A recent study conducted jointly by NASSCOM & Zinnov LLC
(http://bit.ly/NasscomStudy ) establishes that India has seen an exponential spurt in the growth and development of GCCs(Global Capability Centres) from a value of USD 19.4 billion (FY 2014 to 2015) to a value of USD 28.3 billion in the FY ended March 2019.Resource growth has also been over 50 percent during the same period with approximately one million employees employed as of date.
What are GCCs?
GCCs are also referred to as GICs (Global In-House centres)/Captive Centres. They are setup to act as prime drivers of employment , innovation and start-up incubation in the Information Technology Industry. There are over 1,200 GCCs in India today and growing rapidly (http://bit.ly/GlobalCaptives).
GCCs have made a conceptual & executional shift to move from being mere “cost arbitrage providers” to being a core part of organizational strategy and objectives. No longer just establishing and running offshore operations, but actively driving business objectives via process and productivity improvements for global corporations with innovation at the core .
The GCC/GIC paradigm and its hybrid models, such as the “ScrumStart Virtual Captive Centre” have proven to be far more effective models than the conventional Third Party Outsourcing(TPA) model of the past, it having proven to be expensive in the medium to long term, relatively unstable & unsafe, with low operational control and transparency.
But why India?
The question still remains as to why India is emerging as the location of choice for the setup of these centres. A recent AT Kearney study (http://bit.ly/ATKearneyStudy) studied various indicators to set up an “attractiveness Index” for various outsourcing countries.
India emerged at the top of the list. Some of the factors identified for its success were :
*A large labour pool of highly and diversely skilled, talented and experienced resources
*Significantly lower costs, cutting-edge infrastructure & higher intellectual security
*A favourable tax and regulatory environment and financial structure
*High level of English proficiency
*Cultural Inclusiveness, synchronicity with global trends and openness
*The 12-hour time difference between India and the US enables a 24–hour work environment, with little or no backlog in processing tasks.
*India offers vast locational choice with information technology hubs in both Tier 1 & Tier 2 cities. These include Pune, Bangalore, Hyderabad, Chennai, Mumbai, Visakhapatnam, Trivandrum, Vadodara, Patna, Mysore, Indore, Jaipur, Mangalore, Lucknow, Coimbatore, Chandigarh, Bhubaneswar and Kochi.
Each of these locations has developed state of the art technology centres with the backing of state/central governments & NASSCOM.
*AT Kearney’s “Attractiveness index” as synopsized above indicates that India is at the top of the list geographically.
Several acclaimed global giants like Sun, Oracle, Cisco, Ford and GE have set up base in India to tap into the potential that India offers. MNCs often engage using a model that starts small and steadily scales up and transitions into a full-fledged GCC/GIC.
For instance, Ford Motor Company started with outsourcing of back office functions such as accounting to India. After experiencing India’s high level of quality and reliable services, they also set up a software development centre to manage their e-business solutions, software development and web services. John Larson, a director at Ford, has gone on record to say that Ford is extremely pleased with the fast and efficient services handled by Indian professionals. This was followed by also transitioning their entire call centre operations to India to get access to 24/7 customer support (http://bit.ly/GlobalGiantsOutsource2India).
But what about the other options available ? Let’s examine a few:
India Vs China :
China has since many decades become synonymous with dynamic, low cost outsourcing, across all sectors. However, in the field of Information technology , India still outdoes China in several areas such as:
Government support, IT Infrastructure, local protection regulations, quality of education and a highly skilled, westernized/culturally inclusive, adaptive English-speaking talent pool that all combine to trump China when it comes to technology outsourcing (http://bit.ly/ChinaOutsourcingObstacles).
India Vs Philippines :
It would only be fair to also mention Business Process Outsourcing(BPO) as well in this overall analysis and the role of Philippines in this context.
Philippines has long emerged as a destination for lower end voice-based services as it boasts of an (even larger than India)population with an acquired American English accent. It is also home to a plethora of business and knowledge processing centres and has established dominance in these areas as well.
However, with automation being an unstoppable force and the advent of AI & ML, 800 million jobs of the above variety are likely to be scrapped by 2030(http://bit.ly/AutomationJobLosses).
India with its R &D and technological innovation capabilities certainly has the edge over Philippines.
GICs in India vs. Nearshoring
Nearshoring , or outsourcing to a location that is the same time zone(e.g. A US MNC setting up a centre in Mexico) has some advantages such as fewer cultural differences, faster problem solving & possibility of more F2F interactions.
However, the costs are still prohibitively expensive as compared to offshoring to a GCC/GIC, & aspects such as cultural/language differences , for countries like India in particular, are rapidly evening out.
ScrumStart’s unique approach to establishing GCCs/GICs in India
At ScrumStart(www.scrumstart.net) we are pioneering the growth of GCCs, but -via a unique, customized “Virtual Captive” model that involves zero CapEx(capital expenditure) during set up. The Virtual Captive delivery model combines the dedicated resource pool, best practices & operational control provided by a captive unit with cost benefits proven to be empirically 25% higher than an offshore third-party software services provider/traditional outsourcing model.
The ScrumStart Virtual Captive Model thereby combines the greatest advantages of a GCC/GIC with the conventional Third-Party Outsourcing model. While eliminating the drawbacks of both.
Clients have the option to completely transfer ownership of all assets of the incubated, fully functional Virtual Captive including all resources & infrastructure as per pre-decided Contractual agreements.
ScrumStart’s unique approach has enabled it to partner with a host of Fortune 1000/MNC clients as well as rapidly growing companies and is proud to have contributed to India’s economic development and growth in this space.
Learn more about how you can leverage the power of GCCs/GICs in India to address your specific business challenges.
Write to us at firstname.lastname@example.org or share a comment below !
About the Author:
Mr. Santosh Panicker, CEO ScrumStart, is a specialist in setting up business processes and has established himself as an inspirational leader in the corporate world. Mr. Panicker has demonstrated his capabilities in setting up end- to -end HR, legal, and business process operations for 9 start-ups through his career years. He has over 22 years of experience working across diverse industries including IT, FMCG, Retail, Automobile and consumer durables with blue chip companies