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Unlocking the True Potential of Global Centers of Excellence

Unlocking the True Potential of Global Centers of Excellence
Bejoy George - EVP & Head, Transformation Initiatives Group, ERS | October 18, 2019
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Indian Global Centers of Excellence (GCEs) have evolved significantly over the last two decades. Known as Captive Centers in the early 1990s, GCEs are offshore centers that function in designated roles for large multinational organizations. Today, there are about,100 GCEs in India, which generate $23 billion in revenue/value and employ more than 800,000 individuals.

The late 1980s saw the upsurge of Indian IT companies when MNCs, predominantly in the western hemisphere, started outsourcing IT work to India. However, relatively, very few engineering/product development activities were outsourced at that time. In the 1990s, GCEs were set up in Hi-Tech, Telecom and IT verticals in order to take advantage of the labor arbitrage opportunities between Western countries (mainly US) and India. In the 2000s, outsourcing expanded multifold, and this drove the growth of GCEs from under 200 to 700+ by 2010. During this period, Indian IT service providers also scaled along with the GCEs, building competencies and capabilities to deliver core activities.

capabilities

The enormous growth of GCEs can be attributed to their ability to facilitate cost savings for their parent organizations coupled with the ability to quickly ramp up headcount by leveraging India’s abundantly available talent pool. GCEs in India have evolved significantly in recent years to become an integral growth driver in the Indian IT-BPM industry. Today, the continuous and enormous digital disruption in industries globally, has led to the need for the GCEs to evolve even further. GCEs have been a catalyst in reshaping the business of global organizations and are playing the role of strategic partners - even trusted agents - for enterprise transformation. GCEs have transitioned from providing purely cost arbitrage to delivering value in multiple ways today. However, the global disruptions in industries provide an opportunity for GCEs in India to transform themselves and their roles even more, thus unlocking their true potential.

Digital disruption and changing business priorities of the enterprise

Technology is becoming a core differentiator that organizations must embrace in order to stay competitive, especially with disruptive technologies like AI, ML, Robotics, IOT becoming mainstream. This calls for GCEs to take the center stage in an organization’s transformational agenda. The future indicates an increased alignment between broader industry-disrupting trends and GCEs. GCEs, with their access to relevant talent, years of experience in gaining domain knowledge, and developing and implementing efficient systems and processes, connects with other players in the ecosystem. Most importantly, with the credibility that they have built with their parent organizations, they are well positioned to service them with skills and capabilities required to stay pertinent in a world of disruptive technology and changes, and become truly smart enterprises.

In order to discover the way forward for GCEs in India, it is vital to identify the turmoil global organizations are facing. Today, technology-focused changes are rapid, thrust by the converging disruptive trends of hyper connectivity, data propagation, and new inventions that lead to shorter cycle-times, enhanced capabilities, and improved experiences. The magnitude of this digital disruption varies from one industry to another. For instance, telecom and media have been significantly more impacted than construction, mining and utilities. Technology is becoming more essential to business and agile methodology is replacing long planning cycles. Previously, organizations used to spend 20% of their IT budget on activities that would reduce costs and/or grow their business. Today, organizations are spending 45% of their IT budget on such activities. This transference imposes a relentless effort on optimizing traditional IT costs, increasing skilled talent and digital initiatives, and making IT agile, adaptive, and robust. Such shifting concerns provide GCEs with unmatched opportunities to play a more active part in helping their enterprises succeed in the digital world.

In order to discover the way forward for GCEs in India, it is vital to identify the turmoil global organizations are facing.

Becoming GCEs of the future

To become truly global and efficient, GCEs in India must consider the following:

  • Responsibility: GCEs should strive to become the owner of key business priorities, from sensing the market to customer-facing functions. GCEs must focus on those business areas that bring measurable results and profitability for the parent organizations.
  • Domain/Technology Leadership: GCEs should, with outstanding leadership, aim to achieve in-depth domain knowledge by investing in high-quality SMEs, and become outstanding talent hubs for their respective organizations.
  • Digital IT: GCEs should prepare for digital transformation and embrace it wholeheartedly, even acting as the driver for these transformations within the parent organizations.
  • Analytics Focus: GCEs should increase focus on analytics in order to generate sustainable competitive advantage for the organization in the functions that they own.
  • Continuous and Persistent Cost Benefits: GCEs should attempt to improve production continuously and ensure productivity enhancements through automation, etc.

Today’s GCEs will need to assume a holistic methodology in order to become GCEs of the future. It should include strategic aspirations like discovering ways in which they can contribute to the changing business priorities of the enterprise and focus on how it can improve an enterprise’s topline and bottom line. The approach should also include focus on core functions of the enterprise, along with supporting functions and operations.

In order to become the GCE of the future, the focus must be on building new competencies and capabilities. Depending on the role of the GCE, the Center of Excellence must selectively excel at one or more capability — IT and Digital, Process Management, Data and Analytics, Software Product Development, Core Research and Development, etc. The key is to use analytics, automation and domain expertise to move toward more high-skilled and less resource-intensive models in core capabilities.

This approach (as defined in the paragraphs above) will become truly holistic when GCEs target to excel at all of the following:

  • Enhance operational quality with traditional productivity enhancements, automation and AI, budgeting and redesigning, and strategic sourcing.
  • Fortify talent and organization by upskilling talent, building strong leadership teams, gathering domain expertise, and creating the right operating model.
  • Form a co-governance model with the parent enterprise. Key performance indicators should include operational metrics, employee metrics, internal and external customer Net Promoter Scores, capability and domain building measurements, and profitability improvement.
  • Adopt the highest standard of cybersecurity by building strong policies, investing in core technologies and ensuring rigid enforcement.

Indian GCEs have a unique prospect to step up and play a larger and more significant part in the organization and, in turn, help in achieving the goal of accelerating enterprise transformation. But getting there requires GCEs to follow a holistic approach, have a resolute focus and a shift in mindset. The journey is unlikely to be business as usual.

The Way forward

To effectively unlock their true potential, GCEs can streamline their activities by:

  • Building cutting-edge products through digital GCEs by channelizing the digital engineering spends of the organizations.
  • Implementing architecture for digital skill transformation to cascade to the bottom layer of the talent pyramid.
  • Planning for structured talent upskilling by building the next state of the art digital L&D programs.
  • Bridging the skill demand-supply gap through collaborations with universities and other institutes.
  • Leveraging service providers and other players in the ecosystem, in their journey, to fill gaps that the GCE themselves could find challenging.

References

  1. https://www.bain.com/insights/global-in-house-centers-in-india/
  2. https://community.nasscom.in/communities/global-in-house-centers/gcc-3.0-spotlight-on-digital-partnerships-new-delivery-models-amp-future-skills.html
  3. https://www.jpmorgan.com/jpmpdf/1320746694177.pdf
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