Tag: GBS

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.

Global Sourcing Takes a Hit from COVID-19 as GBS Activity Decreases 48% in Q2 — Everest Group | Press Release

Service providers see declining revenues and margins; cybersecurity, desktop and mobility services gain traction as enterprises adapt to work-from-home

Q2 results are in, and Everest Group reports the Global Sourcing industry is suffering from the negative business impacts of the COVID-19 pandemic. Two trends illustrate this: First, the worldwide setup of Global Business Services (GBS) centers, also known as Global In-house Centers (GICs), fell sharply (more than 48%) as offshore/nearshore activity dropped 46% and onshore setups dropped 52% for the quarter. Second, although overall outsourcing activity ticked upward slightly (2%) for the quarter based on the number of deals signed, service providers reported a decline in both revenues and operating margins.

In offshore and nearshore locations, GBS market activity declined from 44 in Q1 to 24 new setups in Q2. In onshore locations, GBS market activity decreased from 33 new setups in Q1 to 16 in Q1 2020. New center setup activity in India reached an all-time low, after seeing only 8 new setups in Q2 as compared to 16 in the previous quarter.

Based on financial reports from Q1 2020, the consolidated revenue and operating margin of service providers witnessed a decline, -1.5% and -21% respectively, in comparison to the previous quarter.

“The global services industry is certainly feeling the pain of the economic downturn caused by COVID-19,” said H. Karthik, partner at Everest Group. “Enterprises and service providers functioning in sectors such as travel and hospitality, aviation, retail, automotive and manufacturing sectors have been hit the hardest in this quarter due to extremely low demand and supply constraints. Further, delays in new project renewals and cancellations of ongoing outsourcing projects have been witnessed in a number of cases. This has been followed by cost optimization measures that included layoffs for several enterprises and service providers.

“However, governments across the world have announced stimulus packages and relief measures,” continued Karthik “The G20, for instance pledged to infuse over US$5 trillion to support economies and protect workers and businesses. This infusion of support provides hope for recovery, and we continue to expect that significant containment in the spread of the virus will lead to further recovery of sourcing activity as lockdowns and travel restrictions can be eased.”

These global sourcing trends are detailed in Everest Group’s recently released Market Vista™: Q3 2020 report. The report shines a spotlight on transaction trends and outsourcing deals, GBS-related developments, offshoring dynamics, location risks and opportunities and key service provider developments.

***WEBINAR, Thursday, September 10***
Everest Group is hosting a complimentary 60-minute webinar, “Impact of COVID-19 Beyond WFH: The Future of Delivery and Locations Strategies.” Everest Group experts will provide a fact-based view of the already-visible effects of the pandemic and discuss the implications of these developments on future delivery and locations strategies, including key changes to delivery portfolios, trends in onshoring versus offshoring, locations portfolio consolidation versus diversification, rise in large scale hubs versus small scale centers, and adoption of a remote or work-from-home delivery model.

The live webinar will be held on Thursday, September 10, at 9 am CDT. Register here.

Highlights of the Market Vista Q3 Report:

  • Demand for desktop services is continuously gaining traction as firms across the globe adapt to a work-from-home model. There was also a surge in demand for mobility services as enterprises are leveraging on-demand applications to increase their online presence amid the COVID-19 pandemic.
  • As the world faces increased risk of cyberattacks due to a shift in the working pattern, service providers are gearing up their investments in the cybersecurity space, yielding an increase in the number of cybersecurity-focused acquisitions, deals and new products.
  • The Technology & Communications vertical recorded the maximum increase in the number of transactions, owing to an increase in deals across the telecom industry. The government vertical, buoyed by deals in North America, also saw an increase in deals. The Banking, Financial Services & Insurance sector as well as the manufacturing, retail and healthcare sectors saw declines.
  • The share of digital-focused new centers saw a sharp increase in offshore locations and remained stable at onshore locations in Q2 as compared with Q1 2020. The Advanced Automation segment (which includes artificial intelligence, machine learning and other cognitive technologies) continued to lead across both regions. Activity was largely driven by India and China in offshore/nearshore locations and by the United States in the onshore region.

***Download a complimentary 8-page abstract of the report***

About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global enterprises, service providers, and investors. Through our research-informed insights and deep experience, we guide clients in their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com/.

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]

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

  • Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.