Hello. This is Alex Bakker standing in for Stanton Jones with what’s important in the IT and business services industry this week.
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Unrealistic Expectations
The immediate problem facing enterprises (and GCCs) is that GCCs often have a dual mandate: to drive innovation but to do so at a price point that balances out the risk inherent in innovation. In other words, the very discipline it takes to focus on in-demand skills and innovate is immediately at risk if the GCC is a labor pool for low-cost services.
Data Watch
Innovate, Scale … and Automate?
In our recent Market Lens study, we found 90% of enterprises that currently have GCCs plan to expand the number of services performed by their GCC in the next two years. And, of those, 65% said reducing overall staff costs was among the top five objectives for their GCC. (See Data Watch)
The data suggests that most businesses anticipate scaling services while trying to reduce staff costs at the same time at their GCC, which leaves them at risk of delivering neither. While organizations have previously indicated that they expect to see growth in AI and data science talent and a reduction in manual work at GCCs, it is unlikely that they will be able to find that talent at scale if they are expecting to reduce salary costs.
When GCCs have failed to achieve these dual mandates in the past, it has often led to enterprises doing GCC exit deals with providers. It is entirely possible that enterprises trying to accomplish these two goals now are setting themselves up for the same outcome, especially if the ongoing management of the GCC proves more difficult than its parent business anticipated.
But, as with so many in IT services these days, it is possible the solution to the dual mandate will depend on AI, agents and automation. Already, we see that cost reduction is the greatest motivation for GCCs adopting AI solutions. To thread the needle of expanded AI skills, growing services and staff cost reductions, GCC leaders will need to focus on automation as processes migrate into the GCC and potentially offload work that is not suitable for automation, lest staff numbers grow in excess of productivity or cost targets.
Compared to the mindset we saw just a year ago, GCCs won’t merely be service delivery providers to the business but also innovators that deliver services.
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