Author: Surbhi Gupta

Strengthening Your Global Services Delivery Location Strategy for Unprecedented Times | Blog

The global services market experienced lower revenue growth in 2018-19 than in the previous year due to the global macroeconomic slowdown, the tightening legal/regulatory landscape (GDPR and Brexit, for example), and volatility in currency fluctuations. The COVID-19 outbreak has further aggravated the slowdown, pushing the global economy into recession and slowing enterprises’ decision-making.

Given the current situation, organizations must rethink their global services delivery location strategies to help ensure long-term success.

Our just published report, Global Locations State of the Market 2020: Moving Forward in Turbulent Times analyzes the ways the global services market has evolved in key geographies/locations, and how sourcing models/functional delivery has shaped up. Here we are sharing a few of the emerging location trends in the global services industry that may help companies strategize their location portfolios/delivery model.

Location portfolios evolving to nearshore and onshore – Nearshore Europe has experienced growth due to the proximity of customers to Western Europe, demand for multi-lingual support, and availability of high-skill talent. Ireland, Poland, and Scotland are the top delivery locations in nearshore Europe, followed by Ukraine, the Czech Republic, and Romania. There has also been an increase in onshore delivery presence due to stricter data security regulations, the US government’s conservative approach to offshoring, increasing work complexity, and greater pressure from buyers to grow their onshore presence for ease of coordination.

In-house sourcing models gaining prominence – GBS organizations are surpassing service providers in new center setup activity due to increased insourcing. Enterprises are extensively leveraging the GBS model to accelerate their digital transformation initiatives, provide a better customer experience, build niche capabilities, and drive operational excellence. In fact, almost two-thirds of the companies that established GBS centers in 2019 were new entrants with no existing offshore/nearshore GBS center. And most new GBS organizations were set up in APAC due to cost arbitrage and high talent availability.

Shift in delivery to digital and engineering/R&D services – Enterprises and service providers are increasingly focusing on digital and R&D/engineering services delivery, with APAC and nearshore Europe setups leading the way. In APAC, India continues to be the largest delivery location for digital services delivery, followed by Singapore and China. Growth in India has been primarily due to high cost arbitrage and strong talent pool availability across digital and engineering/R&D services. The increase in digital delivery setups in nearshore Europe has been driven by high growth of setups in Ireland and Romania. Digital center setups in the Middle East and Africa (MEA) have also picked up pace and even surpassed the number of setups in Latin America and the Caribbean. The majority of center setups in MEA were led by technology and automotive players, and Israel turned out to be the location of choice in this region for delivery of advanced engineering/R&D services, primarily to support the US and Europe.

The road ahead

Onshore delivery will further increase in 2020 as digital delivery and remote work gain prominence. Further, rising unemployment in key demand geographies like Italy, Spain, Germany, and the US might result in protectionist sentiments, which could lead to less offshoring. Enterprises will increasingly embrace the GBS model, as it will enhance their ability to deliver additional business impact in these turbulent times. Enterprises and service providers will both focus on rapid digital transformation and accelerated automation adoption as they struggle to thrive amidst myriad disruptive forces.

To learn more about the global services locations landscape and locations-related developments, and to get an update on locations activity by region and country and trends affecting global locations and locations portfolio strategies, please read our recently published report Global Locations State of the Market 2020: Moving Forward in Turbulent Times. The report is based on deep-dive, first-hand discussions with investment promotion bodies, leading shared services centers, service providers, recruitment agencies, and other market participants.

Relatedly, we’re hosting a webinar on Tuesday, May 19, that will cover topics including:

  • How COVID-19 has impacted enterprise workforce strategies to date
  • What the next normal is for locations and delivery strategies in this unfolding economic environment
  • How organizations can make their Business Continuity Planning (BCP) strategies simultaneously resilient and responsive.

Please click here to register for the webinar.

Demand for Next-Gen Services Defining Location Strategies | Blog

Regulatory uncertainty, technological disruption, talent challenges, and a host of other issues have all played significant roles in enterprises’ and service providers’ location strategies for global services delivery over the past couple of years.

The deep-dive analysis we conducted on enormous volumes of 2018 data to develop our Global Locations Annual Report 2019 made it clear that five key trends came into play in 2019, and will continue into 2020:

  • Increased focus on digital and R&D/engineering services
  • Increase in nearshoring
  • Slowdown in headcount growth
  • Increase in onshoring by service providers
  • Growth in emerging locations.

Here’s a quick look at each of these trends.

Digital and R&D/engineering services continue to dominate

Enterprise demand for digital services and the associated R&D/engineering services compelled most global service providers to set up innovation centers and COEs to keep up with the changes in the digital landscape. And there was a significant rise in the number of R&D/engineering and digital service delivery centers – especially in APAC and nearshore Europe – as providers vie to develop data-driven, intelligent, and robust systems using automation, cloud, and AI-based capabilities.

Global services delivery is increasingly being characterized by nearshoring

In a move to rebalance and optimize their existing locations portfolio and comply with data protection mandates, both enterprises and service providers are marginally shifting from offshore to nearshore locations. Nearshore Europe experienced the greatest increase in headcount and new center setups in 2018 due to the availability of complex skills, proximity to customers in Western Europe, increased regulatory oversight, and demand for multi-lingual support.

Poland, Ireland, and Scotland will continue to dominate the global services landscape in nearshore Europe, followed by Ukraine, the Czech Republic, and Romania.

Global services headcount continues to grow, but modestly

Increasing use of automation for low complexity, high volume services is having a considerable impact on the talent landscape. While growth in digital services will lead to newer job and skill profiles, the headcount required for newer digital jobs will be significantly lower than that required for low complexity jobs, and the growth will be slower due to technological advances and the shortage of talent for new-age technologies.

Service providers continue to grow in onshore geographies

Leading service providers have been continuously growing their presence in onshore geographies. This is in large part due to increasingly stringent data protection laws and mounting pressure from clients to have local delivery centers. The United States and continental Europe continue to remain the destination of choice for setup activity across onshore locations. The lion’s share of the work delivered from these onshore centers is in IT services.

We expect the United States to continue to grow in the wake of uncertainty around visa regulations and increased pressure from clients to have local delivery centers for ease of coordination, better alignment/training, and promoting customer intimacy. And, we also expect growth in digital services to push providers to continue to expand in other onshore locations – such as Belgium and Switzerland – due to availability of skilled talent and the ability for extensive collaboration with Europe-based clients.

Growth in emerging locations for global services delivery

While use of the traditional delivery locations continues to grow, other locations are picking up steam, including:

  • Jamaica continues to grow in setups for voice services
  • Ghana and Kenya are being leveraged to support the East and West Africa regions
  • Israel is growing significantly for delivery of R&D/engineering and high-end IT services
  • Lithuania is also growing as a destination for delivery of IT (largely digital) and R&D/engineering services.

To learn more about the dynamics shaping the global services locations landscape, please read our recently published report, “Global Locations Annual Report 2019: Demand for Next-Gen Services Defining Locations Strategies.” We developed the report based on deep-dive discussions with the regional investment promotion bodies, leading shared services centers, service providers, recruitment agencies, and other market participants.

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