The FAO market is approaching maturity with growth rates tapering to ~6%. This is also evident form the increasing share of renewals in the market activity. With maturity, the buyer expectations have become more value-centric instead of pure labor arbitrage driven. As a result, the FAO contractual characteristics are evolving to include technologies such as Robotics Process Automation (RPA), predictive & prescriptive analytics, judgment-oriented processes, and hybrid pricing models.

In this study, we analyze the global multi-process FAO market in 2014. We focus on:

• Market overview and buyer adoption trends
• Impact of changes in the FAO value proposition on contract characteristics
• Service provider landscape
• Outlook for the FAO market

The scope of analysis includes:

• Third-party FAO deals
• Over 900 multi-process FAO deals signed as of 2014 with a minimum of two F&A processes, over US$1 million in ACV
• Coverage across 20+ FAO service providers with multi-process capability, including Accenture, Capgemini, Cognizant, Datamatics, Dell, EXL, Genpact, HCL, HP, IBM, IGATE, Infosys, IQ BackOffice, Minacs, Quatrro, Serco, Sutherland Global Services, Tech Mahindra, TCS, Wipro, WNS, Xchanging, and Xerox
• Global survey and one-on-one executive-level buyer interviews to understand how organizations perceive their FAO engagements

Content

This report is meant to provide FAO buyers, service providers, and third-party enablers (technology vendors, investment firms, etc.) a detailed view of the current state of affairs of the market. As part of this, the current report provides insights into market growth & activity, adoption trends, key changes in the contract characteristics (in terms of technology, analytics, global sourcing, process scope, geographic scope, and pricing). It also throws light on the landscape in terms of service provider market share and investment trends.

Some findings of the report:

• Market overview and buyer adoption trends
• The FAO market is reaching maturity with its growth tapering to ~6%, compared to double digit growth a just few years back
• Renewals now command a lion’s share of the FAO market activity – another sign of increasing maturity
• After a spike in 2013, contract termination rate has declined in 2014
• Growth is coming from new buyer segments:
• Emerging markets such as Asia Pacific and Middle East & Africa
• Smaller organizations, i.e., Small-to-Medium Business (SMB), and mid-market enterprises
• Industries such as healthcare, retail, and hi-tech & telecom
• Impact of changes in buyer expectations on contract characteristics
• Value proposition of labor arbitrage is commoditized (though still important)
• New value levers are increasingly centered around technology, RPA, process transformation, and analytics
• Traditionally, a year-on-year productivity commitment has been a norm. However, buyers are increasingly asking and pushing for automation-related benefits to leap-frog on the productivity aspect
• Analytics beyond Financial Planning & Analysis (FP&A) is becoming an important component in the contracts for better monitoring and control
• The contractual scope is increasing in terms of both processes as well as geographies being served
• With increasing pricing pressure from the buyers, global sourcing is on a rise
• With an increased focus on output and outcome, hybrid pricing models are playing a more important role than they did in the past
• Service provider landscape
• The top five service providers comprise nearly two-thirds of the FAO market
• The service providers are increasingly investing in technology solutions and process expertise in order to meet the evolved buyer expectations
• An increasingly larger proportion of these investments leverage partnerships, especially with the technology vendors