gbs the future of sourcing

Global Business Services (GBS):The Future of Sourcing

Helping Clients Leverage Global Services & Sourcing

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Copyright © 2016 Neo Group, Inc. All Rights Reserved.

GLOBAL BUSINESS SERVICES (GBS) – THE FUTURE OF SOURCING


Introduction

Global Business Services (GBS) is gaining

a lot of traction among the Global 2000

enterprises as the next transformative

upgrade to their global sourcing models. As

with all new strategies and ideas, different

organizations define GBS differently and

have different expectations from this model.

This paper attempts to define GBS in a

comprehensive manner, as well as discuss

how the model evolves and must meet

different expectations at each level of its

maturity.

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Global sourcing models are ever evolving to accommodate the growing complexities within

global enterprises and new challenges. While Shared Services Centers (SSC) and 3rd

party Independent Software Vendors (ISVs) paved the way for the early sourcers to

leverage global talent for the IT organizations, their wide acceptance triggered

development of offshore centers within globally dispersed enterprises, called captives or

Global In-house Centers (GICs). The adoption of captives/ GICs have been rapid in the

past decade and there are currently over 2000 GICs globally. Over half these global

captive centers serve US based companies, and about 55% of all GICs are based in India.

As enterprises grow in complexity and geographic diversity, it becomes imperative to adopt

evolved sourcing strategies which are better aligned to the overall enterprise business

strategy and can comprehensively address the sourcing needs of the enterprise. Many

sourcing models in the industry like 3rd party managed services, SSCs or GICs are mostly

an either/or model, which does little to integrate the efficiencies of both the 3rd party

vendors as well as internal sourcing capabilities.

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INTRODUCTION


Copyright © 2016 Neo Group, Inc. All Rights Reserved. 4

For the most mature globalizers, it was the search for such transformative and integrated

multi-sourcing models that resulted in the evolution of Global Business Services. Most

companies that have adopted the GIC model have now achieved maturity, and GBS has

become the natural way forward for these organizations. The consumer services industry

began successfully experimenting with GBS in the early 2000s. P&G owes savings of over

$800 million to their successful GBS organization. While companies like P&G have been

vested in GBS for over a decade, other global enterprises have recently begun to

increasingly adopt GBS strategies for their sourcing needs.

INTRODUCTION



Defining GBS

The proven success of the GBS model in

large global organizations has caught the

interest of global organizations of all sizes

and this aspirational model has been

established in different organizations with

varying degrees of success. Global

Business Services has also meant different

things to different organizations, which

makes it important for us to define GBS in

the right context for the purpose of our

discussion in this paper.

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By consolidating multi-functions services

and delivery models under a single

organization, GBS has the potential to

realize far more value than the ‘sum of the

parts’.

Definition

Global Business Services (GBS) is an autonomous

business organization within an enterprise that is

responsible for the delivery of end-to-end business

processes using integrated services from internal

and 3rd party sources, across locations and business

units.

DEFINING GBS



How does GBS

Compare?

A GBS model differs from traditional

‘captive’ sourcing strategies such as

Global In-house Centers (GICs) and

Shared Services (SS), and also from

traditional 3rd Party outsourcing

models including Staff Augmentation

and Managed Services.

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GBS COMPARISON

Attributes GBS Traditional GIC/SS Traditional Outsourcing

Executive

SponsorshipCEO/COO CFO or Function Head

Function Head or CPO or

Sourcing

CharterAligned with corporate

business objectives

Aligned with business

functions

Aligned with projects or

discrete functions

AutonomyGBS manages its own

budget

Budget controlled by CFO

or Function

Budget controlled by

Functions

Metrics &

Success Factors

Measured by corporate

outcomes

Measured by process

outcomes

Measured by SLAs and

cost efficiency

Services

Combination of internal IT

& business services and

externally sourced

services

Internal IT services and/

or functional processing

services

3rd. Party ITO/ BPO/ KPO

Managed Services

Delivery Integrated Function based Task based

ProcessesStandardized global

processes

Different levels of

standardization across

functions

Largely optimized for cost

efficiency at task level



GBS COMPARISON

Attributes GBS Traditional GIC/SS Traditional Outsourcing

Resources Internal and external Internal External

Demand

Management

Demand consolidation at

Enterprise level – multi-

function, across all

engagement/ delivery

models

Demand consolidation at

functional level; No

3rd.party leverage

No demand consolidation;

Complete dependence on

3rd. party services

providers

Vendor

Management

Global VMO manages all

vendor relations and

reports up to the GBS

No vendors involved, so

no VMO

Procurement manages

vendor relations; in some

cases VMO exists but

siloed

IP, Knowledge &

Best Practices

Enterprise-wide repository

of IP, Knowledge-base

and best practices;

Promote cross-functional

sharing

Retained internally but in

silos

Potential risk of IP

leakage; Limited

opportunity to leverage

vendor’s knowledge or

learn best practices

Analytics

Comprehensive

enterprise-wide data

available for analysis

Limited Analytics; Data

availability inconsistent

across functions

Minimal or no analytics

available as processes

are managed externally

Career Path

Multiple career growth

opportunities, across

regions and functions

Career growth limited to

specific functions and

regions

No growth path for internal

employees and limited

career growth options for

3rd. party resources



GBS COMPARISON



GBS Evolution Model

Different organizations approach GBS

enablement differently, but they all aspire to

achieve an advanced, mature and well-

organized GBS sourcing structure. GBS

adoption, like other sourcing models, traverses

through various levels of maturity and growth. It

is critical for organizations to track their

performance against the various GBS related

strategies implemented in their organization to

help acknowledge what they are doing right and

identify areas for improvement.

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A periodic assessment of the status of GBS evolution within an organization creates

opportunities to benchmark against the market trends and adopt new practices,

methodologies and tools to further evolve and grow the model. GBS organizations have

higher visibility and impact on the overall business strategy, and hence their performance

or the lack thereof, could result in deeper impact to the overall performance of the

enterprise.

An evolution assessment must focus on measuring risks and opportunities in different

layers of the GBS organization. It must help clarify what responsibilities lie with the GBS

and what areas could leverage a robust GBS program. The evolution index (a calibration of

the current stage in the evolutionary journey) contributes to set expectations from a GBS at

that specific stage of growth.

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GBS EVOLUTION

MODEL



The value of an evolution index is in being able to evaluate what level of GBS is ideal for

the enterprise at a given point in time and understanding key elements that contribute to

that level of performance. This helps in developing a scorecard for the organization against

which ongoing performance can be tracked.

When it comes to long term strategic goal-setting for the GBS organizations, the GBS

Evolution Index can be leveraged as a reference map to identify what areas to focus on or

avoid depending on the overall enterprise’s maturity forecasts and thus develop a long

term GBS strategy that closely aligns with the enterprise business goals.

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GBS EVOLUTION

MODEL



Neo’s GBS Evolution Model classifies GBS evolution into 5 succeeding steps of maturity.

The journey to an efficient GBS governance structure can be tracked through milestones

for each stage. These steps help an organization classify their GBS performance under

either of the 5 stages and also be able to learn what level of transformation is required to

graduate to the level.

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GBS EVOLUTION

MODEL

5 Stages of the GBS Evolution Model



I. Basic:

Organizations that are beginning to focus

on GBS as a strategic option to manage

their offshore capabilities and sourcing

arrangements fall in this Basic level of

evolution. These are global enterprises

that have successfully established

offshore delivery centers or have a well-

established managed services capability.

At the Basic stage of the GBS evolution,

sourcing processes are still fairly

decentralized and there is no clear GBS

leader identified. At this exploratory stage,

GBS could just be a new name for a

bigger, better and improved Centralized

Shared Services (CSS) that is already in

place.

II. Evolving:

Enterprises that have already established

a GBS strategy and have begun exploring

ways to transform into a GBS led

sourcing organization are in the Evolving

stage. Though the business departments

are still reluctant to commit resources to

the changing structure, GBS must begin

to differentiate its purpose from that of the

main enterprise and establish

relationships with partners both external

and internal. At the evolving stage, GBS

organization would typically include at

least a CSS and remote Global In-House

Center (GICs) for a single function.

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GBS EVOLUTION

MODEL



III. Mature:

In an enterprise with a Mature GBS

organization, business leaders commit

resources to the GBS strategy. The GBS

now has roles and responsibilities defined

to engage better at the functional levels

and it also owns the overall sourcing

strategy. At the mature stage, a GBS

must at least include SSO, GIC and 3rd

Party Dedicated Centers for a single

function.

IV. Advanced:

An Advanced stage of the GBS would

see increased commitments from

business groups towards initiatives with

strong business plans, while the

corporate leadership makes it a priority to

frequently review the GBS operations and

provide inputs. At this stage of the

evolution, the GBS organization fully

owns the sourcing strategy and develops

it in alignment with the overall enterprise

business strategy. An Advanced GBS

would now include multi-function sourcing

operations (ITO & BPO) and all operating

models.

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GBS EVOLUTION

MODEL



V. Leadership:

At the top end of the evolution curve, the

Leadership stage, the GBS is essentially

functioning as an independent business

unit headed by a GBS head who is part of

the corporate executive council.

Operational groups like the VMO,

Demand Management, Intellectual

Capital Management, Resource

Management and Infrastructure

Management now report to the GBS

head. At the Leadership stage the GBS

would have evolved into an entity with an

integrated governance model that

oversees full GBS scope: multi-function,

multi-shore and all operating models

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GBS EVOLUTION

MODEL



Neo Group’s GBS

Evolution Assessment

The GBS Evolution Assessment performed

by Neo Group is a review-based process

through which we calibrate the evolution of

a GBS organization across a number of

related categories. The assessment could

be administered either as an advisor-led

interview process or a cloud based self-

evaluation exercise.

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The assessment is driven by gathering responses to a specific set of questions pertaining

to different elements of a typical GBS organization and its governance. These questions

are typically addressed to various leaders in the GBS or sourcing organization, though

some questions may require additional information gathering from respective stakeholders

across the enterprise.

Responses are calibrated on a scale of 1 through 5, across the following 10 categories to

quantify the GBS Evolution Index.

1. Strategic Alignment

2. Relationship Management

3. Demand Management

4. Supply-side GTM Strategy

5. Intellectual Capital Management

6. Human Capital Management

7. Performance Management

8. Legal & Financial Management

9. Risk Management

10.Infrastructure Management

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The assessment is better served if administered across multiple GBS centers within the

enterprise to develop a comparative mapping of the GBS evolution across different

centers. This helps identify gaps as well as better performing areas in each center and

assesses how they contribute to the overall enterprise GBS Evolution Index.

GBS EVOLUTION

ASSESSMENT



Conclusion

The GBS Evolution Index provides a score that

helps in the identification of the stage of

evolution of the GBS organization and does not

in any way signify the success of the GBS

itself. The score must only be read as

analogous to a standards certification process

like the CMMI.

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The evolution index helps a GBS organization evaluate if the GBS is at a certain stage of

maturity as intended by the strategy put in place. Each organization might aspire to be at a

certain level of evolution depending on several aspects like the type of enterprise, their

strategic outlook, their functional strategy and operating model, amongst other things.

The index is designed to help the GBS measure their success against the expectations

from the specific level of maturity that the organization has planned to achieve. While the

Neo Group GBS Evolution Index helps the organization identify gaps in their achieved

status across different categories, it also helps the organization to learn in which areas

they excel. In short, it helps objectively assess the strengths and weaknesses in the GBS

operations.

As different sourcing models converge into the GBS operating model, it is important to

ensure that this does not just develop into a syncretic juxtaposition of several sourcing

models under a single umbrella called GBS, instead the overall sourcing strategy must be

transformative so as to evolve into an integrated sourcing model that champions the

sourcing needs of the enterprise.

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CONCLUSION



Neo Group Can Help

The global sourcing landscape is constantly evolving. For a deeper discussion on planning and executing

a successful globalization strategy, contact one of our lead advisors.

Adolfo Masini Brad Pickar Hemant Puthli

Partner & SVP Partner & SVP Partner & SVP

[email protected] [email protected] [email protected]

Kevin English Pankaj Sharma Vikram Naaidu

Partner & SVP Partner & SVP Partner & SVP

[email protected] [email protected] [email protected]

About the Authors

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Hemant Puthli is a Partner and Senior Vice

President at Neo Group, where he is responsible

for assisting clients in the development of their

outsourcing strategies and governance models.

Hemant brings over 25 years of experience in

Management Consulting and IT Services, having

served several clients in North America and

India.

Vivek Pappu is a manager with the advisory

services team at Neo Group. He focuses on

engagements related to global sourcing

transformation, vendor management, services

offshoring and procurement strategies. He has

been advising clients in the Media, Publishing,

Internet, High-Tech and BFSI industries, across

Asia and the Americas, for over 8 years.

mailto:[email protected]








About Neo Group

Founded in 1999, Neo Group helps organizations meet business objectives and address business

challenges by leveraging global services and sourcing. To learn more about Neo Group, please visit

www.NeoGroup.com.

About Supply WisdomSM

Supply WisdomSM is a unique cloud-based service that provides data and intelligence for sourcing risk

and opportunity monitoring of global countries, cities and suppliers. To learn more about Supply

WisdomSM, please visit www.SupplyWisdom.com.

No part of this report may be reprinted/reproduced without prior permission from Neo Group.

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