THE SHAPE OF GICs to COME
With so much action and noise around the future of Indian offshore IT given the big political changes around the world, I’ve been asked what I think will be the future for India based GICs (Captive Centers).
Let’s consider some of the facts as of now.
1. Some protectionist regulation is being set up in the US. The most significant one is the proposed H1B visa regulation that will make it less profitable to ship Indian engineers to the US for long term onsite work. Apart from this, there is really no other regulation or legislation in the offing to curtail ITO and BPO work being done offshore.
2. It’s business as usual in Europe and the other major buyer markets for Indian ITO and BPO work.
3. Third party Indian ITO and BPO providers will most definitely adopt automation very quickly to retain relevance and margins in the medium term. They will also move to more outcomes based commercial models- FTE pricing will soon be a thing of the past. Automation will also enable better data and information security and would provide a case for driving more in-house work to the service providers.
4. Global enterprises are grappling with significant challenges as they move to a more digital way of doing things to improve products and customer experiences while tightening operations. The race is on and there are major on-going internal transformation initiatives in place in almost every enterprise.
The implication of all this is that once the dust settles, third party ITO and BPO providers that survive will emerge leaner, hungrier and more competitive while global enterprises will be looking for the best ways to achieve their digital transformation objectives and release more operating efficiency.
GIC’s will need to deliver a business case that addresses these forces rather any external political ones.
In order to remain relevant, GIC leadership needs to ask themselves if they have established their centers as ‘strategic assets’ or are they still delivering only labour arbitrage? If it’s the latter, it’s time for a major rethink and move to providing core strategic value to your enterprise.
Several India based GICs are still operating as large physical centers with deeply partitioned functional organisations. Control of service delivery and outcomes is still with individual lines-of-business which makes cross-functional synergies difficult. This operating model will soon be outdated and will raise questions around lost efficiency, capability and hidden costs.
When your GIC is performing as a strategic asset, delivering strategic value, it will have the following characteristics:
Is organised as skill groups and is leveraging cross functional synergies and is moving away from working in functional silos.
Is looking to be measured on functional outcomes and not on ‘roll-over benefit’ from relocating headcount.
Is integrated into developing and delivering enterprise transformation by supporting digital business transformation and automation.
Has developed or is developing people with core skills in support of these initiatives. Has clearly established centers-of-excellence.
Has a plan and blueprint for its own transformation in terms of new operating models, re-skilling and up-skilling programs, developing leadership talent and internal stakeholder connects.
Has a plan in place for significant work-force restructure.
The future is bright for India GICs provided they keep step with these changes and are prepared to take the bold decisions in terms of planning and initiating these changes in the near term.