Note: We have used the term “GICs – Global In-house Centers” through out this note instead of the more traditional term “Captives”
Part 1 – GICs reaching a Tipping Point
Part 2 – GICs can become Revenue Centers
Value Addition an imperative for GICs to retain relevance
Embarking on the value-addition journey can not only help GICs transform the core business of their parent organizations but also help address the chronic challenges that many GICs face. While GICs have moved well past the predictions of doom and gloom that were rampant 2–3 years ago, they are perhaps still at a 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. There are three challenges that are endemic to many GICs:
- Retaining top talent given increasing staff tenure, diminishing headcount growth and the GIC structure being seen as limiting for professional growth.
- Escalating costs, especially the annual growth in wage costs. In addition, costs are often higher than third party providers.
- Ensuring continued relevance to senior management priorities (e.g., business growth, customer experience).
Focus on value addition is the best solution to the above challenges. It provides an excellent opportunity to engage top talent and answer the “what next” question for them. It can address the cost challenge by moving higher cost resources to more value and, potentially, revenue generating activities. In addition, this movement of talent creates the space to bring up younger talent that currently is at the base of the pyramid. Finally, by getting engaged in core business activities, it raises the relevance of the GIC for the CEO and other senior stakeholders.
The consequences of maintaining the status quo and not pushing forward on value addition are severe. It can lead to attrition, loss of expertise, and consequently, a constant struggle to maintain quality. Organizations that try to pay their way out of an attrition problem would see their costs escalate, which would lead to a weakening of the core offshoring proposition. Clearly, value addition for GICs 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.
