Category: Shared Services/Global In-house Centers

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.

Seven Key Global Services Market Developments in 2019 and the Outlook for 2020 | Blog

The global services industry saw a dramatic shift in 2019 across multiple dimensions, described in detail in our Market Vista™ Annual Report, which is based on an assessment of 1,800+ annual outsourcing deals, 550+ new delivery center setups, GIC market activity, trends in digital adoption, and other developments across 30 leading service providers.

Our research identified seven key global services market developments in 2019.

  1. After a significant uptick in 2018, the number of outsourcing deals declined marginally in 2019, primarily driven by a decrease in IT outsourcing. Business Process Outsourcing (BPO) deals grew.
  2. Short-term deals rose as a percentage of overall deals, driven by growth in outsourcing among small companies, an increasing share of digital services-focused deals, and global uncertainty resulting in apprehensions among buyers who are now signing smaller contracts.
  3. Global Business Services (GBS) center setups hit an all-time high, driven largely by an increase in setups by small and mid-sized enterprises. We also saw a lot of activity in R&D/engineering center setups.
  4. The share of digital-focused outsourcing deals far exceeded pure traditional services deals, with strong demand for cloud and automation services. GBS center set-up activity was also driven by digital services with automation, analytics, and IoT being the most dominant.
  5. We saw an increase in onshore delivery center set-ups by both enterprises and service providers. While the Asia Pacific region continues to lead in offshore and nearshore location activity, the Middle East and Africa saw significant activity growth.
  6. Tier-2/3 locations experienced rising activity, as both GBS centers and service providers increasingly explore smaller cities, especially in mature markets.
  7. Offshore-heritage service providers saw higher revenue and employee headcount growth than did global service providers.

Turning our attention from the past to the future, let’s take a look at what these shifts may mean for the global services industry – and your organization – in 2020.

  1. Uncertainty will rule in 2020 driven by environmental changes, geopolitical and macroeconomic concerns, business model disruptions, rapidly emerging technologies, and, most importantly, the impact of COVID-19. This uncertainty will require organizations to be increasingly agile in order to be able to respond quickly to changes. Driving agility will require a comprehensive shift across multiple dimensions, such as organization culture and people strategy, and a deliberate change to operating models.
  2. The economic slowdown caused by COVID-19 disruptions will have multiple implications for the global sourcing industry:
    1. Weakening financial performance resulting in significant cost pressures across organizations. Rapid and radical cost takeout will become a top priority for enterprises.
    2. A new focus on risk, which will force enterprises to reassess their global sourcing strategies and service provider portfolios.
    3. Accelerated technology adoption to unlock the next wave of cost savings and drive resiliency.
    4. An evolving role for GBS to provide higher value-add services to help mitigate the impact of recession. Simultaneously, financial pressures will result in divestitures of GBS centers that operate as a typical service provider.
  3. The global services market outlook remains uncertain across locations, driven by global macroeconomic and geopolitical concerns and the COVID-19-caused slowdown.
  4. The Center of Excellence (CoE) model will grow within GBS centers as they focus intentionally on building depth versus merely expanding breadth of services. Further, CoEs will act as powerful enablers to revise and execute the required shift in the GBS-parent relationship and help blur the boundaries between the parent and GBS.
  5. As organizations increasingly realize the benefits of various strategies such as offshoring, cost optimization, and automation, they will need to boost their focus on workforce productivity. There are multiple levers organizations can pull to enhance workforce productivity, such as optimizing active time, increasing efficiency, and improving effectiveness/quality.
  6. Customer experience is a key priority for both enterprises and service providers, and they plan to invest in technologies and capabilities to improve customer experience, even during the economic downturn.

For more details on these developments and the 2020 outlook – and to understand the implications for your organization – please see our report Market Vista™: 2019 Year in Review and Outlook for 2020.

What Are the Characteristics of Truly Innovative Global Business Services Organizations? | Blog

To gain – and retain – competitive advantage, enterprises are increasingly tapping their Global Business Services (GBS) centers to build innovative, future-ready capabilities.

But what are the characteristics of truly innovative GBS organizations? What sets a small handful of GBS groups – those that we call Pinnacle organizations – apart from the rest? How have they succeeded in generating innovation-oriented business outcomes? To find out, we analyzed 51 GBS centers across diverse industries and geographies.

In this blog, we share a few of these world-class GBS organizations’ distinguishing characteristics. You can find the complete analysis in the full report, Innovation in GBS | Pinnacle Model™ Analysis.

Recalibrated talent strategy with a special emphasis on developing a culture of innovation

As part of their talent management strategies, Pinnacle GBS centers:

  • Invest significantly in upskilling/reskilling programs for their teams
  • Strongly emphasize education and awareness of innovation’s capabilities and benefits
  • Leverage multiple levers to foster an inn­­ovation culture and mindset among their employees
  • Recognize highly innovative employees/teams with non-financial rewards
  • Promote a spirit of intrapreneurship to give employees ownership of their innovation ideas
  • Conduct innovation talks, ideathons, and hackathons to help embed an innovation culture throughout the group

One example we found in the course of our research was a leading electronics, hi-tech, and technology GBS center that has trained about 40 of its employees to work as in-house intrapreneurs responsible for driving and owning their own innovation ideas. This approach not only sends a strong message about the important role innovation plays in the center, but also helps institute a start-up culture and make the workforce more agile and lean.

Proactive proofs of concept and solutions

Pinnacle GBS organizations have recognized that proactively creating their own proofs of concept (POCs) and innovation solutions is one of the vital ways they can evolve from cost enablers to strategic partners, and gain buy-in from their parent companies to drive and support their innovation agendas. For example, one Pinnacle GBS center proactively initiated an innovation-themed accelerator program focused on social entrepreneurs as a part of its parent’s corporate social responsibility initiative. It leveraged this program to showcase its capability and gain buy-in from stakeholders within the parent organization to take a high degree of ownership over the corporate innovation program and drive the organization-wide innovation agenda. Today, the GBS center has significant ownership in the entire innovation journey – from ideation and concept testing to detailed design and development.

A dedicated innovation fund

Pinnacle GBS organizations have realized that a formal and dedicated innovation budget – rather than an ad-hoc or informal one – is essential to drive innovation and achieve long-term success. A dedicated fund introduces more structure to innovation initiatives and ensures that innovative ideas don’t get stuck in the pipeline but instead receive timely and necessary funding. For example, a leading financial services GBS center extensively leverages its centralized GBS innovation budget to drive innovation-focused upskilling and reskilling programs for its innovation workforce. Additionally, it utilizes this fund to drive innovation initiatives at the ideation stage. Then, as the idea progresses to the pilot and development stages, the business unit within the GBS center that owns the idea must generate the requisite funding from its BU-specific innovation fund to drive the idea further.

We’ll be taking a deep dive into our analysis on how Pinnacle GBS centers are building out their innovation capabilities in our May 7, 2020, webinar, How GBS Can Leverage Innovation to Prepare for the Economic Downturn. In it, we’ll discuss:

  • The characteristics of Pinnacle GBS centers
  • Why what they’ve achieved to date is just the tip of the innovation iceberg
  • How they’re likely to build on their current foundation and penetrate deeper into their organizations with ever more complex and value-generating innovative solutions
  • Popular myths – and debunking insights – surrounding innovation delivery from GBS centers

Please reach out to us at [email protected] or [email protected] if you’d like insights on how your GBS organization’s innovation capabilities stack up against the competition, or want more information on the webinar. Click to register for the webinar.

 

Will COVID-19 Ease the Relentless War for Talent? | Blog

While some people in the global services industry think that large scale unemployment and the slowdown in growth due to the COVID-19 pandemic may reduce the talent demand-supply gap, we wholeheartedly disagree. Indeed, we believe that strategic workforce planning has become even more critical for the global services industry.

Here are four reasons why organizations need to accelerate their workforce initiatives right now.

Talent shortages will become acute

A survey we conducted in early 2020 found that, even before the COVID-19 crisis, 86 percent of enterprises considered the talent shortage a key barrier to achieving business outcomes. This situation will further exacerbate. It’s true that the impending economic downturn could lead to even more unemployment and oversupply in the talent market. However, the available skills profiles may not necessarily match organizations’ current and future requirements, especially because highly skilled talent is expected to be retained even during downsizing. Increasing focus on automation and digital transformation will further widen the demand-supply gap for skills, making it difficult for organizations to source suitable skills internally or in the open market. The prevailing circumstances (e.g., the lockdown, financial distress, and health issues) may impact overall talent employability in the open market, further compounding the talent availability issue.

Rapid digital transformation is inevitable, and it will intensify the demand-supply gap

COVID-19 has accelerated digital transformation across organizations. It has not only reinforced the utility of tech-enabled platforms and advanced automation for seamless service delivery during mandatory Work-From-Home (WFH) protocols, but also enabled organizations to react to the evolving business environment and customer needs faster. The impending budget cliff and business model changes will further push organizations to prioritize digital transformation, which will have implications on the talent needed both to drive this change and to deliver services after transformation. Demand for emerging skills will spike even faster, again creating the need for reskilling, alternative talent models, and productivity enhancement. We are already seeing a spike in hiring by companies like Amazon and Google. Some firms are seeing this as an opportune time to acqui-hire – or acquire startups primarily for their talent. Leading global banks, healthcare firms, and manufacturing firms are rethinking their talent strategies.

Supposedly foolproof location and BCP strategies did not work in the face of this pandemic

COVID-19 has exposed key issues with enterprises’ and service providers’ existing locations strategy and Business Continuity Planning (BCP) approaches. Nearly three-quarters of enterprises that have offshore/nearshore GBS centers operate in only one location. Even enterprises with multiple GBS centers have a high concentration of talent in their largest center. Others have developed centers of excellence with large portions of their workforce for a specific function consolidated in a few locations. Less than 10 percent of GBS centers were truly prepared for a seamless WFH model. Companies will need to re-evaluate their redundancy matrices and location/portfolio mixes to achieve a more robust BCP. Some seemingly obvious responses to locations portfolio questions may not apply anymore.

WFH is here-to-stay

A 2017-18 survey by the Bureau of Labor Statistics revealed that nearly 30 percent of the American workforce could work remotely. The extended lockdown in the near term and a high utilization, once the COVID-19 crisis has abated, will likely make WFH an integral component of the overall service delivery model. This change will have significant talent implications – motivation, employee engagement, performance metrics, reporting metrics, communication protocols, and collaboration – which organizations will need to proactively address to optimize productivity and enhance output.

COVID-19 has precipitated a fundamental shift in the way we work. There are underlying opportunities for enterprises and service providers that proactively adapt to the new normal. We believe there are four immediate steps that enterprises must take:

  • Review your enterprise global workforce strategy
  • Develop a roadmap for skills development initiatives
  • Review your locations portfolios and BCP strategy
  • Build a playbook for integrating WFH and crowdsourcing into your services delivery models

We’d love to hear your thoughts on how the COVID-19 pandemic is impacting talent strategies. Please share with us at: [email protected], [email protected], or [email protected].

The Evolution of the Automation CoE Model – Why Many GBS Centers Are Adopting the Federated CoE Model | Blog

Automation CoEs in Global Business Services (GBS) centers or Shared Services Centers (SSCs) have evolved over time. Mature GBS adopters of automation have made conscious decisions around the structure and governance CoEs, evolving to extract maximum value from their automation initiatives. Some of the benefits they have hoped to gain from the evolution include:

  • Faster scaling
  • More efficient use of automation assets and components, such as licenses and reusable modules
  • Better talent leverage
  • Greater business impact

The typical CoE model evolution

CoE models generally evolve from siloed model to centralized and then to a federated:

Siloed model – kick starting the journey

Most GBS centers start their automation initiatives in silos or specific functions. In the early stages of their automation journeys, this approach enables them to gain a stronger understanding of capabilities and benefits of automation and also to achieve quick results.

However, this model has its limits, including suboptimal bot usage, low bargaining power with the vendor, lower reusability of modules and other IP, limited automation capabilities, and limited scale and scope.

The centralized model – building synergies

As automation initiatives evolve, enterprises and GBS organizations recognized the need to integrate these siloed efforts to realize more benefits, leading to the centralized model. This model enables benefits such introducing standard operating procedures (SOPs), better governance, higher reusability of automation assets and components, optimized usage of licenses and resources, and enforcement of best practices. This model also places a greater emphasis on a GBC-/enterprise-wide automation strategy, which is lacking in the siloed model.

However, this model, too, has limitations, suffering slow growth and rate of coverage across business units because the centralized model loses the flexibility, process knowledge, and ownership that individual business units bring to the bot development process.

The federated model – enabling faster scaling

The federated model addresses both of the other models’ limitations, enabling many best-in-class GBS centers to scale their automation initiatives rapidly. In this model, the CoE (the hub) handles support activities such as training resources, providing technology infrastructure and governance. Individual business units or functions (the spokes) are responsible for identifying and assessing opportunities and developing and maintaining bots. The model combines the benefits of decentralized bot-development with centralized governance.

The federated model has some limitations, such as reduced control for the CoE hub over the bot development and testing process, and, hence, over standardization, bot quality and module reusability. However, many believe the benefits outweigh the drawbacks.

The three CoE models are described in the figure below.

Automation Adoption in GBS centers and the Rise of the Federated CoE Model

The table shown below shows how the three models compare on various parameters.

Comparison of salient features benefits and limitations each CoE model

Why GBS organizations are migrating to the federated model

There are several reasons why GBS centers are moving to the federated model, as outlined below.

  • The federated model helps to better leverage subject matter expertise within a business unit. With bot development activity taking place within the BU, the federated model ensures better identification of automation opportunities, agile development, and reduced bot failures
  • The federated model leads to efficient resource usage. Centralization of support activities ensures: efficient use of resources, be they human, technology, reusable modules, licenses, etc.; standardization; and, clear guidance to individual business units
  • The federated model facilitates development and sharing of automation capabilities and best practices, which helps in the amassing of standardized IP and tacit knowledge important for rapid automation scaling

Federated model case study

A leading global hardware and technology firm’s GBS center adopted the federated CoE model, which houses the CoE hub, in 2017. In the three years since, it has grown to over 400 bots across more than 20 business units in a wide variety of locations, and saved more than $25 million from automation initiatives. The CoE hub has also successfully trained over 1,000 FTEs from technical and business backgrounds on bot development. As a result, firm-wide enthusiasm and involvement in the GBS center’s automation journey is high.

Transitioning to a federated CoE model has helped many GBS programs scale their automation initiatives rapidly. For more details, see our report, Scaling Up the Adoption of Automation Solutions – The Evolving Role of Global In-house Centers or reach out to Bharath M  or Param Dhar for more information on this topic.

The Evolving Role of Retail and CPG Shared Services Centers | Blog

Over the past few years, India has emerged as an attractive destination for both the expansion of existing shared services centers – or Global In-house Centers (GICs) – and new GIC setups by retail and CPG enterprises. This change is due largely to access to skilled talent, especially for digital services, and the relatively low operating costs. Today, India accounts for 20-25 percent of offshore retail and CPG GICs, of which roughly 50 percent were set up in the last five years.

While these GICs initially focused on the delivery of services such as IT, HR, F&A, and contact center, the need for digital integration to obtain faster results and innovation is driving retail and CPG GICs to help deliver core operations by leveraging next-generation technologies such as AI, advanced analytics, and automation.

In recent years, India-based retail and CPG shared services centers have started to deliver complex, judgment-intensive work such as sourcing and procurement, merchandising and inventory planning, sales and marketing, supply chain and logistics, and customer experience management; this work was earlier managed in-house by enterprises themselves.

In fact, best-in-class GICs have been aggressively pushing the envelope by building capabilities to deliver niche/complex processes for core operations. For instance, an American multinational CPG that set up its GIC in India in 2019 focuses only on the delivery of core services such as consumer science, packaging, and product development from the facility.

And that’s only one among many examples of enterprises leveraging shared services centers to deliver core functions. In the sales and marketing function, for example, India-based retail and CPG GICs are delivering some of the most niche/complex processes within the function. Here’s a look at these processes and the extent of GIC adoption for process delivery.

Processes managed by India based retail and CPG GICs

As you see, India-based centers are increasingly delivering processes like customer engagement and site merchandising, and there’s significant delivery potential for processes such as promotion management, marketing communication, and channel management.

Of course, the availability of skilled talent is key for the successful delivery of these core processes from India. Even when most companies globally face an acute talent shortage, best-in-class India-based GICs have been quick to scale up niche talent to deliver both core operations and digital services by hiring resources from adjacent industries. For instance, an American retailer’s shared services center has hired employees with TV, visual media, and digital content experience from the domestic advertising industry to support less-adopted processes such as promotion management and marketing communication. The GIC plans to establish structured upskilling programs to familiarize these new hires with global delivery operations.

Over the coming years, we expect this trend of GICs delivering core operations to continue and, in fact, increase significantly. Doing so will drive accelerated innovation, as the centers’ talent will have the advantage of deeper business context.

To learn more about the growing synergies between enterprises and GICs, please reach out to Bharath M or Ranjith Reddy.

A World Caught Unaware: Business Continuity and Disaster Recovery in the Wake of COVID-19 | Blog

This is the fourth in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.

A virus originating in China has brought life to a standstill around the globe – and that includes service providers and shared services centers or Global In-house Centers (GICs). From delays in procuring office supplies (most of them sourced from China) and rescheduling of important meetings/events to the threat the virus poses to human capital, the risks have pushed most firms to revisit their business plans and potentially prepare for another worldwide recession. The virus spread has also been a wakeup call for providers and shared services centers, testing their preparedness in terms of business continuity and disaster recovery. In fact, it has made some firms comprehend the need to balance their cost-competitive mindset with a risk-competitive one.

Some organizations are well prepared and offer examples for others to follow. In this blog, we take a look at some of these noteworthy business continuity and disaster recovery measures, based on our conversations with more than 20 GICs and service providers globally. Strategies that stand out in particular include:

  • Site-based strategies for senior leadership – A few firms have balanced their leadership positions across centers and geographies to ensure that all senior roles for critical processes are not based in a single location
  • Headcount thresholds – Some firms have thresholds on the maximum number of Full Time Equivalents (FTEs) in a particular location – both at a city level and country level
  • Dedicated resilience management groups – Some firms maintain a full-fledged business continuity team to manage crises and their responses
  • Robust work placement strategies – A number of firms ensure that critical activities are spread across locations

For example, a UK-headquartered bank (with GICs across multiple locations) has an intra-city, inter-city, and inter-country Business Continuity Planning (BCP) strategy. The bank follows a robust BCP operating procedure by: (A) assessing a service’s/process’ business impact /criticality if work were to stop due to reputational, financial, or customer-related reasons, among others); and, (B) identifying the work location based upon criticality – highly critical services/processes are typically distributed across two countries. To understand this better, the company invokes:

  • Intra-city BCP for extremely short-term events, such as shutdowns for three to four hours due to maintenance work at a site
  • Inter-city BCP for short-term or limited impact events affecting a city, for example, transport strikes
  • Inter-country BCP for critical events such as natural disasters. For instance, during the recent floods in Chennai, India, the bank moved critical processes such as risk and analytics to other GIC locations, such as Poland

Disaster Recovery and Business Continuity in Service Delivery Centers

In the aftermath of the coronavirus outbreak, we are likely to see significantly strengthened business continuity plans – those that take into account talent availability, work placement strategy, infrastructure availability, and newer metrics to manage performance. In particular, we encourage enterprises to explore answers to the following questions to develop robust business continuity plans:

  • Can the virtual model emerge as an effective alternative to physical locations? What does it mean from an infrastructure perspective?
  • How can automation solutions be deployed to manage down time?
  • What additional features need to be added to office communication tools and applications to enhance collaboration?
  • Is there a need to adopt new metrics to monitor resources working from home for an extended period of time? What should these metrics be? How will they co-exist with privacy laws?

Visit our COVID-19 resource center to access all our COVD-19 related insights.

Coronavirus Service Delivery Update | Blog

This is the third in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.

Over the past two to three weeks, media focus has shifted away from China, where the growth rate of new infections has slowed markedly. Hubei province remains the epicenter of the disease, but 8 of the 10 provinces that make up that core group of provinces where the disease has been most prevalent, have seen no new cases for several days. Hubei and the coastal province of Zheijang alone among the 10 are reporting new positive cases. There have been no public reports of service delivery interruption from any of the 44 Global In-house Centers (GICs) inside the core group of 10 provinces. Indeed, the last week has seen a steady return to work outside Hubei province.

The new global focus is on a group of high-risk countries including South Korea (Daegu and Cheongdo), Iran and Italy (specifically the whole of the north of the country and not just the provinces of Lombardy and the Veneto), and on a secondary group comprising Japan, Singapore, Laos, Thailand, Vietnam and Myanmar.

Data from Everest Group Market Intelligence (EGMI) shows that there are 470 Global Inhouse Centers (GICs) – or shared services centers – and 196 service provider delivery centers located in China and across these additional nine countries. Based on travel advisory and media reporting of regions that are more or less severely impacted, China still has the greatest exposure to delivery risk, with 73 delivery centers in high impact areas, and a further 272 in areas that are likely seeing little or no impact. Italy has 14 service provider delivery centers in the high-risk Northern provinces. South Korea has one or two GICs in Daegu, the city most affected by coronavirus infections. See details by country and sector in the two tables below.

exposure by country

exposure by sector

In view of restrictions imposed by governments, or companies implementing business continuity protocols, or simply out of fear of contracting the virus through proximity to large numbers of people, it is highly likely that most, if not all, of the delivery centers in high impact areas are closed and will remain so until further notice.

Many multinational corporations with offices in China and Hong Kong have imposed either complete travel bans (Amazon, Apple, Citigroup, Credit Suisse, Ford, Goldman Sachs, Google, HSBC, JP Morgan, LG, Salesforce) or have banned non-essential travel (GM, Johnson & Johnson, P&G, PwC, Siemens) to and from mainland China, Italy, Japan, and South Korea. In some cases, cross-border travel has been suspended indefinitely.

The same imposition of a work from home policy for all staff of multinationals in China and Hong Kong, which is beginning to ease, is now the norm for many businesses in Milan, the capital of Lombardy. The cancellation of meetings or conferences involving even modest numbers of international participants is now a daily occurrence.

The outward spread of the disease has also started to impact major service delivery locations, especially India, which comprises 40 percent of the world’s global services delivery capacity. As of March 6, 2020, 30 Covid-19 cases have been confirmed in the country. Initially, only passengers from high-risk countries were being checked at airports, but the government has implemented universal screening for all passengers flying into the country. Multiple companies such as Cognizant, PayTM, Wipro, and KPMG have temporarily closed select offices in Delhi NCR and Hyderabad and stepped up their employee safety efforts. In addition to encouraging the remote working model, these efforts include disinfecting and sanitizing office spaces, putting hand sanitizers at entry and exit points, discouraging staff from conducting physical meetings, restricting the entry of outsiders in office premises and distributing N95 masks amongst employees.

We continue to monitor these locations.

Visit our COVID-19 resource center to access all our COVD-19 related insights.

Innovation in 2020: Shared Services Can’t Fake it Anymore! | Blog

At the very beginning of 2020, we launched our Pinnacle Model analysis focused on innovation in shared services centers (SSCs)…also referred to as Global In-house Centers (GICs). This ground-breaking research identifies the characteristics of Pinnacle GICs™ – those global shared services centers that stand apart from others for their business outcomes and capability maturity. We study these best-of-the-best GICs to identify common trends among them, including the differentiated capabilities they’ve built to support and drive enterprises’ innovation agendas, and the best practices they’ve adopted to enable the desired transformation and overcome any operational challenges.

Here’s a look at two of the top trends we’ve identified thus far from our current analysis of leading GICs spread across offshore and nearshore geographies.

Time to achieve the expected ROI

Realizing fast return on investment (ROI) is key to making an innovation agenda a win-win for both SSCs and their parent organizations. A quick ROI enables the GIC to gain the influence it needs to serve as an end-to-end innovation strategic partner to the parent enterprise. Our emerging findings show that approximately 90 percent of GICs/SSCs achieve expected ROI in less than 24 months.  If you’re a GIC leader, you can confidently use this number to boost your parent enterprise’s confidence in further leveraging your team and its capabilities to drive its innovation agenda.

Extent of external ecosystem collaboration

GICs have a unique combined insider’s and market view that enables them to provide strategic insights to orchestrate enterprise-wide innovation. Our emerging analysis shows that Pinnacle GICs have invested extensively in and partnered with start-ups and academic institutions to source innovation ideas across their product and services portfolio. They leverage these partners across various stages of the innovation cycle, particularly in the idea generation and concept testing stages. Additionally, Pinnacle GICs strongly embrace start-ups to help drive an innovation-focused culture across the entire organization.

We’re winding down our analysis of GICs’ innovation journeys and would love to incorporate your views into our report. Please click here to participate in this study. When we’ve finished our analysis, we’ll send you a complimentary report that will show you where you stand relative to the industry’s crème de la crème.

Retailers’ Evolving Sourcing Strategy Industry | Blog

The National Retail Federation, industry analysts, and economists alike have debunked the idea that the retail industry is struggling, dying, or on the verge of an apocalypse. While some retailers and CPG manufacturers have sung their last swan song, many are dramatically transforming their businesses to effectively compete – and indeed, thrive – in the dynamically changing marketplace.

As part of this transformation, retail and CPG firms are evolving their sourcing strategy for: industry-specific processes including sourcing and procurement, merchandising and inventory management operations, sales and marketing, and customer experience; and horizontal processes like IT services, digital services, compliance and quality, and corporate functions such as F&A, contact center, and HR.

Global sourcing maturity across functions

Our recently released Industry Insights – Retail and CPG report looks at the changing shape and flavor of sourcing in the industry.

Here are the four key takeaways from the report.

Key takeaways

The in-house model is gaining ground

Historically, retail and CPG firms leveraged third-party service providers to deliver a broad range of services such as IT, F&A, and HR. However, in the past several years, many have invested in building what we call Global In-house Centers, or GICs. These in-house shared services centers (SSCs) give them more flexibility and control over the quality of work and reduce their costs. And they’re not only delivering standard back-office processes; they’re also building strong capabilities in areas such as store layout management, pricing optimization, custom application development, financial planning and analysis, customer sentiment analysis, predictive threat monitoring, and other digital services. For example, a US-based retail SSC in Bangalore, India, is developing a new order management system to scrape competitors’ websites for pricing data.

Service providers are moving up the value chain

Just like SSCs, third-party service providers in the retail and CPG stage are also upping their game. They’re not only delivering rules-based and transactional tasks, but also much more advanced services like cybersecurity, blockchain, ERP implementation and maintenance, and legal services.

Delivery destinations are similar to other industries

Retail and CPG firms choose their sourcing delivery destinations based on their competencies, just as enterprises in other industries do. They typically leverage locations in Central and Eastern Europe (CEE), such as Poland, for marketing and analytics, and India for business process services – including those specific to the retail industry – IT and digital services. The Philippines and other APAC countries offer capabilities such as customer service (both voice and non-voice) and regional language delivery of accounting services, while LATAM primarily supports the U.S. market.

As is the case with most industries, India has emerged as the most popular offshore location for retail companies’ SSC setups, delivering both business process services and IT/digital services (product analytics, application design and development, R&D, etc.) to North America and Europe. In fact, a U.S.-based retailer’s GIC in Bangalore, India, provides it a full suite of solutions including technology, marketing, HR, finance, merchandizing, supply chain, property development, and analytics and reporting services.

GICs and providers are building deep domain and digital skills

To help make sure their digital strategies are up-to-date, CPG and retail firms are opening dedicated R&D and innovation labs in offshore locations with the help of third-party providers and GICs to support them in automation, analytics, cloud, and social media services. And with the spread of e-commerce and mounting competition, some retailers have started employing engineering talent in India to build pricing systems that determine how demand would respond to a change in price.

As part of the broader digital agenda, some centers have also started exploring the use of AI for certain activities within operations and sales/marketing, such as store layout and pricing optimization, as well as RPA solutions for automating rule-based processes. For instance, Tech Mahindra signed a contract with a Nordic retailer for end-to-end managed services, wherein it will automate and consolidate the retailer’s existing IT infrastructure and enhance the end-customer experience through digital solutions.

Going forward, we expect both service providers and GICs in the retail space to evolve their capabilities with an increased focus on the use of digital technologies such as analytics, automation, blockchain, augmented and virtual reality, and IoT. These advanced capabilities will help retailers stake their claim in the highly competitive marketplace.

To learn more about sourcing in the retail and CPG space, please read our recently published Industry Insights – Retail and CPG report, or connect directly with the authors Bharath M and Sana Jamal.

 

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