Hello. This is Stanton Jones with what’s important in the IT and business services industry this week.
If someone forwarded you this briefing, consider subscribing here.
Global Capability Centers
Most global capability centers (GCCs) plan on either increasing or maintaining their use of outsourcing over the next two years. This means more G2000 enterprises recognize that they will need multiple delivery models to meet their talent and cost optimization objectives.
Data Watch
Background
We’ve talked a lot about the recent wave of GCC activity over the past 18 months – from how GCCs have been evolving as sources of value, to how their talent needs are changing, to the challenges they face in regards to using AI.
One area we have not yet focused on is how GCCs plan to accomplish their objectives. We think that the IT services sector will increasingly play a role here. That may sound like a contradiction – the industry tends to think of these two entities as distinct or even in competition with one another – but we think they’ll increasingly work together.
The Details
- Nearly 80% of GCCs plan to expand the work they are doing over the next two years.
- Over the same time period, only 28% plan on decreasing their use of outsourcing.
- Nearly 60% plan on increasing their use of IT services.
What’s Next
What’s likely happening at GCCs is similar to what’s happening at corporate headquarters and regional units across the globe: they are finding ways to address the dual mandates of 1) cost optimization and 2) scaling tech and domain-specific talent.
So it’s natural that GCCs are increasingly planning on tapping into the IT services sector to do what it does best – to deliver cost optimization through standardized processes and modernized technology.
What specific services will GCCs be buying from providers over the next 24 months? That, of course, depends on the age and maturity of the GCC.
My colleague Namratha Dharshan and her team will release a report in April focused on service provider strengths and competitive differentiators in the GCC ecosystem. The report will break down these services into two main categories: design and setup for new GCCs, and optimization and enhancement services for existing GCCs. I encourage you to check it out – it’s a fantastic way to understand this fast-moving ecosystem.
So, back to the original question: Are GCCs and IT services colleagues or competitors? They’re both. And, actually, a better question may be “are enterprises continuing to look for ways to find talent at scale at a price point that helps them optimize costs?”
And that’s a definitive yes. Enterprises are already using – and plan to continue to use – an ecosystem of GCCs and service provider partnerships to achieve their goals.
Steve, Kathy, Alex, Namratha and I will have a lot more detail on this on the 1Q25 ISG Index Call on April 10. Please join us by registering here.