NASSCOM GIC Conclave 2014 - Evolving the GIC maturity model – Substantiating business impact by GICs - Everest Group

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  • 1. Thought Leadership Research: Substantiating Business Impact by Global In-house Centers Key findings | NASSCOM GIC Conclave 2014 April 16, 2014
  • 2. Proprietary & Confidential. © 2014, Everest Global, Inc. 2 Substantiating business impact: Key messages GICs create business impact for their parent in various forms in addition to arbitrage. However, quantification lags behind “actual” value addition 1 Experiences of GICs indicate that quantification of business impact helps accelerate the ticket to play (e.g., articulate business case to support evolution) 2 Best-in class GICs that deliver and measure value create business impact that is 6- 8 times incremental arbitrage. However, the impact delivered by most GICs is a third of the best-in class benchmark 3 While the need to quantify impact varies by organizational construct and there are challenges, GICs will benefit from a structured approach to quantification 4 Call to action requires GICs to carefully identify metrics beyond costs, set measurable targets for these metrics and proactively align business partners 5
  • 3. Proprietary & Confidential. © 2014, Everest Global, Inc. 3 GICs create business impact for their parent in various forms in addition to cost arbitrage High skill capabilities Enablers of value creation Product/process innovation Collaborative relationship and alignment with parent P&L view to business impact beyond arbitrage Process improvements Global leadership platform End-to-end ownership Efficiency New products/services and customer segments Enterprise business continuity Vendor spend reduction Loss reduction and/or cost avoidance Expand coverage of existing services Savings beyond arbitrage Revenue impact Risk mitigation Effectiveness Competitive pricing and preventing revenue leakage
  • 4. Proprietary & Confidential. © 2014, Everest Global, Inc. 4  Innovation and new products/services  Revenue streams that are significant contributors to enterprise top-line  Global leaders for the enterprise As GICs evolve, quantification of business impact helps accelerate the “ticket to play” and raise profile Prove the concept Cost arbitrage and mature delivery Business impact and thought leadership Competitive advantage for the enterprise  Teams for select anchor functions  Multiple pilots and transitions  Hi-quality delivery  Process efficiency  Capacity augmentation  Transformational improvements  High skill capabilities  Vendor management  Enhanced customer experience Low cost set-up Scaled internal provider Value addition partner Strategic entity driving innovation 2 1 3 4 Key focus Value drivers Source: Everest Group (2014). Originally developed as part of the NASSCOM GIC value addition study (2013) by McKinsey & Company Stage 1 Stage 2 Stage 3 Stage 4
  • 5. Proprietary & Confidential. © 2014, Everest Global, Inc. 5 Case Study: Best in class GIC delivered overall business impact that is 6-8 times incremental arbitrage 6-8x X GIC incremental business impact delivered Annualized incremental impact; US$ million Cost impact Risk impact Revenue impact Addition of ~500 FTEs in FY 2013 Incremental arbitrage Efficiency Effectiveness Savings on vendor spend Risk reduction/cost avoidance Revenue growth Overall incremental business impact  Working capital enhancement though global transformation projects  Reducing SG&A through sales force effectiveness projects  Use of analytics for improved product/market positioning and win loss ratios Source: Everest Group (2014), Interviews with GIC leadership, parent/exec sponsor 300-350 80-110 10-15 140-160 20-3040-50 ~7% YoY productivity improvements  Reduced losses on inaccurate invoices  Reduce penalties related to non- compliance Incremental overall impact of US$36,000 / FTE / annum
  • 6. Proprietary & Confidential. © 2014, Everest Global, Inc. 6 Impact of value drivers other than arbitrage and efficiency increases exponentially with GIC evolution 1-2X 2-4x 6-8x Incremental arbitrage Efficiency Effectiveness Savings on vendor spend Risk mitigation Revenue impact GIC overall incremental business impact delivered (As a multiple of incremental arbitrage) 1 Total business impact as a multiple of incremental cost arbitrage which is represented as a base of 1 Source: Everest Group (2014) 77% 42% 15% 21% 18% 10% 16% 21% 5% 8% 8% 7% 11% 39% Stage 2 Stage 3 Stage 4 1% 1% Critical enablers High skill capabilities 100% = BEST IN CLASS GICs Process improvements automation Global ownership and leadership
  • 7. Proprietary & Confidential. © 2014, Everest Global, Inc. 7 Incremental business impact realized by most GICs is only a third of the best in-class GIC benchmark Incremental business impact as a multiple of cost arbitrage1 Currently reported vs. best in class for GICs in stage 4 of maturity 2-3X 6-8X Market average GIC Untapped impact  Most GICs can add value in multiple areas beyond their current focus  Business impact of revenue and effectiveness can be disproportionately high  GICs can improve their quantification of business impact. While the need varies by organizational construct and there are challenges, there are multiple benefits to quantification Best in-class GIC 1 Total business impact as a multiple of incremental cost arbitrage Source: Everest Group (2014)
  • 8. Proprietary & Confidential. © 2014, Everest Global, Inc. 8 Call to action for GICs to capture full realization of business impact 1 Consciously shift the mix of activities performed by the GIC towards higher business impact generating ones 2 Identify metrics to capture the full spectrum of activities the GIC is targeting/delivering to the parent 3 Set measurable targets for business planning that include different sources of business impact beyond cost arbitrage 4 Proactively seek endorsement from business partners. Make the measurement of business impact and consequent goal setting transparent
  • 9. Dallas (Headquarters) info@everestgrp.com +1-214-451-3000 New York info@everestgrp.com +1-646-805-4000 Toronto canada@everestgrp.com +1-647-557-3475 London unitedkingdom@everestgrp.com +44-207-129-1318 Delhi india@everestgrp.com +91-124-284-1000 Blogs www.sherpasinblueshirts.com www.gainingaltitudeinthecloud.com Twitter @EverestGroup @Everest_Cloud Stay connected Websites www.everestgrp.com research.everestgrp.com