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H Karthik

Driving Impact through Collaboration in Global In-house Centers: Myths and Realities | Sherpas in Blue Shirts

By | Blog

Originally posted on NASSCOM


Dilbert collaboration

The comic strip to a large extent reflects the current thinking on what “Collaboration” really means. There is a tendency to confuse collaboration with normal, day-to-day liaisoning for the purposes of service delivery. We define collaboration as a “way of working together through the formal/informal means to achieve common goals, often beyond ongoing service delivery mandates.” There is a higher emphasis on achieving goals beyond the “normal call of duty.”

Now that we have defined collaboration, let us look at the various entities in the ecosystem with which Global In-house Centers, or GICs, (formerly called Captives) are collaborating today. The GIC ecosystem comprises of parent stakeholders, vendors to the parent, other GICs within the same organization and GICs outside of the organization. We will focus this blog on demystifying  some common myths regarding collaboration between GICs and these entities.

Myth #1: Collaboration with the parent is likely to remain the sole priority for GICs; collaboration with other ecosystem entities is not important

Most GICs primarily focus on strengthening collaboration with their parent organizations. This form of collaboration comes naturally to GICs as the interaction and engagement with parent stakeholders is significant. Further, the impact of collaboration on achieving organizational objectives is quite visible.

While GIC-parent collaboration is and will continue to remain top priority for GICs, collaboration with the broader ecosystem is becoming increasingly important. Collaboration with other entities, such as vendors, other GICs (within the company) can also drive meaningful organization-wide impact. Best practices, ideas and knowledge (residing within GICs or other ecosystem entities) can be shared and collectively used to create value for parent. GICs must leverage their vantage positions as extensions of the parent to drive ecosystem-wide collaboration agendas.

Myth #2: Collaboration with other ecosystem entities will lead to loss of competitive advantage

This risk of losing competitive advantage is more a perceived risk rather than a reality. This perceived risk impacts multiple types of collaboration, especially with vendors and with GICs across companies. However, some GICs have overcome this risk by putting in place collaboration models to successfully reap the benefits of collaboration. Examples of these models are:

  • Service-delivery collaboration: GICs and vendors collaborate on service delivery to achieve common objectives for the parent
  • Competence-based collaboration: GICs within the same company have designated leadership roles for specific functional or technical  competencies (e.g., centers of excellence), which form the basis for collaboration among GICs
  • Issue-based collaboration: GICs across companies collaborate on common issues (e.g., talent development, regulatory) that impact the industry

Myth #3: Collaboration can be enabled primarily through formal mandates from the parent and GICs can do little to drive it on their own

While formal mandates can help initiate collaboration, it is just a “starter.” GICs need to adopt a more proactive approach towards collaboration to reap full benefits. Mature GICs are using informal modes of collaboration with great efficacy to meet their organizations objectives. Instead of waiting for the mandate, GICs need to emerge as collaboration “champions.” The collaboration journey of GICs can be classified into three stages:

  1. Participate: GICs adopt a largely reactive approach to collaboration, as a consequence of parent-driven mandates
  2. Influence:  GICs proactively start to enable collaboration but within a limited sphere of influence
  3. Champion: Collaboration is a strategic-priority for GICs and GICs initiate large global collaboration initiatives across the ecosystem

In summary, to pursue the collaboration journey successfully, GICs need to pursue three action items:

  1. Extent focus of collaboration to a broader ecosystem beyond parent to capture full potential
  2. Align talent/leadership model and goals to ensure successful collaboration
  3. Intentionally challenge the perceived risk of losing competitive advantage and convert this into opportunities

Download the complimentary report, Driving Impact through Collaboration: Collaboration in the GIC-Parent, GIC-Vendor, and GIC-GIC Ecosystem.

Service Providers Versus GICs: the Age-old Debate | Sherpas in Blue Shirts

By | Blog

The debate on whether outsourcing or global in-house centers (GICs) is the better service delivery option for today’s enterprises has again been ignited by multiple divestitures in 2012. While there are solid arguments in favor of both models, the truth is that companies have to change their sourcing decisions from time-to-time to maximize value from global services.

Let us examine how the market has moved over the last few years. For a long while, Everest Group has affirmed that GICs are here to stay and we still maintain that view. However, GICs have become more mature in terms of their services portfolios and have upshifted toward delivery of more complex work such as analytics. Buyers have become more intentional about what work to source from which model, e.g., complex work from GICs and transactional work from service providers.

The chart below is an analysis from Everest Group’s GIC database, and is a testimony to the above stated scenario. During 2009-2011, the GIC market continued to witness new set-ups on a sustained basis. The model’s stability was evident in the decreasing number of divestitures in that period. And the stark shift from business processes and IT to R&D/engineering was clear.

Global In-house Center (GIC) set-ups

However, the market saw a bit of a shift from January-September, 2012, with a declining number of new set-ups and rising number of divestitures. There were five major divestitures during that period, (compared to just two in 2011), and the acquirer was a service provider in each case. Four of these key GIC divestitures are listed below:

Global In-house Center (GIC) Divestitures

What is leading this shift? Is the overall market really moving away from the GIC model to an outsourcing model? Our answer is unequivocally NO. Here is why:

  • If you look at the new GIC set-ups during 2012, there is an indication of a dip… but the story is not the same across all industry verticals/functions. For instance, activity picked up during the year within emerging verticals such as professional services. Besides, R&D activity was also largely stable within some verticals such as telecommunications and technology
  • All the divestitures were organization- and situation-specific considerations. For example:
    • ANZ-Capgemini: As part of ANZ’s broad technology roadmap, the bank needed change for ~800 applications and more than 280 projects at a pace it could not achieve alone. So, the bank moved to a hybrid technology delivery model by transferring 360 jobs to Capgemini
    • Hutchison Global Services-Tech Mahindra: This was a part of Hutchison’s broader strategy to exit the Indian market (similar to its exit from India’s telecommunications business). For Tech Mahindra, the acquisition added further capabilities to its already strong telecommunications vertical

Interestingly, some companies have made the reverse decision and are insourcing work that was previously outsourced. An example is the recent in-housing decision made by the new CIO of General Motors (GM), via which the company expects to see long-term cost savings by bringing technology development under its roof. While HP had been GM’s main IT vendor per a US$2 billion contract awarded to the service provider in 2010, it will now provide only a few services to the automaker.

So, which model is better? Which one is winning? Obviously, the decision is complex and dependent on multiple organization-specific factors. Everest Group’s December 12, 2012 webinar, Global In-house Centers vs. Service Providers: Who is Winning?, will provide fact-based insights on this topic, and recommendations on how enterprises can compare and evaluate both options for their own unique requirements. We hope you’ll be able to join us!

Determining Today’s Value of Global In-house Centers (GICs): GIC – Value Diagnostic Survey 2012 | Sherpas in Blue Shirts

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In 2007, Everest Group conducted a value diagnostic survey among GICs (previously called “captives”) and their parent organizations to understand the alignment on expectations and perceptions of value delivered by GICs to parent organizations (Download results of the 2007 survey). A whopping 42% executives from parent organizations stated that the GIC should focus only on delivering cost savings. Interestingly,

  • 58% of these responses came from executives in parent organizations of early stage GICs (<2 years of age)
  • Lack of requisite capabilities and offshoring of only limited part of work were cited as the top two reasons for the belief that GIC should focus on cost savings only

GIC Value Diagnostic

Fast forward five years: Has the expectation of parent organizations from their GICs changed? Have the GICs evolved and matured in their approach to serve parent organizations? Have the GICs developed the capability gaps unearthed by the 2007 survey?

To help answer these questions and also take a fresh view of the GIC-parent model from cost-savings vs. value delivered perspective, Everest Group is re-launching the survey . The results will help the industry understand the progress GICs are making and help companies learn if their approaches to GICs are similar or different than others.

If you are an industry stakeholder with first-hand experience with GICs, we invite you to take the survey.

All survey participants will receive a complimentary copy of the summary findings. If you wish to get a customized benchmarking for your organization to compare expectation and perception of value delivered between parent and GIC, please contact us, and we will get back to you with next steps.