An in-house business model is the need of the hour

As the Global In-House Centers (GICs) in India shape up for the next phase of growth, they have to focus on becoming revenue centers that influence the direction taken by their parent organizations. By Radhika KTP

The second edition of the annual GIC Conclave 2012 held in New Delhi stressed the need for adopting location-based strategies for GICs. Centered on the theme of ‘Co-creating Value’, the two day conclave provided a platform to share global best practices, success stories, new business models and strategies. It also addressed the various challenges faced by the GIC segment.

Delivering his keynote address, Montek Singh Ahluvalia, Deputy Chairman, Planning commission of India, said that the Government had noted the importance of GICs for the country’s economic growth. “To foster economic growth, GIC-related investment should happen in India. Moreover, GICs should look for possible markets inside the country while meeting the needs of their parent company,” he added.

Som Mittal, President, NASSCOM, said, “GICs are one of the important components of the global services market and they have always delivered on their mandate of providing meaningful cost savings while adding capabilities to their parent organizations. These centers have unique structural advantages as they have access to intrinsic offshoring strengths and are able to deliver more complex products.” Increasingly, these centers are acting as institutions of excellence, backed by innovative business partners.

According to Noshir Kaka, Managing Director, McKinsey & Company, client expectations of GICs are changing throughout the world. “Even if cost and productivity stand first and foremost, companies have started to give greater importance to business outcomes than before.”

During his speech, Howard Elias, President and Chief Operating Officer, EMC Corporation, said that the world economy was shifting. “Today, India and China are driving most of the business. People from different parts of the world are more interconnected and their expectations are changing. This is providing GICs with tremendous opportunities to add value beyond the traditional focus on cost and productivity.”

The GIC model is continuously evolving and moving up the value chain, offering high value services, end-to-end ownership and global leadership. In India, these centers are providing value addition in four key areas namely operational efficiency, high skill capabilities, total customer experience and revenue impact. While operational efficiency drives cost-efficient operations with continuous productivity improvements, high skill capabilities offer higher expertise processes delivered end-to-end, expanding to upstream segments on core processes. Total customer experience is driving operations focused on end-customer needs by adapting processes to address customer needs. All this will result in an impact on topline growth by extending services and building new ones.

During a session, Kush Kamra, Senior Vice president, Global Operations, CMD, Global Operations Support Centre, Metlife, said that GICs could effectively reduce their costs through internal operating practices, expense management, adopting lean Six Sigma and proactive capital investments with effective returns.

Across the country, GICs have been witnessing growth with revenues reaching close to $14 billion for FY12. Having a growth rate of 18%, they generated 21% of the industry’s export revenues.

Nitin Seth, Managing Director, FIL India Business Services, said that, at present, the GIC model of business continued to be robust and that it accounted for 70% cost savings from the total cost of ownership perspective. “However, the needs of first phase GICs and second phase GICs are quite different. In the second phase, GICs should become revenue centers and, for that, robust leadership is required. They should also focus on value addition in the next level of growth.” he added.

According to Pari Natarajan, Co-founder and CEO, Zinnov Management Consulting Pvt. Ltd., in the new economic scenario, product companies were shifting to service-oriented business models. “Here, due to its distinct ecosystem, Indian centers have an opportunity to play a key role in guiding the parent company through this transformation”

The conclave also discussed best practices that GICs could adopt for their growth and value addition frameworks in order to help these centers emerge as strategic ones. On the sidelines of the GIC Conclave, NASSCOM in association with its partners released three reports about the GIC landscape in India. The first study, Cost Competitiveness of Global In-house Centers (GICs) in association with the research firm Everest Group, detailed the state of the GIC model with growth and adoption trends. The second study on Strategy for location assessment, in association with KPMG, is based on interaction with the leaders of more than 30 GICs. In association with McKinsey & Co, the third report titled, Unlocking the full potential of GICs – Status update and emerging findings from operations benchmarking stated that the offshore centers continue to deliver strong performance with customer satisfaction continuing to be strong and rising.

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