Enterprises are increasingly leveraging global in-house centers (GICs), often called Shared Services, as strategic partners that play a central role in digital transformation and innovation initiatives. According to Everest Group, GICs are playing a critical role in helping enterprises adopt new digital technologies such as advanced analytics, machine learning, robotic process automation, blockchain, IoT and artificial intelligence.
“As GICs continue to evolve and deliver value beyond arbitrage, their role is becoming a more involved and critical one in supporting their enterprises’ innovation agenda and sustained competitiveness,” said Rohitashwa Aggarwal, practice director, Global Sourcing, at Everest Group. “Most mature GICs have evolved to drive impact through high-value capabilities, operating as an integral team with core business teams, building the next-gen talent pool, and leveraging ecosystem partnerships to capitalize on digital opportunities.”
While enterprises continue to predominantly rely on service providers for IT services delivery, they have started leveraging the GIC model, which is consistently driving the share of GICs in the overall sourcing mix for IT services. Insourcing has experienced constant growth, with the share of GICs in overall IT services delivery for global organizations increasing from 20% in 2010 to 28% in 2018.
The GIC segment accounted for 26% of the global offshore services market (estimated at US$196 billion in 2018). The GIC market has now grown to reach more than 3,100 centers and more than 1.4 million FTEs across leading offshore and nearshore locations.
The GIC market saw a 20% year-on-year increase in 2018 in the number of new GIC setups, driven by new setups from the manufacturing; healthcare and life sciences; retail and consumer product goods (CPG); and banking, financial services and insurance (BFSI) sectors.
The research supporting these findings is summarized in “Global In-house Center (GIC) Annual Report 2019: Enterprises Insourcing IT Services to Their GICs,” a report recently published by Everest Group. This report provides a deep dive into the GIC landscape, year-on-year analysis, and the GIC trends in 2018, comparing them with trends in last two years. The research also brings out key insights related to the GIC market across locations, verticals and functions and concludes with an assessment of the increasing insourcing of IT services delivery in GICs.
More GIC Landscape Trends:
- Europe-headquartered firms are setting up GIC centers in Central and Eastern Europe given proximity and language-skills requirements, while US-based companies are more inclined to leverage India due to the availability of large-scale talent for English language delivery.
- A majority of GICs focus on a single function (such as operations, IT or voice-based business process services), but many have multi-functional capabilities.
- Technology and communications firms lead GIC activity in terms of the number of centers (37%), but the BFSI vertical has the highest share of FTEs employed by GICs (36%).
- GIC setups by small companies have increased on the back of higher demand for R&D and innovation. In 2018, small companies’ GIC setups increased by 65% over 2017.
- While business process/operations continue to be the dominant function served by GICs, R&D GICs have gained traction during the last couple of years to help develop digital products and services such as machine learning, artificial intelligence, IoT, mobility, analytics, cloud and cybersecurity.