Tag: GBS

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 and Sustainable: How to Plan Your Global Business Services WFH Strategy | Webinar

60-minute webinar delivered live on Tuesday, June 23, 2020

Download and view the presentation

The future is now for Work From Home (WFH). While WFH is not a new concept, COVID-19 has dramatically changed the way global leaders look at the need for, and benefits of, WFH. As a result, scaled WFH is inevitable in the global services industry, even after COVID-19-related restrictions ease.

In this webinar, we will share insights you can use in developing your global business services (GBS) WFH strategy including:

  • Convictions on the future state of WFH adoption
  • Business case for scaled WFH adoption
  • Best practices for integrating WFH into delivery models

You’ll get answers to questions such as:

  • What is the business case for scaled WFH in a post-COVID-19 world?
  • How do you determine the scale and scope of work for WFH adoption?
  • What are the key elements of integrating WFH into the GBS delivery model?
  • What talent and operating model changes are needed to build a remote workforce for the future in GBS?

Who should attend and why?
This session will help leaders across organizations evaluate impact and uncover opportunities:

  • Global Business Services / Shared Services Center / Global In-house Center Executives
  • IT Executives
  • Strategic Outsourcing and Vendor Management Executives
  • Service Provider Executives

Can’t join us live? Register anyway!
All registrants will receive an email (typically within 1-2 business days of the live presentation) containing the link to the slides and on-demand playback.

Presenters
Rohitashwa Aggarwal
Practice Director
Everest Group

Shirley Hung
Vice President
Everest Group

Eric Simonson
Managing Partner
Everest Group

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

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