Today, multinational companies (MNCs) from the USA, Europe as well as the Asia Pacific region are increasingly setting up their research and technology centers in India. These centers are mainly focused on the areas of research & development (R&D), Business Process Management (BPM) and information technology (IT).
These centers are commonly known as Global In-house Centers (GICs). The primary reason for moving their core operations to India are no longer just cost. “It is digital technology that is bringing companies here”, opines K S Viswanathan, Vice President, Industry Initiatives at India’s leading IT industry association NASSCOM. India has clearly moved away from cheap outsourcing work to digital-technology areas such as big data, analytics, mobility, artificial intelligence, machine learning, IoT (Internet of Things), blockchain as well as robotics.
“These GICs are typically more strongly integrated with the core business as they are perceived as an extended team of the parent or onshore organizations,” says Aditya Verma, co-director of Everest Group’s global sourcing practice. “They typically have specialized knowledge of the business as they cater to only one customer (the parent organization) as compared to a multi-tenant service provider.”
The interventions via GICs give an edge to the organization in many ways such as fast- paced data proliferation, improved capabilities and hyper-connectivity. They help the business grow by bringing in direct visible benefits like higher customer engagement, targeted marketing and a visible reduction in capital expenses. In fact, these GICs are a big enabler of overall transformation and high-paced growth of their parent firms.
“Most GICs play a strategic role in building internal innovation capabilities for the parent and act as innovation hotspots to foster and propagate the cultural shift to innovate,” says Prashray Kala, co-director of Everest Group’s global sourcing practice.
“The nature of work being put in these GICs is skewed towards engineering and R&D as opposed to the traditional operations work such as finance and accounting. This enables GICs to be successful and sustainable even with small scale”, emphasizes Verma.
India today happily boasts of having more than 1500 GICs, being operated by MNCs like Target, JCPenney, AB (Anheuser-Busch) Inbev, Saks Fifth Avenue, Grant Thornton, Adobe, Fiat Chrysler, GM, Volkswagen, Hyundai, Texas Instruments, GE, Honeywell, Airbus, Boeing, Shell, AON Hewitt, Intel, Qualcomm, Tesco, Petrofac, Novartis and Mercedes Benz, to name a few. These GICs collectively employ roughly 10 lakh people in India, being an important employment generator.
As one can note, these companies are spread across varied sectors such as financial services, consumer electronics, semiconductors, automotive, retail, consumer goods, energy, oil & gas, engineering, aerospace, healthcare, pharmaceuticals, travel, transportation etc.
Philips’ research, design, intellectual property and standards team operate out of its innovation center at Bengaluru. “Many innovations are expected to scale up from this center”, says M R Srinivasaprasad, CEO of Philips Innovation Centre, India. “Philips recently launched Healthcare@Home, providing home healthcare treatment, diagnosis and care in the areas of critical care, respiratory disease, wound management, post- surgical rehabilitation and sleep disorders”, he elaborates.
With more than 12,000 employees across domains of engineering, IT, finance, accounting, data analytics and manufacturing; Ford’s Chennai facility today is its biggest center of employment, second only to Dearborn, Michigan, US.
To re-enhance their capabilities, GICs are planning to further invest in areas such as analytics, traditional IT along with digital-age IT, domain expertise, leadership quality as well as cost excellence.
While analytics centers will accelerate in generating a clear competitive edge for the MNCs as a whole, digital IT will ensure a technology edge for the organisation at its core, at the same time a strong traditional IT will help rolling out the digital plans across its length and breadth at a faster pace. Domain expertise gets amplified with key skills of focus on priorities, market sensing capabilities, customer focus and profitability watch.
GICs are investing in attracting and retaining talented leaders to give right direction to the entire enterprise. They are also investing in working processes that lead to high value generation.
Finally, cost excellence is being planned to be achieved by paying earnest attention to improving efficiency and productivity.