Global Business Services: Redefining value and success in dynamic markets

21/02/24

PwC study 2023: Results of our international client survey on their challenges around Global Business Services

GBS organizations and the growing importance of Centers of Excellence

Global Business Services (GBS) organizations are gaining more trust from parent companies, leading to an increase in the delegation of complex tasks. As a result, transactional service centers are often expanded to or complemented by specialized Centers of Excellence (CoEs).

Originally, CoEs were established as competence centers with the goal of improving processes and consolidating process knowledge.

However, we are now witnessing companies utilizing CoEs as a driving force for introducing new business models, initiating, and developing new products and service offerings, and leading general innovation.

Following these developments, CoE organizations play a vital role in transformations and are leading business change.

Drive improvements, set standards

Cost savings have always been the main reason for implementing a GBS and GBS organizations continue to be a valuable source of efficiency. However, we now observe several other factors that highlight the resilience of the GBS model.

One of these factors is the establishment of talent hubs with personnel specializing in complex processes, which is a goal for the majority of surveyed companies (31%). Additionally, there is a growing emphasis on generating added value for the entire organization through highly specialized competence centers (27%) and a constant focus on delivering transactional services with cost advantages (28%).

Next to these, GBS organizations are increasingly associated with digital transformations, playing a pioneering role in digital transformation and the implementation of digital tools and innovations (13%), as well as in generating insights from data-driven approaches (1%).

The importance of GBS is expected to further develop, with more emphasis on supporting modernization of the overall organization through digitalization, process standardization and agility. All with the goal to provide efficient responses to market challenges and changes.

The overall strategic direction for the next five years is consistent with our previous study. Key strategies and objectives for the large majority of companies remain digital transformation, standardization, expansion of value-added services and broadening to scope of activities.

Attracting and retaining top talent in a dynamic market

One of the major challenges for GBS organizations is attracting and retaining top talent. To address this challenge, virtual collaboration, flexible working arrangements, and the use of agile methods have become standard practices that are vital for attracting and retaining high-quality professionals.

Other major challenges go hand-in-hand with recruitment: once top talent has been found, it is a challenge to set up relevant career paths for new employees (51%) and meet their requirements (45%) – otherwise, companies may have to face high turnover if skilled employees decide to leave (42%).

A strategic approach is required to strengthen the position as an employer of choice in an increasingly competitive job market, with the intention to further enhance the overall capabilities.

In addition, recent geopolitical developments had a severe impact on location strategies. The coronavirus pandemic has resulted in increased acceptance of remote and hybrid workplace, allowing for talent attraction outside local labor markets. The war in Ukraine has, at least temporarily, slowed down realization of new centers in the Eastern European region. Combined, these trends spark location-independent virtual teams, that can combine benefits from low-wage countries and access to highly qualified talent.

GBS as digital innovators

Mature GBS organizations have the potential to play a key role in driving overall business innovation by acting as pioneers in the adoption of advance technologies such as (Gen)AI, NLP, RPA, process mining, OCR, global ERP systems and many more.

Keeping up with these innovations is essential in growing the potential of the GBS and establishing a competitive advantage. We focus on the Centers of Excellence (CoE) again, that will become increasingly important and could become the driving force in digital transformation and optimization strategies for the entire organization.

With increased flexibility, process knowledge and digitalization these centers contribute to make their organizations fir for future and crisis-proof.

Outsourcing remains rare

As in our previous 2021 study “Global Business Services - Key to Agility”, we note that GBS organizations place little emphasis on outsourcing tasks to external service providers.

Only about a third of survey responders indicate they outsource transactional activities, which are mainly in the areas of Accounting, Tax, HR and IT. The majority of participants aim to build up the necessary capabilities in GBS, offering the required services internally.

However, evolving and more mature GBS organizations could outsource many of their transactional processes as part of their GBS/BPO 2.0 strategy, allowing them a stronger focus on growing their competence centers.