Everest Group spotlights market-shaping trends and fastest growing delivery locations for global services.
In the modestly growing global services industry, the location strategies of enterprises and service providers are being reshaped by two key trends—reshoring and a strong demand for engineering/R&D and digital services—according to Everest Group, which recently published its annual report on global services delivery locations.
Key Findings and Predictions:
- The global services market continues to grow overall, but modestly. The global services landscape sustained 6 to 8% revenue growth in 2018 (the same pace as 2017). New center setups witnessed a significant increase in 2018 (12.5%), driven by a focus on digital and R&D/engineering services; however, headcount growth in 2018 (6-8%) was slower than in 2017 (7-9%). Everest Group predicts that the market will continue to grow for the next three to five years, but at a slower growth rate in 2019.
- Global services delivery is increasingly being characterized by nearshoring. A marginal shift in growth from offshore to nearshore locations in 2018 was primarily driven by enterprise and service provider initiatives to rebalance and optimize their existing locations portfolios and to comply with data protection mandates. In particular, Nearshore Europe witnessed a significant increase in headcount and new center setups in 2018, benefitting from availability of complex skills, proximity to customers in Western Europe, increased regulatory oversight and demand for multi-lingual support. Everest Group predicts that Nearshore Europe will continue to expand its share of the global services market, with Poland becoming the third-largest market for global services delivery behind India and the Philippines.
- Enterprises are adopting insourcing to a greater extent than outsourcing for digital services. Using the GIC model, enterprises are focusing more on building skills in and delivery of IT-related services. Between 2017 and 2018, GICs led service providers (62% to 38% respectively) in the setup of new centers for digital services such as analytics, mobility, artificial intelligence and cybersecurity. Everest Group predicts that enterprises will continue to rebalance portfolios to bring more critical pieces of work in-house, but we will also see growth in the outsourcing market as enterprises outsource non-core activities.
- Engineering/R&D and digital services continue to dominate the industry. An increased focus on R&D/engineering services delivery (especially in India, Singapore and China) contributed to APAC’s growth. Nearshore Europe had the second highest increase in new center setups, growing significantly in digital services delivery in Ireland, Lithuania, and Poland. Everest Group predicts that APAC will continue to be the leading geography of choice, and Nearshore Europe will grow faster as the market sees increased demand for R&D and innovation hubs to support development of digital products and services.
Additional research findings and predictions are discussed in “Global Locations Annual Report 2019: Demand for Next-gen Services Defining Location Strategies,” a comprehensive guide to understanding the nuances of the global services locations landscape and interpreting locations-related developments and trends to frame locations strategies.
“In our volatile global services market, the location decision should never be about cost or talent alone,” said Sakshi Garg, vice president, Global Sourcing, Everest Group. “Enterprises today are having to continuously re-evaluate and carefully evolve their location strategies because of multiple disruptive forces that are at play. These forces include increasing demand for next-gen technologies, intensifying competition for talent, evolving customer preferences, pressure on growth and margins, and geopolitical and macroeconomic uncertainties, just to name a few.”
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About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empowers clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at https://www.everestgrp.com