Synopsis of the session I had taken on Global In-House Centres for a management group at FIL India
An Overview
Global In-House Centres (or ’Captives’ as they are often called) were initially set up as global delivery centers to support technology and contact center operations, primarily to leverage the availability of suitable talent at much lower cost in India and other offshore locations. The industry chose a new term ‘GICs’ two years back to reflect the growing capability and potential of such centres. Today, a lot of GICs are evolving towards becoming important strategic assets for their parent companies, by innovating their service delivery models, by generating new ideas for value add to business and by creating new IP for the enterprise.
GIC Development Journey
GICs are at different stages of the journey – from cost effective delivery centres to hubs for driving value addition and innovation. A GIC typically goes through four phases in its development journey:
Phase I – Set Up: The inception model of GICs is typically that of shared services where teams are set up for select anchor functions with high reliance on expats. It is imperative for GICs in this phase to successfully deliver on pilot processes and initial transitions to prove the concept and set the stage for the next phase of growth.
Phase II – Ramp Up: The second phase typically sees GICs proving their relevance resulting in a period of rapid growth. There is an expansion in the breadth of services and building of skills to handle mature and complex deliveries. There is also often increased vertical integration with the parent enterprise. This brings forth the opportunity to build domain expertise and nurture local / regional leaders.
Phase III – Value Addition: In the third phase, GICs leverage the scale and the domain expertise built over time to develop value added capabilities, drive process change and efficiency across the organisation and encourage innovation in both products/services and business models. The GICs now begin to make a shift in business priorities with customer focus and revenue contribution becoming more important. The industry is seeing a number of GICs moving into this phase and more likely to progress here over the next two to five years.
Phase IV – Breakthrough Innovation: In the future, GICs would likely build on the strong position they have established and evolve into a source of competitive advantage for the global enterprise. They would focus on new IP creation and contribute significantly to the “top line” by opening up new revenue channels and innovating with global products and service lines. This would likely go in hand with transformation of the parent enterprise into a flat globally networked structure, with the GIC being viewed as another business location.
While these four phases can seem like a linear path in the development of a GIC, each phase of growth and development poses some unique challenges. These can range from evolving the operating delivery model to match value proposition; attracting, developing and retaining the right talent; aligning stakeholders to facilitate the transition journey to identifying the right metrics to measure value delivered.
Way forward for GICs
While GICs have moved well past the predictions of doom and gloom that were rampant 3–4 years ago, they are perhaps still at cross-roads. There are tremendous opportunities for them to add more value, but they also face many challenges that can negatively impact their future proposition. Where GICs end up in 3-5 years from now will depend on the path they choose to take:
- Value Addition Journey: To embark on this journey, the organization needs to focus on building value-added capabilities by deepening business knowledge while continuing to build on the continuous improvement and innovation programs. This would also mean investing deeply in professional development and career tracks for people and developing entrepreneurial leaders. This path could lead to the GIC becoming a source of competitive advantage for the enterprise and a key driver of customer satisfaction and change across the company. It would also translate into a highly motivated and engaged work force with a strong leadership pipeline.
- Traditional Approach: If the GIC continues to operate as ‘business as usual’ with limited focus on innovation beyond incremental process improvements, and the leadership team remains in a ‘comfort zone’, the GIC is likely to be on a slope of declining relevance to the enterprise. This would lead to the inability to retain top talent resulting in higher costs, and eventually some fundamental questions will be raised on GICs overall existence.
Clearly, GICs today are at an important juncture. Value Addition is not just an opportunity but an imperative. Relevance, and in many cases, survival will depend on being able to forge a value addition journey that takes the GIC beyond cost arbitrage as its raison d’être.
Changing Ask of GIC Leaders
GIC leaders across levels have a critical role to play in helping their organization realize the full potential of their GIC. While most GIC leaders have excelled at building efficient and high quality delivery teams, moving to the next level would require a significant shift in their mindsets and leadership styles. This means shifting the focus from ‘efficient delivery’ to ‘value addition’ and being more entrepreneurial and business focussed. Specifically, the fast changing environment requires GIC leaders to:
- Show more initiative and take more risks; while at the same time be resilient to absorb the hurdles and setbacks that come along the way
- Build intimate understanding of the business beyond managing operations and delivery teams. This would require deep understanding of the end customer needs and market dynamics
- Establish strong global influence in the enterprise; which is necessary to drive change that goes beyond the boundaries of the GIC and to participate at a strategic level in the global organization
