GS100: 2011 Global Services Compendium
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Clients and Delivery Locations 

The largest client-base in this sector is based in the US. In 2010, the top three verticals adopting FAO were manufacturing & retail, financial services, and travel & logistics. Industries that have adopted FAO in recent years include healthcare, media, real estate, and hospitality. 

In 2010, nearly 95 percent of FAO contracts had an offshore component with maximum offshore growth occurring in Indian tier-2 locations, Central and South America as well as Southeast Asia. Several new locations entered the FAO delivery location map including South Africa and Morocco.

Providers are looking for a stronger presence in destinations – China, Central Europe  and Latin America- where they can serve regional clients with multilingual staff and higher-touch processes.

More than 55 percent of FAO contracts offshore F&A services to India. Of more than 20 leading FAO service providers tracked by Everest, 18 have delivery presence in India with close to 80 delivery centers when taken together. In recent years, India has also emerged as a buyer geography for FAO.


Demand in the emerging markets- whether it is India or Asia Pacific or
Latin America- for FAO services is expected to increase this year.

Shantanu Ghosh, senior vice president and global head of practices, solutions and transitions, Genpact opined, “The reason being a lot of multinationals - which are US and continental Europe based- have done their first wave of FAO, where they obviously focused on high impact geographies like US or UK or continental Europe are now focusing on their second or third wave outsourcing through the new market. These economies are creating companies that are growing from small to medium to big and they are expanding outside their home territories. They are also looking not only from the prospects of labor arbitrage but also from the prospect of creating growth platforms along with delivering process excellence through use of process management expertise.”

FAO will continue to increase in the developed markets, which is the source destination for demand. Demand will continue to come from late adopters. Ghosh shared, “These are the people who have not jumped on the FAO bandwagon earlier, but now have seen the model get proven and have got enough confidence that this works and they are therefore now coming in the market. Many of them are large but that also includes the medium business segments that are now beginning to show interest in now getting into the FAO market.”

For people who have experienced their first wave of FAO, they can be clearly seen going up the value chain. Lots of the business with existing customers that was in the initial pieces of transactional and little beyond transactional like ledger FAO has now moved on to closing reporting, financial planning, tax support etc. FAO is on its second generation of what can be done. FAO has moved beyond just Accounts Payable, Accounts Receivable and General Ledger.

An end-to-end process-driven approach to FAO is also emerging as opposed to a traditional functional and piecemeal approach.

Gupta added, “Competitive intensity among FAO service providers is at an all time high and the need to achieve differentiation is paramount.  This is visible in terms of expanding delivery network to newer locations, launching process maturity models, investing in technology solutions, building new process offerings etc. The market has recently seen some consolidation as well (iGATE acquiring Patni and EXL acquiring OPI)”

In terms of contract scope, the trend towards end-to-end solutions will continue to gain momentum as opposed to a traditional piecemeal solution.

There is an increasing trend of “verticalization” in FAO, moving away from the traditional assumption that FAO is a horizontal function. Many service providers are coming up with industry-specific FAO solutions (e.g., focused offering in travel, telecom, utility etc.). Service providers are also aligning their sales and delivery team along key verticals to make a targeted market approach.

 GS100: 2011 Global Services Compendium
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