5 key factors to consider while setting up GICs

With the rise of digitization and innovative technologies such as Artificial Intelligence (AI) and Machine Learning (ML), the scope of GICs (Global In-house Centres) has expanded from just service delivery centres to a strategy machinery for IT, innovation, R&D, and more. At present, the GIC model accounts for 25% (US$38–42 billion) of the global offshore services market. 27% of the US based Global 2000 firms have a GIC already set up in India and 40% of retail GICs were established within last five years. As the number of players increase in the market, businesses need a concrete plan before entering the GIC space. Business leaders are evincing keen interest in studying how first movers have established their global centers and are optimizing it so they can tackle the initial challenges of transitioning from outsourcing to insourcing.

Here are five key factors that an organization must consider before setting up a GIC of its own.

 

1.  location evaluation

India is a vast country that has a variety of geographical and demographical opportunities for any business. Before deciding to establish a GIC, a firm needs to evaluate the most feasible and best possible location to set it up, in order to maximize the benefits from it. With plenty of support and incentives from state governments, businesses have far more opportunities to set up an in-house IT or innovation hub. Apart from the leading GIC locations such as Bangalore, Pune, Hyderabad, Chennai and Delhi, there are newer cities like Jaipur, Indore, Surat, etc. getting added to the list. Location selection by businesses must be based on factors such as core business objectives, business environment, policies of the state, connectivity, availability of talent, accessibility of resources, etc. Foods & agriculture multinational – Cargill has set up its largest business services centre in Bangalore, India due to the availability of a massive pool of talent.

2.  risk assessment

It is of utmost importance to do a thorough risk analysis for the business before establishing a GIC. From market conditions to governance to competition to political and infrastructure stability; several factors must be considered before setting up a GIC. The aim is to maximize efficiency, reduce costs, and explore new business avenues while minimizing risks. Testing the waters beforehand prepares a business to mitigate possible risks and achieve business goals. General Electric (GE) has been a leading example of successfully setting up a GIC in India in phases. From a plain vanilla business approach to leveraging talent to innovating for their global products to now finally creating globally relevant products in India, they have eased into optimizing their GIC set up.

3.  change management

Another critical factor that could impact the success of a GIC is how firms manage change during the whole transition. Establishing an offshore GIC is a lengthy process and entails big strategic and operational changes within the organization. This transition can be challenging for the team and they need to be guided and supported throughout the process to ensure that the change is focused on successfully achieving business goals. Bringing in consultants for project management can be very useful at this stage of launching a GIC. Leading consultants such as the Deloitte and Everest Group offer their services to companies for change management during the shift from outsourcing to insourcing.

4.  leadership identification and hiring

4.	Leadership identification and hiring The success of any project rests on its leadership to a great extent. Right leadership helps a team navigate through unforeseen challenges with more clarity and assurance. Identifying key personnel for heading a GIC by either laterally moving in-house talent or by hiring locally is a critical decision that business leaders need to make while setting up an in-house innovation centre. According to Everest, majority of GICs believe in upskilling and reskilling the existing talent to meet the changing need of skills. It is also recommended that the parent company fosters local GIC leadership through continuous communication and visibility.

5. legal and regulatory compliance

With its supportive regulations and automated approval systems, India is a relatively easy location for setting up a business. However, it is a must for any business to have legal advisory and support when it comes to setting up a new wing such as a GIC. A legal system for employee and partner contracts, audits, etc. has to be set in place in order to ensure compliance with local regulations and avoid any legal or governance complications at later stages of the business. Consultancies such as Excelict provide an offshore legal entity while setting up a GIC.

The idea of a GIC or a captive offshore centre should be to push the envelope beyond building a cost-driven centre and to ultimately design a hub of innovation. The larger vision of creating sustenance as well as discovering new business opportunities for the global parent is where the long term success of a GIC would lie.