Tag: Global In-house Center

GICs Are Here to Stay! Getting Bigger, Better, and Brighter | Sherpas in Blue Shirts

Do you remember back in 2009 when questions were raised on the sustainability of the Global In-house Center (GIC) model? The GIC market was shaken up with multiple divestures, giving rise to speculation that the model was dying. Since then, confidence in the construct has been a little precarious, even though the number of divestitures has remained low (except for in 2012.)

But here are some recent facts that will quell those concerns:

GIC facts

Now, after recognizing that the shared services model is flourishing, let’s look at key developments that occurred in the GIC space in 2014:

  • Business Process Services (BPS) continued to witness growth due to increased demand for Customer Relationship Management (CRM), Finance and Accounting (F&A), and Human Resource (HR) services

GIC Annual Report 2015 I3

  • Activity in the Manufacturing, Distribution, and Retail (MDR) vertical picked up considerably, especially in the retail sub-vertical, as companies set-up GICs for IT services delivery
  • Several locations made their mark on the location radar for the first time for specific industries. For instance, Romania and Ghana emerged as new GIC regions for BFSI firms, Croatia for healthcare companies, and the UAE for the hospitality sector
  • Share of GIC activity by U.S.-based firms declined, as most of the large companies are already adopters of the model; moreover, other geographies are increasingly embracing the GIC model.

While the model continued to see considerable momentum in 2014, the overall market is gradually shifting toward getting better and becoming more relevant for their adopters. Changes that have surfaced and are expected to shape the future course of the industry include:

  • GICs are no longer seen as only a support unit or cost-saving mechanism for the parent entity; rather, they are becoming a partner in their companies’ growth journey
  • Due to the increased value that the GICs are adding, or are capable of adding, buyers are willing to invest more for the additional advantages they can reap from the model
  • Cost arbitrage is not the only factor for GIC location selection. Talent scalability and sustainability, and linguistic and cultural affinity, are also playing a critical role in the decision making process
  • Realizing the value of diversification and the concentration risk involved in the mature markets of India and Philippines, companies are increasingly leveraging locations in other geographies such as Central and Eastern Europe, Latin America, the Middle East, and Africa. Ericsson, Intel, Johnson & Johnson, and Robert Bosch are among the firms that have spread their wings in the last few years to explore delivery locations in countries including Ghana, Mexico, Romania, Ireland, and Vietnam. Still, India remains the top location for GIC set-ups, with 28 centers established in 2014
  • Several delivery locations are also becoming attractive for their domestic market opportunities. Thus, some organizations are leveraging offshore centers for dual purposes; for their GIC operations and to tap into the local market
  • In addition to the pure GIC model, hybrid sourcing constructs, such as virtual GICs, that require a partnership between the buyer and the service provider to deliver services, are being considered.

For those of you who may have been questioning the health of the GIC model, it’s clearly vibrantly alive and kicking. The data speaks!

For more insights on the GIC model landscape, please refer to our recently released report “Global In-house Center (GIC) Landscape Annual Report 2015.” The report provides a deep-dive into the GIC market and an analysis of the GIC trends in 2014, comparing them with the trends in last two years. The research also delivers key insights into the GIC market across locations, verticals, and functions. It concludes with an assessment of the hybrid sourcing constructs.

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