Global business services vs. Shared services vs. Outsourcing: Differences explained

What is the difference between global business services, shared services, and outsourcing?

Global business services vs. shared services vs. outsourcing comes down to who runs the work and where: GBS unifies functions worldwide, shared services centralizes them inside one region, and outsourcing hands them to an outside provider.

• GBS integrates finance, HR, and IT into one global structure.
• Shared services consolidates the same functions within set regions.
• Outsourcing contracts functions out to third-party experts.

Today’s business world pushes firms to work smarter, streamline operations, and cut costs.

Among the many ways to reach these goals, three models stand out. They are global business services (GBS), shared services, and outsourcing.

Each model aims to improve business processes. However, each one works in its own way. As a result, people often mix up their roles and benefits.

So knowing the differences matters. It helps you pick the right strategy for your needs. Join us as we explain how GBS, shared services, and outsourcing compare.

Whether you run a multinational, a regional firm, or a company that needs outside expertise, this guide will help. It walks you through these service delivery models step by step.

Global business services vs. Shared services vs. Outsourcing: Definition of terms

These days, the global business world is closely linked and very competitive. So many firms use these three key strategies to reach their goals. As a result, the three models below keep gaining attention.

Global business services

Global business services (GBS) is a model that brings support functions into one unified structure. For example, it combines finance, human resources, and IT across the whole organization.

First, GBS aims to deliver steady, efficient service. So it uses global capabilities and standard processes.

It also uses advanced tech and analytics. As a result, it drives better performance and new ideas across the enterprise.

In fact, Custom Market Insights reports strong growth for the GBS market from 2023 to 2032. It will be driven by rising demand for:

• Specialized business solutions
• Technological advancements
• Efficiency and cost savings

Overall, the market is set to grow at a compound annual growth rate (CAGR) of about 21%. It was valued at $203.7 billion in 2023. So it is projected to reach $1,380.6 billion by 2032. For a closer look, see how GBS and shared services compare.

Shared services

In short, shared services means combining business operations used by many parts of the same organization.

For example, these services often include HR, IT, finance, and payroll. So the firm centralizes them into one unit to serve the whole organization.

The main goal is to cut costs and lift service quality. As a result, firms gain economies of scale, standard processes, and expert skills.

According to Global Market Insights, the shared services center market was $51.1 billion in 2023. It is also set to spike to over 16% CAGR between 2024 and 2032.

Outsourcing

Outsourcing is the practice of contracting out certain business functions to outside providers. In short, it is how outsourcing helps your business tap outside skills fast.

Some commonly outsourced functions include:

• IT roles
• Customer support
• Manufacturing
• Accounting
• Human resources
• Data entry
• Content creation

In addition, the main goals are to cut costs, access special skills, and boost efficiency. So the firm can focus on its core strengths.

Outsourcing can happen at home or abroad. When the provider sits in another country, we call it offshoring. To weigh location, compare offshore versus onshore models.

Per Grand View Research, the global outsourcing market is set to grow by 9% each year from now to 2030.

Global business services vs. Shared services vs. Outsourcing: Key characteristics

First, note that GBS, shared services, and outsourcing are three distinct models. Each one manages and delivers business functions in its own way.

So each model has traits you should know. As a result, you can pick the right fit for your needs and goals.

Global business services

First, here is an overview of the key traits of GBS.

Integration and centralization of functions

In the GBS model, functions are integrated and managed from one center. So this cuts repeat work, improves coordination, and streamlines operations.

As a result, firms gain economies of scale, steady service, and shared best practices across the enterprise.

Global reach and standardized processes

GBS works on a global scale. So it serves teams across many regions and time zones.

As a result, this reach means every business unit gets the same high-quality service, wherever it sits.

Standard processes also keep work consistent, efficient, and compliant. As a result, they cut variation, lift quality, and make benchmarking and steady improvement easier.

Focus on delivering business value

First, the main goal of GBS is to deliver real business value. So it aligns GBS work with the firm’s strategic goals.

In addition, GBS drives efficiency, cost savings, and new ideas. As a result, it supports growth and keeps the firm competitive.

It also centers on outcomes and metrics. For example, better service levels, faster time to market, and happier customers.

Shared services

Next, let us look at the main traits of the shared services model.

Internal consolidation of services

For example, shared services combine many functions into one central unit inside the firm.

So this removes overlap and improves coordination. As a result, it uses economies of scale for more efficient service.

Cost efficiency through centralized management

So by managing services from one center, shared services can cut costs a lot.

Central management also allows better use of resources and standard processes. As a result, it removes duplicate work and lifts financial performance.

Typically geographically confined to certain regions or countries

Unlike GBS and outsourcing, shared services often stay within set regions or countries.

As a result, this focus helps align work with local needs and rules.

It also aids closer communication among team members. As a result, service to internal customers stays responsive and tailored.

Outsourcing

Finally, as for outsourcing, here is how it differs from GBS and shared services.

Use of third-party providers

For example, outsourcing brings in third-party providers to handle set functions. In turn, these providers offer special skills, tech, and resources.

So the firm gains their expertise without building it in-house.

Flexibility and access to external expertise

Meanwhile, a big plus of outsourcing is flexibility. For example, firms can:

• Scale services up or down with demand
• Adapt to changing market conditions
• Roll out new tech or processes fast

Outsourcing also opens access to outside expertise and best practices. As a result, the quality and speed of the work improve.

Often driven by cost savings and focus on core competencies

Also, cost savings are a top driver for outsourcing. By handing off outsourcing non-core functions, firms cut costs like labor and infrastructure.

So they can put more resources into their core strengths. These are the areas where they hold an edge and create the most value.

As a result, outsourcing lets firms focus on strategic work that drives growth.

Global business services vs. Shared services vs. Outsourcing: Challenges businesses may face

Before you pick a model, know the drawbacks of each one.

Challenges of global business services

GBS can pose these challenges:

• Complex integration. For example, merging functions across many regions and units can be complex and slow.
• Change management. A smooth transition and buy-in from all stakeholders can be hard to get.
• Cultural differences. Managing a global workforce with diverse backgrounds can strain communication.
• Regulatory compliance. In addition, different rules across countries add complexity.
• Data security. Still, keeping data safe to the same standard worldwide is tough.

Challenges of shared services

Meanwhile, for shared services, growing firms should weigh these points:

• Initial set-up costs. For example, a shared service center takes a large upfront investment.
• Internal resistance. Staff and departments may push back on change.
• Service level consistency. Steady service across all units can be hard to keep.
• Scope creep. Limiting the scope of services to avoid overreach can be tricky.
• Performance metrics. Finally, setting and keeping useful metrics can get complex.

Challenges of outsourcing

Outsourcing has clear perks, yet it also has drawbacks. For a fuller view, see the advantages and disadvantages of outsourcing.

• Quality control. For example, high standards can slip when you rely on outside providers.
• Communication issues. Time zones, languages, and styles can hinder teamwork.
• Dependency on vendors. Over-reliance creates risk if a vendor stumbles.
• Loss of control. You may lose some control over certain functions.
• Hidden costs. Finally, contracts, transitions, and fixes can bring surprise costs.

Global business services vs. Shared services vs. Outsourcing: When to use each approach

When you choose between GBS, shared services, and outsourcing, keep these points in mind.

First, GBS suits firms that want to integrate functions globally, use standard processes, and deliver business value.

Next, shared services fit firms that want to consolidate internal services within set regions. So they gain cost efficiency and better service quality.

Finally, outsourcing is the right call for firms that want flexibility, outside expertise, and cost savings. For example, many start with back-office outsourcing before they scale.

Each approach has its own perks and challenges. So the right choice depends on your operations, goals, and resources.

Frequently asked questions

Is GBS the same as shared services?

No. Shared services centralizes functions within set regions. GBS goes further and unifies them across the whole globe. So GBS is broader in reach and scope.

Is outsourcing cheaper than shared services?

It often is at the start. Outsourcing avoids the big upfront cost of building an internal center. However, watch for hidden costs in contracts and transitions.

Can a company use more than one model?

Yes. Many firms blend them. For example, a firm may run shared services for HR and outsource IT support at the same time.

Which model is best for a global company?

GBS usually fits global firms best. It gives one standard structure across regions and time zones. As a result, service stays consistent worldwide.

Key takeaways

• GBS unifies functions like finance, HR, and IT across the whole globe.
• Shared services centralizes those functions within set regions or countries.
• Outsourcing hands functions to outside providers for flexibility and savings.
• Each model carries its own challenges, from integration to hidden costs.
• The right choice depends on your reach, goals, and available resources.