Over the past few months, several companies have overhauled their operating model and reduced their headcount in response to the changing economic scenario. In addition, the recent announcement by the US to ban the issue of temporary work visas is likely to raise a lot of concerns, compelling organisations to rethink their strategies.
Concerns for India
The Indian offshoring industry has a significant reliance on the US, which is the largest consumer of outsourcing services. The offshoring industry in India can be broadly classified into two segments: service providers and global in-house centres.
Service providers: A significant proportion of their business comprises the colloquially termed body shopping. This revenue stream relies heavily on temporary visa programmes. Organisations, in the process of de-risking, have begun to hire local talent to manage their businesses. The current crisis has also highlighted the efficacy of the remote delivery model, which service providers could leverage to their advantage and continue to scale operations by leveraging the skilled talent pool available to them in India.
GICs (global in-house centres): Now referred to as global capability centres (GCCs), GICs have evolved into strategic business value creators with a shift in their value proposition from cost arbitrage to value arbitrage. This shift in strategy, fundamentally driven by leveraging technology and building resilience and agility, uniquely positions them to take advantage of the current situation to enhance their role in the global operating model.
How are the GICs likely to benefit from this?
GICs in India have faced similar challenges in the past. In 2009, during the global financial crisis, Indian GICs began a transformation process. They expanded their service portfolios to deliver higher-value processes.
While organisations focused on risk and compliance, Indian GICs emerged at the forefront with their ability to scale rapidly and deliver high-quality service. With this, GICs highlighted the large availability of talent in India for core control functions, resulting in organisations shifting the base of their three defence lines.
GICs embraced technology swiftly and built their credibility in driving global digital strategies of organisations from India. The success of GICs can be measured with two simple metrics: the percentage of the global workforce now based in India and the number of global leadership roles in India.
Over the past five years, the former has witnessed an increase of 20% and the latter by 16% (Deloitte analysis: Workforce increment and trends survey). These metrics have only seen a year-over-year surge. The current ban could also result in such professionals and global decision making being based in India.
The current economic crisis has accentuated the need to embrace technology and organisations across sectors have moved to a “digital-first” strategy. This could heighten the need for technology and functional experts, but more importantly, it could also drive the need for professionals with the ability to acquire new skills to help organisations maintain their agility. Hence, the ban is not only expected to impact organisations’ access to low-cost talent but also their ability to innovate and embrace new-age-technology-based solutions.
GICs, even during the past three months, have emerged at the forefront of their global organisations’ responses to the current crisis.
For example, GICs in India had a significant role to play in enabling the US to roll out the US$ 2 trillion financial aid package by being nimble, scaling quickly, and leveraging technology more effectively. These attributes are expected to not only enhance the entire value proposition of GICs but also unlock the next stage of evolution in the global value chain of service delivery.
What would GICs need to consider as they embark on this journey?
The large and available talent pool in India provides GICs with the opportunity to scale, thereby giving them an inherent advantage in contrast to other offshoring destinations.
The following considerations also need to be taken into account as GICs in India move up the value chain:
- The staffing models would need to undergo a change as higher-value processes would require experienced domain experts, thereby introducing the middle management layer.
- This would also impact the cost structures of GICs. Balancing cost structures across traditional and new services in their portfolio would be critical, thereby requiring a rethink of workforce deployment strategies.
- The entire employment value proposition for the new pool of experts would need to vary.
- Re-skilling, upskilling, and continuous learning initiatives would need to be the central focus of HR strategies for building agility and resilience against similar situations in the future.
We believe that with the ongoing crisis, the business case for establishing GICs in India and their subsequent growth has been strengthened. We do anticipate more organisations building on their existing GICs in India or establishing new ones.
GICs have, time and again, proved their ability to be agile and quick responders to evolving situations, which could be the key differentiator as we emerge out of the current crisis. Although it is easier said than done, GICs would need to closely examine their workforce strategies to make it a compelling value proposition for organisations to embrace this model.
Anandorup Ghose and Vamsi Karavadi
Anandorup Ghose, Partner and Vamsi Karavadi, Director, Deloitte India. The views in this article are their own.