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Home Industry Verticals

Cost arbitrage to remain important for Global Business Services

FutureCIO Editors by FutureCIO Editors
April 26, 2021
Photo by fauxels from Pexels

Photo by fauxels from Pexels

2020 was not a bleak year for Global Business Services (GBS) organizations. Research from Everest Group suggests that the GBS market witnessed improvement in performance, enhancements in role, and growth across verticals and functions.

Despite the pandemic, the GBS centre set-up activity continued to experience strong growth, with 200+ GBS centres established across onshore and offshore/nearshore locations in 2020. Approximately 27% of the US$214 billion global services (sourcing) market is attributed to the GBS model.

The COVID-19 crisis further strengthened the value proposition for evolved GBS organizations, as GBS centres exhibited resiliency and earned spikes in Net Promoter Scores in 2020.

The pandemic acted as a catalyst across most verticals for accelerating adoption of digital initiatives, thus providing an opportunity for GBS organizations to step up and deliver higher value-add services for enterprises.

More than 50% of GBS centre set-ups expanded their digital capabilities in areas such as advanced automation, analytics, cloud, and platform-based engineering to meet evolving business expectations and priorities.

The GBS focus on value addition beyond cost arbitrage remains critically important to future growth.

Top 5 expectations from the GBS model going into 2021

  1. Enable digital transformation
  2. Drive cost excellence
  3. Accelerate innovation
  4. Drive agility and cross-functional collaboration
  5. Enhance service delivery resiliency.

Other key findings:

  • India continued to be a leading delivery location for GBS market activity, accounting for more than one-fourth of centre set-ups in 2020, followed by the Rest of Nearshore Europe and the Rest of Asia.
  • Despite the overall GBS centre set-up activity dominated by U.S.-based companies, firms based in Asia-Pacific have gained significant traction over the last three years (increasing APAC’s share of centre set-ups from approximately 10% to nearly 25%).
  • Enterprises are increasingly leveraging the GBS model to establish digital hubs and Engineering, Research and Development (ER&D) centres to create successful digital customer and employee experiences, thus driving differentiated strategic capabilities.
  • The contribution of new adopters in the overall GBS model has increased significantly over the last three years; more than 70% of the companies that established GBS centres in 2020 were new entrants with no existing offshore/nearshore GBS centre.
  • Small companies (i.e., with revenue less than US$1 billion) accounted for almost half of the centre set-up activity in offshore/nearshore locations in 2020, with technology and communication companies leading in terms of centre set-ups.

New GBS priorities

  • Re-evaluation of operating models, especially geographic diversification
  • Designing a workforce strategy that is holistic and based on design principles.
  • Winning the talent wars
  • Embracing productivity as a superpower
  • Addressing issues with the Work from Home model
  • Ensuring cost-competitiveness to overcome inevitable third-party economic comparisons
Related:  Metaverse increase trust risks for enterprises and users
Tags: Everest Groupglobal business servicesNet Promoter Score
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