Category: Shared Services/Global In-house Centers

Is Perceived Impact Hindering Your GIC’s Growth? | Sherpas in Blue Shirts

The GIC model has evolved significantly over the last decade, and is gearing up for the third wave of evolution – GIC 3.0, as some are calling it – driven by GICs’ strong desire to move away from the “arbitrage-first” delivery model towards a “digital-first” model.

Everest Group describes the journey to mature GICs as progressing through four different stages.

Journey to GIC maturity

GIC maturity for optimal business impact

Our research shows that best-in-class – or Stage 4 – GICs deliver up to six to eight times incremental value beyond arbitrage. Yet, while many of our engagements over the last few years have made it clear that most Global 1,000 GICs deliver value beyond arbitrage, very few track and measure their impact. When they do, it’s typically in a piecemeal, selective manner. Thus, their parent perceives that they are delivering limited business value, beyond arbitrage, to the enterprise.

By educating their parent on their impact, GICs can improve their credibility, and build a case to secure support for expanding their role.

So how can GICs measure and articulate the value they deliver?

We believe that putting a dollar number to the business impact is the most objective and effective way for GICs to showcase their true worth. The framework we use maps value drivers linked to savings, risk, and revenue, quantifying all forms of impact created by the GIC.

GIC business impact model

Here’s an example: a U.S. company’s GIC was able to prove to its parent that it delivered US$20 to 22 million in overall business impact, compared to incremental cost arbitrage of US$4 to 6 million, through increased effectiveness, greater efficiency, and revenue growth. This helped the GIC secure the parent’s buy-in on increasing the scope of functions currently delivered out of their GIC.

A comprehensive quantification facilitates measuring the overall business impact across businesses/LOBs supported by the GIC. A GIC can use these results to:

  • Enable better understanding of its impact/role in the enterprise
  • Guide internal thinking on prioritization of value-add opportunities
  • Map its maturity to the market
  • Achieve greater sponsorship from parent stakeholders

Contact us about Everest Group’s business impact quantification framework, and learn more about our research on in-house delivery models.

Are Offshore-heritage Service Providers “H-1B Visa Abusers” or “Sitting Ducks”? | Sherpas in Blue Shirts

Recently, an official from the Trump administration accused Indian IT providers of abusing the H-1B visa process by “flooding” the lottery system with applications, giving them an unfair lottery draw advantage. The statement again spotlighted the issue of importing foreign IT services workers to the U.S., thereby limiting job opportunities for domestic candidates. It also underscored the huge extent of outsourcing being done by U.S. corporations, especially to offshore-heritage providers. What it didn’t discuss was other types of companies’ usage of the H-1B program to import skilled talent into the country.

Everest Group conducted a quick analysis on the Labor Condition Applications (LCAs) employers filed to obtain H-1B visas in the last few years. We classified the employers into several categories:

  • Offshore-heritage service providers, such as Cognizant, Infosys, and TCS
  • Multinational service providers, such as Accenture, Capgemini, and IBM
  • Professional services firms, such as Deloitte, EY, and PwC
  • Product companies, such as Apple, Cisco, and Oracle
  • All other companies

Our findings?

  • While the total number of certified positions increased at a CAGR of 11 percent between FY 2011 and FY 2016, offshore-heritage providers’ share has dropped significantly, from 74 percent in FY 2011 to 40 percent in FY 2016
  • The biggest share grabbers are professional services firms, which are increasingly competing with traditional IT services players across deals. Their share in H1-B visas has increased from 7 percent in FY 2011 to 37 percent in FY 2016. On an absolute basis, that’s an almost ten-fold increase
  • The top 25 employers contribute ~50 percent to the total positions certified, which implies that offshore-heritage providers have only a 20 percent share of the total positions certified for H-1B visas by the Department of Labor between FY 2011 and FY 2016.

(For the uninitiated, a certified LCA (ETA Form 9035), is a prerequisite to H-1B approval. The LCA must be certified by the Department of Labor (DOL) before the H-1B petition (Form I-129) is submitted to USCIS. The LCA contains basic wage and location information about the proposed H1B employment. Please note that a certified LCA does not guarantee H-1B visa approval, however, certified position trends are good indicators of H-1B visa usage. Also, note that the data below includes positions certified for new H-1B visa applications as well as renewal and transfer of H-1B visa.)

H-1B visa and offshore service providers

One of the Trump administration’s suggested reforms is to increase the minimum wage for H-1B visas from US$60,000 to US$130,000. But as this minimum wage recommendation is applicable to companies that are “H-1B dependent” – and most offshore-heritage providers fall into this category – the required increase in minimum wage, whatever it ultimately is, will likely affect offshore-heritage providers more than any other type of organization.

At the same time professional services firms have quietly increased their leverage of the visa-led model, offshore-heritage providers have been the unfortunate recipients of far greater scrutiny and negative limelight. In order to successfully compete, offshore-heritage providers have no choice other than to prepare now for the impact of visa policy changes. As the old saying goes, “better safe than sorry.”

What’s Driving The Vibrant Growth In Global In-House Centers for Services? | Sherpas in Blue Shirts

There is a do-it-yourself (DIY) movement building in the services space. At Everest Group, we continually track the number of Global In-house Center (GIC) startups, and the number is accelerating. Along with new startups, existing GICs (formerly known as “captives,” or enterprise shared-services organizations in low-cost areas) are expanding their scope. In this post, I’ll highlight four reasons why the DIY GIC movement is growing and delivering value.

  1. Lower Barriers to Entry
    Historically, building a GIC or captive has been difficult and risky due to the substantial barriers to entry. It’s a daunting prospect to go into a country where you don’t have a presence, particularly in a developing country such as India or Eastern Europe or South America and master the complexities of local property regulations, business licensing, hiring practices, finding and identifying the right leadership, finding and hiring the necessary talent teams.

Read more at Peter’s Forbes blog.

From Captive to Catalyst: The Next Milestone in the Global In-house Center Evolution Story | Sherpas in Blue Shirts

At a conference I attended recently on the role of global in-house centers (GICs) in digital and RPA, one of the speakers asked everyone to imagine what their organizations would look like in the future. The answers from a room full of enterprise and GIC leaders were varied and fascinating. My personal favorite was the one where robots will manage all forms of work while people relax on a beach, soaking up the sun, and sipping their piña coladas. Tempting as that sounds, I don’t expect it to happen anytime soon.

But what is happening now is a flurry of changes in the business environment globally. Amidst recent geopolitical developments in the U.S. and U.K., increasing talks of protectionist policies, the advancement of RPA and other service optimization technologies, and regulatory pressures affecting the global services sector, GICs and shared services centers find themselves at a crossroads. As the global services sector moves from an arbitrage first to a digital first delivery model, GICs have an opportunity to break away from the orthodox boundaries by taking the road less traveled, and enhance their role in enterprises’ global sourcing strategy.

Everest Group has seen first hand the evolving role of GICs, which has expanded beyond providing low- cost delivery to being agents of change – or catalysts – for enterprises’ back- and middle-office services.

Now, GICs are at an inflection point in their evolution journey, well positioned to take on this enhanced role driven by: increased endorsement from the enterprise and the shift towards insourcing; a strong foundation and ability to offer an insider’s view; tight integration with the existing core business; and strong adjacency with existing focus on driving efficiency and optimization.

What does the future of GICs look like?

Global Services - CatalystTo successfully undertake changes within their enterprises and redefine their role from captive to catalyst, GICs need to:

  1. Drive business impact and thought leadership
  2. Develop global leaders and talent/skills
  3. Play a pivotal role in the transformation of processes and service delivery
  4. Lead organizations through digital disruptions in global services.

Here are Everest Group’s recommendations on how GICs can capitalize on this opportunity:

  • Redefine the art of the possible, and adopt a business outcome-oriented mindset, which is significantly different from the current delivery mindset
  • Identify and prioritize investments, such as their choice of functional and technology segments, and the best approach to gaining more than just incremental growth
  • Change their talent model (e.g., hire for learnability, strengthen culture of innovation) and operating model (e.g., different onshore-offshore collaboration models due to agile/DevOps) to catalyze the digital agenda.

Our newly renamed CatalystTM subscription research program (formerly known as Global Sourcing) provides GICs and enterprise clients with actionable insights to navigate through the evolutionary journey from captive to catalyst. Benefits of a Catalyst subscription include:

  • Industry-leading research and viewpoints on multiple topics relevant to GIC market
  • One-on-one briefings with Everest Group analysts and SMEs
  • Exclusive invitations to GIC events – including webinars, roundtables, and virtual networking sessions – organized by Everest Group

Learn more about our work in the GIC space, and see details about our Catalyst research program.

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