
Cognizant is to take over 1,000 ING personnel
and two centres
3
$263m
10 years
New
contract
Life policy services &

customer relationship
management
The services to be supplied by Serco include:

initial underwriting through to claims
management for the AEGON Individual
Protection (AIP) suite, and policy servicing and
claims for some small 'closed books.
The contract involves the transfer of 330
personnel
4
$190m
Large UK
Insurance
Intermediary
3 years
New
contract
Long-term insurance firms

remain prominent in the
top deals list, this year
dominated by the $2.2bn
Friends Life deal
P&C claims processing
Quindell will provide services to an intermediary

to the policyholders of six of the largest UK
insurers
Services provided will include legal services,
medical reporting, rehabilitation, accident
management, credit hire, replacement vehicles,
and credit repair
$168m
Extension Life policy services
Capita has been awarded a 15-year life and

pensions administration contract extension by
Lincoln Financial Group
The total contract is now worth 272m over 25
years

15 years
70 | Page
6
$81m
5 years
New
contract
Finance & accounting
Suncorp has awarded Genpact a contract to

provide finance and accounting services
8
$20m
7 years
Renewal
Multi-process BPO
Genpact will provide; underwriting support,

claims processing, actuarial data analytics,
technology, finance and accounting services.
Services will be provided to Ironshore's global
operations in the United States, Canada,
Bermuda, United Kingdom and Ireland with
future expansion into additional regions
9
$15m
$40m
5 years
Renewal
CSC has been awarded a 5 year BPO contract

extension by the insurance firm Northstar
CSC will continue to provide back office services
including policy administration, contact centres,
commission handling, quality control and remote
auditing
Finance & accounting
Capgemini will provide a range of F&A services

for the US, the UK, Switzerland and Germany
from its dedicated financial services BPO centre
in Poland
There were only a limited

number of large insurance
BPO contracts in 2012. The
top five deals make up 95%
of the total contract value of
the top ten deals
10
5 years
Renewal
$11m
Leading APAC
insurance
company
5 years
Unknown
F&A outsourcing
WNS has been awarded a F&A outsourcing

contract by a leading APAC insurance company
71 | Page
Top ten banking ITO deals 2012
1
$1.3bn
2
10 years
New
contract
Caixa has signed a 10-year contract with CPM

Braxis Capgemini in Brazil, with Caixa's
investment arm CaixaPar acquiring a 22% stake
Capgemini will become Caixa's strategic IT
services provider helping them to modernise
current IT systems
$450m
Large German
Bank
5 years
Renewal
management
Atos awarded IT infrastructure management

renewal and expansion contract by its "first
German bank
Atos will continue to provide managed desktop
services, and will additionally provide storage,
email and server management
3
$350m
5 years
Renewal
Application outsourcing &

management
The top five banking ITO

deals are worth over 2.5
times the top five banking
BPO deals
CGI has been providing National Bank of

Canada (NBC) with application development
and support services for over 10 years
Under the terms of the new contract, CGI will
continue to develop and maintain NBCs
banking information systems
4
$260m
5
7 years
New
contract
Multi-Scope Infrastructure
Management
Postbank has awarded Atos a $260m contract

to provide infrastructure management services
$250m
New
contract
Application outsourcing
HCL Technologies will deploy about 1,000

professionals globally to provide UBS
application services
HCL is also setting up an offshore delivery
centre in Bangalore for UBS

5 years
72 | Page
6
$223m
5 years
Extension
management
CSC has won an IT infrastructure management

contract extension by Australian insurance and
wealth management vendor AMP
CSC will provide support to integrate
infrastructure of AXA Asia Pacific Holdings
which was acquired by AMP in March 2011
$200m
10 years
New
contract
outsourcing
IBM has been awarded a 10-year, $200m IT

outsourcing contract by Public Joint Stock
Company Ukrsotsbank, part of UniCredit Group
Services to be provided by IBM include:
application development and management,
datacentre management, network and ATM
management and end-user support
8
$140m
3 years
Renewal Multi-scope infrastructure

& Expansion management
Atos has been awarded an ITO contract renewal

and expansion with Morgan Stanley
The contract is estimated to be worth c. 100m
(NelsonHall)
9
$100m
10
US Financial
Services firm
3 years
Unknown
Infrastructure management
accounts for almost 80% of
the cost of the whole top ten
banking ITO deal cost
Application testing
Management
Infosys has been awarded a 3-year $100m

testing contract by a US-headquartered financial
services client
Services to be provided by Infosys include
performance testing and engineering and test
environment management and release
management
$100m
5 years
New
contract
management
Services to be provided by IBM include

mainframe operations and midrange server and
storage management
73 | Page
Top ten insurance ITO deals 2012
1
$490m
2
5 years
New
contract
Infrastructure
management
Allianz has awarded HP a contract to manage

its desktops, network and telecommunication
services
These services were previously delivered by
Fujitsu
As a part of the contract HP will take over 500
AGIS employees
$350m
7 years
Extension
Old Mutual has extended an ITO contract with

TSYS, originally a 2008 5-year 150m contract
Services include: service desk, mainframe
services, storage, end-user computing, data
centre outsourcing, mid-range outsourcing and
remote infrastructure management
3
$250m
5 years
New
contract
management
Fujitsu will purchase the BCBSNC data centre

and provide a variety of Information Systems
(IS) support services to BCBSNC
Fujitsu will provide functions such as
mainframes, servers, PCs, telephone systems,
networks and technology security
4
$220m
The total value of the top ten

insurance ITO deals are
worth only half of the
equivalent ten in banking
5
5 years
Renewal
Multi-Scope IT
Outsourcing
BSC have renewed a contract with HP to

modernise its membership and claims
processing systems
HP Enterprise Services will provide: hosted data
centre services, applications development &
management and network management
$142m
Renewal
Infrastructure Outsourcing
CGI will consolidate five data centres to two

green, more cost effective data centres located
in northeast U.S
Applications used to manage day-to-day
operations will be delivered in the cloud

7 years
74 | Page
6
$100m
3 years
Extension
Application management
Services to be provided to RSA UK include:

application development, implementation and
ongoing maintenance for customer relationship
management, claims processing, commercial
lines products, policy management and backoffice operations
$80m
RSA Canada
6 years
Renewal
Infrastructure
management services
CGI has been awarded an IT infrastructure

management services contract renewal by P&C
insurer RSA Canada
Services provided include: mainframe and midrange equipment, in addition to data storage
and recovery for RSAs broker and customer
programmes and services
8
$51m
4 years
Renewal
Application management
The contract involves the transfer of 25

personnel to Tieto
Services to be provided by Tieto include
management of the client's central business
applications
Folksam is also a client of Tieto for IT
infrastructure services and cloud computing
9
$47m
The market is heavily skewed

to the top five deals, which
account for over 80% of the
value of the top ten
10
5 years
New
contract
Network management
Services to be delivered by BT include: LAN

management, WAN management, IP telephony,
contact centre services and service
management
As part of the contract Standard Life will migrate
its infrastructure to BT's IP Connect network.
$46m
Local Insurance
5 years
New
contract
Multi-Scope infrastructure
management
Services to be provided by Tieto include:

server management, end user workplace
services, network management and service
desk
34 employees will transfer to Tieto Finland
75 | Page
About Elix-IRR:
Elix-IRR is a strategic advisory firm, offering
bespoke, differentiated advice to plan and execute
achievable transformation that creates
demonstrable business value. We provide
inspiration and drive at every step of the process,
from defining business strategy, through operating
model design and strategic sourcing, to the
alignment of major change initiatives. Our team is
comprised of senior professionals from top-tier
consulting and services firms, as well as
experienced practitioners from industry.
We provide insightful, practical and pragmatic
advice that leads to real results.
Elix-IRR Partners LLP

Level 3, 20 Abchurch Lane
London
EC4N 7BB
www.elix-irr.com

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Trends in Outsourcing in the Financial

Services Industry 2009 2013:

Elix-IRR: Trends in Outsourcing in the Financial Services Industry 2013

Global financial services overview

BPO Trends Analysis

BPO performance in financial services: market trends

ITO Trends Analysis

ITO performance in financial services: market trends

Elix-IRR: Trends in Outsourcing in the Financial Services Industry 2013

Elix-IRR: Trends in Outsourcing in the Financial Services Industry 2013

I am very excited to announce the

We provide a brief review of the

This years report contains analysis of

Elix-IRR: Trends in Outsourcing in the Financial Services Industry 2013

Despite the return to growth in the financial services

From a demand perspective this is driving changes in

In their search for value, financial services

Financial services institutions continue to see

The increasing demands on financial services

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Against this backdrop, the global outsourcing sector

Outsourcers are diversifying their approach and

These trends have had a noticeable impact on the

Features in this years report

What is the impact of changing regulation on

In this context the provider landscape is

What will the impact of increased customer

How can transaction banks move up the value

The traditional boundaries between BPO and ITO

How is the insurance industry using

What alternative outsourcing destinations are

As financial institutions become more accepting

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Figure 1. H1 2013 profit increase vs. H1 2012

Figure 2. 2013 Q1 RoE performance by selected global banks

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Global financial services

Whilst 2012 saw many global banks continue to

Regulation remains the key driver behind

Growth has been prompted, in part, by the

The regulatory environment continues to evolve.

The insurance industry has also experienced

Same game, new rules

The performance of financial

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Figure 3. Overall outsourcing market performance 2009-2012

Overall outsourcing market ($bn)

Figure 4. Overall outsourcing market 2012

Sources: NelsonHall data, Elix-IRR analysis

Elix-IRR Trends in Outsourcing in the Financial Services Industry 2013

Global outsourcing market

1. The labour arbitrage model is no longer the

3. The rapidly evolving digital world is forcing

Online is becoming the norm: this requires

Greater demand for big data analytics to drive

Cloud applications and services are allowing

4. Rise in stronger value propositions

Flexibility and scalability of resources

Guaranteed price, even if this is not

Higher levels of service and expertise

Many of the quick wins or easy cost saving