Tag: recession

6 Innovation Myths Busted by Everest Group Research on Global Business Services | Press Release

May 7 Webinar to Address How GBS Organizations Can Leverage Innovation to Prepare for Economic Downturn

For those enterprises striving to create a culture of innovation, Global Business Services divisions* can be an enormous asset, markedly accelerating the innovation journey and driving the enterprise innovation agenda, according to Everest Group research.

In its newly published report, Innovation in GBSs: Pinnacle Model® Analysis, Everest Group examines 51 GBS organizations and identifies Pinnacle™ (best-in-class) GBS centers—those entities that are achieving superior outcomes because of their advanced capabilities.

Collectively, Pinnacle GBS organizations debunk six common myths associated with innovation.

1.    Myth: Bigger and older GBS centers are not agile and lean enough to deliver better business outcomes. Reality: Bigger and older GBS centers deliver better business outcomes.
2.    Myth: GBS centers should not focus on in-house technology development. Reality: Pinnacle GBS centers primarily develop mature technologies in-house while leveraging ecosystem partners for niche technologies.
3.    Myth: Mature GBS centers deliver only high-end innovation. Reality: Pinnacle GBS centers focus mostly on incremental innovation.
4.    Myth: The GBS innovation team should have more leadership members to ensure better outcomes. Reality: Pinnacle GBS organizations exhibit a balanced team structure while other GBS organizations are more top-heavy.
5.    Myth: Centralized innovation teams in GBS centers and parents are essential to deliver business impact. Reality: A hybrid team structure at the parent level and an innovation head or dedicated steering committee at the GBS center level have proved to be more successful.
6.    Myth: Service providers and technology vendors are the most important value creators in the innovation ecosystem. Reality: Pinnacle GBS organizations extensively leverage a mix of service providers, technology vendors, and startups for driving innovation.

“The entities we’ve identified as Pinnacle GBS centers are adept at leveraging their unique position and capabilities to help their parent organizations build truly disruptive innovation capabilities,” said H. Karthik, partner at Everest Group. “This is demonstrated by significantly higher ROI and cost savings as well as operational and strategic impact.”

Pinnacle GBS centers have been able to achieve significant business impact by effectively driving their innovation engines. Here are a few examples:

  • Cost impact: Pinnacle GBS centers generated 1.5X higher return on investment (ROI) and cost savings than other GBS centers. An example of an innovation initiative with cost impact is identifying potential opportunities to consolidate multiple product lines and processes, thereby realizing the benefits arising from economies of scope.
  • Operational impact: Pinnacle GBS centers have achieved 1.9X greater operational impact than other GBS centers. For instance, a leading Banking, Financial Services and Insurance (BFSI) GBS organization built a smart contracting platform to seamlessly process unstructured data and automate multiple transactional processes, reducing FTE time.
  • Strategic impact: Pinnacle GBS centers delivered 1.6X more strategic impact than other GBS centers. An example of a GBS center having significant impact is a leading electronic and hi-tech GBS organization who leveraged next generation technology solutions to revamp its existing cold chain to preserve and increase the shelf life of perishable goods and chemicals, ensuring the quality through last-mile delivery to the end customer.

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

May 7 Webinar: How GBS Centers Can Leverage Innovation to Prepare for the Economic Downturn

Everest Group is hosting a complimentary webinar to assist senior enterprise executives in understanding how they can effectively leverage their GBS organizations for driving the enterprise innovation agenda. The webinar will address these questions:

  • For what kinds of innovation initiatives are enterprises leveraging the GBS model?
  • How does the current uncertain environment present a significant opportunity for GBS centers to build and demonstrate innovation?
  • What business outcomes have Pinnacle GBS centers delivered for their organizations?

The live webinar will be held on Thursday, May 7, at 9 a.m. CDT.

***Register here.***

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.

*Note: For the purposes of this report, Everest Group uses the term GBS to include Shared Services Centers (SSCs), Global In-house Centers (GICs) and Global Capability Centers (GCCs), although distinctions in these business models can be made.

Redefining the Status Quo: The IT-BPM Industry Post-COVID | Webinar

This webinar is hosted by IBPAP (IT and Business Process Association of the Philippines). Attendance is by invitation only. 

The spread of COVID-19 has wreaked major havoc across nations, people, and businesses, and disrupted the global IT-BPM industry. In this webinar, industry experts from Everest Group will discuss the impact of COVID-19 and the economic recession on the global IT-BPM industry, the outlook going forward, opportunity areas, and action steps that can help IT-BPM players better prepare for the future, followed by an open discussion in which IT-BPM leaders from the Philippines can ask questions and share perspectives.


April 29, 12:30-1:30 PM IST


H. Karthik
Everest Group

Prashray Kala
Vice President
Everest Group

Are IT Buyers Pushing for Discounts Due to the Pandemic?

Not surprisingly, we’ve been flooded with questions about the implications of COVID-19 on the IT services industry over the past two months.

Let’s take a look at the two most prevalent questions.

How are IT contracts being impacted?

Financial distress – such as a dip in revenue generation and restricted cash flow – is forcing enterprise IT to review their IT contracts. Clients are exploring three options:

  • Putting non-critical projects on hold
  • Deferring payments to keep critical projects running
  • Seeking discounts

Their preferred option is putting non-critical projects on hold. Clients are triaging to keep their business-critical functions – like transactions systems, call centers, datacenters, and supply chain systems – running. However, they’re putting non-critical engagements, such as new application development and feature upgrades, on the back burner.

Second in order of priority is deferring payments. We’re seeing deferral requests increase in frequency, especially in distressed industries such as travel, transportation, hospitality, and medical devices. And we’ve seen payment terms going up to 180 days in a few situations. However, an early trend that will soon establish itself as the IT industry norm is balance sheet (or cash pile) financing; vendor balance sheets have started to play a role in enabling billing deferrals and “deploy now pay later” models. For example, Cisco has set up a US $2.5 billion war chest leveraging its balance sheet to help some of its clients defer payments until 2021.

Our analysis shows that vendor balance sheets, both tech products and IT, are healthy. For example:

  • IT vendors’ (HCL, Infosys, TCS, Wipro, etc.) balance sheet assets over liabilities ratio ranges from 1.3x to 3.5x
  • Tech vendors’ (Adobe, Amazon, Microsoft, Oracle, etc.) balance sheet assets over liabilities ratio ranges from 1.1x to 3.4x.

And there is evidence that they may dip into them to help their clients out.

The third in priority is seeking discounts. We’re seeing anecdotal evidence of clients seeking discounts on contract value and in a few cases extending up to 50 percent of the annual contract value. But to clarify and qualify this:

  • The discount discussions are largely focused on time and materials (T&M) projects. Few are around fixed price and managed service engagements, which form a larger share of revenue profile for large IT vendors
  • And this means that smaller IT and staffing vendors – for which T&M constitutes larger share of the revenue profile – are going to be impacted more than the large IT vendors

Most importantly, we’ve seen enterprises being very flexible and collaborative with their vendors – working closely with them to keep initiatives running.

How will enterprises prioritize and fund IT initiatives during this crisis?

Enterprises are currently preparing their playbooks to navigate the ongoing recession. It’s important to note that recession does not mean that IT initiatives will be broadly deprioritized. Depending on the impact they see on their overall business and their anticipation of recovery, enterprise executives will triage their resources (cash, talent, vendors) to keep critical initiatives running.

Here’s a look at the framework we’re using to help buy-side clients prioritize their decisions:

  • Rescue business critical initiatives most severely impacted by the recession through financial engineering and aggressive cost takeout
  • Revitalize revenue-generating business functions that can gain from automation usage and cloud-driven agility
  • Reinforce the lowest impact portions of the revenue profile through M&A and product launches
  • Restructure those portions of the portfolio – such as vendors, locations, and talent – that already had redundancy and concentration risk issues

Portfolio approach by enterprises

In the coming weeks, enterprises will be using this framework to:

  • Triage between critical and non-critical IT spends
  • Build their blueprints for how they will reallocate budgets and engage with vendors
  • Identify new scope and financial models on which they’ll engage their vendors

Watch this space to see how this playbook evolves. If you have any questions or ideas on other approaches, please write to me at [email protected].

What Is Your Post-COVID-19 M&A Strategy | Blog

The International Monetary Fund has recently confirmed what most of us already know – we have entered a recession. Given the evolving COVID-19 situation, in the short-term, organizations are doing their best just to implement business continuity plans and keep the lights on. At this point, they simply don’t have the bandwidth to take a forward-looking view.

However, now – or at least very soon – maybe the best time to be bold – to consider the opportunity to slingshot through and out of the recession with a strong M&A strategy.

Increasing acquisition activity

As part of our technology research over the past few years, we’ve analyzed innovative firms (which we call Trailblazers) to identify high potential start-ups based on their growth stories, innovation, and the impact they have created in the market.

More recently, we’ve seen an uptick in M&A activity across the IT services market as organizations have sought exponential inorganic growth to expand their geographic footprints and/or fill gaps across their services portfolios. (See the exhibit below.)

timeline of acquisitions of high potential start ups presented by everest group 1

How we expect the recession to impact this activity

Although this has been an acquisition-rich industry in recent years, everything is completely different now – the post COVID-19 market is clearly headed straight into recession, or worse. If previous recessions are any indication, M&A activity is likely to take a hit. While we believe M&A activity in the immediate aftermath of the pandemic will be subdued, we also believe there will be some interesting opportunities for those willing to invest some thinking and strategizing.

Is now the right time for you to consider M&As?

As the world adjusts to the next normal following the pandemic, some specific technologies/tools are likely to see a surge in adoption, including cloud, collaboration and CX, network and security, IoT and edge, to name a few. These technologies will play an important role in ensuring business resiliency and serving a distributed and remote workforce.

Within this context, a well-planned acquisition strategy can enable competitive advantage for those organizations willing – and able – to take a bold approach. We believe this segment-specific activity will be further fueled by:

  • Lower valuations: Most start-ups take a relationship-based selling approach, with about 80% of their revenue coming from a few high-value, large clients or markets. As the recession deepens, start-ups that are highly dependent on a few clients and markets will struggle to survive, lowering their valuation and increasing their propensity to be acquired. The lower cost of capital and the impact of the financial stimulus are also going to provide acquirers an impetus to re-examine their M&A playbooks. One such example is Magic Leap, which is looking at opportunities to be acquired as the hardware sector faces threats from the COVID-19 crisis, the impending recession, and the trade war between the US and China. Cash-rich organizations (PE/VC firms, service providers, and BigTech companies) are already looking at leveraging their balance sheets amidst this downturn
  • An opportunity to fill portfolio gaps: As growth across IT services is expected to soften for the foreseeable future, now may be the time – and the price may be right – for organizations to augment their capabilities, expand their addressable market, and increase their top line

We are already seeing interest from acquiring firms focused on cloud services (AWS, Azure, GCP), enterprise platform adoption (capabilities in ServiceNow and Salesforce), network services, and security, to name a few. As we approach the fallout from the pandemic, a range of investors will be eyeing the technology sector for M&A opportunities, and we believe there will be a lot of activity. Picking the right segment bets and timing these initiatives will be crucial.

What is your post-COVID-19 M&A Strategy? Please write to us at [email protected] and [email protected].

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