Note: We have used the term “GICs – Global In-house Centers” through out this note instead of the more traditional term “Captives”
Today, most enterprises are looking for innovative ways to drive growth and gain a competitive advantage. They are looking to serve new client segments, build a presence in newer geographies and markets, and boost revenues through newer business models. While there is no one single – or simple – answer, GICs (traditionally called captives) are reaching a stage of maturity where they can contribute several game-changing thrusts to transform the core business model of their parent enterprises. They can add value well beyond cost arbitrage and delivery efficiency and become a solution to the many business problems that enterprises face. This is a significant opportunity and enterprises that are able to realize it will gain a competitive advantage.
This note has five sections with the following key messages:
- GICs are reaching a tipping point, where their value proposition for the parent organization can change substantially.
- Tremendous opportunities exist for GICs to add more value and become a revenue center.
- While value addition is a great opportunity, it is also imperative for GICs to undertake this journey to remain relevant.
- Realizing the full potential of GICs will require significant changes, often challenging long-held orthodoxies around governance and talent models.
- Industry collaboration can be an important facilitator to realize the full potential of GICs.
GICs Reaching a Tipping Point
GICs have unique structural advantages, which they are now in a position to realize fully. Unlike third party providers, GICs not only have access to intrinsic offshoring advantages (i.e., cost + talent), but offer additional opportunities given their integrated model with the parent company. They can deliver more complex products because of the “one team” model, have a better “learning curve”, are able to accumulate skills over time, enable proprietary knowledge development given better IP protection, and attract superior talent given the pull of the parent’s brand and work environment.
Given the last 12–15 years of the industry’s existence in India, many GICs have reached a tipping point, where their strategic impact for the parent organization can be greatly enhanced. Their growing maturity provides the basis to realize the full potential of the cost + talent offshoring proposition and additional advantages of the in-house model. There are four dimensions where GICs growing maturity is especially relevant and is creating significant additional opportunities:
- Domain expertise – going beyond functional and technical expertise and building a deep understanding of the parent company’s business and the industry it operates in. This enables both higher value addition in existing roles and the ability to undertake more complex, “front office” roles.
- Scale– some GIC centers have emerged as the largest operating sites for their parent company, often housing a significant proportion of the total headcount. This provides the opportunity to drive change across the organization and leverage their scale to invest in innovation.
- Co-location of functions– many GICs have become a microcosm of their parent organizations, with co-location of capabilities across functions and regions. Often, a GIC is uniquely placed to offer co-location opportunities that go beyond traditional organizational structures, i.e., the only site where that co-location is possible. This helps facilitate innovation and superior delivery through collaboration.
- Leadership maturity and network building– leadership that has built deep understanding of the parent company’s culture. In addition, GICs have strengthened their delivery credibility and networks within the organization. This makes it easier to engage in strategic discussions and get senior sponsorship.
These four factors, coupled with the parent company’s increasing confidence in GICs, are strengthening the enabling environment required for them to deliver the next level of value addition. Moreover, the highly competitive environment that many parent companies now operate in is creating an additional thrust for them to look at radical options to redesign their business models. Given their increasing maturity, GICs can now emerge as a strategic option not just for COOs/CFOs but also for CEOs and Heads of Businesses.
