New beginning for global business services value generation

We would like to sincerely acknowledge the contributions of our PwC partners, especially Bill Gilet (william.gilet@pwc.com) and Liz Evans (liz.evans@pwc.com), for collaborating with us throughout the development of this report.

GBS need to change now—don’t be left behind

The idea of large enterprises operating with a global business services (GBS) mindset has existed for more than 20 years. From the outset, GBS were considered a strategy to improve the effectiveness and efficiency of internally consumed services. Today, the norm is that GBS blend their work with activities (or services) performed by external service providers (ESPs). The goal is to unify service delivery models and, in doing so, create the environment for new value realization. In this Point of View, we describe the main differences between legacy and new-generation (new-gen) GBS and give you six steps to establishing new-gen GBS.

Among the many capabilities required in a new-gen GBS is understanding and evaluating complex, “digitally entwined” solutions being developed. No longer just presiding over simple equation sourcing arrangements delivering transaction-focused back-office services (such as invoice payment), new-gen GBS manage complex chained services, such as multichannel contact hubs and detailed options analysis for production runs, impacting every enterprise function.

Against this complexity, a new three-way interaction model replaces the traditional two-way model. In the three-way model, the service recipient, provider, and advisor combine their knowledge and experience to drive the efficacy of new-gen GBS organizations to seamlessly deliver new sources of value and quantified outcomes for the enterprise. In this triumvirate, the advisor firm acts much as a reinsurance firm does by ensuring business services consumed by the enterprise are successfully realized. The most effective advisory firms understand the complexity of organizational change and have deep industry knowledge to help the enterprise navigate the macro-level business landscape.

Let’s return to the question of “Why now?”

GBS have incrementally changed their way of operating from single-threaded relationships to more evolved, multi-functional engagements with ESPs. In the past 12 to 24 months, however, we’ve seen the confluence of major environmental changes, presenting a window of opportunity for early adopters of change:

• The larger ESPs with truly global coverage are removing the internal barriers that limit their ability to engage their global enterprises consistently. Removing internal competition enables the better ESPs to engage as “one” with their largest end-user enterprises.
• There is a new order across the ESP market. ESPs that have traditionally focused on operating or transactional services and ESPs pitching themselves as purveyors of professional services have been on a collision path, competing for growth. More recently, however, we are seeing alliances develop where two or more ESPs present a leading model to large global enterprises.
• The emergence of ESP alliances has been advanced by the aim to be the prime channel partner to the leading technology providers (e.g., cloud, process mining, data enrichment, and industry-specific platforms). We are leaving behind the decade when technology firms offered unlimited channel partners. Today, large enterprises with significant buying power expect the A-team from their ESPs as they move into transformational changes to their operating models.
• The end of second-generation BPO contracts allows large enterprises to revisit the realities of these agreements. More often than not, we witness a sense of being underwhelmed when the appetite and opportunity to impact have never been greater. Boards of directors are willing to accept more significant change, but they need to be sure that brand reputation is enhanced and the ever-increasing regulatory and social expectations are met. To this end, while the time to move is now, we also see some of this risk mitigated by using advisory firms. Think of this as “re-insurance” for those global enterprises that understand the complexity of human and technology impacting markets, customers, and employees at unprecedented rates.

Even with the combined insight of the ESP and advisor communities, moving to a new-gen GBS state is challenging. Faced with often-uncertain levels of self-decision-making rights and a constant tide of push-pull negotiations with internal stakeholders, new-gen GBS should be strategically acute in their activities, clarifying all areas of services performed.

However, the measure of the new-gen GBS will be its ability to amplify the business benefit realized from the business services ecosystem. Think of this as improving the rate of return from 1:1 to 1:3, where differentiated service leads to improved employee experience (EX) and an improvement in risk exposure (infosec and compliance), as just two examples of this amplification. New-gen GBS demonstrate an adaptiveness toward multiple internal stakeholder groups and have the talent to reposition the ecosystem to a multitude of different business drivers across the front-, middle-, and back-office functions. Achieving this will position the new-gen GBS truly in the domain of an enterprise strategic asset, unlocking inherent enterprise value to guide these activities. We support the adoption of GBS frameworks by those global enterprises to extract maximum value from all services. Exhibit 1 shows one such framework.

GBS groups seen to be forward-looking will improve outcomes for the enterprise of today and positively contribute to shaping the enterprise of tomorrow.

Exhibit 1: GBS leaders demonstrate enterprise-wide leadership by balancing the activities contained in a six-way operating framework

Source: HFS Research, 2024

In the following pages, we examine these areas and share some differences between old-style “legacy” GBS and “new-gen” GBS. We also offer six specific activities we have observed from leading GBS.

We start our comparison with the ultimate measure of success: stakeholder experience.

New-gen GBS difference 1: Stakeholder experience

When coupled with the traditional procurement-centered lifecycle of work activities, GBS can only drive customer experience so far. Evaluating, selecting, contracting, and some element of governing often describe the sublevel activities of GBS. Too often, however, they drive an inward set of behaviors that cause blind spots for how internal customers see the GBS. Equal time should be invested in skilling up a new breed of GBS “business partner”—part technologist, problem solver, project manager, change manager, and subject-matter expert.

GBS leaders, remove deskilled work activities from your team’s work scope and invest in the talent that can influence and be seen above the pulpit.

New-gen GBS difference 2: Benefits realization

Large enterprises (the Global 2000) compete to differentiate, and win based on sustaining differentials.

The expectation from executive leadership is for the GBS organization to be the prime enabler of future change, no longer just tasked with delivering outcomes on the current operating state but making a difference to the enterprise of tomorrow.

In a high-performing enterprise, GBS is recognized for understanding the broad impact of any transformational decision and with access to the innovative mindset of their ESPs and their drive to bring a digital mindset into the enterprise.

GBS leaders, don’t wait for a seat—create a new table with an expanded invitation list!

New-gen GBS difference 3: Commercial and organizational transformation

There is an irony in that just as global talent created the GBS model, today, GBS needs a solution for a talent base located literally anywhere globally—office, home, or virtual.

GBS are ideally situated to assess within the enterprise and document the areas of work that positively or negatively affect employee experience (EX). Process-mining tools and workflow applications give management unprecedented access to and information on the activities that add or subtract from the employee experience. GBS leaders, use this insight as grounds for your seat at the table.

GBS leaders, your improved visibility into the enterprise can help unlock better work for the enterprise employees. Don’t miss this opportunity.

New-gen GBS difference 4: Digital-as-a-service

With a view across the enterprise, GBS are most effectively placed to guide the enterprise toward end-to-end and front-office to back-office solutions with a data-centric culture. GBS should monitor emerging technologies’ commercialization while consuming advisory services on how the enterprise can better adapt to the resulting cultural changes.

GBS leaders, be prescriptive in showcasing digital-centered solutions from your ESPs.

New-gen GBS difference 5: Thought leadership

One of the most understated benefits of using ESPs is the option to shift from internal-only production measures to an ESP-centered measurement framework. This shift almost always improves the insight into performance by way of better-defined, more objective, and arguably more believable means of measuring work.

Couple transactional performance management with predictive analytics and data visualization, and we start to see new-gen GBS organizations applying digital-as-a-service to include management information and service delivery.

GBS leaders aspire toward a one-to-many performance management model where every service level impacts multiple enterprise goals.

New-gen GBS difference 6: Portfolio management

GBS leaders should change their perception of enterprise value to the ESPs. ESPs will walk away from requests for proposal if they sense the enterprise is not aligned or underestimates the complexities tied to major transformation deals. The GBS leader can and should step into the role of “readiness lead” and confirm alignment is in place across all the internal stakeholders and that they understand the current discretionary projects adjacent to the in-scope services. As a GBS provider, you want the top talent—the individuals who understand your industry and the macro challenges impacting how enterprises compete.

In short, you need to form the mindset of “value to,” not just “value from.” Having clarity of “value to” and “value from” supports the idea of tiering your providers by HFS Horizons. (For more information on HFS Horizons in ecosystems, refer to this HFS report.) It allows for clarity in governance and performance management style and minimizes the likelihood of relationships falling into a haze of disillusionment.

GBS leaders, consolidate your portfolio to create room for emerging vendors.

Six steps to establishing new-gen global business services

GBS that use a framework to guide their development will be able to reflect on how they operate today and what the more progressive GBS focus on to unlock new value for the enterprise. We offer the following steps from leading global business services to illustrate broad changes in approach that enable enterprise stakeholder groups to have a positive perception of GBS.

Promote new-gen GBS to the role of benefit realization leader

The first step we see today is the one large enterprises need most. If there is one activity separating most GBS groups from new-gen GBS, it is the ability to deliver benefit-realization service on all operating expense projects.

When C-level leaders comment on areas they wish their enterprises could improve, they frequently say they really don’t know if their major projects have delivered on the promises of the business case (assuming a business case was, in fact, prepared).

GBS should seek more accountability to support their right to a seat at the strategic decision-making table. Benefit realization should include making the pitch for GBS to be the single repository of all meaningful business cases involving operating expenses. In doing so, the enterprise can:

• See an improvement in the quality of business case submissions
• Achieve a more consistent approach to project evaluation
• Position the GBS to drive post-contract benefit realization activities

Stepping forward to facilitate business case creation and realization is essential to elevate the standing of the GBS. If you can understand and articulate service offerings to the stakeholders in your enterprise, you will shift from a one-to-one function, such as the CFO, to a one-to-many function, instantly expanding your influence and importance across the enterprise.

Don’t forget your management’s needs!

In driving a digital-as-a-service mentality, include adaptive work—the work the enterprise retains around the outsourced work activities. This work, often at the managerial level, is dynamic and focuses on the input and output phases of the outsourced work.

Too often, we see business process outsourcing (BPO) agreements performed to the letter of the contract, but customer satisfaction from service consumers is low because the change in working practices to accommodate the outsourcing delivery model too often becomes burdensome. On investigation, we find managers in the business areas consuming services ill-equipped to deal with the new delivery model.

Enterprises can pivot when tactical work is outsourced, but they truly shift gears and create enterprise momentum when adaptive work is reshaped in addition to the outsourced work packet.

Make the play for generative business services

Don’t underestimate the importance of the established GBS purpose; look to continuously add value by being the incubator, testing ground, and implementation arm of advancing AI technologies and their associated business models. In doing so, you can create enriched work activities for GBS staff and enhance GBS’ role as an orchestrator of organizational change. Indeed, it’s the DNA of GBS to provide annual efficiencies to the business where these upskilled digital resources are found.

Provide an active partner experience

This “lead, don’t follow” objective results from new-gen GBS committing to being students of the marketplace, being curious, asking advisors and service providers for research and development plans, and conducting validation exercises across other enterprises to unearth the reality of others who may have adopted new solutions previously. The combination of real partner experience and employee experience enables great customer experience.

Build an alliance with corporate strategy and research

Leading GBS groups have built collaborations with the enterprise corporate strategy and research (CS&R) groups. As a result, we see more solutions for the enterprise front office comprised of ideas that the GBS team has captured from their primary ESP. It is a sad indictment of poorly functioning enterprises when there is no relationship between CS&R and the GBS group.

Orchestrate, orchestrate, orchestrate

The most effective GBS leaders are building an environment where their staff have the skills and remit to proactively engage across all the stakeholder groups, listening and capturing their internal colleagues’ requirements and challenges of the day. We call this effort “orchestration.”

Orchestration is the key competency for gathering, assessing, and determining mutually beneficial paths forward. It is the basis of enterprise demand management that, in turn, is the preface for meaningful dialogue with the ESPs as you seek enterprise-wide, not just single-function, transformation.

You cannot move GBS forward if you are not doing this.

The Bottom Line: In the enterprise, GBS are shifting from being imposed to being in demand.

In many ways, the new-gen GBS are the sensory organ of the end-user enterprise.

Having mastered the delivery of economic and service outcomes, best-in-class GBS organizations are aggregating internal multi-stakeholder requirements and challenging their portfolio of third parties to act collectively.

Absorbing expertise from operating and advisory partners, GBS can capture unique knowledge vital to the enterprise in shaping tomorrow’s success.