Experts in the global services terrain
Hope you enjoyed solving the India GIC landscape crossword we posted last week. Below is the answer key to it. (Download a printer-friendly version of the answer key.)
|Texas Instruments and GE were among the first entrants in the GIC landscape|
|None. GIC divestiture activity has seen a decline in recent years after peaking in 2011 and 2012|
|India has dominant share in the GIC market in terms of revenue (~50%), number of delivery centers and headcount|
|Mumbai has the least number of GICs among tier-1 cities in India|
|United States-headquarteredfirms have more than 60% share in the Indian GIC landscape|
|Share of United Kingdom-based firms setting up GICs in India has declined in the last 2-3 years|
|GICs were formerly known as captives|
|Telecom is the 2nd largest vertical after BFSI in terms of average headcount|
|BFSI is the largest vertical in terms of overall GIC headcount in India|
|Technology is the leading vertical in terms of number of GIC set-ups in India|
|Bangalore has the maximum number of GICs in India|
|Pune is the leading tier-2 city in terms of number of GICs and has seen lot of GIC activity in the recent past|
|Companies started GICs to capture cost arbitrage|
|Outsourcing to service providers in an alternative to the GIC model|
|Engineering services is the leading function delivered by GICs in India|
|Value beyond arbitrage|
|Within the Energy & Utilities vertical, Europe-based firms have highest share|
|ADM (Application Development & Maintenance) is the topmost sub-function within IT|
|Kochi is also seeing GIC activity among tier-2 cities in India|
|Cognizant acquired ValueSource NV, a subsidiary of KBC Group|
Photo credit: Taki Steve
Over the last 18 months, we have seen a significant shift in the global in-house center (GIC) location strategy of UK-based firms, with many more embracing Central and Eastern Europe (CEE) over offshore countries for their GICs.
Factors driving the growth in nearshore locations include:
- High attrition rates in offshore locations, and far more expensive talent in onshore regions, make nearshore locations a suitable alternative. Relatively lower-cost locations in CEE are equipped with skilled workforce with multi-lingual capabilities
- Nearshore locations offer cultural and geographical affinity, and a favorable time zone
- Concentration risk in offshore locations. Realizing the value of diversification, well-known companies such as Barclays, BP, HSBC, PwC, Rolls-Royce, and Vodafone have expanded their location portfolios beyond offshore in-house centers and established GICs in CEE
Some of the popular nearshore locations being leveraged for IT, F&A, and call center (CC) services are depicted in the diagram below:
While some companies are leveraging their existing nearshore offices and expanding them into GICs, others are setting up greenfield centers. Recent examples of new GIC set-ups by UK firms in nearshore locations include:
- Barclays opened a human resources service center in Lithuania
- Vodafone opened a new shared services center in Bucharest, Romania, to cater to Germany, Ireland, Italy, Spain, and UK-based clients. The center will also provide IT services for the Vodafone Group headquarters in London
- PwC opened a service center in Bratislava, Slovakia, to carry out its internal finance function for the CEE region
- Toumaz Group opened a software development center in Timisoara, Romania, to develop IT-based solutions for Toumaz and Frontier Silicon, a Toumaz division.
What are the implications of this trend? Are we saying offshore locations will lose their draw for UK-based buyers? Certainly not! Although the CEE region will continue to maintain its growth momentum, several factors will still drive GIC activity in offshore geographies among UK buyers:
- For first-time adopters of the GIC model, offshore locations (e.g., India, Philippines) offer a proven and established value proposition
- For companies highly focused on cost savings, the arbitrage offered by offshore geographies remains unbeatable
- Companies looking to set-up large scale centers (1,000+ FTEs) may not find many scalable options in nearshore regions, making offshore geographies more attractive
- Several offshore locations are also becoming attractive for their domestic market opportunities. Thus, some organizations are leveraging offshore centers for dual purposes; for their UK operations and to tap into local sales prospects
Beyond the traditional offshore locations, there is increasing acceptance of South Africa, Egypt, and Mauritius as delivery locations for UK and other European buyers due to accent similarity and strong cultural affinity. But the battleground is now definitely becoming hotter between nearshore and offshore locations.
For more insights into the GIC space, please see the following additional Everest Group research:
- GICs Creating Business Impact Beyond Cost Arbitrage
- Quantification of GIC Impact Accelerates Internal Value
- Global GIC Market Activity Heatmap
Photo credit: Charles Clegg
If you’re a stakeholder – any stakeholder – in the United States’ healthcare system, the data in the following charts is troubling and flummoxing.
The U.S. Healthcare System Paradox
Although the country’s outlay on healthcare (as a share of GDP and per capita) substantially exceeds that of other developed countries, it ranks behind most nations on many measures of health outcomes, quality, and efficiency. In fact, a June 2014 study by the Commonwealth Fund ranked the U.S. dead last on most performance dimensions – e.g., access, efficiency, and quality – when compared against 10 other developed countries (Australia, Canada, France, Germany, Netherlands, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom).
Winds of Change
The health insurance space in the U.S. is undergoing a radical transformation driven by regulatory changes and consumerization of demand. So it is not surprising that the current focus of the massive reform underway in the country focuses on cost rationalization and efficiency enhancement.
Reforms (primarily rising from the Affordable Care Act, or Obamacare) are reshaping health plans’ operating model. The onset of a value-based reimbursement model (moving from “defined benefits” to “defined contribution”) raises fundamental questions about current business paradigms. The impetus provided to Accountable Care Organizations (ACOs) and the blurring lines between payers and providers are leading to a fundamental realignment of incentives, ownership, and priorities. Obamacare and ICD-10 have had a sizable impact on payers’ technology portfolios as they look to leverage next-generation IT and modernize legacy platforms.
Payers are embracing the challenge of consumerization as their customers take increasing ownership of health outcomes, signaling the shift from large national accounts to the individual segments. This directly impacts their sales, outreach, and member engagement channels and methodologies. There is a renewed focus on approaching traditional buyer segments through non-traditional channels, primarily Health Insurance Exchanges (HIX) and direct engagement. These wide-sweeping changes are leading to a rethink of current systems, processes, interfaces, and vendors.
Payers Looking Ahead
Payers are marrying reform-driven changes with their overall technology portfolio in an effort to pivot from a primarily B2B business to a B2C model. These regulatory changes call for increased systems integration efforts, establishment of public portals, customer outreach, remediation, testing, and revenue cycle program management.
Healthcare reforms, a dynamic regulatory landscape, and consumerization of demand are transforming the healthcare industry. Payers need to understand, assess, and be proactive in navigating these choppy waters.
For further insight, check out our recent publication, “IT Outsourcing (ITO) in the Payer Industry – Annual Report 2014: Regulations on Payers’ Mind.” This report provides an overview of the ITO market for the payer industry. Analysis includes market size and growth, forecasts (up to 2020), demand drivers, adoption and scope trends, key areas of investment, and implications for buyers and service providers.
We recently published a report on the Global in-house Center (formerly known as captives) landscape in India that provides comprehensive coverage of the GIC landscape in the country. (Download a complimentary preview deck of the report.) India is now home to 700+ GICs delivering a range of IT, business process and engineering services to buyers globally. Would you like to know more key insights from this report?
Let’s play a game!
Below is a crossword that captures 20 key insights from the report. (You can also download a printer-friendly version of the crossword.)
Stay tuned! We will post the answer key in a few days.
Photo credit: Jessica Whittle
This is the final blog in a series of three on the topic of impact sourcing. In the first one, I covered the fundamentals of the model and in the second, the value proposition and business case. Now, I’ll share insights on the nature of work it is best suited for and the activities the model can potentially deliver.
Work suited for impact sourcing
Given that the targeted talent for impact sourcing are individuals with disadvantaged backgrounds, their skills levels are typically suited for specific types of BPO activities as given below.
- Transactional, repeatable, and high volume: Typically includes non-voice support for back-office work and voice-based work on a selective basis when business needs align with talent capabilities
- Bespoke work, not amenable to “industrialization”: Typically requiring human intervention to handle case-to-case customization or work that cannot be fully automated
- Work that is generally suitable to offshoring: Typically includes work with no regulatory or legal restrictions on offshoring or in situations where cost savings and efficiencies are key objectives
Having said the above, impact sourcing employees have demonstrated a wide-range of aptitude from basic data entry to complex data processing. For example, Pangea3 used impact sourcing to deliver complex contract abstraction services; Deloitte in South Africa is using impact sourcing to deliver accounting services and is considering hiring impact workers in its other offices across Africa.
Is impact sourcing actionable?
So, what does this mean for companies considering impact sourcing for BPO work? Are there tangible examples of work where companies use impact sourcing in a meaningful manner? The answer is an unequivocal yes! To illustrate impact sourcing in action, consider the example of a typical optical character recognition (OCR) image validation process given in the box below. The blue text represents activities that fit with impact sourcing and may be completed by impact workers.
|A typical OCR image validation process|
There are many more such processes where impact sourcing can be an attractive fit for delivery of BPO services. Some of these are given in the table below.
|Sales & marketing|
|Supply chain management|
|Finance & accounting|
|Industry specific operations|
The notable point is that there are companies already using impact sourcing to deliver many of the services mentioned above. For example, RuralShores is delivering invoice processing, mortgage document digitization, customer care, logistics management services using impact sourcing. Accenture uses impact sourcing to deliver not only basic F&A processes but also more complex HR, PO, F&A functions. These are also echoed in the examples from Aegis, Infosys, and Quatrro. We also saw earlier how Deloitte and Pangea3 are using impact sourcing for complex work. These examples substantiate that impact sourcing is actionable and a viable alternative to traditional BPO.
In conclusion, in this series of three blogs, I discussed how impact sourcing is an established phenomenon that offers access to previously untapped talent pool, lower attrition and the ability to achieve corporate social responsibility and diversity objectives as compared to traditional BPO. There are many large, global companies that have acknowledged the benefits of impact sourcing and have adopted it in their business process service delivery. It is a win-win business service delivery model with optimized enhancements and creates tangible positive impact on people that extends to communities as well.
Everest Group, supported by The Rockefeller Foundation, conducted an in-depth assessment on impact sourcing (IS) as a business process service delivery construct. The study presents a detailed, fact-based business case for IS that substantiates the benefits of the IS model for Business Process Outsourcing (BPO). Additionally, it sizes the current IS market for BPO work, profiles the landscape, details the business case, and shares experiences of companies through case studies and testimonials. The report focuses on Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, India, and the Philippines.
The Rockefeller Foundation aims to catalyze the IS sector in Africa through its Digital Jobs Africa Initiative. The Foundation’s role is to ensure positive social and economic impact on 1 million people by supporting high potential but disadvantaged youth to work in the dynamic outsourcing sector in Africa, benefitting them, their families and communities. The Foundation recognizes that the most sustainable and scalable path to achieving this impact is because of the tangible business value impact sourcing provides. Impact sourcing enables companies to purposefully participate in building an inclusive global economy, gaining business efficiencies while changing people’s lives.
Visit our impact sourcing page for more information.
Be sure to join our webinar, The Business Case for Impact Sourcing on today at 9 a.m. CT / 10 a.m. ET / 3 p.m. BST / 7:30 p.m. IST. Register now.
Photo credit: The Rockefeller Foundation