GS100: 2011 Global Services Compendium
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The FAO market continues to be vibrant and dynamic. According to reports, the United States accounted for over half of total FAO spending in 2010 while Asia-Pacific witnessed the fastest growth. Large buyers accounted for 55 percent of contracts signed in 2010. Mid-market companies that have revenues of $1-5B annually, revived adoption of FAO last year.
According to Everest Group, the FAO market is expected to grow 15-20 percent and top $4B in annual contract value in 2011.

According to the same report, in 2010, ACV grew almost 15 percent in comparison to about 10 percent growth during 2009, and total contract values (TCV) of new engagements reached $5 B. The FAO market reached $3.5 B in ACV in 2010, representing about $28.5B in total FAO spending.

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As per HfS research, the average contract size for an F&A BPO engagement has declined from $30M in TCV in 2004 to less than $20M in 2010. This size decrease is caused by increased competitiveness, falling price-points  and increased number of engagements being signed with organizations in the $750M to $3B revenue category.

More than half the market engagements are with Accenture, IBM and Genpact, the report says. Approximately 48 percent of 2010's engagements involve gainshare incentive. This space is witnessing a growing demand for more transactional and outcome-based pricing models.

The FAO Leaders

Accenture and IBM dominate the global F&A BPO market. Accenture, IBM, Genpact, Capgemini, Infosys BPO and HP have been recognized as the major players by advisories. In Everest Group’s Performance/Experience/Ability/Knowledge (PEAK) matrix, leading service providers named were Accenture, IBM, Genpact, Capgemini, Infosys BPO and HP.

Recent years, have witnessed these players bag multiple engagements  in the $50M+ range and thus they are able to dominate this space. Interestingly, market leader Accenture and IBM adhere to different approaches as per HfS Research on FAO: Accenture has consolidated its commanding presence with large-scale enterprise customers, but IBM has determinedly gone after the mid-market to take a commanding position in that sector.

Capgemini and Genpact are the major contenders for large scale engagements. Multi-billion dollar offshore-centric providers Infosys, TCS and  Wipro, and BPO pure-play specialists EXL Service and WNS, are also very active in the market for large engagements. ACS has merged with  Xerox, they have commercialized their end to end Source to Pay capabilities.

ACS has also formulized three key alliances in the Source-to-Pay area. 

These alliances bring additional technology enablement and capabilities with certain spend categories. They continue to invest in F&A enabling technologies that will help drive benefits beyond labor arbitrages ACS is aggressively integrating new Xerox technologies into their FAO solutions.

Tony Chambliss,
global offering lead for F&A BPO services at Accenture articulated, “The ability to undertake analytics on transactions, understand the insights and then identify opportunities to improve and add value is what our clients expect from BPO. For F&A BPO clients we process their invoices, collate the spend, map that back to their strategic sourcing agreements and identify rogue spending outside that agreement – that is money sifting through their hands. We’re focused on finding it and 'giving it back' to help drive savings. We’re also seeing more emphasis on deep industry expertise. More and more, clients are looking for providers that have a deep understanding of the industry environment in which they operate.”

space will further consolidate as providers draft acquisition strategies to increase their presence. EXL Service recently announced the acquisition of OPI Global, a pure play FAO vendor.

Genpact's strategy for addressing the market in 2011 is not different from their 2010 plan. That is, client acquisitions will continue to be very aggressive in terms of both new logos as well as expanding their footprints with their existing logos. 

 GS100: 2011 Global Services Compendium
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