Kunal Anand, Author At Everest Group

Strong Performance in US GBS Model Expected to Continue in 2021 | Blog

April 22, 2021

New Market Report Shows Digital Services Among Trends Driving GBS Growth

Despite the massive spread of COVID-19 across the US, the Global Business Services (GBS) model continued to grow in this market in 2020, demonstrating that the model, in its many different forms, continues to be integral to enterprise sourcing strategy.

Building on the success over the last two to three decades, GBS organizations diversified extensively and experienced growth in new verticals (such as healthcare and life sciences) and functions (such as legal, R&D, and digital).

Everest Group’s US Global Business Services Market Report provides an extensive assessment of the US GBS landscape and adoption trends, along with a deep dive into the trends leading to increased onshoring in the recent past. The report is based on Everest Group’s proprietary GBS database of more than 5,000 GBS centers.

Among the compelling findings detailed in the research are:

GBS organizations are embracing digital transformation

Both the outsourcing and GBS models continued to grow in the US in 2020, with more than 40 new GBS centers in the first three quarters. However, the pace of growth and new setups were relatively lower than the prior year. Some of the new GBS center setups in 2020 include Amazon, Denso, JP Morgan, and General Motors, to name just a few.

While traditionally, organizations have used US-based GBS organizations for customer care and back-office work, a focus on engineering and R&D (ER&D) and digital services have driven new setups in recent years. Enterprises are increasingly leveraging US-based GBS organizations to build digital hubs, especially for automation, AI, and analytics, with more than 45 percent of the setups in 2020 focused on delivering digital services. This is driven by a couple of factors. First, onshore locations can provide access to high-end talent for innovation and R&D and facilitate closer integration with business stakeholders. Secondly, resiliency shown by GBS organizations during the crisis has increased enterprises’ confidence.

This image illuminates how GBS markets are steadily moving toward digital transformation.

New adopters are driving GBS growth

Surprisingly, the majority of the new GBS setups in the US in the past years were driven by new adopters of the GBS model. This continued in 2020, with more than 70 percent of the new setups by first-time implementers. The growing maturity of the GBS model, success demonstrated by peers, and decreasing obstacles related to transitions, and legal and regulatory environments have enabled new firms to move to the GBS model.

US locations are attractive for GBS

The technology and communication verticals continue to dominate the GBS market in the US, accounting for more than one-third of the total activity. This is followed by manufacturing, which has experienced a significant increase in the share of total setups.

Historically, approximately 90 percent of firms have preferred non-tier-1 locations for GBS set up given attractive cost-talent proposition (within the US) and proximity to select industries. This continued in 2020, with tier-3/4 locations accounting for about 60 percent of new setups. Key tier-3/4 locations include Austin and Pittsburgh.

Positive Trends Emerge for Onshoring

Traditionally, key factors driving enterprises towards onshoring, especially in the US, have been ease of setup, the proximity of CS services with business and customers, and a familiar operating environment. However, in recent times, the following new drivers have emerged that will continue to contribute to a spike in GBS in the US going forward:

Rising demand for digital services – Enterprises are rethinking the role of onshore GBS to build and drive capabilities required to fulfill the demand for digital services
Tightening regulatory environment – Tightening regulatory environment (in certain verticals), increased trade protectionism, and rising stringency of visa norms have led to a recent increase in onshore center setups
COVID-19-led disruption – While the resiliency shown by GBS organizations during the crisis has increased enterprises’ confidence, they also need to ensure greater control and proximity and reduce their offshore concentration to diversify their risk portfolio

Explore the complete details of the US Global Business Services Market Report by downloading the full report here.

Choosing Your Best-fit Cloud Services Delivery Location | Blog

August 27, 2020

While enterprises around the globe began their steady march toward cloud services well before the outbreak of COVID-19, the pandemic has fueled cloud adoption like never before. Following the outbreak, organizations quickly went digital to enable remote working, maintain data security, and ensure operational efficiencies. Globally, first quarter spend on cloud infrastructure services in 2020 increased 39% over the same period last year.

Given the new realities, as firms make long-term cloud investments, it is vital for them to understand the cloud landscape and how various regions and countries fare in comparison to each other as cloud destinations. In this blog, we evaluate and compare the capabilities of different geographies in delivering cloud services.

The Americas

North America is among the most mature geographies for cloud services delivery. The US and Canada offer excellent infrastructure, a mature cloud ecosystem, high innovation potential, a favorable business environment, and business-friendly rules and regulations. The US is the most mature location in North America, offering a large talent pool and high collaboration prospects due to the presence of multiple technology start-ups, global business services centers, and service providers. However, the cost of operations is significantly high, primarily driven by high labor and real estate costs.

In contrast, most locations in Latin America (LATAM) have less mature cloud markets and ecosystems. While they provide proximity to key source markets in the US and considerable cost savings as compared with established markets (60-80%), they offer low innovation potential, a relatively small talent pool, few government policies to promote cloud computing, and limited breadth and depth of cloud delivery. Mexico is a standout location in LATAM, scoring better than others on parameters such as quality of cloud infrastructure, size of talent pool, and business environment.

Europe

Europe provides a good mix of established and emerging locations for cloud services. Countries in Western Europe have a fairly robust infrastructure to support cloud services, with high cybersecurity readiness, sizable talent pools, high complexity of services, and robust digital agendas and cloud policies. England and Germany are the most favorable locations in the region, driven by a comparatively large talent pool accompanied by high innovation potential, excellent cloud and general infrastructure, and high collaboration prospects due to numerous technology start-ups and enterprises. However, high cloud-adoption maturity has markedly driven up operating costs and intensified competition in these markets.

Countries in Central and Eastern Europe (CEE) offer moderate cost savings (in the 50-70% range) over leading source locations in Western Europe. While they offer a favorable cloud ecosystem, talent availability, greater proximity to key source markets, and lower competitive intensity, they score lower on innovation potential, complexity of services offered, and concentration of technology start-ups and players. The Czech Republic is a prominent location for cloud services in the CEE, while Poland and Romania are emerging destinations.

Asia Pacific (APAC)

Most locations in APAC have high to moderate maturity for cloud services delivery due to the size of the talent pool and significant cost savings (as high as 70-80%) over source markets such as the US. For example, India offers low operating costs, coupled with a large talent pool adept in cloud skills and a significant service provider and enterprise presence. However, it scores lower on aspects such as innovation potential, infrastructure, and quality of business environment. Singapore is an established location that offers well-developed infrastructure and high innovation potential but also involves steep operating costs (40-45% cost arbitrage with the US). The Philippines, a popular outsourcing destination, has lower cloud delivery maturity given its low innovation potential and talent availability for cloud services.

Middle East and Africa (MEA)

Israel is an emerging cloud location in the MEA that has achieved high cloud services maturity, but that benefit is accompanied by high operating costs and low cost-savings opportunity (about 10-15%). Other locations in the region have moderate to low opportunity due to small talent pools and lower maturity in terms of cloud services delivery.

Choosing your best-fit cloud services delivery location

Our analysis of locations globally reveals that, while different locations can cater to the increasing cloud demand, there is no single one-size-fits-all destination. Instead, the right choice depends on several considerations and priorities:

If operating cost is not a constraint and the key requirements are proximity to key source markets and a favorable ecosystem, the US, Canada, Germany, England, Singapore, and Israel are suitable locations, depending on the demand geography
If you are looking for moderate cost savings, proximity to source markets, and a favorable ecosystem, with the acceptable trade off of operations in a relatively low maturity market, countries such as Mexico, the Czech Republic, Hungary, Poland, Ireland, Romania, and Spain are attractive targets
However, if cost is driving your decision and proximity to demand geographies is not a priority, India, Malaysia, and China emerge as clear winners

The exhibit below helps clarify and streamline location-related decisions, placing an organization’s key considerations up front and identifying acceptable trade-offs to arrive at the best-fit locations shortlist.

Key considerations for choosing your cloud services delivery location

To learn more about the relative attractiveness of key global locations to support cloud skills, see our recently published Cloud Talent Handbook – Guide to Cloud Skills Across the Globe. The report assesses multiple locations against 15 parameters using our proprietary Enabler-Talent Pulse Framework to determine the attractiveness of locations for cloud delivery. If you have any questions or comments, please reach out to us at Hrishi Raj Agarwalla, Bhavyaa Kukreti, or Kunal Anand.

Selecting the Best Multilingual European Service Delivery Destination for Your Needs | Blog

February 11, 2020

Although Europe is the second smallest of the world’s continents by surface area, it packs a huge business and economic punch. And because the continent is home to 24 official languages, businesses that are headquartered or have large operations there need to have workforces proficient in languages beyond the native tongue in the country in which they’re located. Extensive language capabilities will help them penetrate new European markets and enable them to have more productive conversations with stakeholders across the globe.

So, just as we did in a recent blog on service delivery destinations best suited for Asian language delivery, we’re taking a look at the countries best equipped to handle the wide range of European languages.

European Countries and Regions

While Europe is, of course, the go-to continent for European language delivery, there are considerable differences among the Central and Eastern Europe (CEE) and nearshore regions, and among the different countries within each region.

Central and Eastern Europe (CEE)

CEE locations offer high scalability of multiple European languages at relatively moderate cost, but many face certain regulatory and macroeconomic issues.

Poland is the premier location in the CEE region. Because many shared services centers – or global in-house centers – are based in Poland, it has a mature service delivery ecosystem and robust infrastructure. Poland also has significant talent availability with the ability to support complex service delivery, and a multilingual talent pool with high scalability potential for a number of European languages, particularly German and French, and Russian, Italian, and Spanish to a lesser extent. However, because it’s a preferred location in the region, high competition for talent has created sourcing and talent retention issues. The country also lacks the ability to scale delivery in other European languages, such as Dutch and Portuguese.

Romania and Hungary are other good options in the region; they offer particularly high scalability for French, Spanish, and Italian language skills at a moderate cost of operations.

Nearshore Europe

Nearshore locations provide the best quality of life in an optimum business environment, but operational costs are high.

Ireland is the top nearshore destination in Europe. It offers a high quality of life, a favorable business environment and infrastructure, and significant availability of multilingual talent, with high scalability potential for French, German, Spanish, and Italian due to its ability to attract quality talent from other countries. And many companies are attracted to its high proximity to onshore locations.

However, like Poland, it suffers from high global and regional player competition for talent and struggles to achieve scaled service delivery for Dutch and Portuguese. It’s also among the most expensive locations in Europe for service delivery.

Scotland is a good alternative, as it offers comparable languages skills and infrastructure at a lower cost of operations.

Beyond Europe

There are also destinations in Latin America and the Middle East and Africa (MEA) region that can satisfy some European languages needs.

Most Latin American countries have large graduate pools with bilingual capabilities, despite a general lack of high-quality educational infrastructure. In particular, Mexico and Costa Rica provide strong Spanish and English skills, along with mature global services ecosystems and proximity to onshore locations. However, as the premier location in the region, Costa Rica suffers from high competition for talent and the highest cost of operations in Latin America.

Destinations in MEA also have large graduate pools with strong multilingual capabilities. For example, Egypt and Morocco offer abundant French – and, to a lesser extent, Spanish – language skills, driven by a strong cultural and historical affinity to France and Spain. But the cost of operations is high in Morocco, and Egypt is politically unstable.

To learn more about the relative attractiveness of key global locations to support global languages, please see our recently published Talent Handbook for Language Skills. The report, which assesses locations against 20+ parameters, uses our proprietary ”Enabler-Talent Pulse Framework” to determine the attractiveness of locations for language delivery. You can also reach out to the report authors: Parul Jain, Kunal Anand, and Pagalam Rajeshwaran.

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Author: KunalAnand