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Sep 17

Is a Bigger Shared Services Center (or GIC) Always Better Performing? Maybe Not | Sherpas in Blue Shirts

By | Blog, Pricing, Shared Services/Global In-house Centers

We recently conducted a deep analysis of the digital maturity of almost 60 shared services centers, (also referred to as GICs) across diverse industries and geographies, and disseminated summary findings through a series of round tables across different Indian cities, including Delhi NCR, Bangalore, Mumbai, and Pune. You can read the detailed results in our recently released Digital Maturity in GICs | Pinnacle Model™ Analysis.

Here, I want to focus on a question that recurs in most of our conversations: Does the size of a GIC have any implication on its Pinnacle performance on digital maturity? Note that we define Pinnacle GICs™ as those that achieve superior performance because of their advanced capabilities.

The answer to this question is not as objective as it seems.

Related: Commercial Options for India GIC Setups

Our study revealed that scaled GICs (those with 3,000+ FTEs) have consistently delivered better impact across cost savings, operational KPIs, and even strategic metrics such as contribution to revenue growth. It also showed that small (those with less than 1,000 FTEs) and mid-sized GICs (those with 1,000 – 3,000 FTEs) have demonstrated lower improvement across all business outcomes.

Is a Bigger Shared Services Center or GIC Always Better Performing Maybe Not blog image

Does this Mean that all Scaled GICs are Pinnacle GICs? Not Really

Based on our analysis, less than one-third of scaled GICs have been able to demonstrate Pinnacle performance, while multiple small and mid-sized Pinnacle GICs (~30 percent of the Pinnacle performers) have achieved superior outcomes because of their advanced capabilities.

  • For instance, a multinational conglomerate’s GIC (mid-sized with 1,000-1,500 FTEs) delivered 20-30 percent improvement on operational KPIs such as process agility and SLA compliance. This GIC operates as the global competency center for IT solutions development with end-to-end ownership across the application development lifecycle, thereby allowing it to drive process transformation changes and yield impressive improvements
  • A U.S. food & beverages major’s GIC (also mid-sized, with 1,500-2,000 FTEs) is leveraging pricing analytics to drive competitive advantage for its parent. The GIC developed a competitive intelligence and analytics platform, which allowed the firm to view what its competitors are selling and make recommendations on the necessary price changes to its merchants. This platform is tied to a machine learning engine that dynamically prices their products.

Related: Learn more about Everest Group’s Shared Services Center capabilities

Common Threads across all Pinnacle GICs’ Journeys

We believe it is the triumvirate of the approach to demand creation, strategic focus of the digital strategy, and orientation towards cross-functional collaboration.

Demand Creation

A pull-based approach to demand creation – i.e., a proactive approach to creating Proof of Concepts (POCs) and showcasing capabilities – has not only helped shared services centers secure CXO-level sponsorship, but also increase the existing breadth and depth of services to enable end-to-end process orchestration. For instance, a European BFSI major’s GIC currently operates as the RPA CoE, and champions the end-to-end global RPA program for the enterprise. However, this was not the initial mandate for this shared services center. It proactively started developing POCs, capitalized on visits by onshore C-level executives to showcase their capabilities, and subsequently received buy-in from the parent company. The CoE now operates in a hub and spoke model, wherein the India GIC (hub) provides global governance and drives RPA for Europe through the CEE shared services center (spoke).

Strategic Focus of Digital Strategy

While other GICs solely focus on technology adoption, most Pinnacle GICs focus on using technology to enable operational improvement, which consequentially results in employee and/or customer experience enhancement. With achievement of these objectives, financial benefits – both top-line and bottom-line growth – follow suit automatically. Technology adoption per se needs to be viewed as a means to the end, not the end itself. Pinnacle GICs’ more holistic approach allows them to see both higher chances of success and ROI.

Cross-functional Collaboration

The third – and most underrated – differentiator is the focus on cross-pollination of resources by breaking functional barriers. We believe that a siloed approach to digital enablement will not work, and that shared services centers need to break silos and provide employees with wider exposure to functional roles across the firm. This will not only improve knowledge flow and increase productivity, but also stimulate innovation. For some GICs, creating CoEs for select digital capabilities has significantly enhanced the pace of adoption, and sharing of skills and best practices

All these aspects, along with dedicated enterprise leadership, have enabled Pinnacle GICs to champion organization-wide digital services delivery.

If you’d like insights on how your shared services center stacks up against the competition on the digital maturity front, please feel free to reach out to me at [email protected].

Jul 18

Everest Group Identifies ‘Pinnacle GICs,’ Digital Capabilities That Exemplify Best-of-the-Best Global In-House Centers | Press Release

By | Press Releases

Digitally mature GICs vastly outperform others in delivering strategic impact, operational improvements and cost savings.

Everest Group has deemed 11 enterprise Global In-house Centers (GICs) as Pinnacle GICs™—GICs that are achieving superior business outcomes because of their advanced digital capabilities. More importantly, Everest Group has analyzed what these Pinnacle GICs are doing well and is sharing the secrets of their success.

Many GICs are playing a key role in driving their enterprises’ digital agendas, thanks to the rise of next-generation technologies such as mobility, analytics, cloud, automation, and other enabling technologies. While most GICs are in the early- to mid-stages of digital adoption, some GICs have performed better than others by building and orchestrating differentiated capabilities and deriving superior outcomes.

Everest Group’s Pinnacle Model™ approach explores what the very best GICs are doing in terms of real impact and then correlates the capabilities required to achieve those results. By examining what these Pinnacle GICs have in common, others can learn how to succeed, whether they desire to make incremental changes or achieve major transformations.

Everest Group studied the digital adoption journey of 54 GICs, examining five key capability areas—scale of operations and penetration across digital segments, breadth and depth of services, digital talent, operating model and level of influence, and innovation. When those key capabilities were correlated with business outcomes, 11 Pinnacle GICs rose to the top.

As a group, the 11 Pinnacle GICs significantly exceed other GICs in three key outcome areas:

  • Cost impact: Pinnacle GICs generated 53 percent ROI from digital initiatives, while 44 percent of other GICs are yet to achieve ROI at all.
  • Operational impact: Pinnacle GICs achieved 46 percent improvement in operational metrics, compared to 19 percent by other GICs.
  • Business impact: 68 percent of Pinnacle GICs generated significant strategic impact, compared to 37 percent of other GICs.

“We found that Pinnacle GICs as a group are 1.8 times more invested than other GICs in supporting multiple business units with digital capabilities and 3 times more likely to provide end-to-end support within digital segments,” said Michel Janssen, chief research guru at Everest Group. “These discrepancies illustrate in a striking way that the GICs that are investing in and applying digital capabilities with breadth and depth across their organizations are reaping drastically superior outcomes in the marketplace. The bottom line for enterprises is that embracing digital is an imperative, not just an opportunity, and the speed of digital adoption is critical to derive maximum impact.”

Everest Group’s recently released report, “Digital Maturity in GICs: Pinnacle Model™ Analysis 2018” describes the journeys of these best-of-the-best companies, provides insights into the key enablers needed to achieve desired outcomes, and points to the investments required for the greatest speed to impact.

***Download a complimentary abstract of the report here.*** (Registration required.)

“Our Pinnacle Model assessments show organizations exactly who is succeeding and how,” added H. Karthik, partner, Global Sourcing, at Everest Group. “One of the most valuable aspects of this research is that we are able to identify Pinnacle Accelerators™, which are specific methods organizations can use to accelerate their digital transformation journey. Armed with clear points of comparison and insightful recommendations, organizations are better equipped to prioritize where to invest their time and resources and plan their own path to the top.”

About the Pinnacle Model

Everest Group’s proprietary Pinnacle Model™ assessments, which include input from executives from leading Fortune 1000 companies, compare internal capabilities to desired business outcomes, such as disrupting the industry, improving customer experiences, increasing market share, and launching innovative products and services. By highlighting what the best—Pinnacle Enterprises™—are doing, these performance studies help organizations plot a journey from their current position to where they want to go, prioritize investments of time and resources for maximum impact, and accelerate change.

May 30

Enterprises Leverage Global In-House Centers (GICs) to Create Centers of Excellence to Drive Innovation, Digital Transformation | Press Release

By | Press Releases

Growing GIC Center Segment Now Accounts for One-Fourth of $185 Billion Global Services Market—Everest Group

Enterprises are increasingly leveraging global in-house centers (GICs) as strategic partners; GICs are playing a significant role in enterprises’ digital transformation journeys as they move from a “arbitrage-first model” toward a “digital-first model.” According to Everest Group, GICs are perfectly suited to serve as Centers of Excellence, driving innovation for their parent companies. One key way that GICs are accomplishing this is by collaborating with the external ecosystem, such as nimble tech startups.

Three models typically adopted by GICs to engage with external innovation ecosystems comprise:

  1. Startup evaluation: The GIC identifies and shortlists startups for the parent organization. No infrastructure or financial support is offered to the startups, but the GIC typically helps the startups in building domain knowledge.
  2. Project-based engagement: The GIC evaluates startups, which are then hired as technology vendors on commercial terms to implement turnkey solutions. This model offers higher predictability in deriving tangible benefits from the engagement.
  3. Incubation and acceleration: The GIC acts as an incubator and runs the accelerator program: Typically, the GIC engages with three to five startups for a dedicated period, offering infrastructure, technology, financial support and mentorship. This model allows experimenting with future technologies and the bringing in of disruptive innovations.

“GICs typically have an enterprise-wide perspective, deep domain and process experience, and access to niche skills at a favorable cost, and so, for these reasons, GICs are often in a unique position to foster innovation and serve as Centers of Excellence for their parent companies,” said Sakshi Garg, practice director at Everest Group. “Leading GICs are adopting several best practices for fostering innovation, such as dedicated investments for innovation, special recognition for thought leadership, and driving customer centricity to grow beyond the service delivery mindset.”

The global sourcing market continued to evolve and grow rapidly in 2017 to cross US$185 billion, and the global in-house center (GIC) model remains an integral component of this evolution, accounting for one-fourth of the market, according to Everest Group.

The GIC market saw a 10 percent increase in 2017 over 2016 in the number of new GIC setups by companies from technology and communications, manufacturing, healthcare, and energy and utility verticals. The market has grown consistently with more than 2,800 centers set up across leading offshore and nearshore locations, compared to approximately 2,100 about five years ago.

The research supporting these findings is summarized in “Global In-house Center (GIC) Landscape Annual Report 2018 – GICs Emerging as Innovation CoEs for Global Enterprises,” a report recently published by Everest Group. This report provides a deep dive into the GIC landscape and a year-on-year analysis of GIC trends. The research brings out key insights into the GIC market across locations, verticals and functions, and concludes with an assessment of the role played by GICs to drive innovation for the enterprises.

***Download a complimentary abstract of the report here.***

Apr 02

Enterprises are Betting Big on India GICs for Driving Digital | Sherpas in Blue Shirts

By | Blog, Shared Services/Global In-house Centers

The rise of India-based Global In-house Centers’ (GIC) role in supporting enterprises’ digital transformation through digital technologies, such as RPA, mobility, and IoT, has been significant in the past few years. In 2017 alone, over 50 percent of the GIC set-ups in India were focused on building/enhancing enterprises’ digital capabilities.

Indeed, enterprises are making their India GICs the hub for developing solutions and products for next-gen technologies, such as machine learning, NLP, predictive learning, cognitive, and blockchain. Recent examples include Samsung, State Street, and Western Union.

Why India?

  • Talent availability: The ability to scale next-gen skills at low cost is a key differentiator. For instance, India accounts for 50-60 percent of the talent pool employed for delivery of automation services from offshore/nearshore locations. A strong base of third-party service providers has also established digital and technology labs in India
  • Mature delivery model: India accounts for 30-35 percent of all nearshore/offshore GIC set-ups, and more than 45 percent of their FTEs. Mature operations and middle-/back-office delivery presence in India give them a strong foundation on which to build their digital efforts. And it allows them to develop more integrated operations, technology, digital, and analytics solutions to address the evolving business needs of their parent organizations
  • Strong start-up ecosystem: India has one of the most evolved technology start-up ecosystems in the world. As of 2016, it had more than 4,500 tech start-ups employing a pool of around 100,000 FTEs. This situation not only allows enterprises to access next-gen technological solutions, but also to tap into the ecosystem to accelerate progress when additional resources are needed
  • Economies of scale and cost benefits: While cost may not be the primary driver, it certainly is a key differentiator. Budgets are always scarce, and needs are always plenty. India offers quality talent at lower cost and allows companies to drive low cost innovation and development

Digital Pinnacle™

How are the best-of-the-best enterprises and GICs leveraging India and other locations for digital? To expand our insights beyond the work we conduct with our clients, we’ve launched a Digital Pinnacle™ survey to learn more about successful GICs’ digital journeys.  We invite you to participate in the survey and/or to share your thoughts and experiences with us at [email protected] or [email protected].

Watch this space for more insights on GICs and for the deep-dive survey results.

Mar 28

Talent Management in Global In-house Centers: Are You Future-Ready? | Sherpas in Blue Shirts

By | Blog, Shared Services/Global In-house Centers, Talent

There’s no question that digital technological advancements, evolving business requirements such as changing consumer needs and faster time to market, and a heightened focus on customer experience are significantly changing the profile of skills needed to deliver services. As most global in-house centers (GIC) are already facing challenges in hiring people with the right skills for the future, it is concerning that their talent-related preparation for such a tectonic shift is lacking.

Talent Management GIC_1

Here are four talent management imperatives for GICs to develop the workforce of the future.

1. Identification of Skills Gap

As automation and other technological advancements kick in, human skills, such as innovation, design thinking, problem solving, empathy, and ethical thinking will become more critical. Identification of skills gap will be pivotal for GICs’ talent acquisition and development strategy. A recent Everest Group study of 80+ GICs across India, Philippines, and Poland identified multiple, and difficult to hire, skills that are likely to become more important in the future.

Talent Management GIC_2

2. Upskill/Reskill Current Workforce

Firms’ talent challenges will intensify with the automation of transactional services. They will face the dual risks of a large existing workforce with many skills that are likely to become redundant, while struggling to find talent with the right skills for their future needs. Upskilling/reskilling existing talent is an important lever for GICs to address these challenges while preserving their trained workforce with string domain/industry know-how. (See our detailed report on upskilling/reskilling in GICs for additional perspectives.)

3. Evolve Talent Acquisition and Development Strategy

As GICs look to develop a future-proof talent strategy, they will need to think outside the box to tap into alternative sources of talent. Opportunities include hackathons, hiring from startups and other industries, project-based partnerships with specialist agencies, and flexible resourcing. From an L&D perspective, traditional classroom model needs to evolve as learning is becoming more real-time, customized, and digitized, e.g., MOOCs, simulation, and gamification.

4. Agile Human Capital Planning

With a dramatic decline in skills’ half-life, particularly in the technical space, GICs need to identify and focus on skills that are more likely to be critical for their growth. A more frequent approach to human capital planning might be essential to account for rapid changes in these skills.

While many GICs are still taking a wait and watch approach to the talent management issue, some have already embarked on this transformational journey. And those that are proactively addressing it are reaping big rewards.

Watch this space for more insights and success stories. And if you’d like to share your challenges, successes, or questions with us, please feel free to write us at [email protected] or [email protected].

Mar 26

GICs Accelerating the Automation Gear in Their Digital Drive! | Sherpas in Blue Shirts

By | Blog

In the beginning of the digital revolution, GICs were primarily used as hotspots for analytic services. But in their quest to deliver more value-added services to the parent organization, many are accelerating their ability to serve as strategic innovation partners by significantly expanding their portfolio of digital-focused activity. In fact, our most recent Market VistaTM report showed that digital activity in new setups and expansions jumped 900 basis points between Q4 2016 and Q4 2017.

Automation GIC blog_1

Like most organizations dipping their toe into the digital pool for the first time, GICs initially focused on automating processes through technologies such as Robotic Process Automation (RPA). However, in last couple of years, they have also started leveraging Artificial Intelligence (AI) to improve in areas such as customer experience, operational efficiency, risk management, and development of digital products and services for the market. After realizing the benefits of RPA and AI, some of the mature GICs are also now testing the waters for cognitive computing.

Here is a sampling of the digital use cases coming out of today’s GICs:

Automation GIC blog_2

Of course, changes and challenges abound in the rapidly evolving digital environment. Here are several that will impact GICs in 2018.

  • War for talent: Although they’re upskilling/reskilling their existing workforce, GICs will still need external talent for critical skills such as intuition and innovation, design thinking, pattern recognition, leadership, and problem solving. They’ll struggle to find this talent due to demand-supply imbalances.
  • Ecosystem partnerships: We expect GICs to accelerate their technology adoption through increased partnerships with service providers, technology vendors, start-ups, and educational institutions to deliver new forms of value, such as innovation, automation, and speed to market.
  • Delivery locations beyond India: While India will remain a favored location for enterprises to introduce new technologies, our GIC market activity tracking (see our recently released Market VistaTM report) suggests that other locations such as Brazil, Ireland, Israel, Romania, and Singapore may gain traction in near future. Israel is already progressing to support a range of digital functions such as IoT, AI, and data analytics for customer experience and cybersecurity services.

There’s no question that GICs have the ability to drive the digital agenda for their enterprises. To gain a deep-dive understanding of how they’re doing so today, and what they plan to do in the near future, Everest Group is conducting an online survey. This first-ever assessment will be based on our proprietary Pinnacle ModelTM, which identifies what the best performers are doing to achieve strategic business objectives and deliver increased value. We invite you to participate in this survey.

Mar 21

How GICs are Unblocking Blockchain Value | Sherpas in Blue Shirts

By | Blockchain, Blog, Shared Services/Global In-house Centers

At a NASSCOM-hosted event earlier this year, I moderated a roundtable discussion on “Blockchain: Looking beyond the hype” among executives from 20+ GICs. The discussion quickly elevated from the “what” to the “how and how not” to do blockchain initiatives.

Here are some of the key take-aways from the session, in part sparked by discussions on some of our blockchain research.

Blockchain is Inching Closer to Prime Time

Blockchain has crossed the chasm: With the definitive number of live deployments and successful PoCs, we believe that the early adopters will be able to demonstrate early results by year’s end. Because timelines for technology evolution have compressed, we also expect a wave of fast followers will invest in this space.

GICs are Taking the Lead

GICs’ innovation can transform them into Global Capability Centers (GCCs): GICs are leading blockchain initiatives, from education, evaluation, use-case design, and PoCs to live deployments. They are also externalizing the technology solutions to create newer business and revenue models, and driving blockchain adoption at speed and scale. And their R&D investments are extending beyond live blockchain deployments to patent filings to retain competitive advantage.

Building a business case: GICs are researching every possible use of blockchain in their industry. We are seeing GICs helping enterprises across a variety of use cases in insurance, capital markets, banking, supply chain, education, and technology – and one leading financial services GIC prioritized four use cases from a long list of more than 40. A framework, like the one we recently published, will help firms prioritize business use cases that are ripe for blockchain adoption.

GICs and the ecosystem: Blockchain adoption requires significant orchestration among governments, regulators, technology vendors, enterprises, startups, and customers to create a win-win environment for all. GICs are not just consortium and forum participants; they are highly active contributors to the advancement of blockchain technology maturity.

Talent is not a huge roadblock: Leading adopters have started by building a core blockchain team that invests its time in understanding the ecosystem, undergoing training, and exploring multiple use cases. Lead steers we’ve spoken with stated that re-skilling efforts to build a blockchain developer pool have not been the uphill battle that leading blockchain consulting firms hypothesized. They’ve approached re-skilling by driving blockchain awareness to a broader group in the firm, and then identifying a pool of talent with adjacent skills, e.g., Angular JS developers to be trained on solidity, for the first wave of training. More developers join these teams as they scale up. Enterprises are conducting a series of hackathons to tap into the talent pool – both in the GICs and the extended ecosystem – and provide on the job training opportunities.

On the Technology Front

Evolution of the enterprise blockchain technology stack: Enterprises are taking a fundamentally different approach than the public or cryptocurrency related initiatives in building their blockchain technology stacks. Blockchain-as-a-service vendors have helped manage the complexities of the blockchain stack for early trials and pilot stage activities. However, early stage trials that did not plan for the blockchain technology stack for the live deployment phase have found it difficult to scale up their pilots. Node-level identity and access management, interoperability, quality assurance for smart contracts, and current scalability limitations of existing blockchain consensus mechanisms and transaction validation protocols are some of the key challenges highlighted by early adopters.

Sidechains are a key feature of the enterprise blockchain tech stack, not limited to cryptocurrencies: Several enterprises are solving the data privacy issues by creating both off-chain and side-chain applications that can then write final-hash on the blockchain network. This unique approach can accelerate blockchain adoption for specific use cases. However, interoperability on different blockchain platforms is a key challenge.

With all this, there should be little doubt that GICs are quickly evolving into global capability centers that further the digital transformation agenda for the enterprise.

As we continue studying enterprises’ and GICs’ blockchain journeys, we’d love to hear about yours. Please share it with me on [email protected].

And please participate in our ongoing GIC Digital Maturity Pinnacle Model™ survey to learn more about successful GICs’ digital journeys and see how your GIC compares.

Feb 28

Global Sourcing Slows, Shifts Toward In-House Delivery in 2016 | Press Release

By | Press Releases

Amidst unprecedented uncertainty, Everest Group predicts 2017 will bring continued market slowdown and technology-led disruption in sourcing

While the global services industry experienced continued growth in 2016, the pace of year-on-year revenue growth1 slowed from 4.5 percent in Q1 to below 3 percent by the end of the year, and the momentum of new activity shifted towards in-house delivery as opposed to outsourcing. In fact, setups of Global In-house Centers (GICs) reached an all-time high in 2016.

Everest Group—a consulting and research firm focused on strategic IT, business services and sourcing—predicts a continued decline in the outsourcing growth rate1 over the next one to three years, falling to as little as 1.9 percent by late 2019, as a result of macro uncertainties, technological disruptions and competition.

Sourcing activity in 2016 was marked by increased location activity that was concentrated in the top-10 locations in offshore/nearshore countries. Another prominent trend in 2016 was the growth of digital services; the share of digital services in outsourcing deals as compared to traditional services rose to 35 percent in 2016, with cloud, analytics and mobility services leading the way.

The outsourcing transactions of United Kingdom buyers neared three-year lows in 2016 as UK buyers followed a “wait and watch” approach amidst uncertainty around Brexit. Similarly, buyers in the United States are facing considerable uncertainty in 2017 regarding the Trump Administration’s approach to visa and immigration reform as well as the political climate around offshoring in general.

The sourcing industry is also facing substantial technology-led disruption. The increasing adoption of automation and DevOps; the growing utilization of IoT, machine learning and analytics; and the need for higher-skilled talent with digital expertise will be key drivers, causing enterprises to re-evaluate their location portfolios to address changing service delivery models.

Overall, Everest Group expects the preference for the in-house delivery model to increase, as it offers the potential for better risk management and control over IP, increased productivity, the ability to deliver more specialized or complex work, and other value benefits beyond labor arbitrage.

“We are seeing a definite skew toward in-house models as opposed to outsourcing, but we characterize it as a shift rather than a complete pendulum swing,” said H. Karthik, partner, Global Sourcing, at Everest Group. “Factoring in political uncertainties, the impact of technology, competitive drivers and many other dynamics in the market, we believe that in the coming year enterprises will continue to leverage both in-house delivery and outsourcing, but they will be more intentional about their location strategy and how to optimize their overall sourcing model.”

Everest Group’s latest research on the global services market explores the evolving market drivers and their implications for global services buyers and providers in two recent reports and a webinar deck available for complimentary download:

About Market Vista™

Market Vista —a subscription-based service of Everest Group—provides the research, analysis and insights that enable Global Sourcing professionals to navigate the complexity of today’s sourcing market and make informed and impactful decisions. Market Vista research includes developments related to service providers, locations, processes and sourcing models, as well as a comprehensive outlook of the fast-evolving global offshoring and outsourcing market.

1 in organic constant currency terms