Topic: Everest Group s PEAK Matrix TM for Insurance AO Service Providers Focus on Tata Consultancy Services (TCS) January 2014 Copyright 2014 Everest Global, Inc. This document has been licensed for exclusive use and distribution by TCS
Background and scope of the research Background of the research In 2012 and 2013, BFSI buyers continued to remain under pressure to increase revenue, enhance customer experience, reduce costs, replace legacy systems, and meet regulatory requirements. To address these challenges, most banks focused on transforming themselves and increasing investments in technologies (such as social media, mobility, big data & analytics, and cloud computing) in order to enhance customer experience while simultaneously reducing their operational costs, better managing risk, and improving shareholder returns At the same time, service providers in the BFSI AO space also ramped up their capabilities, built up scale, and invested in newer technologies, developing and acquiring IP / proprietary solutions. Further, they also formed alliances that allowed them to undertake and deliver on large-sized, annuity AO engagements. The competitive intensity in the BFSI AO services space is at an all-time high. As a result, it is becoming difficult to differentiate service providers based purely on delivery capability. It is, therefore, critical to have a comprehensive, well-rounded, and a fact-based assessment of each service provider's BFSI AO value proposition Everest Group has assessed the capability of 20 AO service providers specific to the global insurance sector and has mapped them on Everest Group Performance Experience Ability Knowledge (PEAK) Matrix TM, which is a composite index of a range of distinct metrics related to a provider s capability and market success. Additionally, Everest Group has also profiled the capabilities of these 20 service providers in detail including a comprehensive picture of their service suite, scale of operations, domain investments, delivery locations, and buyer satisfaction specific to insurance AO services This document focuses on TCS s insurance AO experience and includes: Overview of the insurance AO service provider landscape Everest Group s assessment of TCS s delivery capability and market success on PEAK matrix Detailed insurance AO profile for TCS 2
The service providers assessed in this study can be classified into four distinct categories Global majors Offshore majors Regional players Tier-2 Indian providers PEAK Matrix assessment dimensions Everest Group PEAK Matrix 6 Market success Major Contenders Emerging Players Leaders Delivery capability 1 2 3 4 Scale Scope Domain investments Delivery footprint 5 Buyer satisfaction These service providers cumulatively represent over 80% of the global large-sized insurance AO transactions 1 1 Contracts that have a TCV of more than US$25 million and are active as of December 2012 3
TCS is positioned as a Leader on Everest Group PEAK matrix for insurance AO Everest Group Performance Experience Ability Knowledge (PEAK) Matrix for large Insurance AO relationships 75 th percentile High Leaders Major Contenders TCS Market success 25 th percentile Tech Mahindra Dell Services Hexaware L&T Infotech Mphasis Syntel Wipro igate HP Infosys CGI Capgemini HCL Cognizant IBM CSC Accenture 75 th percentile Leaders Major Contenders Emerging Players Star Performers Softtek Mindtree Low Low Emerging Players 25 th percentile Insurance AO delivery capability (Scale, scope, domain investments, delivery footprint, and buyer satisfaction) 1 PEAK Matrix specific to large (>US$25 million TCV), multi-year (>3 years) application outsourcing relationships for the insurance sector (i.e., life, annuities, and property and casualty segments); excludes banking and capital markets Note: Assessment for Accenture, Capgemini, HP, IBM, and Wipro excludes service provider inputs and is based on Everest Group s proprietary Transaction Intelligence (TI) database, service provider public disclosures, and Everest Group s interactions with insurance buyers High 4
Additionally, TCS is also identified as a 2013 Star Performer based on its strong forward movement on the PEAK Matrix Methodology Everest Group selects Market Star Performers based on the relative YoY movement of each service provider, on the PEAK Matrix Market success Year 1 Service provider Year 0 Capability In order to assess advancements on capability, we evaluate the performance of each service provider on the PEAK Matrix across a number of parameters including: Annual growth in scale Increase in the scope of services Expansion of delivery footprint Technology / domain-specific investments In order to assess advancements on market success, we evaluate the performance of each of the service providers on the PEAK Matrix across a number of parameters including: Yearly ACV growth Number of new contract signings Yearly growth in total insurance AO TCV Success with large insurance buyers Insurance AO revenue CAGR The top-quartile performers on each of the identified parameters are identified and the Star Performer rating is awarded to the service providers with: The maximum number of top-quartile performances across all of the above / left-listed parameters and At least one area of top-quartile performance in both market success and capability advancement The Star Performers designation relates to YoY performance for a given service provider and does not reflect the overall market leadership position. Those identified as the Star Performers may include Leaders, Major Contenders, or Emerging Players Distinguishing feature of 2012 market success Active ACV grew by ~20% as compared to the last year to reach ~US$600 million Highest number of large active insurance AO deals (~20) Demonstrated success with large-sized insurance AO clients Distinguishing feature of 2012 capability advancements Average deal duration rose to more than seven years High buyer satisfaction levels with multiple contracts renewed regularly Launched web-and mobilebased solutions for life and P&C segments Strengthened leadership position 5
Corporate and BFSI overview >US$500 million US$100-500 million <US$100 million Company description: Tata Consultancy Services (TCS) offers a range of IT and consultancy services across various industries. Within the BFSI vertical, the company offers solutions and services to meet the needs of universal banking, core banking, payments, asset management, etc. These solutions also address emerging areas such as social media marketing, mobile banking, governance, risk management, compliance, customer relationship management, and customer analytics Scale of BFSI subverticals Banking Capital markets Insurance Key financial parameters Revenue in US$ million Revenue 1 from the BFSI vertical Revenue 1 from other verticals Operating margin Headquarters: Mumbai, India Website: www.tcs.com Geographical mix 2013; US$ million India Continental Europe 7.5% 7.8% 9.5% 17.1% UK 52.7% North America Service mix 2013; US$ million 100% = 11,568 100% = 11,568 Engineering & Latin MEA Global industrial America (3.3%) (2.1%) consulting (3%) services (4.6%) Other APAC Assurance services Infra. services 7.7% 11.5% 42.8% 12.5% BPO 15.2% Enterprise solutions including BI Asset leverage solns. (2.7%) ADM 1 FY ends on March 31; total may have minor variation owing to rounding-off adjustments 2 Major BFSI client mentioned here are based on information collected by Everest Group from public sources 27.0% 27.6% 28.1% 11,568 10,171 8,187 4,384 4,986 3,627 4,560 5,787 6,582 FY 2011 FY 2012 FY 2013 Services offered for the BFSI vertical: IT application development, maintenance, infrastructure, re-engineering, BPO, consulting and assurance services and TCS BaNCS (including capital markets, banking, and insurance). Services spans entire insurance value chain Major BFSI clients 2 : Aviva NA, BNP Paribas, Phoenix Life, Pearl Group, Friends Life, RSA, ING, Rabobank, RBS, Bank of America, Lloyds, JPMC, Friends Life, AIG, Allianz life 6
Insurance AO capability assessment and market success Headline assessment Ability to win and execute large, application outsourcing contracts coupled with high client satisfaction levels positioned TCS as a Leader and Star Performer (for a second year in row) in insurance AO PEAK Matrix Everest Group PEAK Matrix for insurance AO Market success High 25 th percentile Success dashboard 1 Insurance lines of business Life and pensions Property and casualty Other 75 th percentile TCS Low Low 25 th percentile High Delivery capability (Scale, scope, domain investment, delivery footprint, and buyer satisfaction) 75 th percentile High Medium Low Geographic scope North America EMEA Latin America APAC PEAK Matrix dimensions assessment Dimension Market success Scale Scope Domain investments Delivery footprint Rating Remarks High Active ACV grew by ~20% as compared to the last year to reach ~US$600 million Highest number of large insurance AO deals (~20) Major insurance AO clients: Friends Life and New India Assurance Derives ~45% revenue from the BFSI vertical (amounting to >US$4.9 billion in FY 2013) Average deal duration is seven years for large insurance AO deals Derives more than 70% of its revenue from large annuity deals Provides services for all insurance LoBs and AO subfunctions: ADM, SI, ERP, and testing; other services include DW BaNCS : Proprietary solution catering to various insurance operations; launched multiple products and frameworks for insurance Continued investments in new technologies, such as smartphones, mobility, and cloud, to drive growth Global delivery network for AO spans ~10 countries High offshore leverage of approximately 75% Low Market share By active ACV By cumulative TCV By number of contracts 18% 30% 14% Buyer satisfaction 2 High buyer satisfaction levels with multiple contracts renewed regularly Recognized for strategic thought leadership and proactive investments in innovative technologies 1 Transaction success for large-sized deals; assessment relative across service providers 2 Based on insurance AO deal renewal trends assessed through Everest Group s proprietary Transaction Intelligence database and market interactions 7
AO domain investments Proprietary solutions (representative list) Line of business Insurance (continued) Solutions Proprietary solutions TCS Digital Insurance Agent Solution: A tablet-based application available both in native ios version and in hybrid version (powered by PhoneGap framework) compatible with ios, Android, and Windows operationalizes all the day to day activities of insurance agents on a mobile tablet, enabling them to be more effective at both sales and customer service TCS Digital Insurance Virtual Advisor Solution: An online virtual companion that aims to provide self-service to the web user. TCS Digital Insurance Virtual Advisor Solution automatically senses user s need for assistance on a web page and pops up an animated character prompting for help. It provides a humanized computer interface to users and users can interact with the animated character either by speaking to the character or using a web chat TCS Digital Insurance Telematics Solution: It helps insurers address the challenges in making telematics adaptable and affordable. The application determines the vehicle speed, compares it with the speed limit for the area and alerts the driver about over speeding. The application offers customers real-time advice (voice-based) about avoiding of regions with severe weather, and where accident rates are higher TCS Digital Insurance Risk Assessment Solution: A mobile application that enables insurance agents and brokers to perform sales in real-time, provide immediate customer service, and stay informed and connected while they are on the go Product Configuration and Management System: Product designing and management platform to create and manage products seamlessly iconsult: Case-based reasoning tool for underwriting in insurance Distributor Management System: Helps insurers to manage channel performance and compensation effectively Fraud Management Framework: Helps claims adjustors to identify suspicious claims that may possibly be fraudulent 8
AO domain investments Proprietary solutions (representative list) Line of business Insurance (continued) Solutions Frameworks SynQuanOnto: Collaborative domain knowledge framework for insurance Prove Alpha: Product and vendor evaluation framework ibids: Business intelligence and decision support framework built on TCS proprietary BIDS framework Solution accelerators Process Models: Standardized process maps for each line of business across the insurance value-chain Illustration System: Illustration system aimed to generate benefit illustration for different life insurance products Lead Management Solution: Customized solution for life insurance companies available on Microsoft CRM Dynamics Platform Product Workbench: Solution to support rapid deployment of new insurance products Agent's Workbench: Solution for lead generation and customer relationship management NextGen Underwriting Solution: Integrates siloed IT systems and provides underwriters with a holistic view of critical data to assess the potential for future risks Attorney Assist Solution: Smartphone-based solution, which enables attorneys to gain productivity improvements and simplifies the process of connecting with clients and adjusters. It also helps insurers get rid of the costly recording software/hardware, which in turn helps them reduce the overall loss adjustment expenses Catastrophe Claims Management Solution: Enables insurers to proactively create claim records for the policies that are impacted or likely to be impacted by a catastrophe, without waiting for policyholders to notify the losses Quotation and Illustration App: An interactive quick quote and illustration app for various lines of business that can be used by sales force as well as consumers Claims Investigator App: Enables field adjustors to update the investigation details into the source claim system Agency Dashboard: Enables agents to keep track of their client portfolios, sales figures, and individual performance through a single tablet-based application 9
AO domain investments Proprietary solutions (representative list) Line of business Insurance (continued) Solutions Solution accelerators (continued) GIS Claims Viewer: Loss profiling solution to track claims losses using geospatial mapping of claims details Premium Indicator: Enables commercial insurance agents to calculate the indicative premium and provide access to sales-related KPI Fraud Detection Using Social Media: Enables SIUs to tap into social media footprint of a customer and find potentially fraudulent cases Sales & UW Dashboard: A customized tablet-based app showing key performance metrics tracked by C-level executives, sales teams, and underwriters Claims Dashboard: Dashboard to track claims by lines of business, geography, state of claims, and process times. Also, offers solutions for contact center representatives to respond to queries, complaints, service requests, virtual world e-learning, retirement calculator, mobile quotation, correspondence repository, reports repository, test scenario repository, commission projection, mobility, and mobile loss notification 10
AO domain investments Acquisitions (representative list) Target Date Capabilities added ALTI SA (France) 2013 Strengthened capabilities to service customers in France and other regions in Europe Citigroup Global Services Limited 2008 Enhanced ability to offer an end-to-end, domain-led third-party solution for business operations to TCS large financial services clients. The acquisition also enables TCS to create platforms for the future and integrate TCS strong domain expertise in operations along with TCS suite of products for the financial services sector TKS-Teknosoft (Switzerland) 2006 Expansion of TCS portfolio of products for the banking and financial services market Comicrom (Chile) 2005 Enhancement of BPO capabilities for the BFSI space and thus, enabling TCS to offer integrated solutions Phoenix Global Solutions (U.S.) 2004 IT, BPO, and customer care services for the insurance industry 11
AO domain investments Key alliances (representative list) Alliance partner Purpose of alliance TCS has alliances with multiple vendors for the BFSI vertical. These include: Lombardi (IBM) Strategic consultancy partner for Business Process Management (BPM) solutions Pega Strengthen TCS BPM practice and provide BPM solutions and services Cognos (IBM) Partners in the IT consulting and technological services space leveraging each other s expertise Adobe Go-to-market strategy for the insurance industry in North America TIBCO Mutual support for marketing, sales, and technology enhancement initiatives Informatica Joint service model including the pre-sales and post-sales services Oracle Implementation partner for Oracle products SAP Preferred partner for implementation Salesforce.com Premier consulting and implementation partner Red Hat Global premier partner implementing Linux products. They also offer joint solutions to the insurance industry Microsoft System integration and implementation partner SAS Consulting and IT implementation partner Teradata Leveraging each other s technological expertise in the BFSI space Software AG Leadership sharing and regional alignment Business Object Leadership sharing, regional alignment, and leveraging technological expertise OneShield Product development partner ThunderHead Alliance to strengthen TCS Business Intelligence Performance Management (BIPM) practice Firstech Solutions Joint venture with Firstech Solutions, a Thailand-based IT company, to expand TCS operations in Thailand, providing IT and BPO services to cater to the country's banking, finance, insurance, telecom, and government clients 12
Insurance ITO transactions activity NOT EXHAUSTIVE Recent transaction activity 1 Buyer s name Announcement date TCV estimate (US$ million) Duration (years) Contract details and services Unknown client April 2013 N/A N/A Application development, maintenance, and assurance services across multiple lines of business Friends Life March 2012 2,200 15 Policy migration from company's legacy mainframe systems and onto Diligenta's inhouse and proprietary database, and content management system, BaNCS Nedgroup Insurance Company Life Insurance Corporation of India February 2012 N/A N/A Deployment of TCS insurance product TCS BaNCS April 2010 N/A N/A Deployment of TCS insurance product TCS BaNCS Pannonia Insurance January 2009 N/A N/A Deployment of TCS insurance product TCS BaNCS 1 Publicly-announced insurance ITO transactions during 2009 to 2013 13
Key offshore AO delivery locations NOT EXHAUSTIVE Confirmed location for insurance AO 500-1,000 AO FTEs >5,000 AO FTEs 100-500 AO FTEs 1,000-5,000 AO FTEs <100 AO FTEs Hungary Mexico Colombia Ecuador Peru Brazil Saudi Arabia India China Thailand Philippines Malaysia Indonesia Singapore Chile Uruguay South Africa Argentina Note: FTE strength represents the total number of AO FTEs across different industries for the particular country 14
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