How Cost Competitive are Global In-house Centers (GICs)?

21 Oct 2014



Global In-house Centers (GICs) are an integral component of the global services market. The model is established, growing, and continues to diversify across multiple dimensions. Almost 200 GICs have been set up across the globe in the last 30 months (2012-H1 2014), while only a handful (<10) have been divested. Adoption of the model has spread to a wide range of industry verticals and service functions. From a geographic perspective, what started as an India-centric model is now well-established in most emerging economies (South East Asia, Central & Eastern Europe, Latin America, and parts of Africa). In addition, established GICs are also focusing on delivering value beyond arbitrage-led savings, with many GICs increasingly focusing on driving more efficiency (e.g., productivity savings) and effectiveness (i.e., business impact) in their delivery scope.

Despite growth and widespread adoption, there are apprehensions about the viability of cost arbitrage offered by GICs. With the maturing of service provider model, companies can choose the best suitable option for their sourcing needs. Consequently, the question of comparing costs across GICs and service providers assumers more significance. In this research, we analyze cost competitiveness offered by GICs.

TCO Savings

Scope of the research

This research investigates the cost competitiveness of GICs by evaluating the following dimensions:

  • Cost competitiveness of GICs with source markets
    • Current savings in key delivery locations (Brazil, China, Costa Rica, Czech Republic, India, Malaysia, Mexico, Philippines, Poland, and South Africa)
    • Current savings in key functions (contact center, IT-ADM, judgment BPO, KPO/analytics, and transactional BPO)
    • Sustainability of cost competitiveness across source markets (i.e., United States and United Kingdom)
  • Cost competitiveness of GICs with service providers
    • Comparison between GIC operating costs and service provider pricing
    • Impact of efficiency levers on cost competitiveness
    • Total Cost of Ownership (TCO) analysis

 Annualised TCO


This report examines the cost competitiveness of GICs with respect to source markets and service providers. It provides information on the sustainability of cost arbitrage offered by offshore GICs. The report also explains why the Total Cost of Ownership (TCO) metric is the more effective method to assess the true financial impact of a sourcing decision than comparing GIC operating costs and service provider pricing.

  • Overview of GIC landscape
    • The global offshore services market is large and growing at 8.5% per annum since 2008
    • Both offshoring models (GIC and service provider) continue to grow
    • New GIC set-ups have diversified beyond “traditional” industry verticals and delivery geographies
  • Cost competitiveness of GICs with source markets
    • The cost arbitrage offered by leading GIC locations during the 2012-2014 period has remained similar / marginally increased during this period
    • The analysis indicates that cost arbitrage for GICs is sustainable for medium- to long-term duration for majority of the locations/ functions, however, there will be some meaningful exceptions
  • Cost competitiveness of GICs with service providers
    • Most buyers compare GIC operating costs with service provider pricing. This analysis takes into account only the “hard” costs
    • A more effective framework for measuring cost competitiveness of GICs with service providers is Total Cost of Ownership analysis which also takes in account “soft” costs (e.g., transition, governance, and relationship/account management), in addition to the “hard” costs. Using this framework, there are instances where GICs have significantly lower TCO than service providers for certain kinds of work, even though GIC operating costs could be higher than provider rates

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