Trump Administration Policies, Technology Disruption Signal Imminent Shifts in Global In-house Center (GIC) Market—Everest Group

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Despite decline in new GIC setups, global GIC remained strong in 2016, performing above five-year average.

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Political and technological disruptions have changed the levers enterprises use to create value. They must now look beyond cost arbitrage to talent management and innovation

The global sourcing market grew rapidly in 2016 to cross US$175 billion mark, with the Global In-house Center (GIC) sourcing model accounting for 25 percent (US$42-46 billion) of the global offshore services market. Although GIC setup activity declined marginally in 2016, with 134 new setups compared to 140 in 2015, overall GIC activity remained strong, with growth above the five-year market average performance. However, Everest Group advises that U.S. President Donald Trump’s job protection initiatives and technology disruption are likely to have a significant impact on the global GIC model in 2017 and beyond.

Since U.S. headquartered enterprises are the world’s biggest adopters (49 percent) of the GIC model, the Trump administration’s “America First” policies stand to cause a far-reaching shift in the global sourcing market. Although President Trump’s early actions have been aimed at saving American manufacturing jobs, the services sector will soon experience shifting fundamentals as well. Specifically, the U.S. segment of the GIC market, which sends U.S. companies’ work to subsidiaries in offshore/nearshore locations, will experience political pressure to keep jobs onshore.

Technology disruptions, such as automation, will strengthen the case for reshoring as well. In the last two to three years, technological advancement in machine learning, artificial intelligence and robotic process automation has facilitated automation of mundane and repetitive tasks. This has created a sizable opportunity for U.S. companies to reduce IT and business process services costs and repatriate jobs. In addition, consumers and end-users of enterprises are demanding innovative products and services, reduced speed-to-market, and integrated delivery models, all of which challenge traditional GIC solutions driven by cost arbitrage.

“Enterprises need to be proactive to take advantage of these market and environmental shifts,” said Sakshi Garg, practice director at Everest Group. “Political and technological disruptions have changed the levers enterprises use to create value. They must now look beyond cost arbitrage to talent management and innovation as the cornerstones of success. This means sourcing strategies need to be realigned. Those enterprises that navigate this changing landscape will emerge as future leaders.”

***Complimentary Download of Report Preview***
The research supporting these findings is summarized in a preview report, “Global In-house Center (GIC) Landscape Annual Report 2017 – Will President Trump’s Job Protection Initiatives be a Wake Up Call for the GIC Model?”, available for complimentary download here.

Other key findings in the research:

  • The GIC market has now grown to reach more than 2,600 centers and 1.2 million FTEs across leading offshore and nearshore locations.
  • U.S.-headquartered firms account for almost half of the overall GIC activity; however, Europe- and UK-headquartered firms are also gaining traction.
  • India, which provides both a talent and cost advantage, is the world’s top sourcing destination, with a 40 to 50 percent share of the overall offshore GIC market.
  • The success of the GIC model in India, Poland and the Philippines led buyers to explore its application in other locations. (See The GIC Market Heatmap 2017)
  • Besides the geographic diversification, the GIC market also expanded across verticals and functions. While the technology and communication vertical led GIC activity [followed by banking, financial services and Insurance (BFSI) and manufacturing], emerging verticals such as chemicals, hospitality and tourism, and business and professional services also set up GICs for a range of business processes and IT functions.

About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empower clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.

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Contact:

Andrea M. Riffle, Everest Group
andrea.riffle(at)everestgrp(dot)com

Robert Cathey, Cathey Communications for Everest Group
+1-865-386-6118
robert(at)cathey(dot)co

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Andrea M. Riffle

Robert Cathey
Cathey Communications
865-386-6118
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