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Future of GCCs: Redefined by AI

3AI May 19, 2018

Global Capability Centers (GCC’s) in India are at an important inflection point. As multinational corporations continue to move to a digital and AI-first paradigm, they are looking at their GCC’s to provide emerging technologies leadership to drive this transformation.

It’s been an exciting evolution for the GCC’s over the last few years. In the not too distant past, multinational corporations look at their offshore captives to contain costs for repetitive, low-value business processes. From there, we saw shared services centers capture a larger slice of the pie in day-to-day business operations of their MNC counterparts, alongside developing centers for research, development, innovation and business transformation. Captives morphed into capability centers, wherein new skills and competencies could be swiftly incubated and scaled.

The numbers pan out well for GCC’s – with nearly a million professionals employed, across 1,500 GCC’s in India, netting an export revenue of over $23mn, the sun is shining brightly for GCC’s. Indian GCCs account for over a fifth of IT-BPM exports and a fourth of India’s export employees. According to a report by analyst firm Nomura, GCCs are growing faster today in terms of revenue attribution than their large outsourcing counterparts (12.4% CAGR for GCCs vs 10.7% for service providers, over the last 5 years). 27% of US-based Fortune 2000 companies already have GCCs in India. GCCs are becoming the centralized technology procurement arm for MNCs as 50% of the Fortune 2000 are planning to shift vendor management to their offshore entities, for the synergistic benefits, as well as to drive outsourcing costs down.

Here’s the inflection point though – as MNCs grapple in an uncertain business environment and business models, changing consumer preferences and consumption modes and digitalization in most areas of the business, they are looking at their GCC leaders to provide the technology disruption that their traditional business desperately needs. For the past few years, analytics and AI has taken a robust foothold in the GCCs, with their India-based talent powering evidence-backed, data-driven decisions for their parent organizations. The next generation of the GCC’s will be expected to provide autonomous decision support and an AI-augmented human intelligence. GCC leaders will need to harness the burgeoning power of AI technologies to power corporate decisions, automate repetitive, low-value tasks through robotization and reinvent business models for the continued success of their business in the new world of business. Digital will be the core element of business model re-design.

Of the multiple reasons driving insourcing decisions, perhaps the most important one is the strong business process integration that GCCs provide. Rather than relying on the volume provided by outsourced companies, MNCs realize that they need to meld quality output with high productivity, delivered by professionals that can reimagine current business functions. Enterprises are increasingly seeing the long-term benefits of investing in a world-class offshore capability center and prioritizing driving investments to these entities. With great investments come great expectations – they need their offshore GCC leaders to have a multidimensional business orientation and act as the key intermediary between the strategic boardroom and the operational engine room.

The future of the GCC is digital and AI-first and to that end, we need to re-imagine the future of the GCC in that direction. Here’s a primer on how AI transformation can be shaped within GCC’s :

Assess Maturity and Develop Roadmap

The first step is doubtless to assess the current state, the desired future state and the gap that exists between the two. Assessments and roadmap development need to be performed in two vital areas – technology and people.

Technology Assessment and Roadmap:

The first step is foundational to the AI and digital reengineering for the GCC. GCC leaders need to take stock of all the processes performed at the center, along with the tools and software driving them. The first step is to classify these processes into traditional vs digital IT. Once this is done, leaders need to further split the traditional IT processes into 3 sub-segments – reimagine, leave as-is or scrap. Whether a software-enabled process has strong business justification for the present and the future will define whether it is scrapped or not.

For the processes that do not get junked, leaders need to check if there are powerful, maturing digital options available – that can improve speed, accuracy and outcomes from the process through digital reengineering. If there is – then that process is ripe for reimagination. If not, and there is a strong business case to keep it as-is, leaders need to put it on a ‘Watch list’ and keep track of technology evolution and commercial-grade solutions emerging in this space. Further, for the reimagined processes, GCC leaders need to also assess the range of technology options available – from RPA to Deep Learning – and develop a roadmap for the automatization of these processes. For instance, deep learning could be progressively applied for high-value tasks which execute complex decision-making, while RPA could be quickly implemented to automate routine tasks, such as report generation etc.

People Assessment and Roadmap:

A similar exercise should also be done for the GCC employees. Leaders need to take stock of the talent pool available within the GCC and map it with the future skills required. Is there enough talent within the current GCC that can be updated with digital skills to develop and run future applications? Or would there be a need to augment internal talent with external consultants – is a key question to ask on the journey to GCCs’ digital transformation. This skill assessment needs to be combined with internal trainings to move existing employees into new roles. For instance, could a portion of the analytics team be moved into automated insight generation, using machine learning? Or can some of the better developers be trained into full-stack developers to build the technology backbone for the organization?

This kind of skill assessment and continuous training will provide the GCC leaders with a continuously updated understanding of the human assets available that can drive enterprise digital transformation. Where certain niche skills may not be available, leaders can look to outsource from topical service providers to help set up their processes and transfer the day-to-day system updates back to the GCC.

Re-engineering the Entity

Once the skills and technology are suitably assessed, the next step is to gear the GCC towards a new set of processes and practices that will help it sustain this digital drive. The new digital and AI-first GCC needs an entirely new set of standards to measure business value delivered and technology performance. This requires a reengineering exercise to change processes, evaluation metrics, and mindsets. Three key factors are at play here:

Process Augmentation:

First, the GCC needs to identify a whole new set of program management practices to build and sustain a digital mindset.

The first of these is the Automation Scorecard. Once the technology assessment and roadmap are completed and the automatable processes are identified, they should be listed onto this scorecard to track and monitor the extend of automation performed on each process.

The second intervention is progressively prioritizing scalable, cloud-based, digital-first software. There is often a strong proclivity to trust and use traditional IT software and this mindset needs to be evolved towards more SaaS-based, API-driven software – which can help organizations dynamically scale the costs and utilization up or down, based on business needs. By moving to a more service-oriented architecture model, GCCs can improve system availability and uptime.

The final intervention is people augmentation. While GCCs have progressively started and scaled their accelerator programs to identify breakthrough technologies solutions, they need to take the people and software integration to the next level. The mandate for these accelerators should be closely tied to the business expectations (as per the technology assessment and roadmap and automation scorecard mentioned above) and their success should be measured through the exponentiality of the results they deliver, not just basic productivity improvements. Additionally, GCC leaders should also seek process and technology guidance from outside consultants so that the accelerator remains true to its purpose and channels the needs of the business

New Metrics Development

The world of digital and AI will require an entirely new set of metrics. While cost optimization and quality of outcomes will remain paramount for any GCC, leaders need to reinvent the intermediate metrics that contribute to productivity and quality metrics. For instance, GCC leaders need to actively capture the extent of automatization delivered in the enterprise, by measuring the man-hours saved (total and monthly). Additionally, they could also leverage the automation scorecard to show progress on the automatization of processes. Thirdly, they need to measure and showcase the quantum of speed and accuracy that is delivered by the new digital process as opposed to traditional IT to their HQs, to highlight outcomes and achievements. Fourth, GCC employees need to be measured for their adeptness at emerging technologies, how much training has been delivered and internalized by employees. 

Evangelize Reverse Innovation

While several GCCs do deliver reverse innovation, the research and development of industry-specific commercial-grade AI and digital solutions should be one of the top evaluation criteria for GCC leaders. Indian executives have a strong frugal mindset, which can naturally deliver innovation under cost constraints – which can then be progressively leveraged by others in similar markets and situations. Identifying processes where reverse innovation can be applied and then commercialized upstream needs to be a top priority for GCC leaders to improve the revenue attributed to their entities. To do so, it is critical to first assess which technology and operational assets they own, that could be useful across new markets.

As Cisco VP – Dan Scheinman once famously said, “We came to India for the costs, we stayed for the quality, and we are now investing for the innovation”. GCCs have quickly moved from invisible, low-value business processing units to invisible high-value technology centers to now visible, high-value AI and Digital innovation hubs. The expectation is to now deliver the digital and AI-centric future for their parent enterprises .

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