INTRODUCTION

Strained revenue growth, low interest rates, rise of the digital consumer, and growing pressure of regulatory compliance continued to adversely affect the profitability of banks in 2013. This has forced global banks to rethink and reinvent their business models as well as technological priorities. As a result, 2013 saw strong return of discretionary spend – led by investments in development of specific applications for regulatory compliance, risk management, channel-specific initiatives (social, mobile, etc.), and customer analytics.

Consequently, the service provider competitive landscape is also intensifying as service providers continue to ramp up their capabilities, invest in innovative technologies, form alliances, and acquire strategic targets to address the growing and complex technology needs of banks and financial institutions.

In this research, we analyze the capabilities of 28 leading AO service providers, specific to the global banking sector. These providers were mapped on Everest Group Performance | Experience | Ability | Knowledge (PEAK) Matrix, which is a composite index of a range of distinct metrics related to each provider’s capability and market success. In this report, we focus on:

• The landscape of service providers for banking AO
• Assessment of the service providers on a number of capability-related dimensions
• Characteristics of Leaders, Major Contenders, and Emerging Players on Everest Group banking – AO PEAK Matrix
• “Star Performers” of 2014, providers with the strongest forward movement over time – in terms of both market success and capability advancements
• Implications for banking buyers and service providers

Scope of the analysis:

• Industry: Banking (retail banking, wholesale banking, credit cards, loans, and mortgages); excludes capital markets and insurance
• Services: Large (TCV > US$25 million), multi-year (>three years), and annuity-based application outsourcing
• Geography: Global
• Service providers: 28 leading banking AO service providers

CONTENT

This report is structured across four key sections, each containing insights on the banking AO service provider landscape, focusing on large-sized contracts:

• Banking AO service provider landscape: Analysis of individual service provider capability and service provider groups across the following dimensions:
• Scale
• Scope
• Domain investments
• Delivery footprint
• Buyer satisfaction
• Market success
• Analysis of each of the categories on Everest Group’s PEAK Matrix – Market Leaders, Major Contenders, and Emerging Players. Additionally, this year’s report focuses on identifying the 2014 “Star Performers” in banking AO. Key aspects covered include:
• Delivery capability characteristics (scale, scope, domain investments, buyer satisfaction, and delivery footprint)
• 2014 “Star Performers” analysis
• Market success characteristics (transaction activity)
• Emerging service provider trends: Transaction analysis for emerging technologies such as regulatory and risk management, analytics, mobility, cloud computing, and social media
• Implications for key stakeholders: Implications of trends on buyers and service providers

Some of the findings in this report are:

• ACV of large banking AO deals for offshore majors is ~2.5 times of global majors
• Leaders expanded their ACV share in 2013
• Major Contenders significantly expanded market share in terms of number of deals, while the ACV share declined
• Leaders have the highest market share for banking AO services in North America, APAC, and Latin America. Major Contenders derived majority of their revenue from the European banking industry
• The share of multi-scope contracts increased in banking AO. All provider categories are capitalizing on the trend of integrated AO/IO/BPO deals
• Regulatory and risk management, analytics, and mobility solutions witnessed high adoption levels in 2013, as banks continued to focus on managing regulatory compliance and enhancing customer experience. Social media and cloud witnessed lower activity compared to other technology themes