Global Services Archives - Page 9 Of 11

Full of Sound and Fury: The Irrelevance of the U.S. Election Offshore Rhetoric | Sherpas in Blue Shirts

September 5, 2012

In our last Market Vista webinar, we asked the audience to share its perspective on what is likely to happen with offshore demand as the election season in the United States concludes. As shown in the poll results below, few expect much to change after the election season – the votes are tightly clustered around slight change or no change.

Although the results are consistent with my own personal view, it is certainly in contrast to the number of times I am asked about this topic by the media and other industry observers.

So why is there more noise than substance? Why does the global services market see the political rhetoric as largely irrelevant?

Three fundamental facts largely explain it:

The U.S. government is much more concerned about offshore manufacturing than offshore services. Not surprisingly, politicians play fast and loose with terminology in their public speeches – does anyone recall a politician accurately using the terms offshoring and outsourcing? They are happy to publicly paint with a broad brush criticizing “offshoring.” But offshore services are continuing to grow and the business case remains strong. In contrast, the reality is that the economics of offshore manufacturing are more complex (for example, the cost of energy and transportation continue to increase), and there is a good business case for moving some types of manufacturing back onshore. Check out the Obama administration’s report on insourcing released at the January 11, 2012, insourcing forum to see just how much of the focus is actually on manufacturing and not services (or read this update). China is mentioned 17 times, India only once. For offshore services, the business case is simply too attractive (in most cases) for the government to push hard for broad-scale onshoring.
The United States has a shortage of information technology talent. Despite the very real concern about broad-based unemployment, technology jobs are still hard to fill. This is why so many organizations have sought to increase their access to these skills either through offshore resources and immigration from other countries. Given the obvious strategic value for the United States to be strong in information technology-intensive industries, it must avoid hindering access to the skills and resources required to allow these portions of the economy to flourish. Of course the politicians cannot easily acknowledge this in public.
The United States has to be a member of the global economy. Although the United States has lost and will lose jobs due to offshoring of services, it also gains much from global services and strong participation in the global economy. It is well understood that U.S. companies benefit from selling products around the world – these range from consumer devices to movies to industrial goods. However, it is less well understood that the United States also exports many services in addition to importing services. Engineering firms, law firms, architecture firms, and many other professions are serving global customers and often by providing high-end services. Next time you are on a plane flying to Asia, ask others traveling with you about their business interests and whether they derive benefit from global trade. In the past two years of trekking to India, I have come across a guide specializing in personalized nature tours of India, a machining engineer helping Harley Davidson enter India to sell its goods, a doctor providing specialized training, and even a dancer for Lady Gaga in route to film a video. They (and many others) are all traveling to Asia to satisfy global demand for their services. There is no realistic choice other than to participate in the global economy and focus on relative strengths.

Stepping back, we must bear in mind that politicians are typically speaking to their audience through mass media and messaging accordingly. In other words, what we hear is dumbed down and intended to grab emotions and headlines. However, outside of the noisy rhetoric, top politicians and policy makers do understand the fundamental forces shaping the U.S. and global economies and are unlikely to meaningfully influence the evolution of global services and associated offshoring – regardless of whether Obama or Romney wins the U.S. presidential election.

Recognizing and Reducing Offshore Location Selection Risks | Sherpas in Blue Shirts

May 17, 2012

A recent article in BusinessWeek, Argentina Tries the Chavez Way, triggered my thinking about the increased role of geopolitical risk in location selection and overall risk mitigation. In the last decade, Argentina became the “darling” of global services given considerably lower resource prices than in neighboring Brazil, a stable society with deeply rooted democratic principles, etc. But the country’s geopolitical risk profile substantially changed recently. Its economy has stagnated from defaulting on its national debt, pseudo-populist movement groups are promising “quick and easy” fixes to the existing problems, and the trend of nationalizing privately owned businesses is expected to continue, given the views of the current political leadership. None of this yet puts Argentina’s geopolitical risk profile outside of the acceptable range. But we’ve seen from examples around the world that, in the absence of more efficient measures, it may be very tempting for a government to divert public attention from internal problems to some newly introduced external threat. For instance, consider what would happen to the country’s business environment if something similar to the almost forgotten conflict over the Falkland Islands suddenly escalated.

Now think about Colombia, whose geopolitical risk is moving in the opposite direction. While 15 years ago it couldn’t have bought a place on the global services location map, for the last two years its stock market gained an impressive ~50 percent due to various successful measures against FARC, drug cartels and other instability factors. Now, BPO and IT delivery centers are mushrooming in Colombia, driven by an abundance of relatively inexpensive but highly qualified labor resources. Given the large size of the young population in Colombia, as well as steady adherence to open market principles, it is believed the country will continue gaining attractiveness as a global services hub. And it is already considered the second largest IT services market in Latin America.

The point of this blog is not to discuss specific country’s risk profiles, but rather to remind readers that such wild swings must be factored into location analyses, similar to how attorneys approach terms and conditions from a worst-case scenario.

Although labor arbitrage was the primary driver – and continues to be important – in offshoring location decisions, typical global firms are becoming increasingly ready to exploit economies of scale. If a company’s offshore delivery is currently split among several locations – say, Argentina, Philippines, and Romania, each serving a respective region – it is quite tempting to consider some consolidation initiative through formation of a mega-large shared services center, and that’s where increased exposure to specific location risk kicks in as a decision factor.

Obviously, increased volatility in geopolitical risk is just one of many aspects an organization should factor into cost/benefit analysis, and the analysis must be tailored to each organization’s specific situation. That said, here are several general thoughts to consider:

There’s no question that it’s very difficult to walk away from an opportunity to reduce your annual cost by, say, US$20-50 million through aggressive optimization of your delivery footprint. But all those savings could get wiped out by billion dollar losses if something goes wrong and disruptions cascade throughout the entire value chain. Therefore, it makes sense to “hedge” such optimization opportunities by developing a customized risk mitigation framework that includes maintaining some “cold” and “warm” alternative sites, and a relocation strategy.
Level of acceptable location selection risk varies from company to company, and depends in part on whether the goal is just to achieve cost parity with industry peers, or if a lighter cost structure is expected to become the source of competitive advantage. But remember that any company implementing a low cost competitive strategy must take on some degree of risk.
You can reduce some of your risk by using a reputable third party service provider instead of building your offshore presence from scratch, as managing location risk is one of providers’ core competencies, and global providers operate multiple delivery centers across the globe. With properly structured terms and conditions, your outsourcing provider will monitor and proactively manage your risk exposure, including geopolitical concerns.

Is 10% Salary Inflation Too High? A Perspective on the Offshore Wage Increases | Sherpas in Blue Shirts

April 16, 2012

For those tracking the global service market, reports of 10-15% salary increases in low-cost countries is almost expected. For executive management not familiar with the offshoring of services, seeing these headlines in the business press is unnerving.

But should it be?

I am not arguing that wage inflation in low-cost countries is equal or lower to high-cost countries, but it is clear to me that those in high-cost countries significantly lack perspective on how to interpret these numbers.

(For a more comprehensive perspective, checkout our webinar on labor arbitrage sustainability or our recent joint study with NASSCOM on Global In-house Center (GIC) cost competitiveness.)

Let’s start with a simple exercise (yes, you can count this towards your daily mental fitness goals).

First, recall your starting salary out of college.

Second, recall your salary in the fifth year of being in the work force (the fifth year is fourth salary increase if you received increases annually). If your salary changed currencies or you jumped to business school, you are disqualified from further playing this game.

Two numbers…now divide the fifth year salary by the first year to get a ratio (this should be greater than 1.0 and generally less than 3.0).

Now compare against the table below to get the annual percent increase in your salary across those five years. For example, if the ratio is 1.5, then the average annual increase was 10.7%.

Ratio	Annual % increase
1.00	0%
1.25	5.7%
1.50	10.7%
1.75	15.0%
2.00	18.9%
2.25	22.5%
2.50	25.7%

Most people find the annual percent to be higher than they expected. And often surprisingly close to the typical reported increase in offshore salaries.

Why? The perspective that most people miss is that the growth in salary for an individual is different than pure salary inflation. Salary growth of an individual reflects both pure salary inflation (what an entry-level developer will earn) and the impact of their career progression (being able to deliver more value). In other words, salary growth also reflects being paid more for playing a slightly more valuable role – even if that does not include a formal promotion.

This picture becomes even more skewed if you consider total compensation (salary and bonus), which tends to grow even faster early in a career.

Many of you are probably now thinking, “Wait, my salary has not been growing that fast recently!”

True – and salary growth in percentage terms slows as individuals reach 10, 15, and 20 years into their careers. Much of the growth in salary in the early portions of the career is due to steady progression in being able to play a more valuable role – taking greater ownership, requiring less quality review, increasing domain knowledge, and other factors. But the benefit of further increasing these skills diminishes beyond a certain point, and salary growth is then predicated on other factors such as impact, leadership, and overall labor market rates for fully developed skills.

These same things are at play in offshore labor markets and much of the labor force is in the first 5-10 years of their careers due to the labor pyramid – so much of the workforce should be seeing “high” salary increases. At more senior roles, salary increases tend to moderate on a percentage basis.

Give this exercise to others – and potentially to that executive who feels 10% salary inflation is far different than what happens in the United States.

Is the Arbitrage of Your Offshore Locations Sustainable? | Webinar

October 3, 2011

Tuesday, October 18, 2011 | 9:00 AM CDT

Global sourcing is a well established phenomenon. The industry has witnessed rapid growth over the past decade, and has now exceeded US$110 billion in annual revenues. The key growth drivers have predominantly been the opportunity for labor arbitrage and the availability of skilled talent pools in offshore locations.

However, given increasing cost pressures in leading offshore markets, such as India and the Philippines, companies are questioning the sustainability of the offshore proposition. In addition, fluctuating currencies are posing challenges to the predictability of arbitrage in many locations, such as Poland and Brazil.

With these dramatic changes in market dynamics, global organizations must take an integrated, multi-location portfolio view in assessing the sustainability of their global services programs.

Everest Group invites you to join us for an insightful, one-hour webinar that will answer the following questions:

How should companies assess the sustainability of offshore locations?
How sustainable are the major offshore locations? Are there real risks of arbitrage eroding?
What implications are companies facing in setting their global services strategies?

Presenters:

Eric Simonson, Managing Partner – Research, Everest Group
H. Karthik, Vice President, Everest Group

Webinar attendees will receive a complimentary arbitrage sustainability diagnostic assessment for three countries from an extensive list including Brazil, China, India, the Philippines, South Africa and more. Please select your preferred countries during the registration process. An Everest Group analyst will supply you with your individualized assessment within two weeks of the webinar. You must attend the event to receive the complimentary assessment.

Eyes Wide Open – What Are the Risks of Global Services? | Sherpas in Blue Shirts

September 9, 2011

Over the last decade, we have been witness to a world that is logically shrinking in size and expanding in its ability to provide options in global services. The phenomenon is being driven by the increased integration of technology and the sudden emergence of service delivery capabilities in new geographies, thus allowing organizations to tap into global resources at a rapidly increasing rate.

The utilization of a global services delivery model is allowing organizations, regardless of their size, to:

Realize cost savings through labour arbitrage
Access skill sets and capabilities on a more dynamic level
Manage a continuous 24-hour service and support model
Adapt cost structures to facilitate focus on core businesses

Sounds great, so what’s the catch?

The catch is that organizations with global and diverse service delivery models face new and ever changing risks. Some of the triggers of global risk include socio-geo political tension, pandemic crisis, financial events, terrorist events, natural disasters, civil turbulence, and infrastructure disruptions.

When risks manifest into reality for an organization that is using a global delivery model, they can occur at significant speeds and at magnitudes of impact that have not been seen before. This is because most global delivery models are heavily intertwined and have interdependencies that are often overlooked. The ripple effect of a risk event and the complexities of demand on resources for recovery are often not realized until it is too late.

Organizations with a global delivery model require a disciplined approach to successfully manage global risk triggers. To do so, they can implement a comprehensive risk framework to proactively monitor and mitigate perils in their global environment. Two key components of the risk framework are:

Risk monitoring by location

Develop a baseline risk profile for all targeted cities/countries as part of the decision-making process on delivery centre locations
Monitor all selected locations on an ongoing basis to assess the change in risk levels
Develop risk profiles for each city/country that contain location dashboards of key risk indicators to allow for a quick assessment of the change in risk levels from the baseline risk profile against the current risk profile
Examples of location risk indicators include:
- Strategic risks that assess the city/country risk, including the likelihood of political, social, and economic inefficiencies and stability, inadequate legal system or regulatory pressures, and natural disasters, etc.
- Tactical risks that reflect market-related changes and dynamics, cost of inflation, flexibility of the labour market, availability and quality of the infrastructure, and medical/health events

City-Down and Country-Down analyses

Identify and understand the impact to the organization and its network of services as a result of a city-wide or country-wide service disruption
Understand the changing requirements of the organization’s recovery plans by continually monitoring and assessing the impact and the conflict in recovery activities, e.g., competition for infrastructure and labour resources among the organization and all of its service providers that impacts the organization’s service recovery capabilities

The nature of the risk events that are monitored, managed, and prepared for vary greatly. Most naturally occurring events have very little, if any, lead-time. However, there are planned risk events that provide a much greater window into the timing of their occurrence. When an organization is properly monitoring and managing its risks, it should not only have the necessary processes in place to address all types of risk events but also to minimize the impact of each. A few recent examples of risk events are listed in the table below:

As we embrace global service delivery models with open arms, how well prepared is your organization to manage and mitigate the risks in this new and highly integrated world?

Procure-to-Pay: Measuring Outcome Beyond Efficiency Gains | Sherpas in Blue Shirts

July 5, 2011

More and more companies are recognizing the value of end-to-end business process management as it breaks down functional and organizational silos to enable a more holistic approach to enterprise performance management.

Of the common sets of end-to-end processes – which include Source-to-Contract (S2C), Procure-to-Pay (P2P), Order-to-Cash (O2C), Record-to-Report (R2R), and Hire-to-Retire (H2R) – P2P is most often identified as the priority for optimization. There are two key drivers of this trend. First, compared to other end-to-end processes, P2P activities are typically more common across the enterprise, making them easier to standardize. Second, the business case for P2P is frequently the most compelling. Through process standardization, workflow automation, system integration, and rigorous compliance enforcement, companies have been able to achieve rapid and significant spend and operating cost savings while simultaneously gaining the ability to better manage risk.

A case in point: a global software and products company achieved an initial operating cost reduction of 35 percent. It subsequently realized spend savings of US$700 million (~9 percent on a spend base of US$8 billion) and captured more than US$10M in Early Payment Discounts (EPD). The savings and benefits accrued generated a break-even on the business case in less than six months.

Based on Everest Group’s experience, one of the most critical success factors of P2P transformation is the institutionalization of a common set of well-defined performance metrics across the entire organization, including both internal and third party delivery partners. The performance metrics should be closely linked to desired business outcomes, and applicable across segments and geographies. Moreover, both P2P efficiency and effectiveness should be easily quantified, measured, and benchmarked.

The table below presents a P2P metrics framework that starts with clearly defined business objectives that are measured by a small set of outcome-based metrics to reflect the overall efficiency and effectiveness of the P2P process. The diagnostic measures are designed to identify specific process breakdowns and improvement opportunities, and are tracked and reported at the operational level.

We strongly recommend companies follow a structured approach to develop a holistic P2P performance management framework:

Define common metrics, and clearly delineate objectives, descriptions, and interdependencies with other performance measures
Establish a standard methodology and systems to track and report performance; key components include:
- Measurement scope, parameters, method, data source, and frequency
- Benchmarking methodology and data source
- Reporting dashboards, frequency, and forum
Assign accountability for:
- Measuring and tracking performance metrics
- Benchmarking and reporting overall P2P performance
- Identifying and prioritizing continuous improvement (CI) opportunities
- Reviewing and approving CI projects
- Implementing and monitoring CI initiatives
- Calibrating performance metrics based on evolving business objectives

There’s no question that the old management adage “You can’t manage what you don’t measure” holds true in the case of end-to-end process management. Having a common set of appropriately-designed performance metrics is both an enabler for and indicator of successful P2P transformation.

Is End to End Really the End All? | Sherpas in Blue Shirts

June 22, 2011

It’s all the rage. Global organizations are starting to take a more “user” centric view of process workflows and operations. As opposed to organizing their delivery capabilities around discrete functions like procurement, finance and accounting (F&A), and HR, the world’s leading firms are organizing around end to end (E2E) processes like Procure to Pay, Hire to Retire, and Record to Report. But is E2E simply a “Hail Mary” pass, a wishful attempt to find value beyond labor arbitrage? Or, as evidence suggests, are the benefits – e.g., better EBITDA, tighter compliance, and greater financial control – real and proven?

A comprehensive CFO survey IBM conducted last year clearly demonstrated that organizations that consistently outperform their peers in EBITDA do, in fact, organize and deliver their global services around principals consistent with an E2E approach. Additionally, these companies all have standardized finance processes, common data definitions and governance, a standard chart of accounts, and globally mandated, strictly enforced standards supporting these E2E processes.

Everest Group’s experience supports IBM’s survey results. And while it seems clear that every large, complex global organization should be chasing E2E in order to improve results and reduce risk, it’s important to note that doing so is neither easy nor without challenges.

To realize the benefits of E2E, Everest Group typically recommends a developing a three- to five-year roadmap with a heavy focus on building the business case, defining the target operating model, and managing stakeholder expectations and change.

Yet even the best game plan will have to address key challenges, including:

Fragmentation – The core of many E2E processes, F&A, is often fragmented in large companies. Finance processes are commonly distributed not only by business unit, but also often by geography. A global rationalization of F&A to understand the base case (current state) is a critical first step.
Vision – It is essential to document and agree on a common target operating model definition for each E2E process which details:
- activities, standards, and data definitions
- a common set of E2E process metrics used to measure performance, provide transparency on delivery performance, and underpin dashboard reporting
- a framework for controls, oversight, and balance sheet integrity
- a compelling and thorough business case that clearly defines the current state, investments, and future benefits
Technology – Even under the best of technology frameworks, a single, global instance of an ERP system like SAP, a further “thin” layer enabling technologies and tools, may be needed to drive standardized processes.

No, E2E is not a Hail Mary pass, but rather a sustained and balanced drive down the field for a game winning touchdown. Success will require strong leadership, talented personnel, technology, a sound game plan, and solid coaching staff to pull it all together, building momentum and confidence along the way.

Sneak “PEAK” into the Banking Applications Outsourcing Service Provider Landscape | Sherpas in Blue Shirts

June 16, 2011

Per our observations of the evolution of the service provider landscape before and after the recession, the single most important factor we have seen for creating differentiation in the IT applications outsourcing (AO) market is significant strengthening of vertical/domain expertise. And recognizing the need for “vertical-specificity” in the AO market, earlier this year we launched an annual research initiative focused on assessing market trends and service provider capabilities for AO in the banking, financial services, and insurance (BFSI) vertical.

One of the first results that emerged from this research initiative was the Everest Group PEAK Matrix for large banking AO contracts. In a research study released earlier this week, we analyzed the landscape of AO service providers specific to the banking sub-vertical. In a world in which everyone and their uncle delivers AO services to financial services clients, this report examines 22 service providers and establishes the Leaders, Major Contenders, and Emerging Players in the banking AO market.

As we congratulate the five Leaders (Accenture, Cognizant, IBM, Infosys, and TCS), and acknowledge the capabilities and achievements of the Major Contenders and Emerging Players, we also want to highlight three inter-related market themes that suggest the PEAK Matrix in 2012 for large banking AO relationships may look significantly different:

Buyer-driven portfolio consolidation: Most banks currently use a complex collection of service providers for their applications portfolio. Decentralized decision-making, global expansion, and large-scale M&A introduced further complexity into their portfolios. Rationalizing the portfolio creates a less complex sourcing environment, enables strategic partnerships with service providers, and also delivers meaningful financial benefit (our analysis indicates that the financial benefits of utilizing fewer service providers can be as much as 22-28 percent on an annualized basis). As more buyers join the portfolio consolidation bandwagon, the larger/more established service providers are winning at the expense of their smaller competitors.

The Matthew effect: Buyer-driven portfolio consolidation is giving rise to the Matthew effect which (in sociology) states that, “the rich get richer and the poor get poorer.” In the context of the banking AO landscape, the Matthew effect translates to “the big get bigger.” Banking AO buyers are placing disproportionate emphasis on domain expertise as a key decision-making criteria for selecting their service providers. Scale influences a company’s appetite to invest in developing vertical/micro-vertical-specific domain expertise, which in turn determines market success, which ultimately impacts growth and scale. This vicious circle of scale fueling scale is increasing the polarization in the marketplace, and could further widen the gap between the Leaders and the Major Contenders and Emerging Players.

Accelerating M&A: In response to the Matthew effect, as the Major Contenders and Emerging Players seek to achieve the next level of growth, mergers, acquisitions, and alliances will accelerate. M&A will play a significant role in service providers looking to achieve quantum leaps in capability and performance. The M&A activity is likely to significantly alter the landscape in the coming months to create a new set of Leaders and Major Contenders, In fact, since we finalized the Banking PEAK, Emerging Player Ness Technologies has already changed ownership.

Given the above three market forces, how much will the landscape of service providers you bank on (pun intended) change in the months to come? Only time and we can tell. Keep watching this space for more!

Related Reports:

Are You Ready to Renew Your Vows With Your Provider? | Sherpas in Blue Shirts

June 15, 2011

The unfortunately all too frequent seven-year itch – “the spice is gone…should we stay together?” – doesn’t happen just in personal relationships, it also happens in outsourcing relationships. Past the mid-point of a 10-year outsourcing relationship (or whatever the length of the agreement) buyers and service providers often struggle to identify how to maintain the health and happiness of their contractual relationship. Buyers are interested in increasing the level of commitment from the provider, in the form of increased productivity or continuous improvement initiatives. However, the provider is often challenged with supplying service improvements and decreasing the cost of service delivery at narrowing profit margins. With the remaining years in the outsourcing relationship, what relationship modifications are required to ensure mutual benefits for both parties?

Organizations should review their changing landscape, organization, and business requirements to identify their long-term strategic objectives so they can decide on the model that is most appropriate for delivering their services and the supporting sourcing option(s) to help achieve their goals. For example, the fact that an organization is currently in an outsourced relationship does not require that it stay in one. If the organization has the internal capabilities, access to the necessary resources, and time to implement the strategic initiatives, engaging in a sourcing relationship may not be strategically (nor potentially financially) beneficial. However, an organization that is potentially looking for greater flexibility and scalability, access to new skills and resources that are not locally available, or to capitalize on new technological trends may consider partnering with one or more suppliers who have the ability to support the organization’s objectives due to lack of in-house capabilities.

An organization that chooses to engage in a relationship with a third-party service provider should ensure alignment for the long-term: strategic objectives (i.e., business and organizational objectives), cultural fit (i.e., mission and values), and solution requirements (i.e., feasibility and adaptability of the service delivery model to meet the organization’s needs.) An understanding of all three factors is imperative in determining the future strategy of the functional organization and shaping the future direction of the current outsourcing relationship.

What is the right change for your relationship?

There are several options you can consider:

1. Don’t rock the boat (i.e., Renew):

After an honest look at your relationship, you realize that the ”same old, same old” is actually working for you
This is akin to renewing the sourcing relationship where you and your incumbent provider agree to continue with the existing contract with minimal changes

2. Face lift (i.e., Renegotiate):

Following discussions on trade-offs and compromises, you and your partner decide that some tweaking to your old routine is required in order for your relationship to continue
Similarly, you and your incumbent provider agree to modify one or a number of limited elements of the outsourcing contract, e.g., price and service levels

3. Overhaul (i.e., Restructure):

Small changes are not going to cut it. In order to make this relationship work going forward there must be some fundamental changes
In a strategic sourcing relationship, you may realize that while you’ve had a provider that has offered value over time and will continue to do so, it must be under a new set of circumstances. In this case, you and your provider can undergo a strategy exercise to restructure the services being you’re receiving to ensure that they align with your long-term objectives

4. Out with the old and in with the new (i.e., Re-compete):

You’ve talked it through with your partner and realize the relationship is not going anywhere. You need someone more supportive and responsive to your needs, and decide it’s time to see other people
The decision to re-compete your delivered services is driven not only by cost, but also by your organization’s long-term strategy. If you assess that your current provider is not capable of supporting your cost and strategic goals, it’s time to start seeing other service providers

5. It’s not you, it’s me (i.e., Repatriate):

You’ve assessed your relationship, and discovered that you are happiest being on your own.
Over time, as your organization evolves, you may find yourself in a position where your long-term goals are best met by bringing services back in-house. This can be the result of M&A activities, a fundamental shift in business strategies, etc.

All kidding aside, buyers must go through a complex exercise when approaching the end of their strategic sourcing relationship. The initial step is to understand their organization’s 10-year strategies and objectives, then begin assessing the current relationship for fit. We typically find there is no single correct answer and, instead, the resulting engagement strategy is a hybrid of the above options. As the marketplace embraces new technologies, the multi-vendor answer is becoming increasingly common. Unlike in personal relationships, it may be beneficial for an organization to have more than one sourcing partner to maintain competitive tension and to optimize the fit with the buyer’s strategies. Organizations can choose their flavor of service providers, a Tier 1, niche, or offshore provider, depending on their objectives and requirements. However, they need to balance the complexity of managing a multi-vendor environment against the benefits provided by each vendor. We strongly encourage full disclosure and consistent communication in a multi-partner model to ensure smooth day-to-day operations and successful service delivery from both/all providers. After all, a little competition never hurt anyone.

Building a Robust Global Services Management Organization | Sherpas in Blue Shirts

June 13, 2011

Today’s large, global companies face an ever-growing need for talented resources to manage their increasingly complex global services delivery organizations. The requirements extend far beyond traditional models that often found firms simply assigning the “folks who have performed the service for the past 20 years” into various leadership roles. While that was never a best practice, in today’s world, it can be catastrophic.

Global services delivery leaders of today must navigate a complicated mix of internal and external delivery engines while forecasting supply versus demand and keeping clients happy across diverse regions and cultures. To meet these demands, leading global services organizations are increasingly adopting highly integrated cross-business leadership teams sponsored at the most senior levels of the corporation.

The graphic below illustrates this concept in a hypothetical global organization.

Organizations seeking to build a robust team to deliver their services globally into the next generation should consider the following best practices as observed by Everest Group in working with many of the world’s leading organizations:

Global governance structures should be aligned with corporate strategy and chaired by a senior leader at the appropriate level in the organization
The governance structure should include an Executive Steering Committee and have formal dedicated roles for key global functions
The structure should have responsibility for global strategy, planning, design authority, reporting, delivery, talent development, and innovation
The structure should have global process leaders who are responsible for the design, implementation, and compliance of standardized processes across the enterprise, with appropriate representation and input from all lines of business
Increasingly, business services are maturing from a legacy functional approach (Finance, Procurement, Tax, Human Resources, etc.) to an end-to-end approach (e.g., Purchase-to-Pay, Record-to-Report-to-File, Order-to-Cash, Hire-to-Retire, etc.). Appropriate transition and transformation teams must be deployed to manage this migration
The structure should also ensure the effective management and integration of all delivery centers

Above all, Everest Group’s experience suggests that companies must treat global services management as a vital business unit with appropriate priority given to recruiting and retaining the talent necessary to execute with excellence and deliver the next generation of value from global services.

Don’t miss the premier conference for GBS, sourcing, and tech leaders. Reserve your spot for Everest Group Engage!

Tag: global services