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Understanding the Waking Giant: The Mid-Market and FAO
15 Oct 2008
Introduction
The mid-market buyer-segment has shown a
spurt in FAO adoption, and although penetrated at less than 1%, it has grown at
nearly 40% CAGR since 2002. Since over 40% of the global organizations belong
to the mid-market segment, it offers significant revenue growth potential for
the suppliers. Everest Research Institute estimates that FAO mid-market revenue
can grow up to nearly US$ 9 billion at a penetration rate of 15%. The mid-market
represents a new set of challenges and opportunities for both buyers and suppliers.
Moreover, the value proposition is very different from that of a large buyer
and the solution levers also vary.
The focus of this study is to understand the
changing dynamics of the mid-market for FAO and identify opportunities as well
as potential risks involved. The document focuses along the following
dimensions:
- Mid-Market FAO adoption patterns and trends
- FAO solutions and delivery models for
mid-market
- FAO mid-market supplier landscape
- Implications for buyers and suppliers of FAO
Scope
The scope of analysis includes:
- Third-party F&A outsourcing contracts and
not shared services or captives
- Multi-process FAO contracts with a minimum of
two F&A processes in outsourcing scope, over US$1 million in Annual
Contract Value (ACV), and a minimum contract term of three years
- 290+ multi-process FAO contracts signed as of
November 2007
- Focused interviews with key FAO suppliers
including Accenture, CompassBPO, Genpact, IBM, Infosys BPO, HOV Services, OPI,
RMS, Softtek, TCS, VWA, and WNS
Contents
This report examines the demand-side and the
supply-side forces that are enabling the adoption of FAO by mid-market buyers,
and provides insights, detailed analyses and implications for stakeholders
along three key dimensions: mid-market FAO adoption patterns and trends, FAO
solutions and delivery models for mid-market, and FAO mid-market supplier
landscape. Each dimension is discussed in detail (and illustrated with
supporting data and analysis) to provide the reader an in-depth and accurate overview
with clear identification of the trends observed. For example, throughout the
report key findings are shared, including the following, among others:
- Despite smaller scale, transition and other
setup costs remain similar in mid-market engagements, reducing the savings
potential. However, maturing FAO solutions and scope aggregation are now
allowing for a stronger business case for FAO adoption by mid-market clients
- Technology plays a significant role in
mid-market FAO solutions as standardized technology tools help mid-market
clients minimize upfront investments and also reduce transition costs, a key
challenge to a FAO business case in mid-market
- Mid-market buyers primarily adopt FTE-based
pricing. However, the average price point for mid-market clients is generally
higher than larger buyers because of lack of economies of scale, broader
scope, and relatively lower levels of offshoring
Page Count: 55
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