Outsourcing to Evolve into Global Business Services: Report

The global business services market will grow 15% to reach $73 billion in 2017, with more than half of organizations replacing standalone outsourcing and shared services with global business services (GBS), according to a survey jointly conducted by KPMG and HfS Research.

Over the next four years, six out of 10 organizations are likely to embrace global business services (GBS) over standalone outsourcing and shared services, the report says.

“GBS offers enormous potential for unlocking greater business value. However, due to its enterprise-wide, cross-functional nature, it also requires new ways of operating between GBS, corporate functions, business units, and their key external delivery partners,” stated Cliff Justice, principal analyst with KPMG Shared Services and Outsourcing Advisory.

In this report, GBS is defined as an operating model that optimizes the mix of human capital, outsourcing and a shared services-based delivery model.

According to the report, companies’ spending on business services will surpass $40 billion in 2013 and increase to $73 billion by 2017, with more than 62% of organizations intensifying their investing in GBS (hybrid, integrated outsourcing and shared services) delivery over the next three years.

The survey found that four out of 10 organizations view cost reduction, operational analytics and automation as critical to the success of their shared services and outsourcing programs.

Nearly 37% of respondents said they have increased their investment in technology (and 38% in analytics) that reduces reliance on labor.

“We are seeing an escalated focus on both automation and analytics from mature organizations, but what is clear is that centralization of governance and a GBS approach provides the building blocks to achieve more effective results,” said Phil Fersht, CEO of HfS Research.

According to the report, GBS is becoming increasingly popular in consumer goods, pharmaceuticals, and manufacturing industries.

Enabling end-to-end process management across functions and geographies, exploiting data analytics and talent management are some of the challenges businesses need to overcome to realize the benefits of GBS, the report added.