Location Activity Increased in 2015 | Market Insights™
March 30, 2016
Location activity increased in 2015 as buyers invested ahead of demand
Location activity increased in 2015 as buyers invested ahead of demand
Downloadable, high-res Market Insights™ graphics and webinar summarize 2015 developments, 2016 predictions in Global Services marke
The maturing global services industry experienced continued growth in 2015, with location activity reaching an all-time high. The drivers of that growth, however, have evolved. Small and mid-sized buyers led growth across industry verticals, and the adoption of new technologies caused disruption in the market, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.
Looking ahead to 2016, Everest Group predicts service delivery automation (SDA) will become a priority for Global In-house Centers (GICs), often called Shared Services or Captives, and will impact the location portfolio in a variety of ways, including a rise in both consolidation and reshoring, the latter especially in situations where speed-to-market is important.
“Twenty-eight percent of GICs have already implemented SDA across multiple processes and have started reaping the benefits of greater operational efficiencies,” said Salil Dani, vice president in the Global Sourcing team at Everest Group. “Fifty percent are pursuing pilots or actively planning to implement SDA, and 22 percent are thinking about it. So, there is no doubt that SDA is impacting the location portfolio; however, it will not replace offshoring.”
These research findings are summarized in a set of high-resolution graphics available for complimentary download here. These Market Insights™ illustrate key takeaways from Everest Group research on the developments that took place in the global services industry in 2015. The graphics may be included in news coverage, with attribution to Everest Group.
The graphics include:
***Webinar Replay***
The research supporting these Market Insights graphics was discussed in a webinar conducted by Everest Group last month. Listen to a recording of “Market Vista™ | Global Services Developments: 2015 Trends & 2016 Predictions” or get the presentation here.
Global services location activity increased in 2015 as buyers invested ahead of demand
The mantra of 80/20 (80 percent offshore, 20 percent onshore) has been the war cry for the services industry for the last 10 years. It has stood for the absolute sweet spot for a services player, particularly in terms of maximum leverage of offshore talent. This has been the most profitable space. Providers that approached this sweet spot have been the fastest growing and most profitable players.
It has been a thing of beauty and a joy forever … well, not really forever. Things change.
What we’re seeing in a segment of the industry is that customers now ask for 80/20 in the opposite way – 80 percent onshore and 20 percent offshore. They’re not asking for their entire delivery platform to do this. But in discrete segments they are looking for a much more intimate onshore model – more industry domain knowledge, more company knowledge and the provider’s teams stood up next to their teams or intermingled with their teams where they can drive to functionality very fast. They also want less churn.
To be clear, it’s not happening everywhere. But the desire to move to this alternative 80/20 model is happening in some of the fastest-growing and most lucrative segments of the industry. For instance, we see this model approaching in digital. We hear customers voice this aspiration in healthcare. And we talk with many large, sophisticated clients that express the desire to change the model.
They’re not looking to lose labor arbitrage completely, but they want to turn the 80/20 model on its head. And they are willing to give up some of the cost benefits of the old factory model for the speed, intimacy, and agility of the new model.
Photo credit: Flickr
Value leakage can have significant consequences – as much as 38-50% of total spending
Offshore/nearshore contracts on the rise in European procurement outsourcing (PO)
The offshore F&A services sector in Central & Eastern Europe (CEE)
Click image to enlarge
Service Delivery Automation (SDA) and offshoring cost benefits accumulate over time to as much as 80%
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