Global In-house Centers: An Overview
GICs are increasingly becoming a mainstream operating model for many companies looking at accessing global talent pool, build strategic capacity and drive their growth, transformation and differentiation agenda. As companies look at establishing a GIC, India clearly emerges as a preferred destination:
- India is a host to over half of the approx. 2,000 GICs worldwide. GICs in India account for 20% of India’s IT and Services industry revenues. The total GIC revenues in India have increased multi-fold since 2013.
- Over 90% of GICs in India operate from tier-1 cities, with Bengaluru, Mumbai and Pune and the National Capital Region leading the locational preference.
- North American enterprises account for over 68% of all the GIC operating out of India, followed by companies from the European region.
- The workforce strength at Indian GICs more than doubled from 400,000 in 2013 to 846,000 in 2016 and is projected to cross the 1 million mark in 2017. Over 60% of this workforce across all domains (except Banking, Financial Services and Insurance) specialize in technology related functions.
The IT and IT Enabled Services (“ITES”) industry in India
The IT / ITES industry in India comprises of third party service providers, GICs, technology/products companies and start-ups. With a direct workforce of over 4 million, the industry is expected to generate a total revenue of $146 billion in 2016.
What are GICs?
GICs are offshore, owned, integrated, strategic platforms for leveraging global talent. A GIC is an operating model that includes a wholly owned subsidiary of the host or parent company at an offshore location and the real estate, IT and process infrastructure to hire, develop and leverage the best global talent. GICs are designed to build service delivery capabilities in core business and strategic areas such as technology, finance, supply chain, and advanced analytics. As an extension of the parent company, GICs are characterized by their ability to provide consistent brand experience to its employees based out of the offshore location.
There has been a significant increase in the adoption of the GICs by leading global companies. GICs offers several advantages such as their ability to hire and retain top talent, deliver value beyond cost arbitrage, improved productivity, and protection of company confidential information etc.
The benefits of GICs include:
Access to Global Talent Pool
The ability of GICs to access and retain the best talent in outweighs other options such as outsourcing. From working environment, quality of work, understanding how the work, customer and business comes together to better compensation and benefits, learning and development opportunities and better business context, GICs are now the destination of choice for top talent.
GICs provide a robust platform to build organizational capabilities in core, strategic and new areas such as digital technologies and advanced analytics.
The ownership of GICs allows for integration, superior collaboration, and better communication across entities resulting in a smooth and effective workflow.
Since the GIC is a wholly owned entity, they maintain the integrity of data and intellectual property. This ensures that secure and confidential stays within the enterprise.
GICs offer value to the parent company beyond significant cost arbitrage. GICs provide an opportunity to companies to access top global talent for the enterprise and build strategic new capabilities in areas like advanced analytics. Additionally, capabilities to provide global support, innovation and significant productivity increases are some of the other benefits being realized from the GICs.
The growth of GICs in India
Of the roughly 2,000 GICs in operation around the world today, over half of them are situated in India. Some of the prominent GICs in India include Apple, Wells Fargo, Walmart, Mercedes-Benz, Visa, Target, LinkedIn,L Brands, Barclay’s, Samsung, Lowes,Facebook, and Microsoft. GICs account for over 20% of the total revenues of Indian IT and business services industry.
GICs have grown at a staggering pace over the last decade and a half and now contribute over 20% of India’s overall IT/ITES revenue. The number of GICs in India has jumped from 180 in 2,000to more than 1,000 in 2015. Over three-hundred GICs have been set up in India since 2010. The revenue contribution of GICs to the IT industry has grown seven times from $3 billion in 2003 to over $22 billion in 2016.
Distribution of GICs in India
Over 90% of the GICs in India are set up in tier-1 cities such as Bangalore, Mumbai, Delhi, Pune, and Hyderabad. Over 35% of all GICs in India are located in Bengaluru largely driven by the rich availability of talent and a mature ecosystem. Mumbai and Pune collectively account for 24% followed by National Capital Region with 14%, Hyderabad and Chennai come in at 11% and 10% respectively. Apart from the metro cities, some businesses are also setting up GICs in a few tier-2 and tier-3 cities like Ahmedabad, Coimbatore, Chandigarh, Jaipur and Trivandrum.
North American companies were among the early adopters of the GIC model and account for over 68% of the total GICs in India followed by companies of European origin with 24% penetration.
Establishing a GIC in India
Establishment of a GIC is a complex, cross-functional initiative which involves incorporating a suitable legal entity, development of real estate and IT infrastructure, the creation of support functions, process infrastructure and hiring of leadership and core teams. A well-planned GIC set up process along with the building blocks of organizational alignment and executive sponsorship provides the right foundation for a GIC that will be successful in future.
India is a talent rich country with a large and youthful population. With around 5.5 million students graduating every year across a range of disciplines like engineering, mathematics, IT, finance, economics and accounting, there is a steady and reliable supply of fresh talent. India boasts the largest talent pool in the world, in which the IT industry is a major employer. This massive talent pool is also enabled and supported by a substantial and rapidly growing expatriate population.
India also represents a large talent pool for mobile app developers, scrum masters, and agile coaches, as well as software product development engineers. There are approximately 14,000 scrum masters and agile coaches in India, while the number of Android and iOS mobile application developers is estimated to be around 90,000, and that number is rising at a compound annual growth rate of 12%.
GICs ensure that talent being hired has the appropriate skills, is culturally aligned, will assume accountability for business outcomes, are collaborative, can manage ambiguity, can work across organizational and geographical boundaries and can communicate effectively to a plethora of stakeholders.