Capability & Innovation Hubs - The Emerging Frontier

Capability and Innovation Hubs (CIHs) are poised to play a more integral role in enterprise growth as they expand their portfolio of services to include front-end customer business facing operations and capabilities in upcoming tech. According to our estimates, global CIH spend is expected to grow at a ~10% CAGR and reach $715 Bn by 2027 from its current size of $465-510 Bn. Of this, Global in-sourced CIH spend, currently estimated at $265-290 Bn, is expected to grow to $390-420 Bn by 2027 (10% CAGR).

CIHs deliver tremendous benefits, however, our analysis of Fortune 500 organizations reveals there is room to grow. Only about ~45% adoption of these Fortune 500 players have leveraged them across sectors while others are yet to capitalize on the competitive advantage they can provide. As the adoption of CIH grows, mature hotspots in India, Philippines, Malaysia, Poland, Brazil, Ireland, and Mexico will continue to remain the bedrock of operations, while CIH ecosystems in Costa Rica, Romania, Morocco and Czech Republic will strengthen over the next 3-5 years.

An exhaustive survey conducted by BCG covering CXOs and CIH heads spanning multiple industries and geographies revealed many interesting insights -- about CIH maturity, focus on technology, perception towards automation, talent strategy and adoption of advanced capabilities. These insights can help organizations shape the way forward as they embark or accelerate their CIH journey. While strategic priorities can differ widely in an organization's CIH journey basis starting point, Capability and Innovation Hubs have turned the corner, and now can offer many different pathways to unlocking value.