Captives Or Global In House Centers? | ScrumStart

Captives Or Global In-House Centers?

A Glimpse into GICs Then and Now

What was initially called a ‘Captive’ is now referred to as GIC which stands for ‘Global In-house Center’. Is this just another change of name and terminology or something more has changed fundamentally in the business model? In this piece, we shall examine the evolution of Captives to Global In-house Centers.

Many organizations shifted some of their operations to lower cost geographies in order to save costs. These centers were called ‘Captives’ and were perceived with a negative connotation as having no value apart from cost saving. Moreover, the terminology didn’t have a context and is not self-explanatory which caused confusion among the new entrants in the global service delivery space. The Everest Group coined the term Global In-House Center and replaced it across all their documents in mid of 2012. Since that time NASSCOM (India) and BPAP (Philippines) have championed the change in terminology. The word ‘Global-In-House Center’ stands to be a great alternative as it is self-explanatory. While the word ‘Global’ hints at covering a large geographical area and doesn’t constrict it to just a particular location, the word ‘In-House’ pretty much gets the point across for its readers.

Global In-House Centers have played a key role in changing the face of the IT sector since the 90s. The industry has observed significant changes over the years and it continues to do so even now. While cost-cutting may have been the driving force, the existing GICs have witnessed a transition in expanding their objective and scope and have brought along other value-added benefits. Let us a take look into the role played by GICs back in the days and the evolved part they are playing now.

GICs first started in the 90s and have evolved gradually but drastically over the last twenty years and India continues to remain the hub for setting up GICs, due to the favorable conditions that prevail in the country. Some of the key factors that make this an attractive GIC destination are:-

  • High skill low-cost talent pool – India is known for its widely prevalent high skilled talent. These professionals perform and deliver world-class projects with excellence and perfection at a fraction of the cost in other countries.
  • Experienced leadership – A very good leadership layer has emerged with experience from the past decades. These leaders are knowledgeable veterans who guide and train individuals in the right direction.
  • Control over IP and data of the parent company – Data security has always been a major concern for most companies while opting for outsourcing; but via GICs this concern is taken care of. The parent company has complete control over data and intellectual properties in the GIC. The parent company has complete access and control over the entire inbound as well as the outbound flow of information.
  • Innovation hub for technology – India continues to be a preferred destination for GICs due to the plethora of innovative ideas that are channelized through the advancement of technology. According to a survey by Deloitte (2014-2015), studies showed that more than 750 multinational corporations had established Global-In-House Centers in India. Industry estimates suggest that this number has almost doubled in the past three years and certainly the number is only increasing.

The 90s were all about focusing on cost arbitrage but from 2000 onwards we see the shift from merely being a backend support to becoming multifunctional centers of excellence. 2010 ahead, right up to current times, we can observe yet another wave of change. The GICs are now becoming creative centers providing value-added services through innovation in service and management with a clearer vision. The IT sector isn’t the only one that is reaping the surplus benefits. GICs have made their presence felt in several industry sectors that range from Aerospace, Healthcare, Pharmaceuticals and Biotech industries etc. According to the recent study by NASSCOM, A total of 1,150 multinationals have global in-house centers in India, employing more than 800,000 people.

According to our observation and experience, we can firmly say that GICs are now a mature phenomenon and operate with a more holistic approach. We believe that the focus now is more on IP creation, building competencies around emerging technologies, setting up centers of excellence and vendor management. In the day and age of digitalization where technology seems to have left a mark on every industry, GICs too are focusing on digitization and are helping their parent organizations to upgrade to a digital enterprise. GICs now are also setting up R&D centers which are a great step forward as there needs to be constant innovation, research, and development in this sector. It is the only way for the sustainability of GICs.