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The leading global service providers of IT Application Outsourcing (AO) services to insurance companies hold the majority of active annual contract value (ACV) and total contract value (TCV) of large insurance AO contracts, but the leading offshore service providers have witnessed the fastest growth in revenues as well as new accounts over the last three years, according to Everest Group, an advisory and research firm on global services.
Everest Group’s study, Application Outsourcing in Insurance: PEAK Into the Evolving Service Provider Landscape, analyzes the capabilities of 18 leading service providers for IT Applications Outsourcing in the insurance vertical. The insurance AO market represented by the 18 service providers assessed in the report scaled up to over US$5.3 billion in revenues and 66,000 full-time employees spread across 20 delivery countries. While global majors dominate the market in terms of revenue, offshore majors are seeing improved revenues and transaction activity built on strategies that include positioning more FTEs in strategic nearshore and offshore delivery locations.
Analyzing performance and capabilities displayed last year, Everest Group classified leading service providers on its Performance/Experience/Ability/Knowledge (PEAK) matrix into categories of Leaders, Major Contenders and Emerging Players: — Leaders are Accenture, Cognizant, CSC, IBM and TCS — Major Contenders are Capgemini, CGI, HCL, HP, Infosys, L&T Infotech, MphasiS and Wipro – Emerging Players are Atos, Hexaware, Mindtree, Softtek and Syntel “During the slowdown phase of the economy, Leaders lost share when discretionary spending was put on hold whereas other service providers with more specialized offerings saw an uptick in business as buyers sought to execute smaller contracts for specialized requirements,” said Amneet Singh, vice president — Global Sourcing. “With the economy returning to growth in 2010, the market-leading service providers benefitted at the expense of the smaller, specialized providers as the result of buyers regaining their appetites for broader and larger outsourcing contracts.” Insights from the AO PEAK performers analysis include: — Leaders have the strongest portfolio of proprietary solutions for insurance AO delivery.
- Major Contenders have augmented their delivery capability by establishing relevant product partnerships in this vertical and are growing scale through acquisitions.
- Emerging Players have leveraged their strength in broader application services and tailored their offerings to meet the specific requirements of insurance AO buyers.
- Multi-tower contracts are more commonly signed by Leaders and Major Contenders whereas Emerging Players focus on pure AO services.
- Leaders have a much broader global delivery footprint compared to Major Contenders and Emerging Players.
“Buyers need to prepare for changes in the evolving service provider landscape.
As economic conditions improve, service providers are gaining confidence to participate in M&A activity to improve competitive position, grow in new markets, offer end-to-end services and acquire domain capabilities,” said Jimit Arora, research director. “In line with this trend, buyers must familiarize themselves with their service provider’s evolving strategy, assess impact on existing services and prepare for changes in their service portfolios.” This year, Everest Group is releasing 15 outsourcing reports for the BFSI (banking, financial services and insurance) industry focused on ITO and BPO themes. This includes nine reports on AO: market trends and outlook, service provider landscape and service providers’ profiles compendiums for AO in banking, capital markets and insurance. Everest Group’s research studies are based upon analysis of about 350 large, multi-year BFSI AO contracts and ongoing analysis of more than 20 leading service providers.