The past two years have brought unprecedented instability. Yet, when we conducted our latest annual Key Issues Study – during the fourth quarter of 2021 – some global business services executives were already seeing and expecting smoother sailing. About one-third of companies reported stabilized business conditions. Over one-half predicted stabilization in 2022, and only 11% expected instability to continue into 2023 or beyond. That was before news of the COVID-19 Omicron variant, before the reality of emerging inflation and talent risks set in, and before the conflict in Ukraine.
In this article, we highlight results from the 2022 Key Issues Study and implications for global business services (GBS) leaders in planning through uncertainty – during 2022 and beyond.
Understanding the enterprise priorities
GBS executives must first consider enterprise priorities so that they can align their strategies accordingly.
Our study found that the shift in enterprise priorities that began in 2021 will continue into 2022. Enterprise digital transformation remains the No. 1 priority, with 61% of companies having a major initiative on the 2022 agenda – up from 53% the previous year. In the face of talent challenges, companies have also stepped up their focus on diversity and inclusion initiatives. More than one-half – 58% – now have such initiatives, compared to just 35% two years ago. On the other hand, sales, general, and administrative (SG&A) cost optimization dropped further down the ranking – from third place in 2021 to fifth place in 2022. This is consistent with an observed shift in focus from margin preservation to growth.
The backdrop of disruption and rapidly evolving business conditions clearly influenced global business services executives’ top priorities – illustrated in the image below – as they looked ahead to 2022. Notably, executives expressed concerns about their ability to meet business expectations with respect to three of these priorities – all related to effective digital transformation.
Collectively, these 10 top priorities reflect four key themes.
- GBS organizations are accelerating digital transformation.
Digital transformation remains at the top of the agenda – albeit with intent to apply more rigor in making technology investments and understanding the return realized on those investments. In fact, four of the top 10 priorities in this year’s GBS Key Issues Study are closely tied to digital transformation.
Over one-half of Global business services organizations have an initiative for accelerating digital transformation – more than any other initiative measured in the study, technology or otherwise.
Most GBS organizations appear to be tackling transformation with in-house resources. Only about one in five has an initiative related to leveraging third-party digital transformation skills and competencies.
Robotic process automation (RPA), digital workforce enablement, business process management (BPM) and cloud-based service management tools are among the technologies with the highest adoption rates in GBS organizations – all over 75%.
Digital operating models require a modern digital architecture, and the research shows that cloud-based service management applications are replacing on-premise legacy service management applications at a rapid pace. In fact, 78% of global business services applications are expected to be cloud-based in two to three years of time – up from 33% now.
Data visualization, master data management, and advanced analytics tools also have high adoption, although more the result of pilot or small-scale application than mainstream use. Only 18% of GBS organizations have large-scale deployments of advanced analytics. GBS executives expect rapid adoption of these technologies in 2022 as they move to shore up data management capabilities and use data to produce insight.
Chatbots/virtual assistants and AI/cognitive computing remain emerging technologies. Deployments are widespread but only on a small scale in most organizations. Furthermore, projections for 2022 adoption remain below those for data management/analytics and cloud tools. Most GBS organizations are still in the experimentation phase, while focusing their digital transformation efforts on legacy migration or development of a process automation layer onto the legacy system’s landscape.
Our study also noted a continuing disconnect between deployment and effectiveness. Somewhere between 20% and 50% of global business services technology deployments failed to meet business expectations. This indicates that GBS organizations need to do a better job planning and managing their digital investments.
- GBS executives know they must strengthen their service foundation.
Already facing significant challenges and disruption due to the shift to remote and hybrid working, GBS executives are preparing for another demanding year of having to do more without comparable increases in staffing or budget. Accordingly, it will be critical to solidify and increase the resiliency of the GBS service delivery model. This will require innovations in service delivery, as well as new workforce policies that can balance business needs with evolving employee expectations.
Global business services executives project their organizations’ workload will increase significantly again in 2022. A projected staffing increase of nearly 6% will provide some of the required capacity, but the balance will need to be achieved through productivity improvement, largely through technology enablement. Technology spend is growing at twice the rate of the operating budget – thus, its share of total GBS budget continues to increase.
GBS executives have a very busy agenda in 2022 to shore up foundations, with an average of 4.4 initiatives related to service delivery model transformation alone. That is in addition to planned digital transformation, talent and service expansion initiatives. Just under one-half of GBS organizations have initiatives in place to establish end-to-end process ownership and optimize virtual work.
The study looked at regional trends in the transition to virtual work. While there are small differences, the total percentage of the GBS workforce that is working from home or in hybrid arrangements appears to be stabilizing at around 85%. During 2022, however, the balance of work will shift away from today’s predominantly work-from-home arrangements. Study participants project that globally about 30% of the GBS workforce will eventually work primarily from home and around 50% in hybrid arrangements.
- The GBS priorities reflect an emphasis on value delivery.
In particular, GBS executives are targeting value creation through expanded services and capabilities, increased customer-centricity, and measurement capabilities that enable them to drive continuous improvement.
Talent and skills will be key to value delivery. Fully one-half of GBS organizations have a 2022 initiative to plan for upgrading GBS talent. Among all planned initiatives for 2022, this is second only to accelerating digital transformation. Many have already done such planning and are ready to execute on those plans in 2022 through hiring and internal development. As they do, they must be prepared to manage the unprecedented increase in voluntary turnover that is occurring in response to the COVID-19 pandemic, generally referred to as the Great Resignation. It is impossible to know how persistent this trend will be and how profoundly it will impact business. But in 2022, there is no escaping it, and GBS organizations must develop specific talent retention strategies to mitigate its impact.
On average, GBS organizations have 3.3 service expansion initiatives planned for 2022. Among study participants, 47% will expand enterprise support service offerings – for example, by adding a transformation office or analytics capabilities. Others will expand the capabilities or capacity of their GBS smart automation center of excellence. Portfolio expansion is also prominent in GBS plans for 2022, with 43% of GBS organizations planning to expand their service portfolio supporting general and administrative (G&A) functions, and 38% preparing to support more business-owned processes.
Disruption will continue – but GBS organizations are preparing
Our research looked at the various types of disruption that GBS organizations face and how they are preparing. GBS executives cited the transition to virtual working, the as-a-service deployment model, automation, and artificial intelligence (AI) as the most likely disruptors to their operations in the next three to five years. Most GBS organizations are actively planning for these and/or already executing response plans. More than one-half are currently executing work-from-home plans, while more than one-third are taking action to fully automate transactional GBS services and deliver them via digital channels. While GBS executives don’t view cybersecurity as likely to disrupt their operations, many are actively planning for or acting to address the potential risks.
Sharpen your focus
It’s clear the turmoil of the past two years is not coming to an end – at least yet. The research findings above represent a very broad and ambitious agenda. GBS leaders will need to be laser-focused – making sure they are investing their time and resources in the areas most critical for elevating their value to the enterprise.
So, where should you focus? That, of course, will depend on your specific needs and operations, but based on our work in the market, we believe the following four areas apply broadly to most GBS organizations:
- Double down on digital transformation
- Virtualize GBS operations
- Put the customer at the center of service design
- Anticipate and mitigate the impact of structural talent shortages
Collectively, action in these areas creates agile organizations that can weather continuing change.