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BW Businessworld

Regeneration: The Next Big Thing For Indian MNC Centres

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MNC centres in India are poised for significant growth in the coming decade. The number of Engineering R&D (ER&D), Software Product Development (SPD)  and IT captive centers (a.k.a. Global In house Centres - GICs) of top 500 global companies have increased by over 500 per cent —from about 40 centres in 2000 to more than 200 in 2012. The new breed of MNC centres will become the partners of choice in delivering on the transformational initiatives of CIOs and CTOs. However, the journey towards becoming a true partner is ridden with challenges and they need a unique approach towards their 're'-growth.

The charters of these centres have evolved dramatically over the last three years and today many of them are looked up to deliver on:
  • Modern IT agenda of the CIO
  • Building products in India for India or Emerging Markets
  •   Developing the blueprint of a shared services function for the corporate

The Challenge
While the MNC centres are starting to enjoy the new found attention, new challenges are beginning to crop up for them.

The Talent Conundrum
With MNC centres moving up the value chain there is a need for HR departments to deal with a talent pool that is highly diverse in capability and relevance; resources who are predominantly focused on keeping the lights on part of technology services and a talent pool that is highly experienced, has niche skills and works on next generation technologies.

The culture, conditions, processes and metrics needed to manage different ends of the spectrum of work are very different.It is difficult to create such mutually exclusive silos in a single container structure of a GIC.

The Efficiency Squeeze
Over the years, these centres have embarked upon a journey of consolidation and have demonstrated that they are operating at an optimal level of efficiency. Across the dimensions of cost, operations and productivity, the MNC centres are now comparable to the service providers. It has now become next to impossible to derive further efficiencies from the system for the premise they were set up.

The only way that the MNC centres can derive further efficiencies is by making disruptive changes to their delivery models which will consume precious management bandwidth.

Innovation Imperative
To drive innovation, MNC centres need to be nimble and flexible in terms of resources. Also, they need to invest and build the necessary infrastructure back bone to support the innovation eco-system. Be it cross / up skilling their resources, building a development and test technology infrastructure, specialised labs, hiring great talent, partnering with the academia and service providers - all of this needs investments.

In spite of these challenges, if MNC centres have to grow, I strongly feel that they should start evaluating themselves as a business in totality andhence adopt re-generation as a growth strategy.

The Solution
Regeneration is an approach where in an entity willingly sheds a part of its organization only to regrow the same to perform a different function or the same function better.

MNC centres'regeneration involves three key aspects:
  • A thorough portfolio rationalization and franchising
  • Service Integration
  • Taking a co-creation based innovation approach
Portfolio Rationalisation And Franchising
This is the first step towards regeneration. MNC centres should look at the portfolio of activities that they are performing at the India center and ask a few critical questions:
  • Are the centres'activities strategic to the enterprise?
  • Are the skill sets that I have in my center sustainable and strategic?
  • Are the systems and applications that am currently working on are part of CIO's strategy?
  • Can I derive further efficiencies from the system?
  • Will I compromise the total customer experience in terms by not working on these systems?
If the answer is affirmative for most of the questions then the centre should look to engage with a service provider on a franchise model for that portfolio. The service providers have industrialised most of the IT services and hence they can deploy an efficient engine to deliver the portfolio in a factory model.

This is not divesting / terminating a centre, instead this is a franchise approach for specific portfolio. In this model, the employees of the MNC centre involved in managing the portfolio typically get rebadged to the service provider whilst for rest of the centre it is business as usual. ANZ & Philips are some examples of this successful model.

When Capgemini took up the testing services from ANZ, they could bring in best practices in terms of automation and process management which resulted in 20% productivity gains and increased the offshore leverage as well.

Philips is another classic example where the application support and maintenance activities with about 700 resources was franchised to Wipro and Cognizant and the rest of the centres operations continue to function as business as usual.

Service Integration

This could be the holy grail of command and control which the MNC centres in India have been searching for. While individual vendors could be achieving their respective SLAs, the overall quality of service gets affected as there is no integrated view of the service.

In the service integration approach, the centre will have to create and deliver on the overarching OLAs (Operation Level Agreements) which tie up the SLAs (Service Level Agreements) of multiple vendors of a given service line. The job of the centre in such a support scenario is to act as a traffic controller, ensure that there are no log jams in service delivery and importantly take up accountability for the entire service.

This can open up multiple possibilities in terms of providing career paths to senior resources within the centre , enabling panoramic view of the systems within the enterprise and also making the it  a nerve center of IT.

Co-creation Based Innovation Approach
Co-creation is an approach where in the customer and an IT service provider work jointly in developing solutions and services for the end consumer of IT services. In this approach, the customer brings in the contextual knowledge and business problem on to the table whereas the service provider brings in the accelerators, frameworks (technology and quality) and scale which are key components to the solution.

The service providers are willing to make the initial investment required in terms of build / test infrastructure, deploying their key talent and providing market access to their customers. Engineering R&D centres that have become hubs for developing products and solutions for emerging markets can work collaboratively with the service providers in building solutions and importantly taking them to the market through co-creation.

Distilled Gyan: Re-generation the way forward for India based GICs
In essence, for MNC centres to be relevant in the coming decade and to become a partner in the overall CIO and CTO strategy they need to re-imagine and re-invent themselves. The centres cannot afford to carry on what they have been doing over the last decade and continue to be relevant in the new scheme of things. The issues around talent management, efficiency improvement and driving innovation could potentially cripple and degenerate them into just another delivery center.

Re-generation is a strategy whose time has come - all the necessary conditions for effecting the change are in place. According to the classic formula for change, the dissatisfaction amongst the MNC centres with regards to the current state of affairs is at an all-time high, the vision on where the centres want to be is emerging and is now clearer than ever and the first steps towards effecting a change have already been taken in terms of securing futuristic charters from CIOs and CTOs. This has made a definitive dent to the resistance to change. Re-generation is the way forward for MNC centres.

The author is Manager-Consulting at Zinnov