Category: Shared Services/Global In-house Centers

Takeaways from the International Innovation Summit 2020 | Blog

We recently partnered with the IT & Business Process Association of the Philippines (IBPAP) for its International Innovation Summit. The conference was a huge success despite prevailing uncertainties, bringing together global experts and leaders from the IT-BPM industry. The sessions were engaging and captured how the IT-BPM sector adapted to the disruptions caused by the pandemic and what lies ahead for the industry.

Here are our key takeaways from the conference.

Success factors for the IT-BPM industry

Organizations’ success will depend on how they capitalize on opportunities arising from the pandemic and how quickly they adapt to the evolving business landscape. In all forms of adversity, there is increased need for reliable leadership that puts people and customers first, and treats profit as an outcome rather than the goal. More than ever, it has become important to co-create with the client and culturally adapt to them.

Reinvent the worker, workplace, and workways

While there’s an immediate and critical need to redesign the worker, workplace, and workways to accommodate the new reality, different organizations are in different places in their comfort and readiness to adjust to the disrupted world. Hence, a single future of work strategy will not be effective for all organizations.

There are, however, some common themes for a successful future of work strategy. It should not be limited to work-from-home (WFH) enablement; it is important to consider the interplay of WFH with other decisions related to work. Organizations need to come up with an integrated approach involving the worker, workplace, and workways to adapt and progress in this dynamic environment.

Accelerate digital transformation and develop the digital workforce

COVID-19 has compelled enterprises to accelerate digitalization. While business transformation is fueled by increased adoption of digital technologies, the success of digital transformation is not rooted in technology.

A successful digital transformation initiative considers multiple factors – fostering a culture of continuous learning and innovation, embracing an agile operating model, creating a well-connected and collaborative workplace to enable higher output, among others.

At the core of accelerated digital transformation remains talent and, hence, the importance of future-proofing the workforce with digital skills. Talent will be the key differentiator, as work will follow where there is readily available skilled talent. The new digital era calls for increased focus on upskilling and reskilling, which can only be possible through a multi-stakeholder coalition of government, industry, and academia.

Rethink business resiliency 

Every business and organization is experiencing some degree of pandemic-driven disruption. The crisis has redefined the meaning of Business Continuity Planning (BCP), and organizations need to rethink their BCPs to ensure necessary resilience.

This future resiliency will be characterized by dependability on teams and leaders, creating/fortifying a nerve center that’s enabled and empowered to respond quickly to various situations, enabling organization and delivery structure, and empowering teams on the ground. There’s also an increasing need to become more agile and cooperative with competition and more consultative with clients.

A unified IT-BPM industry forging forward in the Philippines

The Philippines IT-BPM industry has shown resilience amidst the challenges arising from COVID-19. The fact that the industry was allowed to operate even during the Enhanced Community Quarantine – as these services were deemed essential – demonstrates the government’s commitment to the industry.

The Philippines will continue to remain a key destination for services delivery due to cost arbitrage and a steady supply of young and tech-savvy workers. The industry is focusing on enhancing digital capabilities and will focus on upskilling talent – for example, one planned initiative is the National Upskilling and Reskilling program, which intends to upskill one million workers over the next five years.

The country launched the Digital Cities 2025 program to promote countryside development and build IT-BPM sector resiliency. The Philippine telecom providers are working in partnership with the government to mitigate the limitations on the retail telecom infrastructure exposed by the WFH model. And the Philippines will continue to improve its infrastructure to provide a more robust ecosystem for existing and new players.

Overall, the IT-BPM industry in the Philippines is well positioned to deliver services at a large scale due to its large talent supply, strong language proficiency, attractive cost savings, robust ecosystem, and strong government support. The industry also plans to take proactive measures to address some of the challenges exposed by the pandemic. It’ll be interesting to see the developments in one of the leading global locations for IT-BPM services delivery.

Read more about Everest Group’s latest research on the impact of COVID-19 on delivery and location strategies; our perspectives on services delivery from the Philippines; and/or IBPAP.

IP Rights Triggering Change In Third-Party Services | Blog

Many US and European businesses now recognize that their third-party services agreements are over-concentrated in some locations and are bundled in key areas such as manufacturing and IP development. In some key industries, companies are starting to unbundle those services and shift that work to other locations. This will trigger a set of consequences that affect the third-party services industry, and companies using those services need to understand the decisions in this process.

Part of the issue in bundled services is that many companies went “whole hog” (to the fullest extent) into third-party service agreements that feature joint collaboration with service providers in developing intellectual property. The advantages of such a relationship seemed worth the collaborative venture and, in some cases, even an incentive risk-reward structure. But the table turned, and the advantages turned to a disadvantage. Both the service provider and the customer want IP ownership and control.

Read more in my blog on Forbes

Choosing Your Best-fit Cloud Services Delivery Location | Blog

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

Cloud Handbook for blog

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.

Africa: On the Frontier of IT-BP Services Delivery | Blog

In the last few years, for a number of reasons, there’s been a major uptick in global services delivery from Africa. The most significant driver of growth is Africa’s emergence as the next frontier for small-scale delivery centers. Another is strong government support that enables global services delivery. But there are a variety of other key forces that are making Africa a destination of choice for companies of all sizes, including some of the world’s biggest brands, such as Accenture, Daimler, Google, Microsoft, Standard Chartered, and Teleperformance.

There is less competition for talent in most locations in Africa compared to key offshore/nearshore talent hubs across leading geographies. Expansion into African cities helps organizations diversify their delivery location risk, as most locations have the ability to serve as Business Continuity Planning (BCP) locations to nearshore/offshore centers. Moving services to Africa also helps organizations differentiate themselves by capitalizing on early-mover advantage.

Other factors, such as an attractive talent-cost proposition, strong domestic demand across East and West African countries, and improving infrastructure capabilities (including rapid adoption of Work From Home (WFH) / remote working models), have improved the business case for new center set ups. For example, there’s been an increase in services maturity for delivery of key services across the region, including voice- and non-voice-based BPS services, IT services, and engineering/R&D delivery. And while most locations have low operating costs, ongoing currency depreciation and lower attrition costs across leading countries like Egypt and South Africa have helped bolster overall growth.

Trade-offs and risks

As market players prepare consider options for service delivery from Africa, they need to be cognizant of the key tradeoffs and associated risks for operating in the region, including:

  • At present, Africa is best suited to deliver transactional services. Companies seeking to support more specialized operations or judgement-intensive processes may find it difficult to operate, or they may find that they need to make substantial investments in the talent market
  • There’s a limited pool of experienced talent. Companies will need to invest in growing and developing talent locally, by training recent graduates and building a recruitment engine from the ground-up, among other options
  • The region poses potential challenges with delivery enablers (including utilities, transportation, meals/catering, and stationery providers), low quality office infrastructure, and comparatively poor connectivity to domestic/international locations
  • The business environment in East and West African countries is less favorable than nearshore Europe locations, including infrastructure quality, digital readiness, and safety and security
  • Given low talent availability, language support beyond English is limited and commands high premiums
  • The presence of key players supporting global services is limited in most African countries; the entry of a few large companies could easily congest the market and quickly increase costs

Most leveraged African countries for IT-BP delivery

Exhibit 2

Here’s a quick look at the top four global services delivery locations in Africa, by market size – largest to smallest.

#1 Egypt

Companies leverage Egypt as a hub location for multi-lingual delivery to the EMEA region, as well as delivery to the US, UK, and Australia markets. It offers an attractive cost and talent proposition to support to a wide range of functions – including voice- and non-voice business processes, IT application development and maintenance, and digital services – and high availability of talent to support English and some European languages. While it offers a favorable business environment, it has some geopolitical stability challenges.

#2 Morocco

Companies largely leverage Morocco as a spoke location for multi-lingual contact center and IT services delivery. It provides extensive support to the North Africa markets. While organizations extensively leverage Morocco to support IT services delivery, it also increasingly supports business process delivery as well, including sales, client support, HR, and F&A. French and Spanish language services continue to be in high demand, and are the most widely used for services delivery. The country offers a favorable business environment but has some geopolitical stability challenges.

#3 South Africa

Organizations continue to leverage South Africa as a global hub to support the UK, US, and Australia markets, and – in many cases – South Africa serves as a regional hub for Africa and Middle East countries. It offers an attractive talent proposition to support both transactional and judgement-intensive processes, including customer analytics, actuarial modelling, fund administration, HR, and procurement. IT services delivery has gained traction over the years, and the country boats a large talent pool to support English and multiple European languages. It has a favorable business and operating environment with no significant challenges.

#4 Mauritius

Organizations primarily use Mauritius as a spoke location to support French language delivery and a suite of services including IT services (application development, maintenance, infrastructure services), voice and non-voice transactional business processes (e.g., F&A, HR, and procurement), and analytics. French language talent availability continues to drive overall demand. The country is highly favorable from a business and operating environment standpoint and has no significant challenges.

While the global services market in Africa is relatively less mature than leading offshore geographies such as India and the Philippines, there is significant potential to tap into the domestic market across the top locations. Industry verticals including BFSI, telecommunications, and IT services continue to drive overall domestic demand. Further, with the strong government support, offshore advantage, growing talent pools, and infrastructure capabilities, several African countries offer a multi-pronged value proposition to enterprises seeking an IT-BP services delivery destination.

To learn more about the dynamics in the region, please read our recently published report Africa: Emerging IT-BP Delivery Force, which highlights the relative attractiveness and talent-cost proposition of key African locations to support global services delivery, based on our holistic and multi-faceted assessment across 10 key parameters parameters.

For more information on Africa as a global service delivery location, please contact us at [email protected] or [email protected].

Is Your GBS Organization Ready for IT Infrastructure Evolution to Enable Business Transformation? | Blog

A sustained focus on digital, agility, and advanced technologies is likely to prepare enterprises for the future, especially following COVID-19. Many enterprise leaders consider IT infrastructure to be the bedrock of business transformation at a time when the service delivery model has become more virtual and cloud based. This reality presents an opportunity for GBS organizations that deliver IT infrastructure services to rethink their long-term strategies to enhance their capabilities, thereby strengthening their value propositions for their enterprises.

GBS setups with strong IT infra capabilities can lead enterprise transformation

Over the past few years, several GBS organizations have built and strengthened capabilities across a wide range of IT infrastructure services. Best-in-class GBS setups have achieved significant scale and penetration for IT infrastructure delivery and now support a wide range of functions – such as cloud migration and transformation, desktop support and virtualization, and service desk – with high maturity. In fact, some centers have scaled as high as 250-300 Full Time Equivalents (FTEs) and 35-45% penetration.

At the same time, these organizations are fraught with legacy issues that need to be addressed to unlock full value. Our research reveals that most enterprises believe that their GBS’ current IT infrastructure services model is not ready to cater to the digital capabilities necessary for targeted transformation. Only GBS organizations that evolve and strengthen their IT infrastructure capabilities will be well positioned to extend their support to newer or more enhanced IT infrastructure services delivery.

The need for an IT infrastructure revolution and what it will take

The push to transform IT infrastructure in GBS setups should be driven by a business-centric approach to global business services. To enable this shift, GBS organizations should consider a new model for IT infrastructure that focuses on improving business metrics instead of pre-defined IT Service Line Agreements (SLA) and Total Cost of Operations (TCO) management. IT infrastructure must be able to support changes ushered in by rapid device proliferation, technology disruptions, business expansions, and escalating cost pressures post-COVID-19 to showcase sustained value.

To transition to this IT infrastructure state, GBS organizations must proactively start to identify skills that have a high likelihood of being replaced / becoming obsolete, as well as emerging skills. They must also prioritize emerging skills that have a higher reskilling/upskilling potential. These goals can be achieved through a comprehensive program that proactively builds capabilities in IT services delivery.

In the exhibit below, we highlight the shelf life of basic IT services skills by comparing the upskilling/reskilling potential of IT services skills with their expected extent of replacement.

Exhibit: Analysis of the shelf life of basic IT services skills

Analysis of the shelf life of basic IT services skills

In the near future, GBS organizations should leverage Artificial Intelligence (AI), analytics, and automation to further revolutionize their IT capabilities. The end goal is to transition to a self-healing, self-configuring system that can dynamically and autonomously adapt to changing business needs, thereby creating an invisible IT infrastructure model. This invisible IT infrastructure will be highly secure, require minimal oversight, function across stacks, and continuously evolve with changing business needs. By leveraging an automation-, analytics-, and AI-led delivery of infrastructure, operations, and services management, GBS organizations can truly enable enterprises to make decisions based on business imperatives.

If you’d like to know more about the key business transformation trends for enterprises in  IT infrastructure, do read our report Exploring the Enterprise Journey Towards “Invisible” IT Infrastructure or reach out to us at [email protected] or [email protected]

Understanding the Commercial Construct of a Build-Operate-Transfer (BOT) Model for Your Global Business Services | Blog

Transformation has become an imperative for all industries, more so during the unprecedented COVID-19 pandemic. A majority of our clients have highlighted the increasing pressure to manage their margins and balance their long-term vision and strategy with short-term needs in a post-COVID-19 landscape. One way for enterprises to achieve this objective is by re-assessing the setup model for their future Global Business Services (GBS) centers.

This blog focuses on one such setup option – Build Operate Transfer (BOT) – and its commercial underpinnings. In these uncertain times, BOT seems to be an especially relevant option, as it offers the unique advantage of lower short-term investment and a better long-term business re-prioritization opportunity. But only if the price is right.

Let’s take a closer look.

Can BOT be your business’ panacea?

In a BOT sourcing model, an enterprise can partner with a third-party service provider to build a delivery center (which includes investing capital, leasing the facility, and sourcing talent), operate it for a pre-defined period (based on the operational agreement), and allow the enterprise the option to transfer the center back to itself. The model helps avoid upfront capital investment, reduces operational risk, limits the burden of managerial and operational oversight, promotes new capabilities, and expedites speed-to-market. As it comes with an exit option, enterprises can also test the model without fully committing to it.

In fact, as part of a recent engagement, we helped a global technology firm assess the best-fit setup option for its GBS center in India. The firm opted for BOT, preferring to partner with a local service provider to reduce financial and operational uncertainties. While the BOT model’s benefits were evident from the start, a key learning from the engagement was that these benefits come at a relatively high cost. Thus, understanding the price tag is key before committing to the model.

Understanding the costs involved

While the key cost components of a BOT model can vary based on the specifics of the service contract, we outline below standard commercial practices prevalent in the market across the build, operate, and transfer stages.

In the build phase, the enterprise is either not required to invest or invests a limited amount, and vendors typically provide most of the upfront investment. In most cases, the service contract stipulates that the service provider’s investment includes setting up the facility (which includes both real estate and technology infrastructure), establishing the hiring mechanism, and laying the ground for services delivery. The service provider recovers this investment in the next two stages.

In the operate phase, the service provider charges the enterprise an ongoing fee to meet all operating expenses and day-to-day operations and to track and maintain pre-determined Service Line Agreements (SLAs). The ongoing fee includes the service provider’s margins, which are typically 2-5% higher than those in a pure outsourcing construct. The additional margin is often dependent on the scope, scale, and nature of services, the service provider profile, extent of initial investment, and lock-in period.

In the transfer phase, the service provider typically charges the enterprise a one-time transfer fee, which could vary widely – 20-30% in some cases – based on other contractual agreements, in lieu of transferring back all services and procured assets. Typically, this fee is charged as a percentage of the ongoing annual fee in the build phase, and an enterprise can pre-determine this percentage in the service contract. Beyond this, if rebadging is required, the service provider charges the enterprise a one-time transfer fee to give up employer rights on resources that are successfully rebadged.

Considering these cost elements, a BOT construct can be about 15-30% more expensive than a de novo / fully owned GBS model. Hence, each enterprise needs to consider the cost-benefit trade-off when selecting a suitable setup option for itself.

Making the move

When evaluating future GBS setups, we urge enterprises to be mindful about the overall business case and assess both the financial and non-financial aspects of the setup model. Doing so will help them understand both the costs involved and associated benefits. Our research strongly suggests that enterprises are likely to find a robust business case for the BOT model to navigate these uncertain times.

Are you looking to understand whether the BOT model would be suitable for your next GBS setup? Connect with us at [email protected], [email protected], and [email protected]

Scaled Work From Home Inevitable for GBS Organizations Following COVID-19 | Blog

GBS organizations have traditionally been reluctant to adopt work from home

Before COVID-19, most Global Business Services (GBS) organizations have been reluctant to adopt a Work From Home (WFH) delivery model, viewing it as hard to govern and only relevant for a few work types and employees. As a result, organizations primarily used WFH for Business Continuity Planning (BCP) purposes – and with less than 5% of organizations deploying WFH at any scale (i.e., 20-50% of the workforce working from home), there was limited/no focus on building an enabling ecosystem to support remote working.

COVID-19 has redefined the art of the possible

COVID-19 led to widescale (and forced) adoption of WFH in GBS organizations across verticals and geographies, as organizations were compelled to scale up WFH quickly to ensure operational continuity and prevent large-scale absenteeism. After initial challenges to ensure home infrastructures were optimal, robust, safe, and compliant with service delivery standards/regulations, most GBS organizations found that productivity did not suffer. In fact, several organizations have reported productivity gains, though the volume of these gains remains debatable. As of May 2020, more than 90% of GBS organizations were delivering services in a WFH model. COVID-19 has redefined what’s possible, truly changing global leaders’ view of WFH, as Exhibit 1 shows.

Exhibit 1: Blueprint for scaled WFH adoption in GBS – the next normal

001

When we find ourselves on the other side of this pandemic, there will be a growing appetite for more WFH adoption, with many organizations considering it a permanent model. Leading organizations, including Facebook, Google, Microsoft, TCS, and HCL, have already announced plans to adopt WFH. We expect WFH to emerge as an imperative for GBS organizations, with more than 30-40% of GBS organizations adopting scaled WFH even after lockdown restrictions are lifted.

WFH – a strategic lever for GBS to evolve delivery and operating models

Even when there is no pandemic or other external threat forcing organizations to engage a WFH model, there is a strong business case to scale it. Our assessment shows that WFH can help drive significant GBS operating cost savings (anywhere from 5-15%), improve the talent model, lower risk in the location portfolio, strengthen the GBS value proposition, and provide societal and environmental benefits, as highlighted in Exhibit 2.

Exhibit 2: Business case for WFH

002

Adopting a WFH model can drive the next wave of cost optimization for GBS. WFH can directly impact and reduce costs related to real estate infrastructure, transportation, and consumption. WFH can also reduce people-related costs by lowering attrition and increasing employee productivity. To support these gains, GBS organizations would have to invest in technology-related infrastructure such as equipment, tools, platforms, and technologies. Detailed Everest Group analysis indicates that GBS organizations can save up to 15% of their annual operating cost with 50% of the workforce working from home. They can further increase savings potential by:

  • Increasing process standardization;
  • Reducing permanent real estate;
  • Increasing cloud adoption;
  • Creating remote sites in low-cost locations;
  • Employing automation; and,
  • Using digital collaboration tools.

WFH can help GBS organizations improve talent acquisition and engagement. For the current workforce, WFH can improve GBS employee retention, improve employee productivity due to reduced stress (such as eliminating the commute) and office-based distractions, and help strengthen branding as a socially conscious organization. For the future workforce, WFH allows the GBS organization to improve the speed and effectiveness of talent acquisition, accessing talent far from its physical site locations, as well as by leveraging the gig economy.

Beyond these benefits, WFH reduces GBS concentration risk without necessitating a change in locations portfolio. Some GBS model features, such as greater control and governance, better protection of IP and domain knowledge, and ease in driving long-term transformation, may be better suited to the WFH model. Thus, GBS organizations can leverage adoption WFH to further strengthen their value proposition to their parent enterprises.

Such a strong business case seems to indicate that WFH is a win-win-win for enterprises, GBS organizations, and the workforce. As a result, it seems inevitable that WFH will become an integral part of the services delivery model.

However, before scaling WFH, organizations must understand the interplay of various decision drivers to determine overall potential to scale it. WFH adoption does not come without challenges, such as its implications for employee development and expectations, social capital, leadership development programs, the role of front-line managers, and work-life balance. Further, there are several regulatory aspects – such as data security, labor and employment laws, SEZ norms, and current limitations of the Shops and Establishment Act or telecom departments – that may hinder scaled WFH. Stay tuned – we will cover these aspects in our subsequent blogs.

For more details on this topic, see our “Playbook: Integrating Work From Home in the Global Business Services (GBS) Delivery Model.” Or reach out to us with your perspectives and experiences, write to us at [email protected] and [email protected].

Paradox Of GBS / GIC Marketplace Due To COVID-19 Crisis | Blog

American politician Rahm Emanuel advised, “You never want a serious crisis to go to waste.” As companies begin to exit the COVID-19 crisis, they look at the business world through new eyes. In a recession, they need to reduce costs. Further, most employees now work from home. Together, these factors, forced by the pandemic, cause boards of directors and CXOs to ask, “How can we operate as a leaner, more competitive company structurally?” But they look at more than how to operate more cost-effectively. They look at how they can add more strategic value in their operations.

Read more in my blog on Forbes

The Silver Lining in the Current Crisis: Retail and CPG Global Business Services Centers Seizing Opportunity | Blog

The recent months have been challenging for retail and Consumer Product Goods (CPG) firms due to the COVID-19 outbreak, with the industry suffering from both demand and supply shocks. However, this situation is actually a blessing in disguise for many shared service centers or Global Business Services (GBS) centers, which have seized the opportunity to showcase their capabilities to adapt to newer and more agile operating models.

As we discussed in detail in an earlier blog, retail and CPG GBS centers have evolved over the years to provide support across the value chain, delivering core processes such as sales and marketing and supply chain management. And digital services increasingly core to service delivery. In fact, about 40% of all new retail and CPG GBS set-ups in the past two to three years have been centered around digital capabilities, analytics and automation technologies in particular.

Many GBS centers have gained confidence and visibility across their enterprises during these turbulent times. In one example, a CPG firm’s GBS center swiftly moved to a work-from-home delivery model, while simultaneously helping its service provider get back on its feet by supplying spare laptops and other assistance. The center also took on additional activities from other parts of the enterprise, completing complex tasks such as quarter-close and year-close using a work-from-home construct – a first for the entire enterprise.

The disruptive environment provided many retail and CPG GBS centers the opportunity to elevate the support they provide to their enterprises. We believe these GBS centers can have an impact in a variety of ways, three of which we describe below.

Retail CPG future

Strengthen support across the value chain

With the re-orientation of consumer behavior and supply chain disruptions, retail and CPG enterprises are likely to adjust several elements across the value chain – from supply chain and logistics to e-commerce architecture. GBS organizations are well placed to lead initiatives related to the revised value chain such as managing e-commerce webpage design, AI-driven customer sentiment analysis, and pricing optimization. The sharp increase in online purchasing also increases the scope of delivery opportunity in areas such as fraud detection, identification of counterfeit products, integrated cashless payment systems, and promotion management, all of which have been in nascent stages of adoption to date.

Expand digital support

In the short run, GBS centers are likely to continue to concentrate on established technologies such as analytics and automation to provide robust solutions in areas such as demand forecasting and customer retention. Supply chain analytics, for example, will become imperative for the organizations. In another example, a leading CPG company’s India-based GBS center is using advanced analytics to help its company reduce customer churn and adopt more targeted marketing practices.

Some mature retail and CPG GBS centers, as part of their longer-term strategy, are looking into technologies such as computer vision, IoT, and Augmented Reality (AR) or Virtual Reality (VR). A few large chain retailers have started to implement smart IoT-based solutions for better warehouse management, which has helped to increase staff efficiency, reduce error rates, and reduce turnaround time.

Ride the disruption wave and adopt newer operating or business models

Many GBS organizations are modifying their current workforce and governance strategies – testing virtual/remote working models as alternatives to locations/BCP strategies, deploying a wider array of metrics to measure value beyond the cost benefits, taking end-to-end responsibility for specific services or technologies/platforms (cultivating an intrapreneurial mindset), and identifying opportunities to better collaborate with external ecosystem, to name a few. We are likely to see structural and governance changes in the next 12 to 18 months as GBS organizations look to integrate better with the enterprises as strategic partners.

The virus has impacted some enterprises more than others. Based on our recent research of retail and CPG enterprises with GBS centers in offshore/nearshore locations, about 60% of retail/CPG enterprises (those that are considered “non-essential,” or are in a single retail brand) are likely to face increased cost pressures, primarily driven by industry headwinds. In the immediate term, these enterprises are likely to be more selective in terms of strategic investments, and their GBS organizations will need to be proactive in adjusting their operating models, adjusting workforce strategies, and accelerating delivery to provide higher value add.

The next 12-18 months is sure to be a turbulent – but transformational – time for GBS centers; their roles are likely to change. Keep an eye out for our upcoming report on the next wave of evolution for retail and CPG GBS for more details. And reach out to Bharath M or Samartha Agrawal if you have questions or comments.

Leveraging Tier-2 and -3 Locations to Strengthen Business Continuity Planning | Blog

It’s time for a fundamental rethink in the way companies approach their Business Continuity Planning (BCP), in general, and their locations strategy in particular. More than 70 percent of enterprises leverage only a single – usually tier-1 – location in one country for global business services delivery, according to our analysis. And even for companies that leverage tier-2/3 locations, deployment is the highest at their tier-1 location. This deployment model not only limits the full value they can achieve from location diversification, but also significantly increases their BCP risk. Let’s take a deeper look at this.

As our recent blog on unlocking value from tier-2/3 locations pointed out, with tier-1 locations fast maturing and saturating, enterprises may soon have to factor in tier-2/3 locations to minimize risk, capitalize on the cities’ advantages, and ensure business continuity. Leading co-working players are also expecting a rise in real estate demand in tier-2/3 cities, and planning to expand to these locations.

In India, in particular, a leading global services delivery location, companies that deliver Global Business Services (GBS) and have leveraged tier-2/3 locations as part of their location strategies (such as IBM and Tata Consultancy Services) have benefited significantly from a BCP standpoint by successfully diversifying their:

  • Concentration risk: Multi-city location strategies, coupled with workload flexibility across delivery centers, have helped minimize prolonged disruption during the pandemic.
  • Delivery locations risk: Tier-2/3 cities help diversify the location risk and also face lower macro-economic and political risk than tier-1 locations, which adds to their viability.
  • Functional risk: Many firms, such as Capgemini, leverage tier-2/3 locations as spoke or support centers in a hub-and-spoke delivery model network. In fact, they don’t shy away from distributing highly critical services and processes across tier-1 and -2/3 locations to reduce the functional risk.

And it’s not just the risk diversification advantage – our client interactions have revealed that leveraging tier-2/3 locations across India can help facilitate business continuity during the pandemic in the following ways:

  • The spread and impact of the virus is concentrated in major tier-1 locations, which account for ~40 percent of the total cases in India. In contrast, most tier-2/3 locations are largely unaffected, and only about 15 percent of them are classified as red zones, or areas with high active cases of COVID-19 and a high doubling rate. Thiruvananthapuram and Kochi in Kerala, Visakhapatnam in Andhra Pradesh, Bhubaneshwar in Odisha, and Trichy and Coimbatore in Tamil Nadu are some of the tier-2/3 locations designated as orange/green zones. Thus, restrictions are likely to be relaxed or lifted earlier in those areas, with a faster return to business as usual.
  • The resilience and back-to-work rate for tier-2/3 locations are higher, as they’re easier to traverse, and employees typically live near offices, unlike in most tier-1 cities, where employees typically rely on public transport to go to work
  • Most firms that operate in tier-1 locations have a considerably large pool of migrant employees who have returned to their native towns/cities in the light of the lockdown and might not be willing to return to work immediately, given the risks.

At the same time, to unlock the full scale of BCP benefits from tier-2/3 cities, firms need to ensure certain baseline factors to facilitate business delivery:

  1. They need to make sure they have ready, skilled, and trained staff for all critical processes in secondary locations, as it’s difficult to transfer employees from one city to another in the event of an emergency.
  2. They need to establish leadership representation in these locations to better govern and manage the increasing workload.
  3. They need a seamless communication system to facilitate data accessibility and transfer.
  4. They should simplify and redesign their processes to reduce handoffs, decision points of contact, and people dependence.

 

We’d love to hear about your BCP experience with tier-2/3 locations and thoughts on the viability of these locations in the coming years. You can also read our blog on “The Coming of Age of India’s Tier-2 and -3 Service Delivery Locations” to understand the key drivers and challenges inherent to tier-2/3 locations to develop your own locations strategy. Please share your inputs with us at [email protected], [email protected], or [email protected].

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