Setups of Global Business Services centers outpaced outsourcing growth in 2019 as enterprises looked in-house for high-value contributions beyond arbitrage
Everest Group reports that the Global Business Services (GBS) market1 commanded a 27% share of the US$210 – $212 billion global services market in 2019, outpacing the growth of outsourced services and continuing the segment’s gradual increase in share of market over the last decade.
Enterprises are extensively leveraging the GBS model to accelerate enterprise-wide digital transformation initiatives, with approximately 54% of new GBS centers focusing on digital services. In particular, GBS centers in the engineering services and research and development (R&D) space have gained traction during the last couple of years, with focus on building deep capabilities in areas such as machine learning (ML), artificial intelligence (AI), internet of things (IoT), mobility, analytics, cloud, and cybersecurity.
GBS organizations are also undergoing changes in their operating and governance models, driven by three key needs: building greater alignment with business teams, building agile organizations, and improving performance reporting mechanisms. As a result, GBS organizations are increasingly:
“GBS organizations are evolving to become strategic partners to enterprises, playing a significant role in enterprise digital transformation journey as they continue the move from an ‘arbitrage-based model’ toward a ‘value-based model,’” said Rohitashwa Aggarwal, practice director at Everest Group. “We see GBS organizations building deep domain capabilities and shifting to operating models that allow them to build “agile” into their core philosophy and to work closely and freely with key global business leaders. Another major shift is in evaluation—GBS organizations are linking their goals to business- or domain-specific targets and shifting beyond cost-arbitrage as the key metric of performance to a wide array of operational, financial and innovation-related indicators.”
Everest Group shares these findings in its recently published report, GBS State of the Market Report: Evolving Operating and Governance Models to Build GBS of the Future. This report analyzes the GBS landscape, sharing key insights on the GBS market across locations, verticals, and functions.
Additional Findings
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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.
1Everest Group uses GBS as the preferred term for in-house Global Business Services setups, which are also referred to as Global In-house Centers (GICs), shared services, global capability centers, or captives. The scope of this research does not include GBS centers serving the domestic market.
Automation CoEs in Global Business Services (GBS) centers or Shared Services Centers (SSCs) have evolved over time. Mature GBS adopters of automation have made conscious decisions around the structure and governance CoEs, evolving to extract maximum value from their automation initiatives. Some of the benefits they have hoped to gain from the evolution include:
CoE models generally evolve from siloed model to centralized and then to a federated:
Most GBS centers start their automation initiatives in silos or specific functions. In the early stages of their automation journeys, this approach enables them to gain a stronger understanding of capabilities and benefits of automation and also to achieve quick results.
However, this model has its limits, including suboptimal bot usage, low bargaining power with the vendor, lower reusability of modules and other IP, limited automation capabilities, and limited scale and scope.
As automation initiatives evolve, enterprises and GBS organizations recognized the need to integrate these siloed efforts to realize more benefits, leading to the centralized model. This model enables benefits such introducing standard operating procedures (SOPs), better governance, higher reusability of automation assets and components, optimized usage of licenses and resources, and enforcement of best practices. This model also places a greater emphasis on a GBC-/enterprise-wide automation strategy, which is lacking in the siloed model.
However, this model, too, has limitations, suffering slow growth and rate of coverage across business units because the centralized model loses the flexibility, process knowledge, and ownership that individual business units bring to the bot development process.
The federated model addresses both of the other models’ limitations, enabling many best-in-class GBS centers to scale their automation initiatives rapidly. In this model, the CoE (the hub) handles support activities such as training resources, providing technology infrastructure and governance. Individual business units or functions (the spokes) are responsible for identifying and assessing opportunities and developing and maintaining bots. The model combines the benefits of decentralized bot-development with centralized governance.
The federated model has some limitations, such as reduced control for the CoE hub over the bot development and testing process, and, hence, over standardization, bot quality and module reusability. However, many believe the benefits outweigh the drawbacks.
The three CoE models are described in the figure below.
The table shown below shows how the three models compare on various parameters.
There are several reasons why GBS centers are moving to the federated model, as outlined below.
A leading global hardware and technology firm’s GBS center adopted the federated CoE model, which houses the CoE hub, in 2017. In the three years since, it has grown to over 400 bots across more than 20 business units in a wide variety of locations, and saved more than $25 million from automation initiatives. The CoE hub has also successfully trained over 1,000 FTEs from technical and business backgrounds on bot development. As a result, firm-wide enthusiasm and involvement in the GBS center’s automation journey is high.
Transitioning to a federated CoE model has helped many GBS programs scale their automation initiatives rapidly. For more details, see our report, Scaling Up the Adoption of Automation Solutions – The Evolving Role of Global In-house Centers or reach out to Bharath M or Param Dhar for more information on this topic.
This is the fourth in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.
These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.
A virus originating in China has brought life to a standstill around the globe – and that includes service providers and shared services centers or Global In-house Centers (GICs). From delays in procuring office supplies (most of them sourced from China) and rescheduling of important meetings/events to the threat the virus poses to human capital, the risks have pushed most firms to revisit their business plans and potentially prepare for another worldwide recession. The virus spread has also been a wakeup call for providers and shared services centers, testing their preparedness in terms of business continuity and disaster recovery. In fact, it has made some firms comprehend the need to balance their cost-competitive mindset with a risk-competitive one.
Some organizations are well prepared and offer examples for others to follow. In this blog, we take a look at some of these noteworthy business continuity and disaster recovery measures, based on our conversations with more than 20 GICs and service providers globally. Strategies that stand out in particular include:
For example, a UK-headquartered bank (with GICs across multiple locations) has an intra-city, inter-city, and inter-country Business Continuity Planning (BCP) strategy. The bank follows a robust BCP operating procedure by: (A) assessing a service’s/process’ business impact /criticality if work were to stop due to reputational, financial, or customer-related reasons, among others); and, (B) identifying the work location based upon criticality – highly critical services/processes are typically distributed across two countries. To understand this better, the company invokes:
In the aftermath of the coronavirus outbreak, we are likely to see significantly strengthened business continuity plans – those that take into account talent availability, work placement strategy, infrastructure availability, and newer metrics to manage performance. In particular, we encourage enterprises to explore answers to the following questions to develop robust business continuity plans:
Visit our COVID-19 resource center to access all our COVD-19 related insights.
This is the second in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.
These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.
To date, over 99 percent of the officially confirmed total of 45,000 (61,000 if the Chinese authorities’ newly expanded definition is used) Covid-19, or Coronavirus, cases are inside China. The impact of the virus is pronounced in a core group of ten Chinese provinces: Hubei, where the virus originated, the six neighboring provinces of Shaanxi, Heinan, Anhui, Jiangxi, Hunan, and Chongqing, plus the adjacent coastal provinces of Guangdong, Fujian, and Zheijiang. As of February 9, these areas account for 90 percent of the total reported confirmed cases and 92 percent of China’s new cases.
While supply chain organizations in these provinces are facing severe impacts due to closures, we believe the level of exposure to risk of disruption for service delivery organizations is limited because the service delivery centers are largely servicing internal customers, which are themselves operating at reduced capacity or are closed completely until further notice.
Data from Everest Group Market Intelligence (EGMI) shows that there are 51 Global Inhouse Centers (GICs) – or shared services centers – and 20 service provider delivery centers located in these 10 provinces. Of the seven GICs in Hubei at the epicenter of the outbreak, two, owned by FedEx and UPS respectively, are thought to deliver internal shared services to domestic and near-Asian employees. The rest are technology research or innovation centers.
In view of restrictions imposed by the Chinese government, provincial governments, or companies implementing business continuity protocols, it is highly likely that most, if not all, of these delivery centers are closed and will remain so until further notice.
Examples of the restrictions imposed by the authorities or by companies themselves that have been in place for at least two weeks and look set to remain include:
As an example of specific defensive measures businesses are taking, all businesses and public facilities in Singapore, in accordance with government guidelines issued on February 10, are now:
It is possible that some enterprises will use the disruption caused by the outbreak as justification for cost cutting and capacity reduction, but we don’t yet see clear evidence of that.
Visit our COVID-19 resource center to access all our COVD-19 related insights.
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