Global Capability Centers – The Epicenter of Innovation
Multinational Companies (MNCs) constantly strive to achieve excellence, reduce costs, and do more every day. Information technology, product innovation, back-office operations, etc., are critical to the success of an organization. In the quest for excellence, lowering costs, and scalability considerations, many MNCs are setting up offices in countries like India. These centers initially focused on cost alone and were called Offshore Delivery Centers (ODCs). As these ODCs mature, they have proven that they can contribute beyond cost savings and are actively working on product innovation, service quality, and customer satisfaction. Today, the focus is on capability development and innovation, and these organizations are being transformed into Global Capability Centers (GCCs). The capability centers are today strategic business enablers and value creators.
Bringing innovation, value, and leadership, these Global Capability Centers transition from resource centers to centers of excellence. By establishing them, businesses have increased access to fast-tracked innovation and skilled and quality talent, lowered costs, and reduced time to market.
Creating and sustaining a successful Global Capability Center must accommodate a few measures ensuring continued learning and talent enablement.
The big question is: Why are MNCs setting up Global Capability Centers in India?
The answer is straightforward.
India has emerged as the go-to place for technology in areas such as digital, artificial intelligence, and data analytics. More importantly, India’s ability to offer young, tech-savvy talent willing to experiment with new technologies and ideas is a big draw.
Several MNCs are looking at entering India, and the existing ones are scaling up their presence, thereby adding momentum to the innovation center wave. It is reported that while IT service organizations have scaled down headcount during the first half of 2023, Global Capability Centers have continued to recruit. The shift to tech arbitrage from labor arbitrage is a game-changer. It indicates India’s growing maturity in being an enabler for MNCs.
In addition to traditional sectors such as banking and IT, aerospace, manufacturing, oil and gas, medical devices, etc., are also part of the recent surge for establishing GCCs. These centers significantly contribute to developing new products and technologies globally.
The young Indian talent is also leading tech innovation within the country. UPI-based payment systems are widely adopted nationwide for mobile-based cash transfers. Indian stock markets have adopted T+1 settlement (where T+2 is the global standard) and are now aiming for T+0. Today, large banks in India manage cash transactions that exceed their global peers regarding the number of transactions facilitated daily. The digital wave has also created a surge of start-up organizations focusing on FinTech, helping global organizations fast-track their product innovation.
Overall, the availability of a skilled workforce, cultural adaptability, favorable government policies supporting IT and IT-enabled services, and a strategic location have made India an attractive destination for GCCs.
Factors to Consider While Setting Up GCCs
Here are a few things to keep in mind while setting up and managing these centers:
Location and Access to Talent:
This is a critical decision. Bangalore in Karnataka is the established tech capital and leads the way with regard to IT infrastructure and talent availability. The next cities of consideration are Chennai, Delhi-NCR, Pune, and Hyderabad. Of late, there is also focus on tier-two and tier-three cities. Trivandrum, Cochin, Coimbatore, Puducherry, Mysore, Mangalore, etc., are being considered, given the number of higher education institutes in these places and the availability of qualified young professionals.
Infrastructure:
The success of a GCC work model heavily depends on crucial components such as proper and adequate real estate, reliable internet connectivity, uninterrupted power supply, up-to-date systems and technologies, and robust voice infrastructure. India has identified this as a critical success factor, and the central and state governments are working with providers to enable world-class infrastructure across the country.
Legal and Regulatory Factors:
Establishing an organization in India is no longer difficult. Many states and government offices offer a time-bound single-window process for completing registration and setup. The Registrar of Companies or RoC for registration of the legal entity, Reserve Bank of India guidelines for money transfer between the India entity and the international parent entity, Income Tax Department for tax-related matters, compliance with the Companies and Establishments Act for employment regulations, etc. are key areas to look at. The government is currently in the process of simplifying many of these. For example, 29 central labor laws are being consolidated into four labor codes.
Staffing and Building the Organization:
This is another area that needs attention. There are different models available. A few popular ones are:
- Set up an Indian entity and staff from scratch. This could be the most difficult one, especially if the parent entity is new in the Indian market.
- Partner with a service provider and agree on a BOT model. In this approach, the partner organization, which has expertise in setting up GCCs, will help set up the organization and staff as required, run it for a pre-defined period, establish processes, and then transfer it to the parent entity. This enables the MNC to quickly set up its GCC, leverage expertise from the industry, and fast-track the stabilization period.
- Another option, especially if the need is for a relatively smaller team, is to partner with a service organization and set up a dedicated team that will work as an extension of the global organization. This saves the MNC from all operational efforts while being able to leverage all the benefits of a CoC quickly.
Establishing Governance Process and Managing Cultural Differences:
This is another area to plan for. Identifying work that will be transferred to the GCC, ensuring a smooth transition, establishing a governance process, monitoring progress, etc., are critical. It is also important to take care of cultural differences so that communication is seamless and the right intentions are understood by staff from both organizations.
Digital Learning for Skill Development
Although GCCs leverage the cost advantage and access a large pool of skilled professionals, managing offshore teams requires careful attention to various aspects.
Fostering a continuous learning and upskilling culture is crucial in this rapidly evolving landscape. While workshops and classroom training are established models for training, these approaches face challenges with scalability and cost. With the rapid change in technology and the sheer number of people to be trained, a blended approach of providing 80% of the information/training via self-paced eLearning content and the remaining 20% through hands-on exposure and clarification sessions is worth considering.
Such a model allows organizations to train many personnel quickly and at a lower costs. The employees can learn from anywhere and anytime. In the flipped classroom model, the learner goes through the concepts, examples, and case studies before attending the classroom session. The limited classroom sessions focus on hands-on exercises, role plays, clarifications, etc. This model is evolving rapidly, and organizations are willing to spend an upfront budget for designing and developing the eLearning modules, resulting in cost savings and rapid learning once implemented.
Role of Learning & Development (L&D) Teams
L&D teams play a critical role in enabling the growth of GCCs. Training managers act as a bridge between the business, for identifying training requirements, and the training providers. They are responsible for identifying solutions to requirements and implementing them quickly and cost-effectively. Here are a few options that may be considered:
- IT Skills: Leverage a combination of off-the-shelf training available in the market, expert network within the organization, and internal social channels created to exchange ideas and solutions.
- Domain Skills: Leverage internal and external SMEs and partner with eLearning design organizations to create and deploy self-paced training programs across the organization.
- Soft Skills: Language training, cultural sensitivity, communication skills, ownership, etc., can be covered innovatively. Internal groups could be formed with a mentor who would take the team through a learning journey. Leadership communication, emailers, blogs, etc., can be leveraged in addition to in-person classroom training and eLearning modules.
- Compliance, Security, etc.: It is critical to increase awareness about social media usage, compliance, phishing, etc., and there could be several formal and informal ways to raise awareness. Digital emailers, video blogs, videos displayed on digital screens in cafeterias/common places, etc., can be utilized to create sensitivity around these topics.
Another option to be actively explored by L&D teams is to curate available content for faster results. Content can be used from what is available within the organization and what is available in social media. It is critical that a content curator be engaged who will understand the requirement and will come up with a list of content snippets that can be utilized. Today, AI can create efficiencies by indexing and tagging content available within the organization and by fast-tracking the search and identification of content from the open network or within the organization.
“Continuous Learning to Drive Innovation” is the mantra. It develops a learning culture in the company and, in turn, helps with talent retention and bringing agility in the workforce to pivot to new technologies and innovation.
Concluding Notes
In the past, L&D teams were tucked within the HR function. Organizations are realizing the importance of the L&D unit, and many of them are setting up L&D teams and bringing in CLOs. It is also critical to leverage the expertise of learning service organizations in this area. This helps to accelerate the process, leverage expertise from the industry, and manage costs instead of setting up end-to-end capability internally and committing to long-term budgets.
Impelsys has been a leader in providing learning content and creative services for over 20 years. With its production centers in Bangalore, Mangalore, and Porto and servicing customers across the Americas, Europe, Asia, and the Middle East, Impelsys leverages top talent in the Learning Solutions and Learning Technology space. Impelsys specializes in designing and developing engaging and interactive eLearning solutions (which include microlearning, gamification, simulations, etc.), AI-enabled digital conversion solutions, AI-enabled chatbot and evaluation of long-text answer options, an AI-enabled learning platform as well as tools for content summarization, indexing, etc. Impelsys has also helped several global organizations set up their extended teams in India and has the expertise to set up a GCC quickly and efficiently. Reach out to us for questions and comments.
Authored by – George Oommen
