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